CEO Olli-Pekka Kallasvuo forecast yesterday that the 4 billion mobile subscriptions mark will be reached in 2009, a year ahead of previous predictions. He also committed his company, which has a 39% market share of mobile handsets, to increase its share even further in 2008.
Speaking at the company’s annual conference for analysts in Amsterdam, he positioned Nokia for a drive into mobile internet connectivity, particularly in parts of the world with inadequate wired infrastructure.
The market is still in its infancy. Nokia forecasts that the market for converged devices, which add the functions of a mobile phone to those of other devices, will reach 120 million units in 2007 and 180 million units in 2008. This will take the smart phone share of the total market from 10.9% this year to 14.9% in 2008.
Nokia expects continuing growth in the overall market with a 10% growth in mobile device sales in 2008 to 1.21 billion, compared with the 1.1 billion it expects in 2007.
The biggest growth areas will continue to be in the developing world with Nokia predicting expansion above 15% in Asia-Pacific, China, Middle East, and Africa, and below 10% in North America, Europe, and Latin America.
However, while it is looking for an overall increase in sales in 2008, it expects some decline in industry average selling prices with the increasing impact of the emerging markets and competitive factors in the industry. This caused some concern because, while it expects its Devices and Services operating margin to be 20% during the next two years, up from the 19% achieved so far this year, analysts has been expecting it to target 21%.
For the company as a whole it has an operating margin target of 16%-17% to be achieved within the next one to two years, up from its previous target set in November 2006 of 15%.
Our view
Nokia’s share price has doubled in the past year but the company has a far more ambitious target than to be the leading supplier of mobile phones. Internet services can provide a substantial further revenue stream from a vast user base. But many others have targeted this market, not least the mobile operators who are seeking to recoup their investment in 3G. Nokia will need immense diplomatic skills to win them over. The long-term prospects of 4 billion mobile users is far more important than short-term financial considerations.
