Nokia Corp. unveiled its long-awaited touch-screen phone Thursday, a challenge by the world's biggest mobile-phone maker to Apple Inc.'s trail-blazing iPhone.

Though the iPhone claims just a fraction of the sales of Nokia's high-end devices, it has developed a fan following with its slick design and access to iTunes music downloads. The iPhone's success has prompted competitors such as South Korea's Samsung Electronics Co., Sony Ericsson and Taiwan's HTC Corp. to push out rival offerings.

Finland-based Nokia has waited more than a year to respond with its answer to the iPhone, the 5800 XpressMusic touch-screen smart-phone. The device's hardware and services--pitched to have mass-market appeal--include 8 gigabytes of memory, a 3.2-inch screen, and access to Nokia's Ovi Internet service portal.

Nokia

The 5800 will cost €279 ($388) before taxes and subsidies when released in the fourth quarter, which includes the key Christmas shopping season. That's nearly half the €499 price charged by some European operators for an unlocked 8 gigabyte iPhone.

The Nokia phone's touch-screen won't work exactly the same way as the iPhone's, which allows users to zoom in and out using two fingers in a pinching or spreading motion. Nokia's interface allows for only one touch point at a time.

Sales of smart-phones--hand-held devices with PC-like capabilities--are forecast to jump to $200 billion in 2012 from $65 billion this year, according to research firm Gartner Inc.

Nokia Chief Executive Olli-Pekka Kallasvuo has said that the hype around the iPhone has created a buzz that benefited the entire smart-phone segment.

Still, aggressive pricing by rivals has caused Nokia to lose some market share in the smart-phone segment, partly because it lacked a touch-screen offering.

Nokia's leading share of the smart-phone market slipped to 47.5% in the second quarter from 50.8% a year earlier, Gartner said. BlackBerry maker Research In Motion Ltd. had the second-largest smart-phone market share, at 17.4%.

Though smart-phones account for a minor percentage of Nokia's revenue, they are higher-margin products, so tepid sales exacerbate the impact of a slowdown in consumer spending across the company's key markets.

Last month, Nokia said it expects to lose overall mobile-device market share in the third quarter on what it called "unsustainable" price cuts by rivals.

Nokia also said Thursday that EMI Group will be part of its new music-download service. Other big music labels already part of the service include Vivendi SA's Universal Music Group, Sony BMG Music Entertainment and Warner Music Group.

Nokia's Comes With Music service is aimed at challenging iTunes' dominance of the music-download market; it offers unlimited downloads for a year for one upfront payment, and users can keep all the tracks they download during the 12-month contract period even after the contract ends.

The first phone to be bundled with the music service, the 5310 XpressMusic, will be sold in the U.K. starting in mid-October through retailer Carphone Warehouse PLC, priced at about £130 ($229). "It's going to radically shake up the market," said CCS Insight analyst Paolo Pescatore.