Nokia fires entry-level salvo in market battle

Set to be rolled out in the third quarter of this year are the Nokia1110 and the N1600, which will be priced lower than the handset manufacturer's middle- to high-end products. The handsets emphasise ease-of-use, reliability and affordability. The N1110 has a black and white display, while the N1600 will feature a colour interface.

Both include a 'demo feature' which allows first time users to navigate the various functions of the phone. Both phones will also offer a 'prepaid tracker' system, which eliminates the need for users to contact the operator for account information and balances. Nokia said the handsets are targeted at first-time users and consumers in growth markets, including China, India, Indonesia and Vietnam.

Industry analysts said the emerging markets are becoming increasingly critical for the major mobile handset players. Asia-Pacific research company IDC's figures reveal the 2004 penetration rate for mobile phones in India was 4.5 per cent, compared with China's much higher rate at 24.5 per cent.

China's higher prevalence of mobile phones is reflected in 2004 adspend figures released by Nielsen Media Research. Of the US$373.3 million spent in total across the television, newspapers and magazines, $272.6 million was spent on television, with print the next highest category at $79 million. In terms of the rankings, Nokia leads the way on adspend, followed by Samsung and Motorola.

But industry pundits said major players like Nokia would face a difficult challenge in maintaining a balance between offering cheap, entry-level handsets while at the same time creating a healthy bottom-line.

"It remains to be seen in the market how much profit it can make from selling phones at a low price," said IDC market analyst Aloysius Choong. But Choong added that while profit was a factor in the handset manufacturer's move into the emerging markets, there were other equally important advantages. "All the users that bought the cheap and low-end mobile phones, may be upgrading to higher-level handsets," he said. "What the handset makers have in mind is not just the market right now, but building brand loyalty for the next generation."

Choong said there were other challenges facing manufacturers in expanding into China's second-, third- and fourth-tier cities, such as efficient distribution channels and the quality of available networks, especially in rural areas. But he was optimistic consumers would benefit greatly from a wider range of cheaper handsets flooding the market as the companies fight for market share.

"This is where there is a need to lower the price points of the handset," he said. "It is possible for prices to go lower and lower."