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Nokia Corporation (NOK - Analyst Report) has decided to offer Netflix, Inc.’s (NFLX - Analyst Report) video streaming services free of cost, for one whole year, to its Vodafone Group Plc.’s (VOD - Analyst Report) customers in U.K. Only Vodafone customers buying the Nokia Lumia 1020 handset can take advantage of this new offer.

The Lumia 1020 is powered with a 41-MP camera and PureView technology. It also features a 1.5 GHz dual-core S4 processor with wireless charging facility. Lackluster demand for the high-priced Lumia 1020 has forced the Finnish handset manufacturer to promote its high-end smartphone either by slashing its handset prices from $299 to $199, or by offering lucrative free online Netflix services to its customers. Moreover, with the holiday season ahead, Nokia will be rolling out more such lucrative deals which in turn may consolidate its market position.

On the other hand, the collaboration with Nokia will also benefit Netflix as the company will easily foray into the European market, following a highly successful stint in the U.S. market.

Over the last few months, Nokia has launched a number of exciting smartphones and featured phones. In the second quarter of 2013, the company sold only 7.4 million Lumia smartphones and 53.7 million Mobile Phones, each down 27% year over year. The average selling price (ASP) in the Smartphones segment was $205.6, up 4% year over year. Mobile Phones ASP was $34, down 16% year over year.

We believe such promotional bundle plans employed by Nokia will help the company to boost sales in the upcoming holiday season.

Recently, Microsoft Corp. (MSFT - Analyst Report) announced its decision to acquire Nokia Corp.’s handset business for $7.2 billion (5.44 billion euros). The deal is expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders and regulators.

Nokia currently carries a Zacks Rank #3 (Hold).

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