Ironically, Nokia did come out with a decent phone (Nokia 6030) which has a Kannada keypad, user-interface and SMS capability. Although the phone has its share of bugs, it is one of Nokia's best phones. Funnily though, these phones are extremely difficult to find in Karnataka itself - retailers present you with one or the other stupid Hindi phone which nobody really cares for.
And of course, Nokia needs to understand that Kannadigas would like to have better phones with Kannada enabled on them - the latest gadgets and gizmos are definitely compatible with Kannada, aren't they?
Nokia, are you listening?