TOKYO, JAPAN - Mitsubishi Electric Corp said it planned to exit its loss-making mobile phone business, becoming the latest Japanese electronics maker to withdraw from a market dominated by overseas giants such as Nokia.

After facing tough competition from Nokia, Samsung Electronics Co Ltd and other global suppliers that enjoy economies of scale, many Japanese cellphone makers have retreated to the domestic market in recent years.

But cellphone demand in their saturated home market is expected to slow this year, as mobile phone operators such as NTT DoCoMo Inc cut subsidies paid to retailers to keep cellphone prices low and instead reduce their monthly rates.

Mitsubishi Electric said on Monday it expects a one-off loss of about 17 billion yen ($164.1 million) on a pretax level for the year ending March 31 due to the withdrawal.

The Tokyo-based company said, however, that the loss is likely to be offset by improving operational efficiency in other businesses.

Mitsubishi Electric expects 100 billion yen in sales from its cellphone operations in the current business year, or 2.5 percent of its group revenue, and shipments of 2.1 million units.

That would be less than 0.2 percent of global mobile phone shipments for calendar 2007, according to data from research firm IDC.

Mitsubishi Electric's decision follows a January announcement by Sanyo Electric Co Ltd that it would sell its loss-making cellphone business to Kyocera Corp for 40-50 billion yen.

"This is a logical step for Mitsubishi Electric after having been unable to launch a hit model for a while," IDC analyst Michito Kimura said.

"But the withdrawals by these two Japanese cellphone makers are not going to make things better for those that are still in the industry, as wireless operators' new business strategy (of cutting subsidies to retailers) is discouraging users from replacing their handsets frequently."

Mitsubishi Electric, which has already withdrawn from overseas cellphone markets, plans to cease shipments to NTT DoCoMo, its sole mobile phone customer, by September.

DoCoMo's other suppliers include NEC Corp, Panasonic maker Matsushita Electric Industrial Co, LG Electronics Inc, Nokia, Sharp Corp, Sony Ericsson, Fujitsu Ltd, Sanyo and Motorola Inc.

Motorola, which has been losing market share to rivals such as Nokia and Samsung after being unable to come up with a strong successor to its popular Razr phone, said in late January it was considering separating its mobile devices business from its other units.

Mitsubishi Electric plans to utilize its mobile phone technologies in related telecommunications businesses such as cellphone infrastructure operations and components used in advanced fiber optic-based networks.

Nippon Telegraph and Telephone Corp's two regional units are building a so-called next generation network (NGN) that will enable the smooth transmission of movies, music and other "heavy" content, in a bid to secure a new growth driver.

NGN-related investments by NTT East and NTT West will nearly quadruple in the new business year starting in April to 115 billion yen.

Shares in Mitsubishi Electric closed down 4.5 percent at 931 yen, in line with the Nikkei average. --REUTERS