New Delhi: The sale of Nokia Oyj’s money-losing mobile handsets business to Microsoft Corp. for $7.2 billion came as a surprise to many. Nokia sold the mobile-phone business, an area that the Finnish company once dominated, after failing to respond to shifting customer preferences as they switched to Apple Inc.’s iPhone and Google Inc.’s Android operating system.
In an interview, Nokia India managing director P. Balaji explains how the company plans to regain its leadership position with the help of Microsoft. Balaji declined to speak on the acquisition as he was not authorized to comment on it. Edited excerpts:
Where do you see Nokia India in the next 3-5 years?
In India, we are on a very strong footing and the brand is buzzing. Our devices are doing extremely well. We are making a connect.
The retail and distribution partners are seeing revenues and profits significantly improve. That says that not only do the consumers want us but our trade partners want us, which means we are back in the leadership mix. The operators are extremely happy that we are making the right efforts and our devices are helping them create the stickyness due to the increasing data revenues. If we continue to do these things then I am quite certain the results will be there to speak for themselves.
How does the weakening rupee affect Nokia’s India operations?
There is an element of import on our devices. Even though we manufacture in India, there are components that need to be imported. This means that as the rupee becomes weaker, the device prices might have to go little bit higher. We can absorb as much as we can but at some point of time, it will have to be passed down to the consumer.
As a routine process, we review the prices on multiple fronts. Whenever there is a new launch, you obviously look at it. On existing products, there could be two reasons for a change—the currency or if taxes go up. In this budget, the customs duty went up 5%, and this had to be passed on. Due to the current currency weakening, we have increased our prices 3-8%.
How is the Microsoft partnership working out?
The two organizations work very closely at a platform level. The HERE platform is part of the Microsoft OS, which shows how closely the two organizations are working together.
It also brings the best of innovation on both sides. From the App eco-system perspective, when we started, we had about 7,000 applications. Now have about 170,000.
Both have very strong engineering capabilities—with the mindset of sytem processing among others. So that is the obvious place for collaborations. In this case, it has gone even deeper, where even at the operating system level, we are working very closely together to figure out what is the next service or wow that we can bring to the devices.
Then there is the market-facing aspect. There are many markets where we are collaborating for marketing activities. For instance, in the US, where the operator, Nokia and Microsoft get together and launch products and put money in, to making them successful.
Likewise, in India, there are many situations, either in B2B (businees-to-business) or in some retail initiatives, we dovetail and make sure we can get the best synergy possible. They are very strong on the enterprise side.
We have had many situations where we are doing joint pitches to enterprises and in some cases we are training their enterprise sales team and they are carrying the Nokia Lumia story to their consumers.
How is the Nokia app store doing?
In India, there was a study done on the number of downloads done from the various stores. They estimated it at around 220-230 million downloads a month. The number that gets done on the Nokia store is around 80 million a month. Nearly a third of the downloads are from the Nokia store.
In India, we have a very vibrant developer economy, and the number of people that have been able to monetize using the Nokia store is pretty high. Indiagames was the first to reach 100 million downloads and now it’s around 200 million. It’s getting a lot of traction.
We have also put assets into other things. We have something called the Nokia browser for the feature phones. It’s a unique thing where we are not only saying that its the fastest in the industry—90% faster—which is very important in the Indian context. This is made possible because the data is compacted in the cloud itself, and thereby accelerating the way it gets buffered and delivered to the phone.
We haven’t stopped there. For the operator, we have gone to them and told them we can customize the browser so there are links provided to promote those apps that are important for the operator. Links like over-the-air recharge of prepaid connections.
We are picking up simple ideas and making them more elegant so they add value to the entire eco-system, and the acceptance goes up further.
In a few years, the feature phone is likely to be extinct. Does it make sense to invest in such phones?
India is one of the top three markets for Nokia. Nearly 160 million phones sold last year, of which roughly 25 million were smartphones. Even two years from now, that number becomes 60 million, or better than the best estimates 75 million. That still leaves a 100 million feature phones still selling in India. From India and Nokia’s perspective, its a pure play of full range handsets. It starts from what we call the entry-level phone, the 105 going up to the Asha series and then the 1020, our flagship product. In between, we have some great innovations. We have devices with one key for browsing—first introduced by Nokia with the N9. We are bringing innovations that many thought cannot be done. These are getting fantastic traction.
The phone, in many cases, is the first experience of Internet for people. There are seven billion people that, over time, will get connected. This is a great time to be in the business. The investments we are making since 2011 are absolutely in the right direction. There will definitely be other devices that come in, and the company will look at them when they come in. We keep evaluating consumer trends.
We are starting to do 3-4 new things in feature phones. Like putting smart-like features in them. In our feature phones, we are looking at enriching people’s social and personal lives—Facebook, Twitter etc.—are being packaged into the devices; GPRS or 3G access, along with Skype and other things and in some cases even hard buttons (qwerty). All of these create the smart-like-features in a feature phone. Feature phones with smart-like features is definitely coming up as a major requirement.
We were the first to bring in EMI (equated monthly instalments) at a time when it wasn’t needed. We have a buyback scheme which is extremely high for the entry-level Lumia.
Then there is value creation. In the recently launched 625, it’s not about watching videos, it’s about playing with videos.
We look at it as an investment we need to make to be a full player as there is a huge market opportunity, at least in the next five years.
In India, it’s not enough to have an innovative product but you need to communicate the value proposition in a very simple manner so the consumers make the right choice. We are creating value for the consumers which is not just about the device but also a package of services—a consumer is getting Rs.16,000-Rs.17,000 worth of goodies on a Rs.20,000 device.
You have said that Nokia is in just the right place where it wants to be as part of the transition that began a couple of years ago.
Stephen Elop, our global CEO (chief executive officer), made two statements when he took over in 2011. One, at the high-end our partnership with Windows would be the differentiator. In that context, he talked of three areas, beyond the operating system—imaging, entertainment and location services. These we own as Nokia, and make the difference in the consumer acceptance of the brand.
So, then we started building the product—the Lumia, our high-end device, on the Windows operating system. In the 18-month-period, since the first in December 2011, we’ve launched 12 devices in the series. We have rocketed into the high-end sweepstakes and the buzz is back. We are taking Apple and Samsung/Google head-on in different markets and we have had successes.
Globally, major operators including Verizon, Vodafone, AT&T, China Mobile chose us over Apple. In India, we are seeing fantastic traction. Our numbers have grown disproportionately larger than the market—we are taking share.
The second thing he (Elop) talked about was connecting the next billion—the Internet and the Asha range of feature phones. In 12 months, we have shipped 20 million Asha devices. It has reached top position in its price category in 25 countries.
We are in transition but are taking the right steps forward. Now we are qualitatively taking on all the biggies and, in quantitative terms, selling 20 million in 18 months is the fastest any ecosystem has grown. Consumer acceptance is great and the operators see us as a viable third ecosystem. It’s a strategy that’s working well.
On the services side, the HERE platform—our location service, is unique in many ways. It provides downloads and not just streaming and is a multi-platform service working on iOS and Android also. Beyond devices, almost every major car manufacturer is using the HERE maps. That shows that location services work well as a differentiator.
Entertainment—India alone, the music service (Nokia Music Unlimited) has nearly nine million songs. Operators also find value because consumers are taking to the service and joint billing we have, means operator billing is also available. Consumers can download, and make it available on multiple devices giving more value. Consumers can even use their prepaid or postpaid to recharge the service.
Imaging—it’s not just the hardware which has the pureview technology, but also the software—it’s almost like you don’t need a professional camera anymore. You can zoom to see the minutest detail. When we say let’s bring an imaging experience to the consumer, it’s actually taking it to the next level.
These are elements that I think make me more confident than ever before, that we are stronger, we have consumer acceptance, operator acceptance and the path that our CEO chose, we are chugging along and doing very well.
There will be people who have opinions. But we are saying that from our perspective, we are growing faster than the market and making an impact sufficient for us to say we are successful in execution of our strategy.