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Vodafone Opens the Ovi

Vodafone Group plc (NYSE: VOD) and Nokia Corp. (NYSE: NOK) have joined forces to add Vodafone Internet services onto Nokia handsets. (See Vodafone, Nokia Team Up.)

Vodafone is the second major operator to work with Nokia to integrate its own mobile Internet and content services with the device maker's new Ovi (Finnish for "door") suite of Internet services. Last month, Telefónica SA (NYSE: TEF) announced a partnership with the Finnish phone maker to develop a billing system and multimedia menu to access services from bother providers. (See Telefónica, Nokia Team Up and Telefónica Hugs Ovi.)

The idea is that Vodafone customers will have a greater choice of Internet and content services available to them. But because there is some service overlap between Vodafone and Nokia, some of the two companies' services will actually be competing with each other.

Nomura International analyst Richard Windsor thinks users will choose Nokia's services over Vodafone's most of the time because Nokia's services will be better.

"By offering its services through Ovi, Vodafone is likely to see better take up than going it alone, but we remain convinced that the lion's share of the value will accrue to Nokia," states Windsor in a research note. "This is because mobile operators have really struggled to create services that are compelling to users whereas Nokia seems to have a much [better] idea of what to do and how to do it."

The details are still sketchy on how each company's services will be presented on the handset. The idea is that a multimedia menu -- which is accessed via a special button -- will give access to both Vodafone's services and Nokia's services, such as games, maps, and music.

Vodafone's MusicStation will have priority over Nokia's music store in the menu, according to an industry source. (See Vodafone Grooves to MusicStation, 3 Signs Up MusicStation, and Vodafone Grooves to MusicStation.)

For map services, users will be able to choose from Vodafone's Google Maps offering and Nokia Maps.

The partnership also calls for Vodafone to have three exclusive Nokia handsets next year. But the integrated services will be offered on non-exclusive Nokia handsets as well.

Vodafone's decision to combine its services with Nokia's shows the power of the handset maker's brand as well as the lack of success mobile operators, generally, have had with their own Internet services.

"In signing up to Ovi, Vodafone has effectively admitted defeat in the brand battle against branded handset vendors but has guaranteed itself a small piece of the action," says Windsor.

Vodafone signaled that it was open to Nokia's services this fall when it announced that it would offer Omnifone Ltd. 's MusicStation over-the-air music download service and its Christmas handset lineup included Nokia's new N81 and 8GB N95 multimedia phones, which come with Nokia's music store. At that time, Vodafone said that Nokia's music store would be available alongside Vodafone's MusicStation.

Some see the tie-up with Nokia as simply the operator's next big brand partner. Other recent partnerships with Internet brands include eBay Inc. (Nasdaq: EBAY), Google, and YouTube Inc. (See Vodafone Offers YouTube, Vodafone, Google Partner, Vodafone Takes EBay Mobile , Vodafone, MySpace Partner, and Vodafone Takes MySpace Mobile.)

"We have a long track record of working with Nokia on devices and the S60 [Symbian] platform," says a Vodafone spokeswoman. "This is a logical next step to work with them more closely on services."

The timing of the announcement comes just days after Google (Nasdaq: GOOG) unveiled a new open source software platform called Android and announced the Open Handset Alliance .

Asked whether Vodafone would ever join Google's alliance, the spokeswoman said, "We are supportive of the spirit and overall principle of what [Google] is doing."

Wait a minute. Was that a "yes" or "no"?

— Michelle Donegan, European Editor, Unstrung

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