I had previously written about how Nokia’s Indian marketshare was being eroded by the advent of local Indian players.This was very concerning as Nokia had at one time commanded 75% marketshare of the world’s fastest growing telecom market.However this marketshare has come down to 52% in recent days leading to increased margin and revenue squeeze for Nokia.Note that India comprises of almost 20% of total unit sales worldwide according to my estimates.The steady erosion in what could be considered as Nokia’s Fortress is equally disturbing for the company as its loss in brand appeal,marketshare and pricing power in the Smartphone segment to Apple,Google and others.
Nokia which is the undisputed king of the Indian market is facing not only increased competition in the high end space from smartphones by Apple,RIMM,Google and others but also in the low priced end. A number of Indian companies like Olive,Micromax etc have made inroads with cheaper and feature rich handsets. Nokia has a much smaller marketshare in the Chinese market because of competition from super cheap local Chinese competitors .
Nokia is already losing the smartphone wars to Apple and Google in the developed markets.So the low end segment is where it is relatively insulated from competition from these technology giants.However local players in the Indian market are nipping at its heels even in this segment. It like a pack of dogs bringing down a bigger prey . Nokia is trying to retain its dominant share by introducing lower price feature rich phones but seems to me that is a losing strategy.With lower prices , Nokia hurts itself the most as it has much more volumes to lose margin dollars on. Would be interesting to see how much marketshare Nokia eventually loses as India is one of the most important markets for this company.It is already down to 60% marketshare according to the following article from the 70% it had in 2008.
Samsung and LG also nipping at Nokia’s heels
Samsung and LG used to be distant rivals to Nokia given its super strong distribution network in India and strong brand appeal.Besides Nokia had phones customised for the Indian market leading to a strong presence in all mobile segments.However it recent product and branding problems have afflicted its Indian arm also.According to a new survey,the local players like Micromax,Lava,Spice and others have managed to increased their marketshare by a whopping 350%.These players source the handsets from Chinese manufacturers and severely undercut Nokia on prices.With more feature rich and better design phones they have managed to carve a fast growing niche for themselves.Strong marketing campaigns built on India’s religion like Cricket Tournaments have helped them capture consumers attention in a very short span of time.Samsung has been the biggest winner of Nokia’s decline amongst the well known brands.It has vaulted to a 17.8% marketshare from 10% just a year ago.Samsung has built on a very strong brand in India due to its well established Electronics division.Its Corby line of products aimed at the Teenager segment has proved to be a blockbuster with very good features like Touch,Social Networking at a very affordable price.LG has also increased marketshare though at a much slower pace to 5.9% from 4.5%.Other players like Motorola,Sony Ericsson have almost disappeared as strong players.For Nokia a radical strategy change such as a merger with Research in Motion is needed to stem its downward spiral.
Homegrown handset makers like Spice, Micromax and Karbonn captured 14 per cent of the mobile phone market in India in FY 2009-10, thanks to the burgeoning growth in the cellular telephony, says a survey. These manufacturers had just 3-4 per cent market share in the previous fiscal. According to the Voice&Data100 Indian Telecom Survey, these Indian brands strengthened their presence in the domestic handset market in 2009-10, growing at the expense of multinationals like Nokia and Samsung.
While Micromax had a 4.1 per cent market share by revenue, Spice and Karbonn had a share of 3.9 per cent and 3 per cent in FY 2009-10, respectively.Lava had a share of 1.1 per cent, Lemon 1 per cent and Max had a 0.9 per cent share, it added.The Voice&Data100 annual survey on handsets is based on the revenue of telecom equipment suppliers, including GSM and CDMA handset vendors.
According to the study, even though Finnish company Nokia remained the market leader, its share came down to 52.2 per cent from 64 per cent last year. Samsung’s market share increased to 17.4 per cent this year from 10 per cent last year, while LG had a share of 5.9 per cent as against 4.5 per cent last year
Nokia’s Problems compounded with S&P ratings cut
Nokia is not only battling multiple competitors in all segments and geographies,it now also faces financial problems.It was forced to cut its profit targets for Q2 2010 twice,but now also faces a S&P ratings cut.This Goliath of the mobile industry with a still impressive 40% global marketshare already looks beaten despite still being at the top.
Standard & Poor’s Ratings Services said that it revised the outlook on mobile phone maker Nokia to negative from stable, though the rating agency affirmed the company’s A rating. “The negative outlook reflects a material deterioration of the historically industry-leading margins of Nokia’s Devices & Services segment, a negative trend which began at the end of 2008 just after the onset of the recent global economic downturn,” said Standard & Poor’s credit analyst Matthias Raab. “It also reflects our expectation that a material improvement in profitability over the near term could be hampered by intense competition for smartphones and traditional mobile phones, and also by Nokia’s rather weak competitive position for high-end smartphones.”