Finnish mobile giant plans to ship up to 100 million MMS-enabled mobiles by year end, writes Karlin Lillington

You wouldn't expect Nokia president Mr Pekka Ala-Pietila to be anything but bullish on mobiles. "If in the 1990s, voice went mobile, we believe in the next 10 years, life will go mobile," he says.

It's a robust statement, especially when telecommunications companies and handset manufacturers are ailing all across the world. And given the speaker, one tends to think, "Well, he would say that, wouldn't he?"

But anybody writes off Nokia, and its mobile vision of the future, at some risk. The Finnish mobile giant, while feeling the pinch of the global downturn, retains 35 per cent of the world mobile market. It pumps around €3 billion into research and development annually - a mix of primary research into social behaviour and how people might use mobiles, as well as product research.

Analysts generally agree that Nokia sets the trends other handset manufacturers follow. Its newest phones, launched in Helsinki recently, reveal the company is placing its biggest bet on eventual consumer and business enthusiasm for multimedia applications that still seem a bit overhyped and pricey.

The problem at the moment is that few people have camera phones or handsets that are multimedia messaging (MMS)-enabled - ready to send and receive pictures, soundclips and video. And consumers have complained that MMS (multimedia messaging) pricing makes it four to five times as costly to send an MMS as opposed to an SMS or text message.

But Nokia and other manufacturers say they are working hard to create a mass market that will make MMS ubiquitous and drive down messaging costs. Nokia will ship 50 to 100 million MMS-enabled phones by the end of this year, says Mr Ala-Pietila. In under two years, half of all phones will be MMS-capable, according to analysts.

Phone manufacturers want this market to take off because it gives consumers and businesses a reason to upgrade handsets. For telecoms operators as well as handset makers, MMS promises lucrative new revenue streams if they can become brokers for new types of content and services.

SMS is held up as the model for MMS's potential - 300 billion text messages were sent in 2003, generating an extraordinary €3.5 billion in revenue. Texters are expected to send 450 billion messages in 2004.

But as critics are fond of pointing out, text messages are cheap to send and use an existing network. MMS requires internet-enabled handsets using either GPRS (2.5G) or wideband CDMA (3G) networks. Signing up for the former requires more upfront and incremental costs per message, while 3G networks are only just beginning to be put in place.

Nokia, like other handset makers, has been hit by initial consumer apathy towards MMS.

"We had extremely high hopes and saw a lot of promise," admits Mr Ala-Pietila. But consumers just aren't rushing to buy the new camera and MMS phones.

The slow take-up is not helped by the snail-like pace of 3G network roll-out. Some 20 completed commercial 3G networks will be in place at the end of 2003 (including one in the Republic), says Ms Sari Baldouf, president of Nokia's networks division, but a year ago, the company predicted many more such networks would be up and running.

"The roll-out has been slower than expected due to financial and commercial reasons," says Mr Rene Svendsen-Tune, senior vice-president, marketing and sales. In other words, the bottom dropped out of the global telecoms market, the industry is consolidating in some spectacularly painful ways, and the global economy is emaciated.

But Nokia remains quietly confident, for some compelling reasons. Mr Yrjo Neuvo, Nokia's chief technology officer, explains that GSM networks had doubters too, and creating a nearly global GSM network (the standard everywhere but in the Americas) at one time seemed an almost insurmountable challenge.

"There were a lot of problems - more problems than we have today with 3G - with launching GSM. Even though the public sometimes seems hesitant, I think this \ is far easier [to implement\] than GSM," he says.

Mr Pekka Ala-Pietila believes 3G adoption will parallel GSM growth. At the dawn of the GSM era, 13 years ago, only 5-7 per cent of the world's population had a mobile, he says. Now, 1.2 billion people, around 19 per cent of the global population, have mobiles. Nokia thinks the mass introduction of 3G services will come in the second half of next year.

That seems hard to imagine when few people have even seen a 3G handset, not least because handset makers have had early technical problems with their production.

But Nokia thinks MMS and multimedia services such as imaging, online gaming and music will pull people over to 3G networks, especially when they get a taste of 3G's high data transfer speeds.

In Helsinki, the company demonstrated a 380 kilobit per second network - which is about mid-range in the speed capabilities of 3G - which gives users a speed typical for a home ADSL (broadband) internet connection in Dublin. However, relationships between content creators, handset makers and telecommunications operators will need to improve before any of them start slicing up any big revenue pies.

Nokia executives complain of operators that want to control the services market and dampen the growth of MMS and other multimedia services by a desire to steer consumers through their own services portals.

Content companies - including Turner Broadcasting/AOL, complain that operators want too much of revenue-sharing arrangements. And operators say handset manufacturers have failed to provide the MMS and 3G-ready handsets that will hasten enthusiasm for their build-out of expensive 3G networks, and generate some revenue.

Nokia says it recognises that people won't jump on the MMS/ 3G bandwagon - assuming one develops - unless the company understands the end-user, has the applications people want, and fits them together in a seamless offering that makes multimedia as easy as SMS.

Executives point to Apple Computer's success with its iTunes music service, which demonstrates that when content, pricing and delivery are tied together well, people are more than willing to pay for content.

They also note that, unlike internet users who expect content to be free, mobile users are used to monthly billing and itemised service offerings.

Nokia also is enthusiastic about the budding enterprise market for mobile services.

And if the appetite for new multimedia services and handsets remains sluggish, there's always the fact that only 28 per cent of voice traffic goes via mobiles. "So we have lots of room to grow," says Mr Ala-Pietila. "We want to approach these opportunities with great hunger," he says. "We need hunger, humbleness and drive."

As the telecommunications market knows, never underestimate the hungry Finnish giant.