Nokia to Double Presence in Korea

http://www.koreatimes.co.kr/www/news/tech/2008/03/133_20853.html

Phone World’s Giant Capitalizes on Both Sales and Manufacturing

By Cho Jin-seo
Staff Reporter

Nokia is the world's superpower mobile phone brand, but it has been a nonentity in South Korea. The handsets are not sold here for various reasons.

The situation may improve for the Finnish brand this year. The three mobile service operators ― SK Telecom, KTF and LG Telecom ― have said they are working on plans to sell foreign-made phones such as Nokia, Sony-Ericsson and the Apple iPhone as early as this year. The government's regulations on mobile phones, which have acted as a non-tariff barrier to foreign manufacturers, are likely to be eased as well.

Nokia and its Korean counterparts have not confirmed this.

``We have always said that we are open to exploring opportunities in Korea if and when there is acceptance from Korean telecom operators of Open Mobile Architecture,'' Louise Ingram, communications manager of Nokia's Asia-Pacific region, said in an e-mail to The Korea Times.

There are ongoing negotiations on the sale of Nokia's multimedia phones, multiple sources say. A high-ranking official of one of the firms said that SK Telecom and KTF are playing a tug-of-war with the company about the modification of smart-phone models, especially the popular S60 series, to fit South Korea's regulatory and technological standards. And the Korean firms have recently become less fussy and more active in the negotiations, he said.

``Nokia can provide WCDMA phones at unmatched prices thanks to its history of making such phones and its global logistics network. It is an attractive option for Korean mobile service firms who are again engaged in a marketing war with the launch of the WCDMA service,'' the source said on condition of anonymity.

The reason that Nokia is receiving fresh attention in Korea after years of being ignored is the introduction of the so-called third-generation mobile platform, or WCDMA (wideband code division multiple access), last year.

South Korea is one of the few countries that use the mobile communication platform called CDMA, while the rest of the world uses GSM platform. Along with regulatory issues, the decision to take the CDMA side has differentiated South Korea from other big markets, which has benefited Korean phone makers in competition with GSM-focused makers such as Nokia at the expense of consumers.

Since WCDMA is an universal platform and the Finnish brand owns many core technologies there and can produce good phones at lower prices compared to other makers, it has a good shot at beating out Korean makers once it is given a level ground to compete on, the source said.

Another opportunity for the company is the government's plan to open the mobile phone market to new players other than the three existing carriers.

According to the plan, new firms can sell mobile phones that operate on the networks of either of the three firms for a fee. Foreign phone makers may consider using the chance to set up their own sales channel in Korea because they have been obstructed by mobile operators' power here and have been discriminated against, said Kim Hoi-taek, an analyst at Infides, a consulting firm in Seoul.

Many believe that once it is unleashed from the government's regulations, Nokia can prevail here as it has been in other nations. It has been the No. 1 mobile device manufacturer since 1998. Last year, it held 40 percent of the global mobile phone market, which was bigger than the sum of the shares of Samsung, Motorola and Sony-Ericsson. Moreover, the gap between Nokia and others is continuing to expand.

Even more astounding than its sales volume is the phone maker's ability to create profit. While the operating margin at Samsung, Sony-Ericsson and LG are around 10 percent of their sales, Nokia raised its margin to 24 percent of sales in the fourth quarter of 2007.

The firm attributes such stellar performance to various aspects such as brand, wide product portfolio, large production scale, efficient global production and distribution and technology leadership. It has also received a good reputation from pundits for its commitment to openness and open platforms.

Manufacturing Prowess

Ironically, South Korea has been of assistance to Nokia's success. The company operates a phone manufacturing subsidiary named Nokia TMC in Masan, South Gyeongsang Province, which is one of its major global manufacturing bases.

This year, the plant aims to produce 41 million phones, about half of what Samsung Electronics makes in its Korean factories.

``We actually have a large presence in Korea with one of our key factory facilities located in Masan,'' said Ingram, the Nokia public relations official.

``Today, Nokia TMC is the largest mobile phone manufacturing facility in South Korea while being one of Nokia's largest manufacturing centers worldwide. Together with our other manufacturing facilities located in Asia such as in India and China, our factory in Korea helps provide Nokia products for worldwide sales, so Korea is a very important center of manufacturing excellence for Nokia,'' she said.