The order from China Postel, China's largest mobile phone wholesaler, to supply phones this year represents a milestone for Nokia in its No. 1 market. Analysts say the order could represent more than 20 million phones.
The Finnish company, which sells more than a third of all mobile phones across the world, has a strong position in emerging markets like China, thanks in part to its efficient distribution system.
Nokia's share of the Chinese market--the world's second biggest after the United States--topped 35 percent in late 2006, according to market research firm GFK.
Nokia'sover closest rival Motorola grew to its widest in years in the beginning of 2007 as the Finnish company is benefiting from its early entry into fast-growing emerging markets.
And withat the start of 2007 to back away from the tightest competition in the low-end segment, Nokia has few rivals there.
Annual handset sales in developing markets have grown more than three times since 2002, compared with just 62 percent growth in developed ones, according to research firm Strategy Analytics, which forecasts that 65 percent of all handsets made this year will be sold in emerging markets.
Nokia said the companies planned to deepen their strategic ties. China Postel has distributed more than 37 million Nokia mobile phones across China since 1998.
"It is a very important market for us. It was our largest market in 2006 by turnover," said Nokia spokeswoman Eija-Riitta Huovinen.
As the $2.5 billion agreement covers the full year some of the phones have already been delivered, Nokia said.
With Nokia's global average sales price the order would amount to around 20 million phones, but analysts said the average sales price in China was somewhat lower.
"More than anything, this is about the retailer and Nokia wanting to communicate how important this relationship is for them. They want to flag their cooperation," said Carnegie analyst Lauri Rosendahl.
Last September, Nokia and China Postel said the Chinese distributor was expected to buy about 1.5 billion euros ($2 billion) worth of handsets from Nokia in 2006.