The growth rate of mobile handset sales has started to plateau in China's main centres, prompting manufacturers to turn to third- and fourth-tier cities, according to a Nokia executive. Colin Giles, Nokia's general manager for sales in China, said the fierce competition among domestic and foreign firms had branched out from the relatively affluent eastern coastal cities, and spread westwards and southwards across the mainland in the search for new customers. 'The marketplace right now is moving towards the smaller cities. This year especially we are starting to see sales move to the third- and fourth-tier cities and moving more to the southwest. Eventually it will spread to all of China where there is a population,' Mr Giles said. He said the shift was also driven by an increasing consumer awareness in the more remote areas of the country and the falling prices of mobile handsets. 'There is a lot of marketing going on and people see their friends have a mobile phone and they want one, too,' he said. To adapt to the change, Nokia last year increased the localisation of its mainland operations, developing distribution and marketing partnerships and customising its products to the market. Last week in Shanghai, the company released its 3610 handset, which includes features for Chinese users and will sell for 1,700 yuan (about HK$1,590). 'We're quite aware of this transition to the smaller cities and we are tailoring our operations to meet the new challenge with more local distribution, local marketing programmes and products that are locally relevant,' Mr Giles said. Nokia has 150 professional retail centres throughout China. The move to expand into new regions of China has also been undertaken by network operators. Last week, China Mobile announced it would invest HK$46.8 billion in telecommunications infrastructure in western China over the next three years. The telecoms company expects the region to account for 23 per cent of its network by 2005, up from 10 per cent at present. State statistics show a mobile phone penetration rate of 19 per cent in eastern China, compared with 7 per cent in the west. Mr Giles said the move into smaller markets would put the leading handset makers, including Nokia, Motorola, Samsung, Ericsson and Siemens, into increased competition with the 30 larger domestic manufacturers, which cater mainly to regional customers. The big foreign firms account for about 80 per cent of the market. 'Until now, the local manufacturers have been competing between themselves,' Mr Giles said. 'Their challenge is to expand their base to a national level but it's clear that towards the end of the year you are going to have to see some consolidation between them. 'First of all they have to compete with each other but eventually they will have to compete with us as well,' he said.