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UPDATE 3-Cellphone market growth raises pricing fears

* LG, Samsung, Apple win greater share in Q3 * Q4 cellphone market to rise 3 pct y/y - Strategy Analytics * Sales volumes have dropped each quarter since Q3 2008 * Analysts cautious about speed of recovery, wary on prices * Nokia cuts prices across portfolio mid-October * Analysts say market fell 4-6 pct y/y in Q3 * Motorola and Sony Ericsson continue to struggle (Adds analyst quotes on pricing, details)

HELSINKI, Oct 30 (Reuters) - The global cellphone market is set to grow in the holiday sales-fuelled October-to-December quarter, after four quarters of falls, raising fears of pricing battles, analysts said on Friday.

The mobile phone industry is ending its worst year ever, with top handset vendor Nokia NOK1V.HE forecasting earlier this month that 2009 market volumes would fall 7 percent from 2008, indicating a small rise in the fourth quarter.

“The industry is edging towards recovery,” said Neil Mawston, analyst with research firm Strategy Analytics, while forecasting handset sales to grow 3 percent annually in the fourth quarter.

He warned, however, that the global handset market was getting very crowded and oversupply and price cutting would be inevitable in 2010.

Strategy Analytics estimated 291 million phones were sold in the third quarter, down 4 percent from a year ago.

Separately, research firm IDC estimated the market dropped 6 percent year-on-year to 287 million phones in the third quarter.

“During the third quarter, we saw a number of channels promoting older devices at significantly lower prices. For many, this was enough to spur demand and push volumes higher,” said IDC analyst Ramon Llamas.

Nokia cut phone prices across its portfolio in mid-October, with analysts saying the quarterly price cuts were spread quite evenly across the models at around 5 percent level.

“Christmas looks to be highly promotional - price cuts in the U.K. market are already aggressive, particularly among cheaper touch-screen phones,” said MKM Partners’ analyst Tero Kuittinen.

OVERSUPPLY IN 2010

Kuittinen said with all the vendors trying to push out new models the industry was facing oversupply in 2010, just like in 2001, but then oversupply coincided with a volume downturn.

“In 2010, we are getting oversupply as the industry is emerging from a major volume decline. The danger here is that the cut-throat competition is going to blight the industry recovery,” Kuittinen said.

The world's second and third-largest handset vendors, Samsung Electronics 005930.KS and LG Electronics 066570.KS, continued to win more share of the market, with sales rising 16 percent and 37 percent, respectively.

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Both Korean firms reached their highest-ever share of the cellphone market, with Samsung controlling 20.7 percent of the market, but still clearly behind Nokia’s 37 percent.

“This was the first time a vendor other than Nokia has shipped more than one-fifth of the world’s handsets since Motorola’s RAZR-heyday performance of 2006,” said Strategy Analytics’ Mawston.

Motorola MOT.N and Sony Ericsson 6758.TERICb.ST continued to struggle in the quarter, with both seeing sales almost halving from a year ago levels.

Sony Ericsson continued to lose market share for the seventh quarter in a row, while Motorola sold the least phones since first quarter 2001.

Apple’s share of the cellphone market volumes rose to its highest-ever of 2.5 percent, Strategy Analytics said.

“Following the vendor’s decision to keep the earlier 3G model on the market at a lower retail price, Apple’s competitors in the smartphone market are now faced with competitive pressures on both the user-experience and the pricing fronts,” Mawston said.

Reporting by Tarmo Virki; Editing by Valerie Lee

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