The developing world will be a crucial market for vendors

As the developed world reaches mobile saturation levels, easy-to-use, cheap handsets will be crucial for vendors, according to a new report from research firm Informa Telecoms and Media.

Services specifically tailored for this market will be essential.

It could see an increase in cheaper, data-based voice services and a rise in voice-based messaging services.

The latter will be particularly popular in areas of low literacy, the report finds.

Walkie-talkie

QUICK GLANCE AT SURVEY FINDINGS 2 billion subscriber milestone surpassed next year 899m handsets sold by 2010 China is world's single largest market 77% of handsets will be camera phones by 2010 52.8% of handsets will have integrated music player by 2010

Using data networks for voice services could have the knock-on effect of driving voice-over IP for mobiles although operators are expected to oppose such a move, the report found.

"The technology is there for operators to do it but as 80% of their revenues still come from voice, operators are unlikely to want voice-over IP enabled devices for a good while yet," said report author David McQueen.

Voice-over IP would be an attractive option for consumers in both the developing and developed world as it means cheaper calls.

Already so-called push-to-talk services - a cross between walkie-talkie technology and an instant messaging network - are taking off in areas such as Latin America, the Indian sub-continent and South East Asia.

Because the service uses data it is likely to be cheaper than traditional voice services and Mr McQueen anticipates it could become a ubiquitous feature of phones sold in developing regions.

Motorola has been one of the key developers of push-to-talk services although it is unlikely to have envisaged it would become so popular in the developing world, said Mr McQueen.

"It started off being used in North America on places such as building sites but it has not really taken off in Europe," he said.

Free TV?

Orange offer TV via 3G

The story for the developed world is one of a slow-down in sales over the next five years, according to the report.

Despite this, vendors will still shift 899m handsets in 2010, with 2 billion subscribers expected sometime in 2006.

The main six vendors - Nokia, Motorola, Samsung, Siemens, LG Electronics and Sony Ericsson - will remain the key players but there will be consolidation among other suppliers.

Increasingly operators will offer own-brand handsets which could mean cheaper phones for consumers although it will also mean they are locked in to the services provided by their operator.

Mobile vendors will continue with their so-called 'Swiss Army knife' approach, loading phones with extras such as cameras, music players, Bluetooth and, increasingly, mobile TV.

Many operators are trialling mobile TV at the moment but there are still many issues to be ironed out, such as how deals will be struck between handset suppliers, operators, broadcasters and regulators.

Bandwidth - which in the UK will come when the analogue signal is switched off - needs to be freed up by regulators and manufacturers have to provide phones that can cope with TV viewing alongside the myriad other functions already eating up battery life.

A bigger question is whether there is demand for TV on mobile phones and, if so, whether people will be prepared to pay for it.

"If you have a device with a digital TV receiver and you have paid your license fee why can't you receive television for free?" asked Mr McQueen.

Music will continue to be an attractive feature for phones and the report predicts that over half of handsets will have a music player incorporated into it by 2010.

But here too there are issues surrounding how revenues will be split with recording companies and the price point for downloads.

Both need to be addressed if mobile music is to take off among consumers as a real alternative to using dedicated music players.

Camera phones will also continue to become widespread with 77% of all handsets sold with built-in cameras by 2010, the report found.