Nokia has priced its new Lumia 920 handset up to 25 percent higher than rival Samsung Electronics' Galaxy S III, risking a consumer backlash and endangering the troubled Finnish cellphone maker's efforts to catch competitors.
Analysts said Nokia will struggle to explain the premium of the Lumia 920, which uses Microsoft's Windows Phone 8 software and is seen as potentially its last chance to break into the profitable segment and secure its future.
"Hardware-wise they are pretty similar, it would be hard for Nokia to justify that extra cost to consumers," said Ovum analyst Nick Dillon. "Windows Phone is still largely an unknown to consumers - they would probably expect to pay less if they are taking a risk."
Nokia said Swedish carriers would sell the Lumia 920 for around 5,700 Swedish crowns ($860), excluding subsidies. This compares to 4,515 crowns asked for Galaxy S III at Expansys, one of the leading online phone stores in Europe.
In Italy, the Lumia 920 will sell for 599 euros ($770), compared with 530 euros for the Galaxy S III which has been on the market for four months.
The Galaxy S III retails for 530 euros also in Germany, where Nokia will ask 649 euros for the Lumia 920.
The Galaxy S III has become the pricing benchmark for flagship smartphones although Apple is selling its iPhone 5 well above those models.
Once the world's biggest mobile phone maker, Nokia fell behind rivals in the fast-growing smartphone market and has struggled to catch up, racking up more than 3 billion euros in operating losses in the last 18 months and forcing it to cut 10,000 jobs, as well as sell assets.
The Lumia 920 is Nokia's bid to catch up with Apple's iPhone and a string of popular phones using Google's Android software, like Samsung's Galaxy models.
The new phone, 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 felt it lacked the "wow" factor to make big inroads against rivals.