Nokia Calls Review of $400 Million Media Biz After Dispute Over Fees

Handset Maker Sought to Revise Compensation for Incumbent MediaCom

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BEIJING (AdAge.com) -- A dispute over fees is at the heart of Nokia's decision to review its estimated $400 million global media business, currently handled by WPP's MediaCom.

Nokia is the No. 1 mobile phone brand in China.
Nokia is the No. 1 mobile phone brand in China. Credit: Nokia
The call for a pitch is believed to have resulted from heated discussions between Nokia and MediaCom, in which the Finnish handset maker sought a reduction in fees paid to MediaCom in return for greater compensation paid to the agency based on sales growth. Multiple executives confirmed the dispute.

Several agencies have been invited to take part, including incumbent MediaCom, but the WPP media agency is unlikely to hold on to the business, said executives close to the company.

While Nokia is based in Europe, much of the company's growth comes from Asia, particularly China, and Nokia's global head of marketing services, Chris Leong, is based in Beijing.

China is the world's largest mobile-phone market, with 649.7 million subscribers at the end of January. The country is also Nokia's single largest market -- and Nokia is the No. 1 mobile phone brand there -- but the global recession has made consumers there cautious about big purchases, including new, expensive handsets.

Nokia sold 12.9 million units in China during the fourth quarter of 2008, a whopping 36% year-on-year drop. Since Nokia's fortunes don't look much brighter in 2009, the company is eager to cut costs, prompting the decision to ask MediaCom for a cut in fees.

While it's unclear which agencies will be selected to pitch for the business, sources said Nokia may end up choosing two or three roster agencies and let each country decide which network to use, rather than appointing a single agency globally.

Nokia declined to comment and MediaCom referred all calls to the client.

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