Nokia boss sees strong mobile demand in 2006

Strong demand for mobile phones will continue into next year, defying forecasts of a slowdown, Nokia's Chief Executive Jorma Ollila said in an interview published today.

"We are surely benefiting from market growth that is pretty healthy," the head of the world's largest mobile phone group said in an interview with the Financial Times.

"There were a number of analysts dragging their feet in January this year, saying it would not be like the last two years of healthy growth. You don't hear that any longer."

The Finnish mobile firm cited unexpectedly large sales as well as cost controls and one-off items when raising its forecasts last month for third quarter earnings.

"We have had to review our volume numbers upward month-by- month. I have a funny feeling next year will be another good growth year," said Ollila, who steps down as chief executive of the Nokia in June next year.

Growth has come from stronger-than-expected demand in mature markets as people replace their handsets, as well as from emerging markets, where Nokia is the leader in low-cost phones.

"The buzz that there is in the Middle East, the Gulf and Africa is the same we saw in China seven or eight years ago in the early part of the market cycle, the same we saw a couple of years ago in Latin America," he said.

The Nokia chief executive told the paper the group's recent performance reflects its product line.

"We have made a lot of progress that shows in market share; you will see that in the third-quarter figures, so we can be quite happy with our product portfolio right now but it will be even better next year."

Nokia's rivals gained when it failed to read the market demand for folding or "clamshell phones," with number two handset firm Motorola making particular gains.

And analysts have also said the company needs to come up with phones that can displace those like Motorola's iconic Razr.

But Ollila's designated successor as CEO, Chief Operating Officer Olli-Pekka Kallasvuo, told the FT: "It is not a question of one iconic product; it is a question of many iconic products and that relates to the segmentation of the marketplace."

Nokia's pursuit of market share has put margins under pressure, particularly as fierce competition in emerging markets has driven down prices.

But Ollila said the trade-off between margins and market share was crucial to achieve critical mass and reiterated Nokia's ambition to regain 40 per cent of the handset market.

Researchers Gartner put Nokia's market share at just shy of 32 per cent in the second quarter.

"It is not a magical number but we set that number as a target to give a clear indication to everybody, both internally and to analysts and shareholders, of where our ambition and aggression level is, medium to long term," Ollila said.

Nokia will report its third quarter results on October 20.

- REUTERS