Finnish powerhouse Nokia, the world’s largest mobile phone manufacturer by some margin, warned Friday that it may lose market share during the third quarter.

The reasoning behind Nokia’s message is that the Finnish firm refuses to compete on price, while its rivals are just about cutting their own throats to make way in the developing regions.

The vendor contends its strategy is only to take share when it is profitable for it to do so, and while Samsung and LG are becoming very aggressive in the emerging markets, Nokia is electing not to respond.

Analysts at RBC Capital Markets note that the entry market in emerging markets is one of the faster growing segments and competition in this area has increased – approximately 50 per cent of Nokia’s volumes come from low end phones where ASPs (average selling prices) are around the Eur30 mark. By comparison, the overall market ASP for the second recent quarter was around Eur74.

As a result of its stance, RBC expects Nokia’s unit shipments for the third quarter to decline from 125 million to 120 million, with revenues for the quarter also declining from Eur13.2bn to Eur12.9bn.

“Nokia’s strategy is to take market share only when the company believes it to be sustainably profitable in the longer term. Nokia has not broadly participated in the recent aggressive pricing activity – as it believes that the negative impact to profitability would outweigh any short term incremental benefits to device unit sales,” the Finnish firm said in a statement.

However, Nokia said it continues to expect industry mobile device volumes in 2008 to grow 10 per cent or more from the approximately 1.14 billion units Nokia estimated for 2007.

RBC said that while Nokia’s revenues decline from lower unit volume, gross margins for the quarter may be stable as ASPs should benefit from not participating in the pricing action as much of the unit loss is from the low end. There should also be a slight benefit from the strengthening US dollar as well, although this may be offset to some degree by a slower ramp of Nokia’s mid-range products.