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SIPDIS 
 
SIPDIS 
 
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