Nokia today unveiled plans to release an iPhone-style touchscreen phone next year as part of a strategy for tackling what it described as 'tough competition' from new players in the handset market, including Apple.

In a separate announcement, Nokia said it was teaming up with Universal, the record label, to give people who buy a particular handset access to Universal's entire catalogue - which includes artists like U2 and the Rolling Stones - for a year without having to pay a subscription.

Olli-Pekka Kallasvuo, Nokia's president and chief executive, said that Apple's device - which was released in the US in June - had "clearly captured (the world's) attention" and that his company would respond by putting new touchscreen devices on the market next year.

In a video shown to an audience of investors and analysts in Amsterdam, the company showed off one of the new devices, which allows the owner to swipe their finger across the screen as a way of accessing the phone's features.

The suite of touchscreen devices, to be released in 2008, would form an important plank in Nokia's new 'services' strategy, which will see the company increasingly focused on internet-based services such as music downloads and games as well as its core handset business, Mr Kallasvuo said.

Outlining his vision for the world's largest handset manufacturer, he said that he expected there would be "full internet capability" across all Nokia devices by 2010. He added that the company's new online platform, 'Ovi' - which is due to go live next year - would bring new revenue opportunities, much in the way Apple's sales of iPods are complemented by iTunes, the online music store.

The Finland-based manufacturer has announced a deal with Universal Music to provide the label's releases, and aims to ship more than 180 million music-enabled phones in 2008.

Consumers downloading music under the offer, to be called "Comes with Music," and starts from the second half of 2008, will get free material from Universal's entire back catalogue for 12 months and be able to keep all the music.

Nokia did not say whether a one-off fee would be payable to offset the cost of acquiring the rights to Universal's music, which will be protected by digital rights management (DRM) software, and will not be playable on any other device.

At the company's annual investor conference, Mr Kallasvuo said that he anticipated the entire 'mobile internet services' market would be 100 billion euros by 2010, and that the new link between devices and services would enhance the Nokia's margins, which he expected would grow to between 16 to 17 per cent in the next two years, as well as improve customer retention rates.

He also referred several times to Google as a competitor, suggesting that Nokia now sees the search firm - which is yet to release a phone - as a threat.

Nokia has a 39 per cent market share in mobile handsets - far greater than its nearest competitor Samsung, and Motorola.

The company said it expected industry-wide shipments of mobile devices to grow by 10 per cent to more than 1.2 billion units next year, and that the number of subscriptions - or connections - would grow globally to more than 4 billion by 2009.

Analysts welcomed the new 'vertical' approach of bringing devices and services under the one umbrella, adding that it was also a sign record labels were betting on Nokia as a means of providing competition to Apple's dominant iTunes music service.

Lucian Grainge, chairman and chief executive of Universal, said: "Comes with music will be the world's first major 'all that you can eat' subscription model. No caomporable service where music can be kept after the subscription lapses."

Shares in Nokia closed down 3.5 per cent, at $26.50.

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