Nokia: The revenant

The phone looked like a clunky old brick but it was still the ultimate symbol of cool in the 1990s. Long before slick smartphones and touch-screen technology entered our lives, you flaunted the Nokia 5110 to say you’d arrived. You couldn’t do much with it apart from making or receiving calls and text messaging, but, boy, did it give you some serious bragging rights. For the longest time, a Nokia was almost everybody’s first phone. It was so easy to use even your grandparents loved it. Moreover, it was almost indestructible; you could drop it on the floor any number of times and it was still forgiving. No wonder the handset maker from Finland dominated the Indian market with a huge 60% share for around 15 years.

But all good things come to an end, they say. And Nokia, which saw its turnover increase almost fivefold globally from €6.5 billion to €31 billion between 1996 and 2001, also hit the end of the road at some point. The beginning of its end was in 2007 when Apple launched the iPhone, which went on to become a style icon across the world. To be sure, it didn’t immediately disrupt the market and Nokia’s devices still accounted for over 60% of the global market at the end of 2007. But a year later, Nokia’s share shrunk to 40% and as the smartphone market kept expanding, iPhones and Android-based devices steadily took over the market. Nokia’s market share dived below 30% for the first time in the fourth quarter of 2010.

Even then, it was the market leader. But the writing was on the wall. In the quarter ended July 2011, Apple emerged as the world’s leading smartphone company with shipments of 20.3 million iPhones against Nokia’s 16.7 million, according to technology website cultofmac.com. The Finnish company was forced to fire around 10,000 employees and hive off divisions to sell to different players. Its smartphone division was sold to Microsoft in 2014, who went on to drop the Nokia brand from its phones. Soon, there was no Nokia smartphone in the market.

India was no different. As Apple and Samsung muscled their way into the cellphone market, the market share for Nokia’s Symbian devices fell to just 4.4% in the second quarter of 2012. Its sales also slid dramatically as a host of other brands such as Micromax and Xiaomi entered India. Market tracker IDC’s research director Navkendar Singh says Nokia was complacent while Samsung and Indian brands such as Micromax and Lava began aggressively courting customers. To make things worse, it picked the relatively user-unfriendly Windows platform while the world was turning towards the easier-to-use Android platform. “They were resting on their laurels and thought that the brand would be bigger than the whole experience,” says Singh.

Around three years ago, Nokia stirred to life again: In the middle of 2016, HMD Global, a Finnish startup set up with former Nokia employees, acquired the rights to use the Nokia brand name. By early 2017, the smartphones were back in the market. Resurrection is in Nokia’s DNA, says Ajey Mehta, vice president and region head, APAC and India, HMD Global. “If you go back into Nokia’s history, it has reinvented itself and come back even stronger,” he adds. He says he learnt a Finnish word sisu in the 14 years he has spent with the brand: Sisu basically means not giving up. Over its history, Nokia has not given up but reinvented itself periodically: The company behind Nokia was founded in 1865 in Finland as a paper company; since then, it has continuously shifted gears from paper to rubber to robotics to chemicals, and finally electronics and telecommunications in the 1970s.

In its second avatar, Nokia phones—built by Foxconn, powered by Google software, and designed and marketed by HMD Global—were relaunched in 100 countries. HMD Global is focussing on three countries—China, the U.S., and India—but its biggest bet is on India. According to Pekka Rantala, executive vice president and chief marketing officer of HMD Global, India is its biggest and most exciting market. It makes sense to focus on India, considering it’s the biggest smartphone market with nearly 350 million users and counting. According to an Assocham-PwC study, the number of smartphone users in India is expected to reach 859 million by 2022 at a compound annual growth rate of 12.9%. The U.S. and China markets, on the other hand, are slowing down. “Our choice is to focus on India followed by the U.S. when it comes to these big three markets,” says Rantala.

According to Singh, India is an important market for any player for three reasons. First, there aren’t many 100 million-plus markets that are growing at close to double digits. Second, there is huge room for growth as around 500 million Indians still use feature phones and are likely to move to smartphones soon. Third, the government is giving incentives to make in India and firms can also think of the country as an alternative export hub to China.

Already, Nokia is among the top 10 smartphone companies in India. But it’s still at the bottom end with a market share of just 2.4% in the second quarter of 2019, way behind Xiaomi’s 28% or Samsung at 25%, according to analytics firm Counterpoint Research. Still, Counterpoint calls Nokia one of the brands with the highest year-on-year growth. Last year was particularly good, with the company hitting a high of 3.5% market share in the December 2018 quarter, in the 147-million smartphone market. This was followed by a dismal 1.7% share in the first quarter of 2019, which Counterpoint Research associate director Tarun Pathak attributes to a shift in HMD Global’s product strategy.

Rantala, who will be moving out at the end of September after being with the brand for close to 20 years, is unfazed by the competition or market share battle. He says the company is laser-focussed on what consumers want. For example, it found the two pain points many smartphone customers had were a sluggish user interface because of a customised version of Android and the battery running out. He says HMD has focussed on getting these aspects right (more on that later). “It is a very competitive market, but I believe we can offer something which is unique for the consumers,” he says.

How is Rantala so confident about Nokia in India? For one, the company is hoping to cash in on the sense of nostalgia that Nokia evokes among some customers whose first phone was a Nokia. But that won’t be enough. “We wanted to make sure that everyone understands that we didn’t come here just to live in the past but live this moment and the future,” Rantala says. Mehta reveals that three-quarters of their customers are young millennials, a very unforgiving band when it comes to matters of taste, who have never experienced the brand. No wonder that millennials and the younger generation—generation Z—are at the centre of Nokia’s marketing strategy. The aura around the brand hasn’t disappeared due to its absence. “Every new brand has to spend millions of dollars on brand building exercises for the first two-three years,” says IDC’s Singh. “Nokia did not need to do that.”

But why would millennials spend on a brand they hardly know, especially when they can choose from way cooler brands in the market? Sure, a Nokia smartphone at a starting price of around ₹5,000 is much cheaper than an iPhone which only begins at ₹28,000, but since when have millennials cared about prices. So, HMD Global is leveraging Nokia’s reputation for making quality devices with a premium feel. It is hoping to make its new ‘getting better with age’ mantra its USP in India. And it has gone with stock Android, which is offered on Google’s more expensive Pixel phones. “We are the only other player who in a sense brings that Google Pixel experience and makes it accessible to every consumer at every price point,” says Pranav Shroff, director of global portfolio and strategy planning, HMD Global. Every smartphone, he explains, has planned obsolescence built-in. In other words, as smartphones age, they becomes slower and slower until they reach a point when you must replace them. HMD Global wants to turn the strategy on its head: With regular software updates, the phone will start getting better with the upgrades, Rantala says. ‘It just keeps getting better’, HMD Global’s new tagline says. And as it hasn’t used a customised version of Android, the user interface is also faster, Shroff adds.

In an industry where planned obsolescence is the norm, we are bringing to our consumers a promise of two years of OS [operating system] updates and three years of monthly security patches... irrespective of the price of your Nokia smartphone,” says Florian Seiche, chief executive of HMD Global.

However, there is a glitch in this strategy, I tell Rantala. If the phones stay fresh, why would people upgrade? You can always hand over the old phone to your family, he tells me with a glint in his eye. “The parent can hand it over to the child, who gets a fresh and as-good-as-new phone,” he says. He calls it the ‘happiness cycle’—a lot of happy advocates who are sharing this news about the brand. And it’s important since 50% of buying decisions are influenced by word of mouth.

Still, that might not be enough to crack the crowded smartphone market where big brands like the OnePlus and Apple are jostling for space. So, Nokia is taking a multi-pronged approach to India: It is also focussing on the cheaper feature phones, a segment where it has been very strong traditionally. It is among the top five manufacturers in the country where 187 million handsets are sold a year. Feature phones still account for a large chunk of India’s total cellphone market because they are cheap—you can get a feature phone for less than ₹1,000. They are especially popular among older people as well as lower middle class, small-town, and rural customers who are looking for just basic connectivity but don’t want to fork out a lot of money. According to Counterpoint, while the feature phone market declined 39% year-on-year in the second quarter of 2019, Nokia grew its share to 9% while market leader Jio was at 28%. Despite that, Counterpoint calls it a $28-billion opportunity in the next few years. IDC’s Singh says if HMD Global wants to stay in the smartphone market for long, it should stay invested in the high volume, low-margin feature phone market because when the time comes for a feature phone user to upgrade to a smartphone, she will often stick to a familiar brand if it has been a good experience.

Let’s get back to smartphones again. One of the biggest factors that influence buying decisions is the debate around specifications versus price. HMD Global might find it tough to be heard amid the din as most players are aggressively marketing the specs of their phones. “The whole USP is broken down into the batteries, the RAM, and the cameras,” says IDC’s Singh.

While HMD Global is getting there, it’s still difficult to explain to consumers how a stock Android phone with a lower capacity battery is better in the long run than a phone with a higher capacity battery but running a customised version of Android. It is increasingly difficult to convince the evolved online customer who accounts for 35- 40% of the buyers. So, the challenge for HMD Global is aggression in terms of giving high specs at prices relevant for the customer, Singh explains, adding that the company has been mostly conservative, banking more on the brand, the design language, as well as the camera. In the online space, HMD Global’s tie-ups with Flipkart and Amazon have helped, but it needs to be more aggressive, since it must compete with the likes of Xiaomi, Oppo, vivo, and Realme. Mehta has another view: “There is a need to change the conversation in the industry from ‘spec-based’ to ‘experience-based’.

In the offline space, Mehta says the company has invested heavily in the market, with 400-plus exclusive distributors, 100,000 stores, and 350 after-sales service outlets across the country. “If you are a leading player in the market, of course, you will get shelf space,” says Pinakiranjan Mishra, partner and national leader, consumer products and retail, EY. But if you’re not among the top three, it is difficult. Plus, some newer players such as vivo, Oppo, and Xiaomi have invested heavily in the offline space in recent years.

Another challenge that HMD Global faces is how to scale. As a two-year-old company, it is entering a critical phase: If the lifespan of a smartphone is 24-25 months, now is the time HMD Global’s first users might be tempted to upgrade from their current smartphone. If they upgrade to a Nokia smartphone, then it’s a success for HMD Global. Experts feel it should concentrate its energies on the premium ₹25,000-₹40,000 segment so it can tap customers who bought an Oppo, vivo or Xiaomi in the past two-three years and are looking to upgrade. IDC’s Singh says HMD can emerge a winner only if it matches the other players in this price range “toe to toe” on specifications, features, design, and pricing. Pathak feels Nokia is one of few brands that can pull off so wide a range from $20-$30 feature phones to an $800 smartphone.

Most analysts say HMD Global should avoid the crowded ₹15,000-₹25,000 smartphone segment where established Chinese players, as well as behemoth Samsung, have flooded the market with a host of products. HMD Global, by focussing on the price segment just above this, could position its offerings aggressively to wean away customers from this price range. HMD Global should also concentrate on the ₹5,000-₹10,000 smartphone segment because it isn’t as crowded and offers the potential for growth. This price segment was once dominated by Indian players who have since been pushed out by Chinese brands. Singh explains that while 50% of the buyers in this segment are first-time smartphone users, the rest could be using second-hand Micromax, Lava or Xiaomi phones. But the phone most would have upgraded from would be a Nokia feature phone; thus, HMD Global can try to retain these customers.

At the end of the day, brand Nokia, even after such a long innings in India, is still intact. But if it wants to grow its market share and become relevant in the global market, it has to conquer the wallets of Indian customers, not just their hearts. More importantly, it has to shake off the image of being a fuddy-duddy phone meant for Luddites.

This story was originally published in the September 2019 issue of the magazine.