Nokia warns of 15% drop in mobile networks business

Nokia, the world's largest maker of mobile phones, predicted that it would grow market share this year but warned that its phone network business would see a 15 per cent decline.

The Finnish company yesterday forecast that global sales of handsets will rise about 10 per cent this year, and said sales of its own phones will outstrip the pace of the market.

First-quarter net profits at the company rose 13 per cent compared with year earlier, despite a 3 per cent dip in overall sales. Nokia boosted the operating profits at the mobile phone business by 9 per cent and expects handset revenues to rise 4 per cent to 12 per cent in the second quarter as the market grows.

The company sold 38 million handsets in the first quarter, after a record 152 million last year. It launched its 3650 model this quarter, which can record and play video clips, and its 6800 handset is about to hit the shelves – a phone aimed at business users that flips open to unveil a full keyboard for writing e-mails.

Nokia has 38 per cent of the market of mobile handsets and plans to target customers from rivals including Motorola and Samsung, who are beginning to encroach on its market share. Motorola this week said it had surpassed Nokia as the top seller of mobile phones in the United States after lagging its rival for five years.

Nokia's phone network operations continue to weigh on the company's fortunes, and yesterday it posted a first-quarter operating loss of €127m (£80m), compared with a profit of €146m, as sales slid 15 per cent. The company expects sales at its mobile phone networks division to drop by 15 per cent or more this year, compared with an earlier forecast of a 10 per cent decline.

But the company yesterday ruled out selling the division, where swingeing job cuts are taking place. This will cause Nokia to take a charge of between €350m and €400m in the second quarter.

Jorma Ollila, the company's chief executive, said yesterday: "While the network market remains very difficult, we have announced strong abative measures in our network infrastructure business to bring down costs and improve operational efficiency and profitability."