1/7/2009 12:47:00 PM
Nokia UK in talks to increase handset prices
Nokia UK is understood to be in talks with operators and retailers about an across the board increase in its handset prices.
The unprecedented move, which would only affect the UK, is believed to be driven by the collapse of the pound against the euro. It would take effect in the first quarter of 2009 and would be the first time Nokia UK’s prices were increased rather than reduced.Sources said the proposed increase is a bid to keep making profits at a time of cost cutting at the handset manufacturer.
Nokia would not confirm or deny the claims. It said: ‘Operators and retailers are Nokia’s key customers and we are in discussions with them
on a daily basis about a number of topics; however, we cannot comment on these types of discussions.’
Sources said Nokia’s proposed price rise would provide it with short-term financial benefits, but it could result in angry operators and a loss of its position as the top handset manufacturer.
Nokia is seeking to cut costs, and in November 2008, it said it was cutting 600 jobs globally following a profits warning. ?
Nokia plans to cut costs ‘appropriately’ in 2009 to ‘offset the negative impact of slowing sales’; however, it is targeting an increase in its 2009 market share despite the negative forecast.
Last month, Nokia estimated that mobile device volumes for the last quarter of 2008 would fall by 5% on its previous forecast of 330 million units.
‘Operators need Nokia’
‘If Nokia puts its prices up, it will be the first time it has done so. It works on a quarter by quarter reduction of 8%, but for Q1 it will be flat or increasing.
‘Nokia is in a very strong position because of share, and the operators need them; however, its profit position is bad. The irony is that the companies with the most market share are hit harder by recession. I think they may have to do it again; it won’t be a one-off. It probably makes financial sense for them at the moment.’
‘Apple will think it’s fantastic’
‘The basic reaction wouldn’t be a good one. It’s a tough climate. I’m not sure if putting prices up is a clever thing to do. A lot of players in the market are hurting – even if they were to do it as a short-term measure it would annoy a lot of people.
‘You either assume that Nokia’s brand is so powerful that you will have to bite the bullet – or you look at other suppliers and balance your portfolio. They may focus on areas that Nokia is strong in and change the rest. The operators are very pragmatic and will look at where they are making money. You only need to look at the 3G phone in Europe. If Nokia puts its prices up, Apple will think it is fantastic news.’
Phil Kendall, strategy analytics director of Wireless Practice
‘Consumers will be hit’
‘By raising prices, Nokia will gain in the short term, but long term it will lose out. While it seeks to make profits, the smaller manufacturers will look to gain market share.
‘In 2009, the challenge is that no-one is making money – something has got to give. Operators are looking at reducing subsidies, so if handset prices go up it will hit the consumer. Something doesn’t fit. Operators have other manufacturers to choose from so might go elsewhere.’