Microsoft and Nokia merger

Nokia, once dominant but has been long in decline because of the explosive popularity of Android and the iPhone. As a result of this they have embraced Microsoft’s Windows Phone as a means to become relevant again. But after two years of Windows Phone-powered Nokia handsets, Microsoft’s operating system still has a meager 3.5 percent of the smartphone market.

That meager percentage is meaningful. It means that developers are unwilling to invest resources into creating applications for Windows-based phones, which in turn results in a fallow app ecosystem for the devices. For instance, an Anroid user thinking of switching to Nokia Lumia finds that he would not get all the applications as he used to in the Anroid phone, then he would definitely not want to switch.

Well, Microsoft has already discussed a number of reasons for the purchase, like the ability to make more money per handset, less redundant marketing efforts and access to the source code for Nokia’s mapping software — in a word, synergy.

But there’s a much bigger, more fundamental factor at work here: Microsoft desperately needs to be successful in the mobile space. The company has tried again and again over the last 15 years to have an impact in mobile from the tablet-optimized version of Windows XP to SPOT watches to Pocket PCs and Windows Mobile phones and has never gotten much holding.

For Nokia, which is still the second-highest seller of mobile phones in India even as its global share has tumbled, the approval is significant because it means the two companies can now go ahead and merge their operations in the country.  For Microsoft, the challenge is keeping Nokia’s customers as more mobile users in the country, the world’s second largest telecom market after China. Had the Competition Commission of India not cleared the deal, Nokia wouldn’t have been able to sell its Lumia phones in the country after completing its merger globally with Microsoft.

In India, Nokia is active in the business of selling mobile handsets, while Microsoft is not, making it unlikely that the merger would create a company with a majority share in the smartphone market and therefore the proposed combination is unlikely to have an appreciable adverse effect on competition in India.

Further there exists a vertical relationship between Microsoft and Nokia. However, this relation is relatively insignificant, considering the fact that there are other companies offering cellphones and software in India. Both the companies are present in India through local units.