Financial Times: Pivotal figure hands over in a period of great change: "After June, Shell will be number one and I will then look at being in a good supporting role at Nokia for Olli-Pekka to run the company," said Mr Ollila.”: Monday 10 October 2005

By Mark Odell and Päivi Munter in Espoo, Finland

Published: October 10 2005

Jorma Ollila may have helped to revolutionise society over the past decade but he believes the technological shift now transforming the mobile phone industry is so profound it is the perfect cue to hand over the reins at Nokia.

As chief executive since 1992 of the world's largest mobile handset maker, Mr Ollila has shaped an entire new industry with his vision of a mass market for voice communications on the move, a period he describes with typical Finnish understatement as "hectic".

The next challenge is to tap the potential offered by the latest 3G technology, which enables users to access the internet, video, music, games and e-mails through a new generation of "smart" phones and handheld devices. Mr Ollila believes convincing consumers to embrace these services is a tougher task than the one he faced at the start.

"This is perhaps more fundamental. Adopting the new music and games devices or a device that allows you to access the internet will take more time than moving within voice communication from fixed-line to mobile. As we have already entered into this new era we need a new young team," Mr Ollila said, nodding in the direction of his nominated successor, Olli-Pekka Kallasvuo, Nokia's chief operating officer, who takes over the helm in June next year.

Mr Kallasvuo, at 52 three years Mr Ollila's junior, will take control of a management team revamped over the past year. The two men were speaking in their first joint interview since Nokia announced in August that its long-serving chief executive would join Shell, the energy group, as non-executive chairman next year while retaining the same role at the Finnish company.

"After June, Shell will be number one and I will then look at being in a good supporting role at Nokia for Olli-Pekka to run the company," said Mr Ollila.

"When you have an internal transition like this, I think you have a great opportunity here to have the best of both worlds. First of all you have an internal successor which allows you to have continuity; internally people feel good about it. Then at the same time me doing something else, having my brain cells working on something different . . . gives the new CEO the opportunity to make changes as they are needed," he added.

Analysts believe one of the biggest challenges facing Nokia is the need to recover leadership in handset innovation, following its failure to read the trend for "clamshell" models over recent years, as it now seeks to address the divergent demands of ever-cheaper phones in emerging markets and advanced devices for developed economies.

But Nokia's senior management team is adamant they are on top of that issue. "It is not a question of one iconic product; it is a question of many iconic products and that relates to the segmentation of the market place," says Mr Kallasvuo.

Mr Ollila says the group's recent performance reflects the stronger product line, with about 40 new devices launched over the past year. "We have made a lot of progress that shows in market share; you will see that in the third-quarter figures, so we can be quite happy with our product portfolio right now but it will be even better next year."

A corporate restructuring in January 2004, which led to the creation of two new business units to focus on the high-end consumer and business "smart" phone market, combined with aggressive pricing more recently, has seen Nokia's market share recover to 33 per cent in the second quarter.

This has inevitably come at the expense of margins. Nokia's overall handset margin dropped sharply in the same period to 13 per cent, well short of its target of 17 to 18 per cent.

But Mr Ollila insisted that the trade-off between margins and market share was crucial for reaching critical mass in a volume business and he reaffirmed Nokia's ambition to regain 40 per cent of the handset market.

"It is not a magical number but we set that number as a target to give a clear indication to everybody, both internally and to analysts and shareholders, of where our ambition and aggression level is, medium to long term.

"It is an indication that we believe that better market share will give us better shareholder return and we see that as valid at least until the 40 per cent level."

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