Convergence and new revenue stream

FT reported on Tuesday that mobile handset-maker Nokia has moved into content service following a string of purchases. The latest one is the $8.1 billion (£4 billion) takeover of Navteq, an American digital map supplier. Analysts said that it is quite expensive, but why was Nokia willing to dig deep into pocket for the new catch?

Nokia has been the leading handset maker in the world for long, but newcomers like google and Apple(newscomers in sense of mobile handset making), boosted by recent fast-paced technology development, start to challenge its dominance. The Gphone or Iphone is starting to eat away the market shares of Nokia.

To survive in the cut-throat competition, Nokia can't just keep to its core business, and there is need for strategic adjustment. That is what Nokia is doing now. It is converging from handsetmaker to service provider, like providing mobile music through its purchase of Loudeye, the US online music company that Nokia bought for $60m last year, or embed video link with content providers like Fox network, CNN and Sony Pictures. Its Mosh section, a social networking website which supports uploading and downloading of content to mobile handset, is also taking off. So the Nokia has already embarked on its convergence campaign.

Nokia may not be the only handset maker to shift into services. Sony Ericsson, which sold 60m music phones last year, has also dabbled in music services, with the launch last year of M-Buzz, which features artists from the Sony BMG label. Miles Flint, chief executive of Sony Ericsson, has hinted there could be more to come.

Put such things into perspective, we see that there is mutual convergence in the telecom industry. Hardware manufacturers are converging into content services, while content service providers are converging into hardware productions. The convergence will bring more added value to each market player. For example in the case of Nokia, it can do more mobile advertisement and targeted marketing, which will be a great source of revenue.

It no longer makes sense to categorise the market players. Nokia is no longer handset maker, but also service provider. BT is no longer operator, but also broadcaster. We have entered an age of convergence. It is a result of economic competition, but also technical development. We will see more convergence coming up....