UPDATE 1-Nokia buys Canada's OZ in Internet services push

Tue Sep 30, 2008 1:22pm EDT

(Adds details, analyst, shares)

HELSINKI, Sept 30 (Reuters) - Global mobile phone leader Nokia (NOK1V.HE) said on Tuesday it signed a deal to buy Canadian instant messaging provider OZ Communications in an effort to improve its internet services offering.

Nokia did not disclose the value of the acquisition, but said the privately-held company employed a staff of 220 and had 5.5 million monthly paid users.

"OZ's team and technology will help Nokia to address the fast-growing consumer messaging market," said Niklas Savander, head of Nokia's services and software unit, under which the new company would fall.

This is the latest in a string of buys the Finnish company has made to boost its consumer internet services business as growth in the cellphone market looks set to stall.

In July, Nokia bought U.S. digital maps firm Navteq for $8.1 billion and it has snapped up ten smaller firms in the industry.

Pacific Crest Securities analyst James Faucette said the OZ acquisition made sense in the context of Nokia's push to improve access to Internet services -- a strategy it has dubbed Ovi.

"(Nokia) had previously been building things to focus on the enterprise market, but the much larger opportunity and the focus of Ovi is on the consumer market> I don't think we should be surprised to see them adding capability to that platform," Faucette said.

Nokia hopes to combine Internet services such as its gaming offering N-Gage, navigation and digital music stores into one user-friendly system.

The company's success has been built on easy-to-use phones, but growth in this sector is becoming harder to achieve.

Earlier this month, Savander said that small companies developing services Nokia itself plans to offer in the future were likely acquisition targets, since such purchases would speed offerings for the Finnish firm.

Nokia said it has been working with OZ since 2003 and sees the purchase as a way to give customers fast and easy-to-use access to leading instant messaging providers.

The deal is expected to close in the fourth quarter.

Shares in Nokia finished 1.98 percent higher at 12.90 euros on Tuesday, after falling to a session low of 12.30 euros in earlier trade. The stock is down about 50 percent since the start of the year.

(Reporting by Agnieszka Flak in Helsinki and Sinead Carew in New York; editing by John Stonestreet)

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