Software leads battle for mobile customers

By Tarmo Virki and Georgina Prodhan

BARCELONA (Reuters)—Telecom industry leaders including Nokia, China Mobile and Microsoft raced to announce online software stores on Monday in a drive to find new sources of revenue and please consumers.

The success of Apple's AppStore, which lets iPhone users download thousands of small software programs to personalize the way they play games, listen to music or find directions has inspired admiration and envy in many rivals.

As phone makers and carriers rack their brains for ways to stimulate demand and differentiate themselves in a depressed market, the value of software that is easy and inexpensive to access and quick to respond to trends has come to the fore.

The industry is also embracing open operating systems such as Google's Android and the LiMo consortium's Linux platform, which are attractive to innovative developers, at this week's Mobile World Congress, the industry's biggest gathering in Barcelona.

"The tremendous success of Apple's AppStore has underlined the importance of this distribution channel," said telecoms research firm CCS Insight in a recent report.

Nokia said it would open an online store for software and media under its "Ovi" brand in nine countries in May, with partners including social networking sites Facebook and MySpace and Microsoft also announced a revamped online store.

China Mobile, the world's biggest mobile carrier by subscribers, told the GSM Association's Mobile World Congress Daily freesheet it planned to launch its mobile market applications store in two phases within the year.

Korean phone maker LG Electronics and France Telecom's Orange said they also planned similar stores, while Samsung Electronics and BlackBerry maker Research in Motion have already announced such plans.

Research firm Strategy Analytics forecasts the value of the mobile content market—including downloadable games, ringtones, wallpapers, video, mobile TV, text alerts and mobile Web browsing—will grow 18 percent to $67 billion this year.

Phone makers also rushed to announce plans for new phones based on Google's open-source Android operating system, which is attracting a large community of software developers.

Google and LiMo, based on the increasingly popular open-source Linux software, are challenging the license-fee model used by Microsoft, already waning in popularity in the face of competition from Apple and Research in Motion.

Samsung, the world's second-biggest cell phone maker after Nokia, said it would launch at least three Android phones and at least one LiMo phone this year, and China's Huawei said it aimed to have two or three Android phones on the market in 2009.

China Mobile told the Mobile World Congress Daily it planned to lead the development of an operating system based on Android.

Until now, the only phone on the market is the G1 made by Taiwanese smartphone specialist HTC and sold by Deutsche Telekom's T-Mobile in the United States, Britain and a handful of other European countries.

Google's alliance built around the Android platform has so far announced 47 members. LiMo has 55, including five new members announced on Monday, but lacks the support of the biggest phone makers, apart from Motorola.

(Additional reporting by Kate Holton and Niclas Mika in Barcelona and Brett Young in Helsinki; Editing by Hans Peters and Erica Billingham)

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