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Cablegate: Nokia: Finland,S Economic Dynamo Looks to The

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R 120719Z FEB 08
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TO RUEHC/SECSTATE WASHDC 4060
INFO RUCNMEU/EU INTEREST COLLECTIVE
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RUEATRS/DEPT OF TREASURY WASHDC

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E.O. 12958: N/A
TAGS: PREL EFIN ECON FI
SUBJECT: NOKIA: FINLAND,S ECONOMIC DYNAMO LOOKS TO THE
INTERNET AND DEVELOPING COUNTRY MARKETS TO STAY ON TOP


1. (U) Summary: The Nokia transformation from a tire and
boot company to a telecommunications powerhouse in just 20
short years is legend in both Finland and the industry.
Nokia and the support industry it spawned account for nearly
20% of Finland,s economy. At the end of 2007, Nokia sold
1.5 million phones every day and exceeded for the first time
the 40-percent market share of worldwide mobile phone sales.
To sustain its global position, Nokia has set its sights on
selling a high volume of low end phones at cheap prices in
high risk emerging markets. It is also betting heavily on
introducing mobile internet and online banking capabilities,
enabling Nokia users to bypass traditional personal computers
completely. End Summary

A brief history of Nokia
========================

2. (U) The Finnish mobile giant began its operations in the
small town of Nokia as a wood-pulp mill in 1865. Shortly
after World War I Nokia merged with Finnish Rubber Works and
Finnish Cable Works; the new Nokia Corporation concentrated
on paper products, rubber tires, rubber footwear, and
eventually televisions and personal computers. In 1992, the
now-legendary CEO of Nokia Jorma Ollila made a strategic
decision to concentrate solely on telecommunications. An
ensuing boom in mobile phone demand in the mid-1990s rocketed
Nokia to the top of the mobile phone market. Today, Nokia is
the world,s largest and most successful manufacturer of
mobile telephones, with a global device market share of over
40 percent spanning more than 200 countries. Already
controlling 60 percent of the market share in China and 85
percent in the Middle East, Nokia is now seeking alternative
sources of profit in emerging markets. Despite its successes
around the world, Nokia has struggled to expand its presence
in the U.S. due to tight control on mobile devices by the
primary mobile communications companies.

Innovation and integration
==========================

3. (SBU) Economic section intern met with former Nokia
Enterprise Solutions VP Susan Macke to discuss Nokia,s
significant investment in developing markets. Although risks
exist with this growth strategy, Nokia has already enjoyed a
significant return on its investment in many developing
markets. Nokia, like its competitors, is seeking to
transcend individual markets and integrate other services
into its existing portfolio. The hope is that through
marketing, branding, and customer retention, long term
profits will extend far beyond the initial investment costs.
According to Macke, Nokia is also committing significant
energy to developing its mobile internet capabilities.
Ultimately Nokia believes it has the ubiquitous device for
offering Personal Computer (PC) services to an ever expanding
population of customers. In fact, Nokia,s goal is for many
users to have their first PC experience via a Nokia brand
mobile phone. Additionally, Nokia and Citibank recently
announced a mobile banking initiative that will permit
financial transactions to be performed via mobile phones.
For emerging markets, this means that plastic credit cards
may become obsolete. Likewise, consumers, first online
banking or &credit8 purchases in these emerging markets
will be with a Nokia phone. According to Macke, online
advertisers are excited about the interconnected, always-on
future of mobile communications.

Networks: Going Online
======================

4. (U) The Nokia/Siemens partnership, a 50-50 joint venture
established in June 2006 between Nokia,s Network Business
Group and Germany,s Siemens is helping Nokia enter emerging
African markets. According to Macke, Siemens, strong
history with African network providers helped Nokia
capitalize on these rapidly growing markets. Infrastructural
reconstruction projects also provide Nokia opportunities to
test the latest technology, such as the Ethiopian HSDPA
network that offers higher speed connections than those
offered by many developed countries. Macke reports, however
that local network providers are nonetheless becoming very
competitive, such as in Kenya and South Africa, so it is
becoming increasingly difficult for foreign companies to
penetrate some markets. Additionally, recent political
unrest in Africa is contributing to commercial uncertainty.

Comment
=======

5. (U) Nokia,s dominance in the mobile phone industry was
confirmed recently by its stellar 2007 fourth quarter results


which led to a nearly 15 percent rise in its share price.
Nokia has solidified its position as the leader in emerging
markets, especially China and India, and is making strong
inroads in Africa. At the same time, Nokia,s multimedia
unit, which sells advanced phones aimed at consumers in the
developed world, more than doubled its operating profit from
a year ago. Its top-of-the-line N95 phone, often seen as the
key rival to Apple,s new iPhone, was the top profit
generator for the group in the last quarter of 2007. Nokia
has sold some 6 million N95s so far, compared with 4 million
iPhones to date. Its challenge, as is true throughout the
industry, is to remain on the cutting edge. Macke wonders if
the current management team, which largely led Nokia,s
transformation from a tire manufacturer to a mobile phone
powerhouse has the ability to also make Nokia the mobile
PC/Internet company of the future. End comment.
HYATT

© Scoop Media

 
 
 
 
 
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