Nokia surges ahead in China and emerging markets

Nokia has increased quarterly sales of mobile phones in China by 40 per cent over the past year, almost twice its average global growth rate, according to CEO Olli-Pekka Kallasvuo. The firm's strength in China, the Asia-Pacific region and other emerging markets has helped keep it firmly in place as the world's largest mobile phone manufacturer, but has also been a factor pushing Nokia's average handset prices below those of any of its major competitors.

The particularly strong growth in China surprised the firm, Kallasvuo admitted. “China was surprisingly strong in the quarter, with 40 per cent year-on-year growth. Again, our estimation of the device markets there was 36 per cent, up two points sequentially and up three points year-on-year.”

“Emerging markets continue to have excellent growth in the quarter with markets like Southeast Asia Pacific, India and Middle East and Africa, seeing extremely strong year-on-year growth in the third quarter,” he said.

Partly as a result of its strength in price-conscious emerging markets, Nokia has the lowest average prices among the world's five major mobile phone makers, according to estimates from Tokyo-based Nomura Securities. Nokia's average handset price fell below $120 in the most recent quarter, compared to prices of more than $130 for Motorola and LG's products, and around $180 for Samsung and Sony-Ericsson.

But Nokia is prepared to go still lower. If competitors seek to break in to markets by undercutting Nokia's prices, the company may respond aggressively, warned Rick Simonson, the company's CFO. “We'll be as competitive as we need to be in all these markets, including emerging markets,” he said.

“In terms of specific markets for the third quarter, year-on-year, Nokia had its strongest share gains in Latin America, China and Asia Pacific,” said Kallasvuo. “Sequentially, we have notable share gains in Latin America and Asia Pacific. In mainland China we have been working flawlessly with China Mobile to penetrate the rural markets. We estimate this has contributed another gain in the market share in the third quarter, resulting in 13 quarters of uninterrupted gains in this market for us.”

China has the world's largest mobile phone market by volume, and one of the fastest growing. According to government predictions, the country will have close to 450 million mobile phone users by the end of the year. Almost 40 million signed for their first mobile phone in the 12 months to July.

As well as selling handsets in China, Nokia has signed multiple network infrastructure deals to supply backend equipment to local telecoms operators around the country. These contracts are typically worth hundreds of millions of dollars each.

Kallasvuo and Simonson made their remarks during a conference call with analysts to discuss Nokia's most recent quarterly earnings report. The company reported third quarter sales grew 20 per cent to $7.75bn, but lower selling prices pushed profits down four per cent to $1.1bn.