Nokia Seeks to Build on AT&T Deal in North America Comeback

Nokia Oyj (NOK1V), attempting a turnaround in North America after losing most of its smartphone market share, plans to expand on its initial deals with carriers AT&T Inc. (T) and T-Mobile USA, the Finnish company’s regional executive said.

Nokia, which decided to abandon its Symbian software last year in favor of Microsoft Corp. (MSFT)’s Windows Phone operating system, is selling its Lumia lineup in the U.S. through AT&T and T-Mobile.

“But that’s just a start,” Chris Weber, president of Nokia’s North America unit, said in an interview. “We’re back in the U.S., we’re back in Canada -- it’s exciting, but there’s more work to do,” he said, without elaborating on the plan.

Nokia rose 0.2 percent to 2.24 euros as of 10:52 a.m. in Helsinki trading.

Nokia is counting on Windows phones to rebuild its cachet in the region, where it’s lost ground to Apple Inc. (AAPL)’s iPhone and devices running Google Inc. (GOOG)’s Android. Symbian fell to a 6.8 percent share of the smartphone market last quarter from 26 percent a year earlier, according to IDC. To promote the Windows-based comeback, Nokia and Microsoft have ramped up marketing, and the Lumia 900 is selling for $99.99 on AT&T’s network -- half the cost of the iPhone 4S.

‘Unique Proposition’

North America was the only region where Espoo, Finland- based Nokia saw handset shipments grow sequentially in the first quarter, helped by the release of the Lumia 710 on T-Mobile in January. Still, the 600,000 units shipped marked a 50 percent decline from a year earlier. Sales of the Lumia 900 on AT&T started in April, after the quarter ended.

The key to getting more Lumia phones into consumers’ hands is giving each carrier a “unique proposition,” so they can show how the devices stand out from the iPhone or Android models, Weber said. While only AT&T and T-Mobile offer the Lumia phones now, Verizon Wireless has said it’s preparing to add a new Nokia model to its lineup.

Most AT&T buyers opted for the iPhone last quarter, with the Apple device making up 78 percent of its smartphone sales. At Verizon, which added the iPhone to its network more recently, the product accounted for 51 percent of smartphone sales. That company relies more on models running Android.

Samsung, Apple

Still, Windows Phone shipments are projected to increase in the next four years, giving a boost to Nokia. IDC predicts that the operating system will overtake Apple’s iOS as the No. 2 smartphone software by 2016.

In the short term, the Lumia phones may struggle to compete with new Samsung Electronics Co. and Apple releases this year.

“It looks like they are ramping up the volumes quite well, but the question is how they are going to address the Samsung Galaxy III launch and the next iPhone launch,” said Mikko Ervasti, an analyst with Evli Bank in Helsinki. “They need to keep the Lumia 900 selling well and have new products in the pipeline.”

In Canada, the homeland of Chief Executive Officer Stephen Elop, Nokia sells the Lumia 710 and Lumia 900 with Rogers Communications Inc. (RCI/B) and the Lumia 800 with Telus Corp. (T)

Global smartphone shipments will grow 39 percent this year, with 5.2 percent of models running Microsoft software, IDC said in a report this week. The Framingham, Massachusetts-based research firm predicts that Windows Phone will account for 19.2 percent of smartphone shipments in 2016.

Ecosystem Advantage?

Research In Motion Ltd. (RIM), maker of the BlackBerry, also scrapped its old operating system and is banking on a new platform to revive slumping sales. The Waterloo, Ontario-based company said last week that it has hired bankers to help it find a partner or license its operating system. RIM expects to report its first quarterly operating loss since 2004.

The difference between RIM and Nokia is that RIM doesn’t have a partner the size of Microsoft to build an ecosystem that can compete with Apple and Google, Weber said. RIM doesn’t agree and has demonstrated large-scale engineering capabilities with the secure server network it runs, Heidi Davidson, a spokeswoman, said by e-mail.

“On top of that unique network, we are building a truly new mobile operating system with proven technology rather than pushing out yet another update of something consumers have rejected time and again for 10 years,” Davidson said.

In addition to creating the Windows Phone operating system and encouraging software developers to use it, Microsoft prods phone retailers and other partners to offer incentives and in- store promotions.

“There are only a few companies in the world who can build an ecosystem that scales to what consumers demand,” Weber said. “Right now my view is that it’s Apple, Google and Microsoft because it takes deep pockets, lots of engineering talent, and the scale and scope globally to build that ecosystem.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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