Nokia, the world's leading maker of mobile phones, said yesterday that it would cut as many as 1,000 jobs at its networking division as it seeks to reduce costs in the face of slowing demand for its mobile phone systems.

The Finnish group - which until its profits warning earlier this month had been seen as a relative safe haven from turbulence in technology shares - said the cuts would be introduced gradually and be completed by the end of the year.

It said the move was part of a plan to restructure Nokia Networks, which employs 23,000 people worldwide, "to align the organisation to the current business environment and to meet the challenges of the future".

Shares in Nokia, which have lost almost half their value since their year-high of €48.50, were down 3.5 per cent at €24.65 in early trading yesterday. The job cuts reflect the slowing growth of the mobile phone handset market but, more worryingly, they may also be a warning that delays in the development of third-generation technology are causing operators to scale down investment in next-generation infrastructure.

Nokia rivals Ericsson, Lucent and Nortel have already slashed staff numbers in the face of falling sales growth of mobile phone systems but, until now, Nokia had resisted cutting jobs in its networking division.

The move is a blow to the group, which earlier this year had looked to leverage the strength of its balance sheet to win third-generation networking contracts, often using vendor financing and taking market share from the more traditional networking companies.

Nokia used such financing packages to win contracts from European operators such as Orange in France, Hutchison 3G in Britain and Mobilcom in Germany.