Nokia calls Africa the new frontier

By Juho Erkheikki  |   2008-6-14  |     NEWSPAPER EDITION

NOKIA Oyj's bet that Africans will consider buying mobile phones as vital as paying record-high corn prices stands a good chance of succeeding.

A surge in demand from China and India over the past decade has made the Finnish company into one of the world's dominant makers of wireless handsets. Now, Chief Executive Officer Olli-Pekka Kallasvuo has made Africa his company's next target.

Like in most developing regions, owning a mobile phone in Africa is viewed as such "a necessity" that growth won't be stymied by money being diverted to pay record prices for staples, Kallasvuo said in April.

Already the world's fastest-growing mobile phone market, Africa still has the lowest penetration, at below 30 percent, of any populated continent.

Sales slowdown

This growth potential may help Nokia sustain sales through the slowdown that has gripped Europe and the United States this year and sent the company's shares down 31 percent.

Africans bought 33 million handsets in the first quarter, up 37 percent from a year earlier, according to Boston-based researcher Strategy Analytics. That isn't far from the 37.9 million purchased in North America, where industry shipments fell 4.5 percent.

"Nokia is better positioned than its competitors to weather an economic slowdown," said Ittai Kidron, an analyst with Oppenheimer & Co in New York.

"A European slowdown will hurt, but we believe Nokia's results over the last year show that it can successfully manage the transition toward lower-tier and more price-sensitive emerging markets," said Ittai, who rates Nokia "outperform."

The African market will grow by 33 percent this year, forecast Neil Mawston, an analyst in London for Strategy Analytics.

Nokia, based in Espoo, Finland, claims it commands 55 percent of sales in Africa and the Middle East, Bloomberg News reported.