Sony Ericsson is set to unveil an unlimited music downloading service for its mobile phones later this month in an attempt to stem its declining market share.
The handset-maker's new music product, expected to be an expansion of its existing mobile download services, will compete with a similar strategy from Nokia.
Nokia, the world's largest handset manufacturer, last week said its Comes With Music service will launch in October, allowing buyers of certain handsets to download as much music as they like for a year.
Sony Ericsson is in discussions with all of the major labels about a rival subscription service. It hopes to announce the product before the end of September, with a view to launching in Europe before Christmas.
Sony Ericsson declined to comment for this story.
The world's fifth-largest handset manufacturer has issued two profit warnings this year, because it is seeing lower-than-anticipated mobile sales in its core European markets.
Dan Cryan, analyst at Screen Digest, a media and technology consultancy, said that competition had encouraged Sony Ericsson to launch a product it had once rejected as devaluing music.
"Sony Ericsson's market share is shrinking," he said. "If everybody is launching 'all you can eat' services, which make handsets more attractive to end users and to operators, they don't have much choice, especially when so much of their brand value is built around the Walkman."
The new launch depends on finalising contracts with record labels and mobile operators. Sony Ericsson's existing music service is based on a pay-per-track business model, and forms part of its PlayNow Arena, which also offers games and ringtone downloads.
It already has agreements with EMI, Warner Music and Sony BMG, as well as several independent labels, but not Universal Music, the largest of the majors.
Pricing of Sony Ericsson's unlimited service will have to compete with Nokia, which plans to add a one-off premium to the handset cost for Comes With Music.
PlayNow Arena charges about €0.99 for individual downloads, with 5m songs available without restrictions on how often they can be played or on what.
Nokia's Comes With Music comes with so-called digital rights management technology, provided by Microsoft, which ties downloaded tracks to an individual computer and phone. That leaves an opening for Sony Ericsson's rival service to offer tracks without such restrictions.
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