Emerging markets lift Nokia profits

Helped by strong demand from emerging markets such as China, Nokia is expected to report a 16 per cent rise in earnings next week

However, the company is remaining cautious over consumer spending in the US and Europe.

"The economic uncertainties have definitely affected sales of pricier phones. Quite a moderate quarter has already been priced into the share," said Pohjola Bank analyst Hannu Rauhala.

"The most interesting part is the outlook. Visibility is weak."

Shares in Nokia have dropped more than 40 per cent so far this year over investor fears that the global economic slowdown has started to crimp the handset industry.

The world's fifth largest phone maker Sony Ericsson warned on 27 June it would make no profit in the April-June quarter due to weaker demand for its more expensive phones, and said the market was challenging.

Yet analysts say Sony Ericsson's problems could be more related to its internal issues than market demand, as smartphone maker HTC this week reported 21 per cent year-on-year sales growth for June.

Data collected by Inquiry Financial Intelligence showed consumers in emerging markets buying their first phone or renewing their old models would still boost global mobile phone sales in the April-June quarter by 14 per cent from the year ago to 299 million phones.

Handset sales volumes in emerging markets surpassed developed markets in 2005 and last year 63 per cent of phones were sold in emerging markets, according to Strategy Analytics.

Nokia is expected to have sold 120 million phones in the quarter, up 19 per cent from a year ago, winning further market share at the expense of struggling Motorola and Sony Ericsson.

Motorola is expected to continue losing market share to aggressive competition from LG and Samsung as well as Nokia.

Analysts expect the handset divisions of Samsung and LG to be hurt due to sputtering global demand. Their outlook for the rest of the year is also seen clouded by pricing pressure coming from Apple's 3G iPhone, which goes on sale this Friday.

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