Pricey phones do well even in developing markets

Nokia's announcement that the average selling price of its phones has been higher than expected could indicate that people in developing countries don't want only the cheapest phones after all, an expert said.

Nokia said on Tuesday that the average selling price of its phones during the first quarter was €103 ($125), higher than the €99 or less that the company had expected. The difference was due to a lower proportion of sales coming from entry-level phones, Nokia said.

Over the last couple of years, mobile phone vendors have said that they expect an increasing proportion of their sales to come from developing markets and they've begun making low-cost devices under the assumption that people in those new markets could only afford very cheap phones.

But Nokia's experience may indicate that there's a market for phones that aren't the absolute bottom of the barrel, said Carolina Milanesi, an analyst with Gartner.

"We have to look at emerging markets in a different way," she said. "Not everybody in emerging markets buys a sub-$40 phone." She cites India and China as good examples. While many observers might expect Motorola to dominate the market in India because it touts a $40 phone there, Nokia holds 60 percent of phone sales in India, even though its phones are more expensive, she said.

She suspects that China, which often accounts for a sales boost in the first quarter due to the Chinese new year, may have also driven sales of phones that aren't the absolute cheapest during the quarter. "Not everyone there bought a cheap phone," she said.

That's not to say, however, that there isn't a market for the very low cost phones, Milanesi said. Nokia's higher average selling price also indicates the power of its brand. "The brand Nokia has a lot of equity inasmuch as people will pay more because it's Nokia," she said. First time buyers and people at the lower end of the income ladder are still interested in the very cheap phones, she said.

Milanesi said that Nokia's higher average phone sales price also could be due to new products that shipped during the quarter and strong sales in more mature markets that may have responded well to the current mix of available products.

Nokia has said that it expects a growing proportion of its sales to come from emerging markets. In late March during Nokia's annual meeting, Jorma Ollila, chairman and chief executive of Nokia, said that he expects that 80 percent of the next billion mobile subscribers in the world will come from emerging markets and that this year half of all mobile devices in the world will be sold in emerging markets.

Nokia plans to release its full first quarter earnings report on April 20.