New trend in emerging markets to drive growth at Nokia

The number of mobile phone users worldwide will reach 3 billion next year instead of 2008, Nokia said, driven in part by a new trend in emerging markets.

For the past year, operators and phone makers have been saying that the bulk of their future growth will come from areas outside of the increasingly saturated mature markets. Nokia expects that in 2007, several regions, including China, Asia-Pacific, the Middle East, and Africa, will experience 15 percent growth.

But Nokia is noticing the surprising trend of growth among customers in emerging markets who are upgrading their phones. Nokia estimates that this year, 52 percent of its sales in emerging markets will come from people who are replacing their phones, said Kai Oistamo, executive vice president and general manager of mobile phones for Nokia. Next year, that figure should grow to 60 percent, Nokia said.

Oistamo, along with other senior Nokia executives, outlined the phone giant’s strategies for pursuing growth in the next few years during its annual analyst meeting in Amsterdam on Tuesday.

Phone users who replace their devices typically opt for higher-priced phones that offer more, Nokia finds, and that’s true in emerging markets as well. In India, Nokia found that among buyers of phones that cost over €60 ($79), 21 percent were first-time mobile users and 41 percent were replacing existing phones, said Bill Seymour, Nokia’s head of investor relations.

In addition to a focus on the emerging markets, Nokia will also increasingly pursue mobile Web 2.0 applications. Computer users have demonstrated their interest in creating online content, through the growth of blogs, social networking sites and online video sites. “The significance of this megatrend to Nokia is obvious,” said Nokia President and Chief Executive Officer Olli-Pekka Kallasvuo. “We are the key player in bringing this into the mobile environment.”

Nokia hopes to extend some Web 2.0 applications to mobile users and add value to them through location information or other offerings that are unique to mobility, he said.

Nokia currently has 850 million users and around half of them have the capability to connect to the Internet, he said. “We can and we will monetize this by embracing the business models that already exist on the Net,” he said.

Some Nokia customers may soon access Web 2.0 applications from phones with a new design from Nokia. The company will increasingly focus on building very thin phones that don’t skimp on functionality, said Oistamo. Motorola recently set off a new trend in ultra-thin phones with its successful Razr and now other phone makers like Nokia are following suit.

At the event, Nokia introduced the Nokia 6300, one of its first handsets to exhibit the move toward thin phones. “It’s a sneak preview of what else will come out in 2007,” Oistamo said.

In addition to thin phones, he expects phones that offer location-based services to also be popular next year.