"We have a new, credible competitor in this business," Nokia Chief Executive Olli-Pekka Kallasvuo told the Churchill Club on Wednesday, a speakers' forum for Silicon Valley civic leaders.

"Of course we need to be able to respond to any competitor and we will."

Nokia will launch the package in Britain, the world's third largest music market. UK retailer, Carphone Warehouse, will start selling the products on Oct 16. Nokia 5310 will sell for 130 pounds, while the price for a version of Nokia's sophisticated N95 smartphone with eight gigabytes of memory was not revealed.

Analysts said the choice of a relatively cheap model was a clear indication Nokia was trying to win over consumers who often are not paying for music but getting it through file-sharing sites on the Internet.

"If you have access to everything, what's the need for pirated music?" said Universal's Rob Wells.