Struggling Nokia has cut the prices of its smartphones in Europe, two industry sources told Reuters on Tuesday, raising the possibility of a more intensive price war in the mobile phone market.

Nokia's smartphones are rapidly losing market share to phones running on Google's Android operating platform, and the Finnish company is expected to report losses for the second and third quarters this year.

One of the sources with direct knowledge of Nokia's pricing said the steepest cuts of around 15 percent were on the flagship N8, the multimedia C7 and the business user-targeted E6.

Other price cuts were smaller, both sources said.

There are no very big cuts per model, but the scale -- across the portfolio -- has not been seen for a very, very long time, said one of the sources, who works at a European telecoms operator.

Shares in Nokia dropped 1.5 percent to 4.37 euros by late trade. They have fallen more than 40 percent this year on fears a shift to Microsoft Windows software may not help it better compete with rivals such as Apple Inc's iPhone.

A Nokia spokesman declined to comment on specific prices but said the changes were part of its normal business.

In the past, Nokia has cut prices globally across its portfolio once a quarter. But it has not used that tactic for many quarters, instead marking down prices model by model.

PRICING PRESSURE

Nokia's latest move could spark a price war, hitting vendors such as Motorola, Sony Ericsson and LG Electronics, warned analyst Neil Mawston of Strategy Analytics.

Consumers and operators would benefit from cheaper smartphones in a price war, but vendors with weak profit margins could get squeezed, Mawston said.

Samsung Electronics Co Ltd will become the world's largest smartphone maker this quarter, Nomura said last month, overtaking Nokia which was a pioneer with its 1996 launch of the Communicator model.

Nokia is coming under a lot of pressure from competitors, most notably Samsung who are also moving aggressively on pricing to steal market share, said Canalys analyst Pete Cunningham.

Nokia's share of the global smartphone market fell to 25.5 percent in the first quarter from 39 percent a year earlier, according to research firm Gartner, and many analysts expect it to fall further during 2011.

Nokia's share of the British smartphone market, seen as a key indicator for trends in Europe, dropped to 10.6 percent in the 12 weeks to mid-May, from 31 percent in the same period a year earlier, according to Kantar Worldpanel ComTech's survey.

At the end of May, it warned second-quarter results would be well below a previous outlook and ditched its full-year targets.

Chief Executive Stephen Elop is pinning turnaround hopes on the Windows phone due this year, but some analysts said Nokia is losing so much market share it may never regain its footing.

In May, European operators largely rejected the new Nokia models, particularly the E6 and C7, said Tero Kuittinen, analyst with MKM Partners.

This is now driving panic price cuts for those models but, without operator support, price cuts rarely work.

(Reporting by Tarmo Virki; Editing by Greg Mahlich and David Hulmes)

Smartphone