Moody’s has cut Nokia’s debt rating following the announcement last week that it had sold fewer phones than expected in the first quarter.

The one-notch rating downgrade, to Baa3, was due to the Finland-based vendor’s “precipitous decline”, the ratings agency said in a statement.

“Moody's believes that the structural challenges facing Nokia's Mobile Phones segment may not be easy to address, such as the market share gains recorded by makers of very low-end phones or new phone promotions by Chinese carriers,” it added.

Moody's said it expected that Lumia devices will be accepted in the market in 2012 with the help of price and marketing support and that it will become the third smartphone system next to Google's Android and Apple's iOS.

However, the gap between sales of Symbian-based devices, which are falling off “very quickly”, and their Lumia replacements remains too great at present.

The ratings agency also highlighted the possibility that Nokia might have to contribute additional capital or funding to NSN if the latter’s restructuring cost starts to exceed cash flow from operations.

NSN, the JV with Siemens, is currently undergoing a radical transformation that involves shedding 17,000 jobs and making saving of €1 billion by the end of 2013.

Nokia's Baa3 rating carries a negative outlook based on the expectation of continued low performance due to market pressures and its product transition.

Moody’s added there was “limited potential” for an upgrade.

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