Nokia's new Lumia 920 handset is being priced up to 25 percent higher than the rival Samsung Galaxy S3, risking a consumer backlash that could endanger its attempt to restore its fortunes.
Analysts said Nokia will struggle to explain the premium on the Lumia, seen as potentially its last chance to break into the lucrative smartphone segment and catch Apple's iPhone and a string of other popular phones like the fast-selling Galaxy.
The Lumia, which with its rounded edges and colourful covers look similar to its predecessors, was unveiled earlier this month and drew a thumbs down from many analysts who said it lacked the "wow" factor to challenge its rivals.
It uses Microsoft's Windows Phone 8 software while Samsung Electronics' Galaxy S3 operates on Google's Android system, the platform favoured by many smartphone makers.
"Windows Phone is still largely an unknown to consumers they would probably expect to pay less if they are taking a risk," said Ovum analyst Nick Dillon.
"Hardware-wise they are pretty similar, it would be hard for Nokia to justify that extra cost to consumers."
Windows Phone has just around 3 percent of the global smartphone market, while the Android platform controls two-thirds of sales. Apple has around a quarter.
Nokia said Swedish carriers would sell the Lumia 920 for around 5,700 Swedish crowns, excluding subsidies. This compares with 4,515 crowns asked for a Galaxy S3 at Expansys, one of the leading online phone stores in Europe.
In Italy, the Lumia 920 will sell for 599 euros, compared with 530 euros for the S3, which has been on the market for four months.
The S3 retails for 530 euros in Germany, where Nokia will ask 649 euros for the Lumia. In Russia the Lumia will sell for 24,990 roubles, some 10 percent above Galaxy S3.
"Nokia will find it difficult to command a premium over Samsung's Galaxy S3 which is the pricing benchmark for a non-Apple flagship smartphone," said Ben Wood, head of research at British consultancy CCS Insight.
Once the world's biggest mobile phone maker, Nokia fell behind rivals in smartphones and has racked up more than 3 billion euros in operating losses in the last 18 months.
Samsung sold 20 million of the Galaxy S3 handsets in three months.
Apple remains confident of its ability to command a premium, selling its new iPhone 5 well above prices of Nokia and Samsung flagship models.
Nokia's volatile shares were 3.2 percent higher at 2.06 euros by 1305 GMT, regaining some of the lost ground from the previous trading session.
Copyright Thomson Reuters 2012