Nokia is about to hit the European market with a $20 bare-bones phones hoping to beat rivals like the iPhone 5, Android and BlackBerry.
The Nokia 105 is a pretty simple phone. It's got 35 days of standby battery life, is water and dust resistant and boasts an FM radio, as well as an LED flashlight. It also has texting-based tools that teach English and provide basic healthcare advice. This is Nokia's cheapest ever phone and has been available in developing markets, namely India and Indonesia, for a few weeks now.
Nokia hopes the appeal is just to have a phone and with its low, low price it can gain a bit more market share. At $20, the phone is more than 90 percent cheaper than any iPhone.
"The low-end, high-volume part of the mobile-phone market is a huge opportunity for Nokia in developing countries. These users will be likely to upgrade to more expensive phones over time, so it's a good strategy to keep a high market share in this segment," said Francisco Jeronimo, an analyst at IDC in London, in an interview with Bloomberg.
While demand for smartphones is rapidly rising, basic handsets still make up more than half of units sold in rural communities. Nokia had a pretty big share of the low-end handset market until manufacturers such as ZTE Corp., Huawei Technologies Co. and Samsung came in to play. Basic phone models made up 31 percent of Nokia's revenue last year while smartphones accounted for only 10 percent.
With declining profits, Nokia needs the 105 to do well in the European market. The company reported a first-quarter net loss this year of €272 million ($357 million). Sales of basic phones, like the Nokia 105, also fell by about 21 percent.
Even in the smartphone market, Nokia's Lumia 920 is $450. That's well below competitor Apple's iPhone 5 that sells for $750, while Samsung's Galaxy S4 goes for $640.
The goal isn't simply to sell as much of the 105 handset as possible. Nokia's hope is to build brand loyalty. The company plans to get people interested in their low-end phones and hope customers stick with them to move up to Nokia's smartphones.