WorldCity Business Magazine

Getting Connected

by Mary A. Dempsey

Cell phone giant Nokia may have opened a new corporate office in Miami, but its eye is on Latin America.

That includes Venezuela, where residents buy a new cell phone every 1.3 years, a faster turnaround time than any other country in the region. It also means Argentina, where mobile phones are a status symbol, and Brazil, where text messaging is popular and ring tones are hot.

The relocation of the company’s Latin American headquarters is part of an ongoing strategy to turn the region into a bigger contributor to Nokia’s bottom line. In 2005, Latin America and the Caribbean accounted for 2.7 billion (about $3.5 billion), or 8 percent of the Finnish company’s global revenues. Robert Andersson, executive vice president for customer and market operations for Nokia in Helsinki, said Latin America has “tremendous growth potential.”

The Latin American team’s move to Miami from the company’s U.S. headquarters in Irving, Texas, puts cell phone executive Maurizio Angelone at the threshold of the region he oversees.

“Latin America is one of the most important growth markets in the mobile communications industry, and Nokia’s aim is to continuously expand its presence and leadership in the region’s markets,” said Angelone, senior vice president of customer and market operations for Nokia Latin America.

“Miami’s proximity to Latin American countries and its position as a regional transportation and communications hub make it the perfect location from which to better serve the needs of our customers in Latin America,” he added.

Tapping opportunity

Nokia held onto its title as the world’s top cell phone vendor in 2005, responsible for the sale of one of every three cell phones sold around the world, according to Gartner, a technology research firm based in Arlington,Va. Motorola was close behind.

Its market share in Europe and Asia is more than double that of its nearest competitor. In Africa, its share is three times that of the closest company, a Gartner report found. But Nokia’s has not managed that domination in Latin America and the company is now working to rectify that.

Nearly 102 million mobile phones were sold in Latin America in 2005. That’s a jump of 40 percent over 2004, according to Gartner research.

The Latin American market is distinctive in many ways. For starters, it has an urban population, with 80 percent of the region’s residents in big cities. This makes it easier for cell-phone operators to reach customers. In other developing countries, a large percentage of people still live in rural areas. Nearly a third of the population in India, for example, lives outside of cities.

Latin America is also a concentrated market: Some 70 percent of all subscribers belonging to three networks. Amrica Mvil, owned by Mexican billionaire Carlos Slim, is the biggest cell phone operator the region, with more than $17 billion in revenues last year.

And Latin Americans love innovation. They picked up the mobile phone habit faster than their counterparts in the United States, and they haven’t stopped embracing the latest novelty.

Brazil has proven to be a hot ring tone market, Chile has the highest rate of cell phone penetration in the Latin America 70 percent and Venezuelan are buying new phones at breakneck speed. For Argentines, a cell phone brand carries status.

Because of the region’s disproportionately young population, this demand is expected to remain high. Recently, Movistar and Entel PCS, which provide service to more than 80 percent of Chile’s cell phone users, began to offer Fotolog, a service that lets users upload photos directly from their camera phones to blogs. Mexican cell phone company Telcel, meanwhile, is working to expand the range of cell phones that support mobile television, while Inmobia, a Danish company that produces made-for-mobile movies, has opened an office in Nicaragua.

“The big piece still to be developed in Latin America is multimedia,” Angelone said.

Although Nokia describes itself as a mobile handset company, it does business solutions. Hernn Lardiez, director of enterprise solutions for Latin America, talks about e-mailing compressed Xcel files to a cell phone, editing them, and then mailing them back. And he laughs about the inadvertent employee protection afforded by a voice-over-Internet-protocol service in which calls to a desk phone are automatically forwarded to a worker’s cell phone.

Embracing the challenge

Nokia’s efforts in Latin America and elsewhere are certain to get additional fuel from the company’s 50-50 joint venture with telecom and electronics company Siemens, which has fixed line phone business. Nokia-Siemens Networks, expected to be operational on Jan. 1, 2007, is part of an ongoing consolidation in the world’s telecom market. The joint venture will put the Finnish company on par with fixed-mobile players Ericsson-Marconi and Alcatel-Lucent.

Still, the region presents a special challenge for companies like Nokia. “Latin America is one of the largest regions in the world in terms of population, but one of the lowest in terms of GDP per capita,” said Angelone.

“The net 500 million or 1 billion subscribers are not going to be the rich people in these countries,” explained Andersson. “These phones must be affordable. We’re talking about reaching people with monthly incomes of $50 to $100.”

Nokia executives acknowledged that it’s not just about recruiting new phone users. In fact, industry studies show that the growth in first-time sales of phones is beginning to slow. Nokia said Latin America is also a powerful market for replacement phones.

Latin Americans used to replace their cell phones every 2.3 years, but that rate has sped up to every 1.8 years. For Venezuelans, it’s every 1.3 years.

Venezuela is not only one of the fastest growing markets, but its residents are willing to spend more on cell phones than elsewhere in the region. Nokia executives said the company’s most important high-end and business enterprise products will be introduced there first.

Throughout the region, however, people replacing their phones are upgrading to more expensive models.

“So when it comes to replacement, it’s not only the volume but the value that is growing,” said Angelone. “More and more consumers are replacing phones and they want to get new features. They want Internet, they want to download music, they want to get e-mail.”

The cell phone giant hopes to match some of that demand later this year with the introduction of the Nokia 6085, a Bluetooth-enabled quad band phone with an MP3 player, camera and expandable memory.

The team in Nokia’s Miami office said its sales strategy for Latin America includes partnering with local companies so that cell phone sales are as widespread as possible.

Nokia’s Latin America division handles the marketing, sales, sourcing, manufacturing and logistics for mobile devices in the Latin American and Caribbean markets.

Within a year, the mobile communications company said it expects the new regional headquarters in Miami to double its initial staffing level to 100 employees.

Within Latin America and the Caribbean, Nokia employs more than 4,500 people, 7 percent of its overall workforce. It has operations in 11 of the region’s countries, including manufacturing plants in Brazil and Mexico.

Angelone said the move to South Florida made sense as Nokia works “to strengthen our organization to be able to grab the opportunities in Latin America, which are big.”