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Operators show Nokia who wears the housut*

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Exclusive Nokia is being handed a sharp lesson in business basics: don't compete with your biggest customers.

In August, the Finnish phone giant announced it was going "beyond the phone" and creating an online portal called Ovi in a bid to become a major service company. This would offer music, maps and games - bringing it into competition with its biggest channel: the network operators.

Revenge has been swift.

Now T-Mobile has become the third UK operator to snub Nokia's flagship music phone for the Christmas season, the N81. The full range will be formally announced in the next fortnight, but a spokesperson confirmed the N81 isn't part of it.

As we reported recently, Orange's autumn range shuns Nokia completely. 3 UK has already declined the N81.

The other two UK operators will ensure the device languishes in obscurity. Officially, you'll be able to get it from Vodafone - pre-register here - but it won't be heavily promoted, we understand. When Vodafone unveiled its MusicStation handsets last month, the N81 was absent from the roster.

Meanwhile, O2 is carrying Apple's iPhone. And O2, having agreed to hand over a spare kidney to secure the rights to the "Jesus Phone", can't afford to dilute its music promo budget.

Mobile operators are essentially hire purchase companies. Heavy subsidies and promotion mean the punter gets a phone for basically nothing up front and pays for it over the length of the contract. You can still get an unlocked device from the likes of Expansys, but this is relegated to the niche market of gadget fans. Without an operator subsidy, the mass market for a device just isn't there.

So, farewell the Nokia N81 - we hardly knew you. Operators have sunk the music flagship before it's even left port.

Is this legal, you may ask? Nokia has been instrumental in persuading the European Commission to investigate Microsoft and Qualcomm, for example, but proving anti-competitive behaviour in this instance is difficult. It needs to prove they've closed the market, and acted in concert doing so. Operators will point out that when it comes to music phones, there's plenty of choice - and Sony has a winning brand. So Nokia will just have to take this one on the chin, we reckon.

One dead flagship doesn't mean the end for Ovi - but it does remind Nokia it has to pursue the strategy relentlessly, embedding it deeply in a wide range of phones. ®

*Bootnote - Finnish for trousers, obviously.

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