Nokia, the world's biggest maker of mobile handsets, is set to go head-to-head with iTunes when it offers free music downloads to buyers of its new music phones.

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," which 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.

The company's intention to expand into music will be of concern to Apple, which dominates the digital music market with its iTunes online download store.

"Even if you listened to music 24 hours a day, seven days a week, you would still only scratch the surface of the music that we're making available," Anssi Vanjoki, Nokia's executive vice-president and general manager for multimedia, said.

The company added that it was in discussions with a number of other record labels regarding the use of their material.

Lucian Grainge, Universal's international chairman and chief executive, said the offering would allow the label's artists to "reach new audiences in a very easy and affordable way".

Paolo Pescatore, an analyst at CCS Insight told the Reuters news agency: "It seems the record labels have decided to bet on Nokia as a means to add competition to Apple's dominant position in digital music."

Meanwhile, at its annual investor day Nokia forecast that the overall market for mobile phone sales would grow by around 10 per cent next year. Last week the world's number two mobile maker, Samsung Electronics, estimated market growth of 12 per cent.

Nokia added that it expects margins of 20 per cent from its phones and services business over the next couple of years and aims to increase market share.

Shares in Nokia fell around 4 per cent on the margins announcement, with investors expecting a more positive forecast from its key business.

"We have made great strides in strengthening Nokia's device portfolio over the past year," Olli-Pekka Kallasvuo, Nokia's president and chief executive, said. "The improvements we've made have driven the profitable growth and market share gains Nokia has enjoyed in 2007, and we aim to continue the good momentum in our device portfolio next year."

Nokia also said it expects very slight growth for the mobile and fixed infrastructure and related services market in euro terms in 2008.

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