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Nokia (NYSE:NOK) is the largest mobile phone player in the world with a market share of around 33%, [1] and competes with Samsung, LG, Apple (NASDAQ:AAPL), Research in Motion (RIMM) and Motorola Mobility (NYSE:MMI). By our analysis, Nokia derives 47% of its stock value from emerging markets (e.g. India, Brazil, and China) and a much smaller 14% from developed markets (U.S. and Europe).

We maintain an $11.78 price estimate for Nokia stock, roughly 30% above market price. Below we examine why emerging markets carry more than 3x the value of developed markets for Nokia

(Chart created by using Trefis' app)

Large Addressable Market

We estimate that emerging markets constitute more than a billion mobile phone units, a number we expect to approach 1.6 billion units by the end of our forecast period.

By comparison, developed markets include about 490 million mobile phone units, and we expect this number to grow to 560 million units by the end of our forecast period. Hence, emerging markets are currently about 2x the size of developed markets, but this ratio will close in on 3x during our forecast period.

(Chart created by using Trefis' app)

Higher Market Share

Nokia’s market share in emerging markets stands at a substantial 33%, although we anticipate a decline towards 24% by the end of our forecast period.

Comparatively, Nokia’s market share in developed markets currently stands at 27% and could decline to 20% by the end off our forecast period.

(Chart created by using Trefis' app)

But Lower Mobile Phone Pricing

So Nokia holds a higher market share across a much larger base of customers in emerging markets than developed markets. It’s not hard to see why the company’s stock value is so sensitive to emerging market operations. However there is one key factor that slightly offsets this effect.

Average Nokia mobile phone pricing in emerging markets is currently around 56 Euros, and average pricing for developed markets is around 86 Euros. While this is a pretty wide gap, we expect the spread to narrow over our forecast period, with emerging markets average price holding steady around 56 Euros and developed markets average price declining towards 62 Euros over our forecast period.

Notes:

  1. IDC: Mobile phone market report for 2010: January 2011

Disclosure: No position

Source: Nokia Sees Triple Value in Emerging Markets Compared to Developed Ones