Nokia’s New Entry-Level Phones Look Beyond First-Time Buyers

It seems to me that dedicated events for emerging markets are becoming a regular fixture in Nokia’s calendar. They show just how seriously Nokia takes its entry-level phones. From manufacturing to packaging, distribution and marketing, it’s this level of commitment that makes Nokia the dominant phone brand in Africa and India.

On 2 April 2008, Nokia held a launch event in Johannesburg, South Africa. Less than a year ago, it hosted a similar event in Delhi and announced it was refreshing its entry-level portfolio with seven new products, including the 1200, 1208 and the 2630 “Barracuda” phone.

The theme this year is very different, though. It’s long been my belief that many analysts are too eager to lump emerging markets into a single category with little thought given to local market conditions, segments and so on. It’s a dangerous assumption that “emerging market” equals sub-$50, monochrome-screen phones designed for voice and text.

In Jo’burg, Nokia unveiled four new devices: the 1680 classic, 2680 slide, 5000 and the 7070 Prism. They’re all aimed at a growing number of people buying their second or third phone. While ultra-low-tier devices are vital for “connecting the unconnected”, Nokia is looking beyond the initial purchase. I’d agree with its assertion that sales of replacement phones in emerging markets will soon overtake first-time purchases.

The new handsets bring different shapes and features into low-cost phones. They also highlight the huge advantages that Nokia derives from its supply chain and economies of scale. The 5000 has a 1.3-megapixel camera, Bluetooth, FM radio and MP3 player for less than €100 (retail, before taxes and subsidies), while the 2680 slide has a similar set of features and price (€75) to the 2630 announced in Delhi in May 2007. The 7070 Prism is a stylish clam-shell with geometrically patterned cover and keys.

Most significant for me, though, is the 1680 classic — a candy-bar phone featuring a VGA camera for €50. It provides a clear upgrade path for owners of ultra-low-end phones such as the Nokia 1100, 1200 and 1208. This will be critical for Nokia if it is to retain its dominant position in emerging markets. The strength of its brand and users’ familiarity with its phones put Nokia in an incredibly strong position, providing it can continue to attract people as they seek replacement phones and new features and services.

Coverage of the four new phones has focused on how they relate to emerging markets. But it’s becoming clear that Nokia’s strength in these markets is benefiting sales in other regions. The revamp of the entry-level portfolio in May 2007 was followed by a push into the low tiers of the Western European prepaid market in the second half of the year. I expect the phones previewed in South Africa will all feature very prominently in mature markets. Vendors such as Alcatel, Sagem, LG and Fly, which focus heavily on the mid- and low tiers of the European prepaid market, should be looking over their shoulders.