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Nokia Expands Footprint in China

Mar 31, 2003 (NewsFactor.com via COMTEX) -- Launching a major push into the Chinese wireless market, Nokia (NYSE: NOK) announced that it will begin manufacturing CDMA phones and combine its four joint ventures there, in an effort to solidify its position in an increasingly competitive region.

China is widely recognized as having the most short-term growth potential for handset manufacturers in a world of otherwise mature, replacement-driven markets. According to Nokia, there are some 215 million wireless subscribers in China, with the number expected to soar among a population of more than one billion people.

Creating a Wireless Giant

China is the Nokia's second largest market, behind only the U.S., Kari Twtti, a spokesperson for Nokia Mobile Phones, told NewsFactor. The mobile phone giant did about US$3 billion in business in China last year.

"The Chinese market is hugely important to us," Twtti said. Combining the four joint ventures will create the biggest manufacturer and exporter in the mobile telecom industry in China, he added.

The new company will be headquartered in Beijing and will produce CDMA handsets using Nokia chipsets, as well the GSM phones and wireless infrastructure equipment currently delivered by the individual firms for local markets. Nokia will be the major shareholder of the new company with 60 percent ownership.

Targeting Motorola

China Unicom, China's second-largest wireless carrier, is the only operator in that country that currently uses CDMA along with GSM.

Nokia, the world's largest phone manufacturer, trails Motorola (NYSE: MOT) in China mobile phone sales, with the U.S. company producing an estimated 50 percent of all its handsets in that country.

Nokia recognizes that China is the one major market that will show significant growth in the near future, said Aberdeen Group wireless technology analyst Isaac Ro. There is a lot of network build-out still to be done there, he told NewsFactor, which is the traditional point of entry into a market.

"With the infrastructure in place, Nokia can start selling its handsets, and while they have been weak in CDMA phones, they want to grow in that area," Ro said. But, he added, Motorola has a commanding lead in Chinese phone sales.

Local Commitment

Consolidating the four joint ventures in China should improve manufacturing efficiency for Nokia Networks and Mobile Phones and facilitate Nokia's entry into the rapidly growing Chinese CDMA market, Yankee Group analyst John Jackson told NewsFactor.

"More importantly, though, this move underscores the importance of communicating a long-term commitment to the local market," he noted.

Ro predicted that Nokia's move will be followed by similar initiatives by other wireless communications companies looking to capitalize on the lucrative market. "Although the per capita income is low, there is still a staggering number of potential customers therrs there, and it is easier to sell there than it is in a lot of other areas," he said.

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