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Case 7
Case 7
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policies of the Indian government, high licensing fees and absence of a proper telecom regulatory
body. The growth in the subscriber base of mobile phones remained sluggish initially, reaching the
1 million milestone in 1998. In 1999, the Government of India announced a new telecom policy.
This policy planned to provide telephones on demand by 2002.
Among other things, the policy allowed unrestricted private entry into almost all mobile
service sectors. The government allowed cellular mobile service providers to share infrastructure
with other operators. It also allowed existing operators to migrate from fixed license fee to one-
time entry fee with revenue sharing. This policy helped many private operators to break even
faster. By 2001, the demand for mobile services was growing well. The private companies
concentrated on providing basic telephone services to consumers. The number of mobile phones
crossed five million by 2001 and doubled to 10 million in 2002...
About Nokia
Nokia was founded in 1865 by Fredrik Idestam in Finland as a paper manufacturing company.
In 1920, Finnish Rubber Works became a part of the company, and later on in 1922, Finnish Cable
Works joined them. All the three companies were merged in 1967 to form the Nokia Group.
In the late 1970s, Nokia started taking an active interest in the power and electronics
businesses and by 1987, consumer electronics became Nokia's major business. Nokia created the
NMT mobile phone standard in 1981 and launched the first NMT phone, Mobira Cityman, in
1987. The company delivered the first GSM network to Radkilinia, a Finnish company in 1991,
and in 1992, Nokia 1011 - a precursor for all Nokia's current GSM phones - was introduced.
In the 1990s, Nokia provided GSM services to 90 operators across the world. Another
significant move of the company during this period was the divestment of its non-core operations
like IT. The company focused on two core businesses - mobile phones and telecommunications
networks. Between 1992 and 1996, the company exited from the rubber and cable businesses as
well...
Nokia entered the Indian market in 1994. The first ever GSM call in India was made on a
Nokia 2110 mobile phone on its own network in 1995. When Nokia entered India, the telecom
policies were not conducive to the growth of the mobile phone industry.
The tariffs levied on importing mobile phones were as high as 27%, usage charges were at
Rs.16 per minute and, at these high rates, consumers did not take to mobile phones. Nokia also
had to face tough competition from other powerful global players like Motorola, Sony, Siemens
and Ericsson...
Nokia was quick to learn from its mistakes and adopted strategies to regain its lost market
share. Globally, during the first quarter of 2005, the company's sales reached 7.4 billion euros,
with the company selling 54 million phones during the period. In India, Nokia continued its
leadership in GSM with a market share of 74% in March 2005. Nokia also surpassed Samsung in
color mobiles in the GSM segment, recording a share of 55% in the same month (Refer Table VIII
for share of major mobile phone brands in the GSM segment and their market shares).
Nokia reorganized itself at the global level in 2004. At this point, a multimedia division was
formed.
The division's Indian operations concentrated on promoting the concept of high-end
telephones in smaller towns while going in for higher volumes in larger cities. The marketing
division of the company concentrated on making distributors in small towns sell high-end
products. Though, the distributors were skeptical to start with, by the end of 2004, the process was
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streamlined and the results started to show...
The Future Prospects
According to industry analysts, by 2010, the mobile phones industry in India will be driven by
voice, multimedia and mobile services for organizations. The teledensity in India was estimated to
increase to 18.2% by March 2009, with mobile subscription rising to 148.77 million by that time.
In many instances, the cell phone has become the only basic telephone link of a
household/enterprise in India, rather than a landline phone. It was turning out to be more
economical and efficient than fixed line telephones. So, there was great scope for further
expansion with reduction in the cost of ownership...
2、case discussion
(1)What did Nokia make use of in this case?
(2)Why did Nokia acquire a leading brand in mobile communication devices industry in
India?