The world's top mobile maker, Nokia, increased its handset sales in China by 40 percent year-on-year, almost twice its average global growth rate.

 

It was a surprisingly strong performance, beating even Nokia's estimates in a handset market that has become overcrowded with more than 70 manufacturers and nearly 2,000 models on the shelf.

 

Continuing gains in China have put Nokia firmly in the top spot in the global mobile phone industry.

 

In the past month, Nokia has also experienced a major reshuffle. On June 1, Olli-Pekka Kallasvuo, former head of the mobile phone division, replaced Jorma Ollila as the company's Chief Executive Officer.

 

Last week, the company appointed Colin Giles, head of Nokia's customer and market operations in China, as the new president of Nokia China. Giles will replace David Ho, who will move to the planned new company Nokia-Siemens Networks as chairman of the China region.

 

Furthermore, on June 19, Nokia formed a 50-50 joint venture with Siemens by combining their respective network equipment business, which is expected to be operational January 1.

 

The company hopes the moves will better align Nokia's operations both globally and in China.

 

Kallasvuo on November 9 spoke to China Daily about how Nokia will better attack both the mobile phone and telecoms equipment markets in China. The questions (Q) and answers (A) follow.

 

Q: When announcing Nokia's third quarter financials in October, you said "China was surprisingly strong in the quarter." Emerging markets such as China and India are contributing a lot to Nokia's global operations. What are the new growth opportunities in China for Nokia?

 

A: China is an interesting market in regard to mobile devices.

 

On one hand China is an emerging market because there is a lot of potential for new penetration.

 

We estimate that by 2010, there will be 160 million new subscribers to the network. In that way, it is a market where there is a lot of penetration potential.

 

But then if you look at the market on the other hand, it is also very sophisticated regarding devices and what people want to buy in the marketplace.

 

The Chinese consumer is interested in all segments of the market. And all price points are relevant in China.

 

For example, there is a strong market for multimedia, high-end and high-tech devices. We don't call these phones, but multimedia computers. In that way, China is a developed market as well.

 

It is an interesting combination: an emerging market and a very developed market.

 

In Nokia, we are working at all price points and in all market segments.

 

I think we have a very well-balanced portfolio of products. This is especially important in China.

 

Q: It seems that Nokia was not the first in the market for some models with cool features such as super-slim design and e-mail capabilities.

 

How is Nokia maintaining strong performance even though it's not the first mover?

 

A: Looking at the market, new features are important and we must be very active to ensure that our new features are the first in the market. That's where we can become even better.

 

And we have a lot of on-going activities to gain even more speed in product introduction.

 

At the same time, I have to emphasize that it's very important especially in China to have a full and complete product portfolio.

 

We have done a lot of work in order to understand consumers in different markets and we have done extensive work in order to come up with a complete segmentation model and to know about different consumer segments in different markets and know what appeals to these consumers.

 

We have interviewed more than 40,000 people, and have more than 6 billion data points. We use these when deciding and marketing our products.

 

Consumers are different. That's true for China, India and the United States. And even inside China consumers are different.

 

At all times we have to get a portfolio of different products to sell to different consumers. This is very important.

 

So getting products, getting more speed, managing a complete portfolio and having insight into consumers are very important.

 

Q: We know Nokia is very conservative about commenting on competitors. Still, what is your comment on Motorola's ambitious goal to overtake Nokia within 1,000 days? What is the gap between Nokia and Motorola? Earlier this month, Nokia won a major equipment contract from Guangdong Mobile. That marks a breakthrough for Nokia in Guangdong's mobile market, a territory previously dominated by Ericsson.

 

What is your comment?

 

A: We take all competition very seriously and there is a lot of competition in the marketplace and in the networks market.

 

If you look into the third quarter, our share of the global handset market was 36 percent, and that is a lot bigger than that held by our closest player.

 

In the Chinese mainland, we have gained market share during 13 consecutive quarters, so we have made very good progress in China.

 

I continue to be very conservative in commenting on competitors. But we must take every competitor very seriously.

 

When it comes to Guangdong, I am very happy that we were able to break through and penetrate that province, and it is a good illustration of the very good momentum that we have there.

 

And of course we are working very hard to build on that momentum.

 

Q: Nokia's increasing penetration in the low-end handset market has caused concerns about the decline of the ASP (average selling prices). What do you think of this trend?

 

A: I strongly believe that to be the market leader you must be active in every area. You have to be active in low end, high end, and intermediate as well. That continues to be our strategy.

 

If you are strong in one part that doesn't mean you will be strong in other areas. Because of that we will push all phones at all levels.

 

Think about if you sell the first phone to somebody, an entry-level phone, and then the consumer is happy with the quality and the design, so you celebrate brand opportunity.

 

When upgrade time comes, the consumer will remember that and you can generate brand loyalty in helping to go forward.

 

It is very interesting if you look at brand loyalty. A survey by Media advertising and marketing magazine "Media" and research company Synovate found Nokia is the No 1 brand in Asia, beating every other brand in world. I am really happy about this amazing achievement.

 

Q: The telecoms equipment market appears to be increasingly competitive. Do you have plans for new acquisitions or mergers in the near term?

 

A: After combining the network business with Siemens, we are very much in the same league as Alcatel-Lucent and Ericsson. Our ambition is of course to be number one in the market.

 

All in all, Nokia-Siemens Networks is an illustration of Nokia's continued willingness to invest into this business.

 

When it comes to the acquisitions question, we, in this new world where there is much complexity and opportunity, we will definitely continue to look at partnerships and acquisitions quite actively, especially in the areas of multimedia, on one hand, and enterprise business on the other.

 

(China Daily November 15, 2006)