NOKIA, THE world's largest mobile phone maker, yesterday warned that its market share would shrink in the third quarter of the year, bringing to an end a period of almost uninterrupted growth and wiping more than 10 per cent off its share price.

The Finnish company stood by its earlier forecast that industry-wide unit sales for the full year would increase, but admitted for the first time that aggressive moves by its competitors were pricing it out of the market.

The warning shocked investors, who had come to believe that the industry juggernaut was immune to the global economic downturn.

Shares in Nokia dropped 11.3 per cent to €13.93 yesterday, its lowest level since November 2005.

The news also hit shares of Nokia's suppliers. STMicroelectronics was down 5.5 per cent to €8.15 while Qualcomm shares were off about 0.8 per cent on the Nasdaq and Texas Instruments was down 1.8 per cent on NYSE.

Rick Simonson, Nokia's chief financial officer, declined to reveal by how much its market share would drop, but he said: "We are not talking about several points here." The company sold four out of every 10 mobile phones globally at the end of the second quarter.

He said that profitability would be affected: "Less units equals lower revenues, equals lower operating profit."

Nokia stressed that the decline in its market share was due to a decision not to participate in a price war for low-end phone sales being waged by competitors, such as Samsung of South Korea.

Mr Simonson insisted that the prices being offered by its competitors were "not sustainable" and that he was confident there would be a recovery in the fourth quarter.

- (Financial Times service)