Emerging markets sales boost Nokia

Nokia, the world’s largest manufacturer of mobile phone handsets, increased market share and margins in the third quarter as it benefited from strong emerging market sales and growing demand for multimedia phones.

Group net sales rose 28 per cent to €12.9bn ($18bn) while net profit rose 85 per cent to €1.56bn, in spite of an operating loss of €120m from the Nokia-Siemens telecommunications infrastructure joint venture.

Nokia sold 111.7m devices in the third quarter, up 11 per cent on the previous quarter, and estimates that its market share rose one percentage point to 39 per cent.

Mobile phone operating income rose 78 per cent to €1.39bn on net sales, up 3 per cent year-on-year to €6.13bn.

Nokia increased both sales and margins, in spite of the average selling prices of its phones falling because of strong competition in entry-level phones.

Operating margins rose from 13.1 per cent a year ago to 22.6 per cent, even though Nokia’s ASP fell to €82 from €90 in the second quarter.

Martin Garner, analyst at Ovum, said: “Everything’s going right for them with phones. They are an awesome phone-producing machine.”

Nokia has strengthened its portfolio of higher margin phones but has also raised margins on low-end phones popular in emerging markets because of its strong supply chain and brand image.

Olli-Pekka Kallasvuo, chief executive, said: “Market share is important because we then get the economies of scale.”

In emerging markets, Nokia reported that handset sales had soared while more consumers were trading up to higher priced phones.

“This has been happening in China already for some time,” said Mr Kallasvuo. “We’re now seeing it in India.”

Nokia also increased operating profit by 57 per cent to €575m in its multimedia division, which includes top-end phones as well as the multimedia services on which it is investing heavily.

Mr Kallasvuo said that discussions were still ongoing with telecoms operators to become partners in its internet services platform.

Even Nokia-Siemens’s operating loss on net sales of €3.67bn was not as bad as feared in a difficult market environment. “It’s clearly improving but it’s not there yet,” said Mr Garner.

Nokia said it had found a further €500m of annual cost synergies towards its target of €1.5bn from the new joint venture, the majority of which it expected to realise by the end of next year. “The savings and synergies seen at the foundation are starting to kick in,” said Mr Kallasvuo.

But the company also said that charges to realise the synergies would be slightly above €2bn, of which €991m had already been taken.

Nokia shares closed up 3.2 per cent to €26.41.