On a three-day tour of India in late August, the first since he became president and chief executive of Finnish telecom giant Nokia (NOK) last year, Olli-Pekka Kallasvuo highlighted just how important the fast-growing Indian telecom market has become. He visited Nokia's manufacturing facility in Chennai and met telecom regulators in New Delhi and corporate customers in Mumbai. Nokia has long dominated the Indian mobile handset market, with a 70% share, and on his trip Kallasvuo announced that India is now Nokia's second-largest market, displacing the U.S. and behind only China. Moreover, he also revealed that Nokia has chosen India to be the global hub for Nokia Siemens Networks, the two companies' telecom infrastructure joint venture.
Kallasvuo talked to BusinessWeek's Nandini Lakshman in Mumbai about the importance of emerging markets and whether the lessons he learned from some were applicable to the others. Edited excerpts of their conversation follow.
Is this your first visit to India‾
I've come here many times, but it's my first visit as a CEO. Coming after two years, I've noticed that India has changed a lot in telecommunications in terms of becoming so much more versatile. It's not just a low-end-handsets market but has a wide offering. The distribution is in place, there's lots of sophisticated retail. They are the right kind of changes.
How has Nokia's popularity in the Indian market changed the way you are looking at research and development or the way your business model works‾
We are not looking at it differently. We look at the Indian market as versatile, complex, and interesting, but our business model is the same. In fact, we have expanded in India rapidly and have 9,000 people. Some of the people here are serving the global market. We are going to do even more of this"”using the Indian talent pool for global services. There are lots of opportunities there.
We just announced that we are locating the global headquarters of the Nokia Siemens Networks service unit in India. This unit will have a big global responsibility. It is exciting for our employees in India as well.
India recently replaced the U.S. as Nokia's second-largest global market after China. Does this bring Nokia closer to the goal of reaching the next billion users‾
Definitely. India will play a big role in that one. In India [alone] the potential is 1 billion.
How important are the emerging markets for Nokia's growth today‾
They are very important. But it's key to understand here that India is quite a versatile market when it comes to a mobile device. The Nokia N-series and E-series generate 25% of our sales in India, and those are the mid-tier and high-end devices. So you can't say that it's an entry market where just low-end phones are sold.
Penetration is important in India, where you get the first-time mobile-phone user. But at the same time, there's a big replacement and upgrading market moving toward more sophisticated phones. When it comes to software, it depends on what kind of phones are sold here. It's a different entry market where software is important"”for example, Internet browsing through mobile phones. India is an advanced market in many ways, and I can't classify it as an entry market or an emerging market.
Nokia is rolling out a range of seven new phones for emerging markets.