Nokia Getting Left Behind In The Smartphone Market

On August 19 2013 , the UAE's TRA published findings on the country's handsets market as part of its state of the market study for Q213 . The key outcome of the study is Nokia 's continued dominance of the handsets market in the Gulf state. While this is good news for the vendor, as in Q113 Nokia will continue to be concerned about the gross underperformance of its products in the lucrative smartphone segment of the market.

According to the TRA's report, Nokia devices accounted for around 56.4 % of the handsets registered on mobile networks in the UAE. BlackBerry pulled ahead into second place this quarter, with a share of 13.8%, while Samsung's share remained stable at 10.7% of the market. Apple handsets came in fourth place, accounting for a 7.4% market share . Nokia's Symbian operating system (OS) also domina ted the OS market with around 38 % market share. Nokia's dominance of the UAE's handsets market mirrors its performance in many other emerging markets where it has built a strong reputation for certain features that appeals to consumers across different income levels, such as durability and affordability. BMI believes the popularity of Nokia's Symbian-based devices is highest among the UAE's large army of migrant workers. However, we believe t he TRA's analysis of the OS market only includes 3G enabled phones, while many Nokia handsets are only 2G enabled, which explain s Symbian's small share of the OS market relative to Nokia's share of the handset market.

Nokia's Dominance Falters
UAE Mobile Handsets (LHS) And OS (RHS) Market Shares, June 2013

Nokia's impressive market share figures in the UAE's handsets market may seem encouraging on the surface. However, we do not expect this to dispel concerns about the company's competitiveness based on two key downside risks. Firstly, there is growing competition in the low to mid-end of the handsets market with Huawei, HTC and Samsung among notable vendors that have launched competitive products in that segment in recent months. Secondly, Nokia has struggled in the high-end market following the advent of the smartphone, as demonstrated by the low market share for 'other' operating systems which includes Windows, the OS for Nokia's high-end Lumia series. Android was the major outperformer in the three months to June 2013, nearly doubling its share of the market to 21%. This indicates the growing popularity of Huawei, HTC and other Android-based smartphones in the UAE.

Nokia's poor performance in the high-margin smartphone segment and growing competition in the affordable handset segment are the main reasons for its weak bottom line figures in recent years and growing concern over its dominance of the handsets market. The company will need to address these issues with the right strategy in order to reassure key stakeholders, particularly investors, of its long-term competitiveness in the handsets market.

This article is tagged to:
Sector: Consumer Electronics
Geography: United Arab Emirates

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