Nokia under threat in Africa
A downgrade by credit ratings agency Moodys and disappointing first quarter results have pushed the world’s biggest handset maker Nokia into a tight corner.
The Finnish company late last week reported an operating loss of $1.8 million in the first quarter of 2012, illustrating its struggle to compete against Apple’s iPhone and Google Android devices, such as Samsung’s Galaxy S2.
Last year, Nokia even ditched its Symbian operating system and teamed up with Microsoft to adopt Windows Phone 7 as its preferred smartphone software: a move aimed at boosting its flagging market share in this segment.
This play from the phone maker, though, had seemingly little effect on turning around the company’s prospects. A Reuters report said Nokia had just a 1% share of the US smartphone market at the end of 2011.
Nokia’s global business has clearly taken a knock, but it is hanging on in Africa, where it dominates the world’s fastest growing mobile market.
A Gartner report says Nokia has a 65% mobile phone market share across all Africa - the continent’s mobile users number 500 million, according to a Booze & Co. report.
Feature phones, or basic handsets designed purely for making calls and receiving text messages, are Nokia’s biggest selling devices on the continent.
Nokia has even unveiled its Asha feature phone range in Africa, as the company aims to further push up sales in this segment on the continent.
“Honestly, emerging markets like India, China, Africa and South America are what is going to drive Nokia’s device sales and pricing is going to be their biggest challenge, said Jonathan Hoehler, chief technical officer and business analyst at Starfish Mobile International.
But even pricing could be Nokia’s weak point going forward, as cheap Chinese handsets begin flood the continent.
Low cost devices from China, such those from Huawei and ZTE, are beginning to penetrate the middle and low end of the market, eating away at Nokia’s share in this segment in Africa, say experts.
Dobek Pater, a senior analyst at Africa Analysis, says Nokia continues to fall behind its competitors on the continent as a result of battling to compete against these devices.
Pater adds that the company has experienced a 17% drop in the fourth quarter in 2011 in terms of its total mobile sales in Africa.
And it’s not just competition feature phone market in Africa that could have those at Nokia concerned. More Africans are buying smartphones as well.
Chris Ngwenyama, telecoms analyst at African Analysis, says, “The popularity of BlackBerry Internet Services has managed to increase the uptake of BlackBerry devices across market segments in Africa and low-cost, entry level touch screen smartphones from other manufacturers will be fierce competition for Nokia.”.
For example, Research in Motion’s BlackBerry phones make up 70% of the smartphone market in South Africa, according to Vodacom.
Nokia’s failure to adapt to the changing feature and smartphone landscape could hurt the company in the long term in Africa and globally, experts say.
“Nokia will have to sort out its smartphone segment,” Hoehler says.
“Or else they are going to be left behind - even worse fade away like Motorola did in the last 3 to 4 years.”
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