nokialogo.jpgNokia, the world's biggest mobile phone manufacturer, has signed a mammoth $2.5bn deal with China Postel, its main distributor in China.

Under the terms of this new agreement, China Postel, part of China P&T Appliances, is expected to purchase Nokia phones to the value of $2.5bn in 2007. Yes, you read that right. This huge deal just covers the current year and translates into around 20m phones.

The shear size of the numbers involved gives us an idea of just how important China has become to the tier one mobile phone manufacturers. We can only guess at the scale of “volume discounts” that you can negotiate if you buy tens of millions of phones a year.

China P&T is China's largest mobile phone distributor and since its relationship with Nokia began in 1998, it has distributed over 37m phones.

The new deal thus represents a big expansion of their existing relationship and, sure enough, Nokia, in its official release, made the the right noises about “deepening strategic ties” and “significant bilateral resource investments”.

I also suspect that this deal it is a sign of the times. The Chinese phone distribution market is maturing fast and the big distributors China P&T and Telling, which between them account for almost half the market, are set to get bigger. Feeling the squeeze as the sector consolidates, distributors will will seek to rationalise purchasing by stocking a more limited range of well-known brands rather than a confusion of products from many manufacturers.

Likewise, the mobile phone manufacturers want to a sign strategic relationships with a few key third-party distributors they can trust, as well as trying to build out their own-brand distribution channels. More on China's mobile phone sales channels in this CCID Consulting report.

China has grown to be Nokia's largest single national market. In value, Nokia's sales in the PRC grew 39% last year to €5.3bn while in units, it sold more than 51m mobile phones, an increase of 57% on the previous year. By comparison, global sales grew 19%.