Nokia's breakthrough deal with Russia's MTS for N97

While Nokia's western sales, and particularly its US ambitions, still dominate the headlines, its recent high profile handset launches have shifted their emphasis heavily towards high growth emerging markets, where Nokia knows its future lies.
 
India was among the first markets for the 5800 Tube musicphone, and the Finnish giant has a key web services alliance with Middle Eastern operator Orascom. Now it has added to its emerging markets arsenal with a deal with Russian carrier MTS, initially centered on the imminent launch of the N97 smartphone.
 
MTS, the largest cellco in Russia and the CIS with over 93 million customers, has signed a memorandum of understanding with Nokia to carry the N97 and other devices on its retail network. This will be a valuable channel into one of the fastest expanding mobile economies, though one that has been beset by problems with grey market sales and price pressures.
 
Subsidized handsets
Earlier this year, MTS and rivals Megafon and VimpelCom reportedly demanded a renegotiation of their iPhone sales targets – they had collectively sold only 230,000 units in Q4 2008, and sales had fallen by as much as 40% in the first quarter of 2009. In March, MTS president Mikhail Shamolin told The Wall Street Journal that iPhone talks were like "the negotiations of a junkie and a narcotics salesman", because of the pent-up demand for the device, but that price tags of between $400 and $800 had resulted in low sales.
 
With carrier subsidies rare in Russia, and the economy still under intense pressure, Nokia will have to be careful to avoid similar problems for the N97. In this instance, Nokia has made itself more attractive to carriers than the iPhone – with its notoriously Apple-controlled software environment – by allowing MTS to launch the N97 with its own user interface and exclusive applications. This should make the Russian carrier more willing to subsidize the phone, balancing this with software revenues and improved customer retention.
 
• Last October, MTS and Vodafone formed an alliance to cross-market high end devices and services.
 

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