Nokia, the world's top mobile phone maker, launched its free music package on Thursday, issuing a challenge to Apple Inc's dominance of the digital music market.

The Finnish company also launched its first touch-screen phone 5800 Xpressmusic to rival Apple's popular iPhone.

Nokia said at an analyst and media event in London it would start selling the phone shortly, pricing it at 279 euros ($395) excluding subsidies and taxes, which it said was roughly half the price of the other main touch-screen phones on the market.

"The price and positioning of the product may result in substantial demand and will undoubtedly put some pressure on Apple," said Ben Wood, research head at CCS Insight.

The price means consumers in large markets will get the phone for free from operators when agreeing to sign a contract. The company also will be able to make a dent in emerging markets.

"We expect it to be listed with most of the (mobile phone) operators," Jo Harlow, head of music phones, told Reuters in an interview.

Nokia said all major music labels and most independent labels will offer their tracks as part of Nokia's 'free' music bundle "Comes with Music," raising the total number of tracks to around 5 million.

"Apple's days of dominant digital music retailer outside the United States are numbered, if they don't do anything radical," said Rob Wells, head of Universal's digital music business.

Apple controls slightly more than half of global digital music sales through its iTunes store.

Nokia said it aims to offer the music service next year on Apple's home ground in the United States, the world's largest music market.

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