Phoney battles, real wars

The azure waters of the Bay of Bengal shimmering in the distance look inviting, with the mid-morning sun beating down mercilessly. The resort in the temple town of Mamallapuram, near Chennai, with its manicured lawns, luxurious cottages and buggies chugging lazily around looks peaceful. It has come a long way, after having been hit by the tsunami in 2004.

Inside, in a well air-conditioned hall, there's a discernible buzz. Nokia's top management team, led by Mr D. Shivakumar, former Managing Director of Nokia India, and now Sr. Vice President, IMEA markets, along with his top management team, in an annual strategy meet, is outlining the path the Finnish handphone major will take to bounce back in the smartphone market.

While it may be hyperbole to say that Nokia was overwhelmed by a Samsung tsunami in the smartphone sweepstakes, it's hurting Nokia that for the first time since 1998 it has lost the number one slot in sales.

In April, Korean consumer electronics giant, Samsung, announced worldwide shipment of 93.5 million mobiles during the first quarter of 2012 as compared with Nokia's 82.7 million. In the fastest growing segment of smartphones in India, Samsung claims a 45 per cent market share by value and is already the leader in this segment. According to CyberMedia Research, the smartphone market grew 87 per cent in calendar year 2011, albeit on a small base.

Nokia, clearly, is scrambling to set the balance right. At its media meet near Chennai, Nokia unveiled a welter of smartphones and services which, it expects, will put it on the comeback trail in the segment where its offerings have been found wanting so far.

Demonstrating the ‘monster' Nokia 808 PureView, which at 41 mega pixel is more camera than phone (typically phones have a max of 8-12 MP), Mr Vipul Mehrotra, Director, Smart Devices, shows a picture of fans at an IPL match in a crowded stadium. Zooming in on a miniscule figure in the first row, the picture shows up as the back of Shah Rukh Khan, as if the picture was taken from two rows behind. No diffused image, but crystal clear.

This phone, Mr Mehrotra explains, has been in the making for five years. Developed using satellite imaging technology, the phone, Mr Shivakumar says, has kept in mind consumer usage. As he told Business Line in an earlier interview “Imaging is big in phones, People snap a lot and transmit a lot. This is kind of a hot leadership credential innovation.”

The PureView phone, expected to be priced around Rs 30,000, will be launched mid-June. The event also saw the launch of a couple of its Windows Lumia phones, the Lumia 900 and 610, which expands its two-phone Lumia portfolio.

Samsung's target

But has Nokia left the launch of its Windows Lumia range too late? Riding on the global momentum, Samsung, has set an ambitious target of capturing a 60 per cent share of the smartphone market in India by value in 2012 from 45 per cent at present. Not wishful thinking, given the Korean company's hot track record.

Mr Ranjit Yadav, Country Head (mobile and IT), Samsung India, says the target will be achieved through a multi-pronged strategy, including creating new categories. For instance, the handset maker has created a completely new market segment called ‘phablet' with its Galaxy Note, a device that's a cross between a smartphone and a tablet.

Samsung sold over 5 million units of Galaxy Note within the first five months of the launch. “India is one of the top three strategic markets for Samsung. We continue to strengthen our product offering to our Indian consumers by launching innovative smartphones across different price points and multiple platforms,” Mr Yadav told Business Line . The handset maker has already launched 19 models in the smartphones category.

For Nokia too, China and India are its largest markets and India, where it saw its share of the handphone market decline to 31 per cent from over 70 per cent five years ago, is expected to be the centrepiece of its turnaround.

Nokia expects its services bundled with the Lumia, such as Nokia City Lens, Transport, for public transport information, and Nokia Music with Mix Radio, a free mobile music streaming and offline listening apps, to strike a chord with its users.

Nokia's Mehrotra, who has worked on the Lumia project right from scratch at the HQ in Finland, is clearly excited about City Lens, which rides on Nokia Maps. Pointing his phone in a general direction, the information on restaurants, stores for artefacts and other places of interest around the resort in the temple town pop up on the screen. It can even show points of interest to a distance of 25 km. Mehrotra says one can easily discover places to visit in the vicinity. Eventually, he says, since City Lens uses GPS, Nokia will know which are the places visited most frequently and will feed in a 3 D image as well as give it a rating as a must-visit place. All possibilities for the future.

Where did Nokia fumble?

The top-of-mind question that one puts to Mr Shivakumar is how did Nokia takes its eyes off the market? Did it not see the smartphone revolution sweeping the country? Says he: “The key is you've to be innovative and lead the consumer. It's a hyperactive market that needs consistent innovation. We could not do that for a while and that's why competition overtook us. We now hope to lead innovation with our new Lumia range; it's a constant game.”

But, as he points out, the market can't write off Nokia yet. He points to the dual SIM category, where it entered late but captured the market in a year's time. “We expect to do the same in the smartphone market,” he adds. According to CyberMedia Research, the dual SIM market grew 61 per cent in the last year and now makes up 57 per cent of the total Indian mobile phone market. Nokia claims a 13 per cent share in this market, pushing back brands such as Micromax and Maxx which had ruled the roost in dual SIMs.

Operating systems

The task is cut out for Nokia. The other big play from Samsung is to bet on multiple operating systems. While other phone makers, including Nokia and Apple, have bet on a single platform, Samsung is offering customers a wide portfolio of products across Android, Windows and Samsung's own Bada operating system. Referring to to its Windows-based Lumia phones, Mr Shivakumar says, “A new operating system is like a new religion.” Users will take time to adapt. “But we are growing the Microsoft ecosystem in India. A year from now, you will see a very different company. The Windows OS is at the stage that any other OS was in its life-cycle,” he emphasises.

The fact remains, though, that tech-savvy young Indians have taken to Android phones like ducks to water. And part of Samsung's gameplan is to customise its devices to Indian tastes. For example, the recently-launched Galaxy SIII offers users India-oriented applications from its ‘Samsung Apps' store. “Our focus is on enhancing the consumer experience with the device, whether it is in terms of the device or at the retail level, where the consumer experiences the product. That is the reason why we have, over the past one year, set up more than 300 Smartphone Cafes in different parts of the country,” Mr Yadav says.

Numbers show that the strategy is working for Samsung. With a 45 per cent market share, the Korean major is already the leader in this segment in terms of value. In terms of volume too it's gaining share.

In 2010 Nokia enjoyed a market share of 72 per cent of the smartphone segment in India by volume but in 2011 this dropped to 38 per cent according to Cyber Media Research. In comparison, Samsung's share in the volume game moved up from 5 per cent to 28 per cent. The smartphone's contribution by volume to Samsung's total mobile volumes last year was 15 per cent. This year, the company is expecting this number to grow to around 30 per cent.

But this does not mean that Samsung has won the battle. As a top official of a consumer goods company pointed out, the Nokia brand is a hugely trusted one with wide brand awareness. Millions of Indians use simpler versions of Nokia phones and could well upgrade to superior Nokia phones.

The Indian smartphone segment accounts for just about 11 per cent of the overall pie. This is expected to move up to 30 per cent by 2015. Clearly, the battle for supremacy in the smartphone market has only just begun.

COMMENT NOW