Mobile phone giant Nokia is set to buy digital music distributor Loudeye for $60 million. The move is seen as the first step in an attempt by the handset maker to develop a music download service that can challenge iTunes.

Loudeye's Windows-only service supplies the backbone for 60 music services in 20 countries. It currently offers a catalogue of 1.6 million tracks. Nokia revealed that it sold 15 million music-enabled mobiles in the April-June quarter.

Anssi Vanjoki, general manager of multimedia at Nokia, said: "Music is a key experience for Nokia and Nokia Nseries multimedia computers. People should be able to access all the music they want, anywhere, anytime and at a reasonable cost. With this acquisition, we aim to deliver that vision and a comprehensive music experience to Nokia device owners during 2007."

Under the terms of the agreement, Loudeye stockholders will receive $4.50 per share in cash for each share of Loudeye common stock. The transaction is expected to be complete by the end of the year.