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Nokia Phones Go on the Back Shelf
// At Euroset
Euroset, the largest cellular telephone retailer in the CIS, has come into open conflict with the Nokia of Finland, the world's largest producer of cellular telephones. Euroset management has ordered Nokia phones to be sold as cheaply as possible in their stores and their staff to use other brands. Analysts say that the dispute with Euroset may cost Nokia its leading position on the Russian market.
The conflict between Nokia and Euroset became known from a letter to employees written by Euroset chairman of the board Evgeny Chichvarkin sent this week with the heading “For internal use.” “We have spent 5.5 years in contact with Nokia and now we are in a dead end again,” Chichvarkin wrote. “They do not ship us the fashionable models and they want to give business with Vertu [Nokia's luxury brand] to the friends of their employees. Also, we are not distributors of Nokia in the CIS. Therefore, as of August 23, the bonus for sales of Nokia telephones will be 0 throughout the CIS. Nokia telephones should be placed on a far shelf without description and be sold only when the client insists on it… The use of Nokia telephones for personal purposes on company territory will be prohibited as of October 1.”
While declining to comment on the letter, Euroset president Eldar Razroev confirmed that “demotivation for sales of Nokia telephones for Euroset personnel has taken place. Motivation for other brands has been raised so that employees do not lose money.”
Kommersant was told in the Moscow office of Nokia that they are aware of the Euroset action but restricted commentary to generalities. “Euroset is a valuable partner and an important player on the market and we have always done everything possible to do business with them as well as possible,” said general director of Nokia Customer and Market Operation in the CIS Alessandro Fiorentino.
Euroset and Nokia signed a distribution agreement on April 6, 2005. The Finnish company's share of the Russian market has grown steadily since then. According to Mobile Research Group, Nokia's share of the Russian market in the second quarter of 2005 was 19.7 percent, 23.4 percent in the third quarter and 24.5 percent in the fourth quarter. The group predicts that Nokia's share of the Russian market in the third quarter of this year will be 26 percent. The leader on the Russian market, Samsung, has a 26.3 percent share.
It will be difficult for Nokia to maintain its share because of its conflict with Euroset, which controls 35 percent of the Russian retail market for cellular telephones. According to unofficial information, Nokia expects to sell about 8 million telephones in Russia in 2006, about 1.2 million of those through Euroset. If Euroset cuts Nokia sales, 300,000 Nokia telephones, worth about $50 million, could go unsold.
Euroset has been in conflict with producers before. A year ago, reacted similarly to the South Korean producer Samsung. A copy of a letter by Chichvarkin to company employees appeared on the Internet in August 2005. Bonuses were no longer given for sales of Samsung telephones, which were moved to back shelves and not recommended for sales. That conflict has since been settled.
Market insiders say that periodic conflicts with prominent producers are part of Euroset's strategy. “Euroset can allow itself to play hardball,” Mobile Research Group's Eldar Murtazin commented. The company has bumped heads with Nokia and Samsung and received trade conditions that were maximally beneficial to it.” Murtazin says that those conditions consist of both discounts on the telephones and the marketing budget that is often split between the producer and seller.
Nokia's worldwide sales amounted to ˆ34.2 billion last year, and analysts say that the conflict with Euroset will not effect the company's overall sales, in which Russia accounts for 3-4 percent.
by
Dmitry Zakharov
All the Article in Russian as of Aug. 24, 2006
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