Nokia Will Make Microsoft Windows Phone 7 a Powerhouse–Outside of the U.S.

News Analysis: Outside of the United States, Nokia is a major player in the wireless landscape; their phones are ubiquitous. This may prove to be a decisive advantage for Microsoft as the two companies strive to make Windows Phone 7 a top player in the global wireless market.

Nokia Will Make Microsoft Windows Phone 7 a Powerhouse–Outside of the U.S.

In the world of mobile communications, the world is divided into two basic places, the U.S. and everywhere else. While I hate to think of this as an Us versus Them situation, that’s actually what it is. The reason ultimately boils down to relatively little competition in the way phones are sold in the U.S., and in how wireless companies operate. 

In the U.S., for example, you see a nearly even divide between CDMA and GSM phones. Outside of North America, CDMA hardly exists. Just about everyone uses GSM, the frequencies are mostly compatible and the carriers don’t have nearly the leverage on handset selection as they do in the U.S. 

Visit a mobile phone store outside the U.S., for example, and you’ll find phones, but you’ll find either no carrier presence at all or you’ll find that the store will carry SIM cards for several carriers. While the carriers do have their own phone stores, they don’t have the dominance that they have in the U.S. Even the process of adding money to your SIM card is divorced from the carriers. When I was in Germany covering CeBIT, I added money to my German T-Mobile SIM card by going to the Shell service station across the street from my hotel. 

This nearly total disconnect between phones and carriers means that there are a lot more phones available outside the U.S. In addition, the differences in economic circumstances and social communications are different from what happens in the U.S. In India, for example, there is an entire social network based not on Web browsing as you do with Facebook, but on SMS messages. 

This is the world that phone makers compete in outside the U.S. and this iswhy Nokia has become such a huge player. In the U.S., most of the competition seems to be centered around smartphones. Elsewhere, most people can’t afford an iPhone or a BlackBerry. They need a phone with some features, but it has to be affordable. Nokia is a major player in this global phone market and its Symbian operating system is a major part of Nokia phones. 

This outside-the-U.S. phone market is now changing. Nokia, which has long been the biggest European phone company, has decided to move ahead with Windows Phone 7 from Microsoft. This is the phone OS that will power the smartphones and in many cases the higher-end feature phones in the rest of the world. As a result, recent reports that Windows Phone 7 may be a dominant player might not be too far off the mark. 

Nokia Will Make Microsoft Windows Phone 7 a Powerhouse–Outside of the U.S. - Nokia the Brand of Choice for Rest of the World

While it’s unlikely that the iPhone will be “crushed” by Windows Phone 7, it’s also unlikely that the WP7 will simply fade away into irrelevance. Because of the global presence of Nokia and its huge user base, it’s highly likely that it will be in the top three or four phone OS choices in the next five years.  

The problem with the iPhone is that it’s an elitist device. You have to be able to afford to buy the device in the first place and the cost of an iPhone outside the U.S. is significant, meaning it hovers around $500 each depending on where you are. To translate this into economic terms, an iPhone can easily suck up several month’s income for a worker in some countries. 

What this means is that there are tens of millions, perhaps hundreds of millions of phone customers who need a phone but who can’t afford an iPhone, and probably never will. This is the market that Nokia has tackled so effectively–the company makes phones, including some that are sort of smart, which people in the rest of the world can afford. 

No matter how you look at it, this is a numbers game. The question that’sbeen addressed by IDC and others isn’t how many iPhone clones will sell, but how many phones overall will sell by 2015. Outside of the US, with its subsidized smart phones and plans that lock you in to a single carrier, things are different and less expensive phones rule. Once Nokia completes the transition to Windows Phone 7, it will be a hot seller if only because Nokia is a hot seller outside the U.S. 

The bottom line is that we don’t really know how the numbers will shake out, analyst projections notwithstanding. But it’s highly likely that Microsoft will sell a lot of phones. It’s also likely that Android phones will sell well where people need a phone with added capabilities since it’s already possible to get low-priced Android phones. But neither Apple nor RIM seem to be inclined to enter the low-priced markets that make up most of the world and that will cost them in terms of global market share. 

Because of their relative costs, Apple will certainly not grow as fast outside the U.S. as it has here and in Western Europe. Nokia will continue to dominate in those areas and because Nokia is now moving to Windows Phone 7 as its OS, so will Microsoft.