New Delhi: After spending years on telecom network equipment business, P. Balaji moved to the handsets business with Sony Mobile and then joined Nokia India as managing director in October. Balaji has since been spearheading Nokia’s handsets business as the firm tries to stave off the steady loss in market share. In an interview, Balaji comments on the growth potential of the Finnish phone maker as India enters the age of data-driven communication. Edited excerpts:
It has been four months since you took over as managing director of Nokia. Give us your perspective of the mobile handsets market as it stands today.
It’s a very vibrant part of the ecosystem and Nokia is still a very strong brand in India, both on the youth front and the overall trust part of it. The devices space is an ever evolving one and one has to be on top of the business more. Though all the aspects of the ecosystem are as important, devices is something you monitor a lot more.
Is the devices segment in the midst of a transition?
Two years ago, the journey on smartphones had started and very few were sold. The market was still about feature phones and entry phones. That momentum is continuing. Most analysts will tell you every second or third device will be a smartphone. It means that players like us have to not only focus on the device and what it can do, but also what people can do with it. This means a focus on services we can offer among others.
While Nokia has the Asha series that makes up the low-end and Lumia as the high-end, many analysts say Nokia needs a middle segment of phones priced between Rs.8,000-14,000.
Margins are there across the spectrum of devices, wherever you add value. We have a very compelling portfolio today, especially in the India context. The eight phones on the Windows platform we have launched in the last 16 months and the 14-15 devices in the Asha range, the affordable smartphone, comprise a full portfolio. It straddles the affordable, lower-priced handset to the higher end, where the Lumia comes in. The range is complete and, therefore, it gives us a very strong compelling portfolio to work with a strong brand, putting us in a compelling position to grow in India. The Asha 305 is the number one smartphone by volumes in the country. Between Asha and Lumia, we have covered the whole range and we are very happy with the acceptance they are getting by consumers.
Around two years ago, Nokia came out with a renewed strategy. How has it done so far?
At any time when you start to work with an ecosystem, you set certain goals. We said we were a company in transition openly and we made investments during the transition which are starting to pay off. We built a portfolio that straddles a wide price range with innovations for consumers to look at us seriously. We also built a full touch portfolio. All of these with the intent to create differentiation. The differentiation is the way we work at the hardware and the software level and bring both of them together, and also in the services space. We started with investments in assets around imaging, music and entertainment and on location. We end up having a success recipe that works well for us. That’s where we are; we have results to show now. The successes tell us we are on the right track.
The choices that consumers make are based on what value they see in the devices and they are choosing Asha and Lumia. We are satisfied with the progress. In 25 countries, the Asha touch is the number one smartphone.
Is there any part of the strategy that needs more work?
We continue to work on our portfolio of devices and services. We need to continue to work on our marketing and distribution. We need to continue to be mindful of our competition. It’s a never-ending essay. We are on the right track and going in the right direction. There’s always scope to do more.
The music service that we offer is now 7.7 million songs, with 10 million downloads a week. That’s 12 songs a second in India. Similarly, store downloads—several studies have said that over 60% of the downloads in India are happening from the Nokia store. Those are two very strong proof points that our services investments are working very well.
Operator billing, where operators are very demanding before they say they will extend operator billing to you, for us to be the first to get operator billing for music tells us that they do value what we bring to the table. Our investments on the entire portfolio is paying off quite well.
We made some investments on Nokia life tools, which is also evolving from SMS and IVR-based (interactive voice respnse) to GPRS access-based (general packet radio service), has over 10 million active subscribers in India alone.
While there is room for us to do more, there are a lot of things that are going right for us and we are not unhappy with where we are.
We have been hearing of a data explosion coming for a while now. Hasn’t it happened yet?
Every ecosystem player is doing their best to make this work. Be it the operators or VAS (value added service) players or us—we are all working very hard to make it happen. When you bring affordability to a new low, it allows people to be exposed to Internet much easier, as access becomes much easier. If operators do data bundling then they are also helping that. When we do various innovations, it helps take it to lower price points. All of these things are enabling platforms.
The hockey stick (graph) takes a little while. It takes some time, but when it happens, people say we told you so. But that inflection point happens for different things at different times. There were studies done for voice which said that when it hit 10%, the hockey-stick effect starts to come in. It’s difficult to put a number for data, but that fact that it is kind of doubling from a low base is a start, and then the double becomes even more significant as we can see what happened with voice. It will happen—with the proliferation of devices, services, innovation at lower price points.
People are not just looking for devices but what they can do with their devices. An average smartphone user has two and a half hours on the phone, on a base of 25-30 million, means people could be on it for more than five hours. The 15-25 segment with access to a smartphone comes back from school or college, are onto it as it is an important, essential part of their lives. That is the direction we are taking. That is the kind of viral consumption that is only going to proliferate. There’s a cultural change that is building up and it augurs well for the industry.
It’s not to say that SMS or voice will lose importance, but the new generation that is coming in is spurring a behaviour which is very different from what it was three-four years ago. It’s spurring its own set of innovators in that space. When it starts to grow then we expect it to grow even faster.
Most of your portfolio is made up of 3G-enabled phones but not all. Does it still make sense to have 2G phones?
There is a market, at the low end, for 2G phones. Today, on 2G or 2.5G there is so much you can do, using GPRS or even cloud service innovations. It’s about price points, segments. The total number of 3G subscribers is small compared to the potential there is. It’s more an adoption thing.
What about the 4G?
There are a number of operators that offer 4G devices. We offer 4G FDD (frequency division duplexing—a form of 4G communications technology). We are in conversations for TDD (time division duplexing). When the networks come up and when there is critical mass to it, there’s still time. We are active on the standards part of it, as that is an important part of our business. At the same time, we keep a very close watch on the rollout by various telecom companies. But we have to prioritize those which are here and now. As an industry, if the operators are rolling out FDD-based networks already, then it’s important for us to meet that real demand and keep an eye out for demand from future technologies that are coming.