Microsoft-Nokia deal: Growth markets may see onslaught of new, cheap smartphones

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a foothold in emerging mkts is one of the reasons why Microsoft is buying Nokia. a foothold in emerging mkts is one of the reasons why Microsoft is buying Nokia.
SummaryNew combined entity faces an uphill task of matching up to Apple, Samsung, Karbonn and Micromax.

Microsoft’s acquisition of Nokia could see an aggressive roll out of new smartphones in growth markets like India, according to analysts, as the new combined entity faces an uphill task of matching up to dominant smartphone players like Apple, Samsung and other homegrown companies like Karbonn and Micromax.

According to Ovum, a telecom research house, a foothold in emerging economies is one of the many reasons why Microsoft is acquiring Nokia.

“As a company selling largely to enterprises, Microsoft will get a much needed consumer focus and get an idea how to wade through the complexities of emerging markets like carrier billing, app developer eco-system and a distribution platform,” Shiv Putcha, principal consumer analyst, Ovum told FE. He added that Microsoft will still offer a cheaper and more compelling option and Nokia will get access to cash for marketing push in these countries to fight Samsung.

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Market shares of top 5 vendors Q1 2013 

Brand Mkt share

Samsung 16%

Nokia 15%

Micromax 7%

Karbonn 7%

Lava 2%

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“Today’s agreement will accelerate the momentum of Nokia’s devices and services, bringing the world’s most innovative smartphones to more people, while continuing to connect the next billion people with Nokia’s mobile phone portfolio,” Microsoft had said in a press statement.

However, the market share numbers as offered by IDC reveal a challenging task for Microsoft. South Korean firm Samsung, which is already the world’s largest mobile phone maker, had shipped 16% of the total phone shipments in India during the first quarter of the calendar year surpassing Nokia, whose marketshare stood at 15% for the same period. While Samsung was much ahead in value marketshare as smartphones accounted for 60% of the total device sales and the global leader had 33% market share in smartphones while Nokia languished with just 6% marketshare much behind Indian players like Micromax and Karbonn, according to IDC.

Putcha said that Asha series was always meant to be a bridge between feature phones and smartphones.

The mobile device market is veering towards smartphones in India and other emerging markets and Microsoft which is going to focus on smartphone will not compromise Nokia’s strength in feature phone segment in emerging economies. With this Microsoft will have better control of product pipeline for Windows phone ecosystem, said Putcha.

Faisal Kawoosa, lead analyst (telecom practice), Cybermedia told FE that for India one needs to see how the feature phone segment is being strategised after this deal. “In India Nokia is the market leader because of its strong presence in the feature phone segment and if this deal is an indication of strategic shift towards smartphones, then the market statistics are going to drastically change.”

Earlier there were talks that Microsoft was talking to many local players in various countries to bring cheaper Windows phones. With this deal, the other device manufacturers will be wary of Microsoft, say industry analysts.

Kawoosa said that since Android being a free source software, it will still offer a cheaper option to Microsoft-Nokia phones. “As long as Microsoft is able to get many other device manufacturers on board to have a wide range of Windows based phones available, things are going to remain the same,” he said.

Anshul Gupta, principal research analyst, Gartner, told FE that both the companies have been working together for the last two-and-half-years and customers can now expect faster upgrade of devices than before. Nokia has significant presence in India with a handset manufacturing unit in Chennai set up in 2006.

It is one of the largest by the Finnish mobile phone maker and employs more than 38,000 people producing 800 million phones.

For Nokia, India is one of the largest market and the manufacturing unit in Chennai plays an integral part in the company’s global strategy. To date, Nokia has invested $285 million in its manufacturing operations in Chennai. Nokia’s facility at the SEZ, Sriperembudur, near Chennai, had reported physical exports of R12,136.54 crore from 2006-2007 to 2011-2012.

Talking to FE, M Shanmugam, general secretary, Labour Progressive Front at the Chennai factory said, “When compared to competitors like Samsung, Nokia is not aggressive when it comes products front. Microsoft should look at converting this facility to a multi-product manufacturing facility.”

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