Nokia says price war costing it market share

The world’s top mobile phone maker Nokia claimed it sacrificed market share in the third quarter to defend profits in the midst of a price war.

Nokia warned its third-quarter market share would fall from the 40 per cent notched up in the second, compared with a steady market share it forecast earlier.

It said it expected the mobile device market in 2008 to be hit by weak consumer confidence in many markets and also cited tough competition in developing markets, its stronghold. It said it would ramp up one mid-range model more slowly than planned.

Due to the confluence of negative factors, Nokia said margins at its Devices & Services unit would fall below 20 per cent in the third quarter.

"In certain markets and in certain areas, including in some of the low end, we are meeting certain aggressive pricing that we believe may not be sustainable," Nokia's chief financial officer Rick Simonson told a conference call.

"So it really is not margins. What we're talking about is units here," he added.

"Most alarming for me is that they're saying they're seeing more pressure in the low end of the market. That really defines their profits, volumes; they get a lot of their economies of scale out of it. They really dominate that area," said analyst Neil Mawston at Strategy Analytics.

Analyst Richard Windsor at Nomura said: "I suspect it's largely the smaller Chinese handset makers who are cutting prices and may gain some share."

Even below 20 percent, Nokia's phones operating profit margin could still be superior to rivals - margins at Samsung and LG were below 15 per cent in the second quarter, while Sony Ericsson and Motorola are struggling to make profits.

Nokia stuck to its forecast of overall market volume growth of at least 10 per cent and said it still targeted an increase in its device market share over 2008 as a whole.

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