June 24, 2011 / 2:27 PM / in 6 years

Slow Finnish phone sales may explain Nokia's woes

NEW YORK (Reuters) - Should Finland, Nokia’s home base, take some of the blame for the one-time market leader’s recent struggles to compete in smartphones?

<p>Customers look over a mobile phone display at the Nokia flagship store in Helsinki September 29, 2010. REUTERS/Bob Strong</p>

New research shows Finland’s consumers have the distinction of being some of the slowest in the world to buy new cellphones, waiting a whopping six years before investing in a new phone.

The British, by contrast, buy a new phone every 22 months and the French replace their handsets about every two and a half years, according to research conducted by Recon Analytics that compared buying habits in 14 countries.

“Maybe it’s no accident that Nokia is having a tough time developing smartphones given that in their home market so few people are replacing their handsets,” Entner said.

Consumers change their phones every 21.7 months in the United States, home of Nokia’s most formidable smartphone competitor Apple Inc. In South Korea, where another big rival Samsung Electronics Co is based, consumers buy new phones every 26 months.

Entner was quick to point out that his research held no scientific proof of a correlation between the slow Finnish replacement rate and competitive difficulties at Nokia, which sells most of its phones overseas.

But weak phone demand at home may have dulled the sense of urgency among Nokia’s developers.

“The innovative pressure is not as high,” if most of the people around them are all using old phones, Entner said.

Income can make a difference in replacement rates, but in this case Entner points out that Finland’s income levels are roughly in line with the United Kingdom and France.

Instead, Entner found carrier subsidy levels tend to play the biggest role in differing replacement rates between countries. He used carrier subsidies for the Apple Inc iPhone 4 as the basis for his study.

In many countries, including the United States, wireless service providers subsidize part of the cost of their phones in order to entice customers to commit to a long term contract.

To illustrate, Entner compared a UK iPhone carrier subsidy of $660 with a $379 subsidy in France and a $84 subsidy in Finland, which only a few years ago started to allow its wireless service providers to subsidize cellphones.

But the home country excuse may only work for Nokia.

For example, Canadian rival Research In Motion might be hard pressed to use the same reason for its struggles to compete. After all, Canadians replace their phones twice as often as Finns.

Finns are not the slowest in the world to replace their phones. Last in the study was India, where income levels are 14 times less than those of U.S. consumers and people keep their phones for 93.6 months or about 8 years.

In Brazil, the second slowest country for replacements, people wait almost 81 months before changing their phone while in Israel, consumers upgrade after 76.5 months, just two months later than Finland.

Reporting by Sinead Carew

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