Nokia Raises Forecast for Mobile-Phone Market Growth (Update6)

March 30 (Bloomberg) -- Nokia Oyj, the world's biggest maker of mobile phones, increased its forecast for growth in the $122 billion global handset market on rising demand in China and India.

Sales of cellular phones will probably expand at least 15 percent this year, compared with a previous forecast of 10 percent or more, Chief Executive Officer Jorma Ollila said at the annual shareholders' meeting in Helsinki today. Global unit sales grew 21 percent in 2005 and 30 percent in 2004, according to Gartner Inc.

Nokia shares rose as much as 5.6 percent, the biggest gain in almost a year. Nokia and rival Motorola Inc. are selling more lower-priced phones as growth in demand from markets such as China and India outpaces that in the U.S. and Europe.

``It's good news,'' said Tom Lehto, who helps manage the equivalent of $1.8 billion at Aktia Asset Management in Helsinki. ``It's a significant increase in forecast.'' Analysts are likely to raise their estimates for Nokia's profit, he said.

Increased sales in developing markets have also brought lower prices and narrower profit margins. Nokia's average handset price fell to 99 euros ($120) in the fourth quarter from 111 euros a year earlier. The mobile-phone unit had an operating margin of 17.1 percent in the fourth quarter, down from 18.9 percent a year earlier.

``Half of the mobile phones sold this year will be sold in developing countries,'' Ollila said at the meeting. ``The size and development of emerging markets is speeding up demand.''

Shares Jump

Shares of Espoo, Finland-based Nokia rose 80 cents to 17.49 euros in the biggest percentage gain since April 21. Shareholders today approved a stock buyback of as much as 6.5 billion euros, the company's biggest ever. Motorola shares rose 19 cents to $22.96 at 4 p.m. in New York Stock Exchange composite trading.

Ollila repeated the company's prediction that about 80 percent of the next billion mobile subscribers will come from emerging markets. Nokia expects the global mobile subscriber base to reach 3 billion during 2008. The industry sold an estimated 795 million units in 2005, Ollila said.

``They caught most investors off-guard,'' said Sanjay Jhaveri, a Zurich-based fund manager at Bank Vontobel AG, which oversees $40 billion including Nokia shares. ``The market was fantastic in 2005 and somehow things weren't looking so good in 2006.''

Cheaper Handsets

Earlier today Nokia unveiled three new ``affordable'' models at an event in Chongqing, China. The models, which cost as little as 45 euros, are targeted at first-time users, Nokia said. China, where three out of 10 people own handsets, is the world's fastest-growing wireless market by users, adding about 5 million subscribers a month.

The revised outlook ``is very good news so early in the year,'' said Theo Maas, who helps oversee $300 million at ABN Amro IT Fund in Amsterdam, including Nokia shares. He said he's ``beginning to see evidence Nokia is able to get good margins on low-end handsets.''

``In terms of unit growth I expect they had a very good first quarter.''

Nokia's revised forecast compares with Gartner's estimate that sales this year will probably increase a much as 15 percent from 817 million units in 2005.

Global mobile-phone unit sales rose 20 percent to 235 million units in the fourth quarter from a year earlier, according to the Stamford, Connecticut-based market researcher.

Nokia's share of the global handset market climbed in the fourth quarter to 35 percent from 32.5 percent in the previous three-month period, Gartner said a month ago. The share held by Schaumburg, Illinois-based Motorola declined to 17.8 percent from 18.7 percent in the third quarter.

The global handset market was worth $122 billion last year, expanding from $106 billion in 2004, which was the first year the market surpassed $100 billion, according to Boston-based researcher Strategy Analytics.

To contact the reporters on this story: Ville Heiskanen in Helsinki at vheiskanen@bloomberg.net

To contact the editor responsible for this story: Lars Klemming at lklemming@bloomberg.net; Zimri Smith at zsmith@bloomberg.net.