Nokia 5310 Arrives Fashionably Late to T-Mobile’s Music Party

| May 22, 2008 | U.S. Wireless Services | Competitive Intelligence Repprt

| Analyst: Avi Greengart

Current Perspective: Very Positive
Vendor Importance: Very High
Market Impact: Low

Event Summary

May 21, 2008 – T-Mobile USA announced that it will offer the Nokia 5310 XpressMusic phone on May 28. The phone includes a 2 MP camera, QVGA screen, external music controls, stereo Bluetooth connectivity, wired stereo headsets, a USB cable for side-loading music and a 1 GB memory card — all at an affordable price of $49 with contract. Customers can listen to the music right away, since the device will come preloaded with two exclusive new hits — one from Panic At The Disco and one from Phantom Planet.

Analytical Summary

• Current Perspective: Very positive on Nokia’s 5310 XpressMusic phone, because at $49 it gets all the musicphone basics right and should fly off of T-Mobile’s shelves. Why it took nine months for Nokia to get the U.S. variant out the door when it knew up front it would be building one is a mystery, but time has not diminished the tiny device’s competitiveness. While competitors have 3G musicphones selling at the same price point, the 5310 offers the best combination of price, form factor, usability – as both a phone and a music player – and accessories.

• Vendor Importance: Very high to Nokia because the company has ramped down production of phones for most of its U.S. carrier partners while it retools its business model to create more carrier-customized devices. The 5310 gives Nokia an opportunity to use its European designs mostly unchanged in the U.S., gaining the full benefits of its global advantage in economies of scale and supply chain management. Plus, at $49, the 5310 is destined to be a volume seller for Nokia.

• Market Impact: Low on consumer handset market, because while the product is an incredible blend of form factor, music features and price, it doesn’t break new ground in any way. There are already branded musicphones selling for $29 after subsidies, and the 5310 is unlikely to change consumer buying behavior significantly. As a follow up to Nokia’s 5300 at T-Mobile, the 5310 doesn’t change Nokia’s position in the U.S. market, either.

Recommended Competitor Actions

• Samsung, LG and Sony Ericsson all need to adopt Nokia’s headphone jack / accessories standard for their musicphones. HTC needs to follow on its smartphones, as well, which use non-standard USB connections for headphones.

• Sony Ericsson needs to start including storage with its Walkman phones – even the $30 ones.

• Motorola’s ROKR E8 (launched at CES in January) comes with 2 GB of embedded storage and is a very nice musicphone, but it still lacks official pricing or availability. This announcement puts a price floor under the E8 (for $49, consumers can buy the 1 GB Nokia 5310) and Apple’s iPhone serves as the ceiling (if the ROKR is priced anywhere remotely close to $399, consumers will spend more for the iPhone).

• Apple’s $399 iPhone is obviously targeting a different segment of the musicphone market. Apple will need an iPhone nano if it wants to address budget buyers, but such a device would need to be subsidized to compete, which has not been Apple’s business model to date.

Recommended End User / Customer Actions

• Consumers looking for a small, inexpensive musicphone should strongly consider the Nokia 5310 XpressMusic at T-Mobile. It offers a solid music experience with none of the usability issues of the Samsung Upstage at Sprint or the Samsung Juke at Verizon Wireless.

• Other good musicphone options are the Sony Ericsson W580i at AT&T, and LG’s Chocolate II at Verizon Wireless. Both of those choices will require purchasing additional storage before they do anything useful music-wise.

• Consumers looking for a premium musicphone experience should look at the iPhone at AT&T, and that’s it. There are competitors on the market (such as LG’s Voyager at Verizon Wireless), but none synchronize with iTunes, include as much storage, or offer the iPhone’s user interface.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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