According to a Nokia Siemens Network study, 3G mobile usage grew 196% in India in 2012. Similarly, China’s 3G mobile usage has grown from nothing in late 2009, to over 230 million users at the end of last year.
So, mobile growth is exploding in these two countries — and in many other places around the world — but there just isn’t the expendable income available like in the USA to use on certain mobile devices. That is why companies like Nokia Corporation (ADR) (NYSE:NOK) and Amazon with their lower prices may challenge Apple worldwide .
Nokia is attempting to cash in by offering lower priced phones. The company has just launched its smartphone, the Lumia 720, in India for about $318 as a starting price in local currency. Nokia Corporation (ADR) (NYSE:NOK) also has many other — even more affordable — phone models than just the Lumia, only increasing its pricing appeal.
The company that has even more to lose than Apple worldwide is Samsung. As of last quarter, Samsung sold twice as many smartphones as Apple. Samsung has done this by offering many different device options, as opposed to Apple’s one iPhone and one iPad. Yet, Samsung’s products are similarly priced to Apple, and will continue to feel the heat from lower-priced competitors.
Foolish takeaway
Going forward, Apple Inc. (NASDAQ:AAPL) and Samsung are going to have an increasingly difficult time gaining market share in countries where pricing matters. As we have seen, even in an economic power like China, or in an emerging economy like India, the majority of the population still have a hard time making luxury purchases. But mobile usage is growing at an enormous rate. Companies like Nokia and Amazon that offer cheaper options should gain significant market share.
This a catch-22 for Amazon. The company is thought to be selling its Fire tablets almost at cost to make it competitive. That, unfortunately, doesn’t grow Amazon’s bottom line no matter how many tablets it sells, although this does drive customers to Amazon’s store. Revenue has grown nearly 50% since the first tablet launch, and I expect revenue to explode now that Amazon will be selling its tablet around the world. An important question to ask is: Will Amazon ever turn increased revenue into increased net income?
Really, I think that Nokia is one of the best positioned companies to take advantage of worldwide mobile growth due to its competitive pricing. Its profit margin isn’t as high as Apple’s, but I believe the quantity of smartphones sold in coming quarters will compensate and return a decent profit for the company.
The article 1 Global Trend You Need to Know originally appeared on Fool.com and is written by Jon Quast.
Jon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
