Worldwide sales of mobile phones will hit a billion next year but the days of massive growth could be over, says an industry report.
Putting TV on mobiles will be key to growth says the report
According to research firm Informa Telecoms and Media, the battle now will be persuading users to upgrade their phones regularly.
New services such as mobile TV will compete with improved cameras, more memory and cutting-edge design.
But the long-awaited switch to 3G could be some time off, the report said.
The report predicts that only a quarter of all mobile phones sold by 2008 will be 3G - which might not be quite the news operators, desperate to recoup the money they spent on third-generation networks, wanted to hear.
Emerging markets such as Asia-Pacific, Latin America and Africa will continue to see large increases in handset sales but the very low profit margins means growth in these markets will be offset by saturation levels in the more profitable Western markets.
This will put pressure on manufacturers to come up with innovative designs and functions in the effort to persuade consumers to change handsets on a regular basis.
Like supermodels, mobile phones will continue to get thinner as the desire for wafer-sized phones continues.
Motorola, which kick-started the trend towards more fashionable handsets, has now sold 50 million Razr phones since the handset was launched in 2004 - more than the number of iPods shipped during the same period.
Style will not be everything though. The report finds that consumers will increasingly expect functionality to walk hand-in-hand with good looks.
Cameras will continue to be one of the key features of phones and more than half of all mobile handsets will have integrated cameras from 2007.
Manufacturers are beginning to realise that there is more to a camera phone than megapixels.
Nokia and SonyEricsson now offer software enabling users to upload images straight onto a personal weblog.
"Looking at how people use their digital cameras and the whole digital camera eco-system will be vital to gain revenue," said report author Dave McQueen.
It will also be crucial to kick-start MMS - multimedia messaging services - the report said.
"MMS has not really found its place in the market," said Mr McQueen.
"People may be happy to use the camera but not know how to send a picture message. In some cases you may have to push up to 12 buttons to send something so the pressure is on software developers to make it easy to navigate," he said.
Getting TV on to mobiles will present new opportunities for operators and is likely to be the next big battleground for subscribers, despite questions remaining about how and if people will use such services.
In the UK, there is an added problem for operators wishing to use the DVB-H standard (Digital Video Broadcast - Handheld) in that the spectrum needed to launch such services will not be available until the analogue signal is switched off in 2012, said Mr McQueen.