Smartphones may be one of the hottest areas in technology with big names like Apple and Google tussling for share, but investors are questioning the growth prospects for mobile carriers as subscriber gains slow.

While it is true that clever devices like the iPhone or Android phones will boost demand for advanced wireless services such as video, games and mobile web, analysts worry that returns from such services cannot sustain revenue growth.

Mobile subscriber growth is slowing as about 90 percent of people in the United States already own cellphones.

Expectations for new subscribers are already lower than usual for the current quarter, which ends days after the March 23-25 CTIA wireless show in Las Vegas.

First-quarter subscriber additions typically tend be 5 percent to 10 percent lower than in the busy fourth-quarter holiday season. But this time, analysts see as much as a 15 percent drop in additions of monthly bill-paying customers, known as postpaid subscribers.

Against this backdrop, operators such as AT&T Inc and Verizon Communications Inc are expected to focus on advanced mobile services at the CTIA show. Carriers can charge smartphone users extra monthly fees for data services, such as Internet access and texting.

But analysts say that will not be enough to offset falling voice revenue and the cost of supporting data services.

You can wave your arms about data all you like, but the reality is that the revenue growth for the U.S. wireless industry was only 2.6 percent by the end of 2009, said Bernstein analyst Craig Moffett.

It's just not a growth business any more, he said, forecasting a 10 percent sequential drop in postpaid subscriber additions industry wide in the first quarter.

Pacific Crest analyst Steve Clement expects a 10 percent to 15 percent drop saying, Demand on the postpaid side has been pretty tepid.

He said the weakness is partly due to the fact that operators themselves pulled some sales forward to the fourth quarter from the first quarter through particularly heavy promotions of smartphones like the Motorola Inc Droid.

CALL FOR TIERED PRICING

Another issue is pricing because Verizon Wireless, AT&T, Sprint Nextel Corp and T-Mobile USA have been discounting services to win customers from each other and to fend off Leap Wireless and MetroPCS Communications, which sell prepaid wireless services. Prepaid customers tend to switch carriers often as they do not commit to long-term contracts.

Carriers also have to spend to upgrade their networks in the face of heavy data use by smartphones and other gadgets.

Bernstein's Moffett said operators may have to charge heavy data users more than today's flat fees for unlimited mobile Web surfing. That way they could invest the extra fees in easing network congestion.

We're in a period of high demand and constrained supply for wireless data (capacity), Moffett said That should be a recipe for pricing power.

But carriers have been hesitant because many consumers are still balking at paying $30 or more per month for unlimited data services. Thus, operators are not expected to announce any kind of tiered pricing structure at the CTIA show this year.

Some analysts say the launch of fourth-generation (4G) wireless services could be a good opportunity for carriers to introduce new pricing structures.

Clearwire Corp, which is majority owned by Sprint, is building a 4G network based on an emerging technology known as WiMax. Verizon Wireless, owned by Verizon Communications and Vodafone Group Plc, is also planning a 4G offering.

That's where we might see prices move somewhat higher, said CL King analyst Lawrence Harris.

But other analysts are less sure, saying they don't expect Sprint to lead the charge with higher pricing when it launches the U.S. market's first 4G phone -- HTC Corp's Supersonic -- expected to be unveiled at CTIA.

For 4G data card customers, Sprint now charges $59.99 a month for unlimited Internet access.

That will be interesting to see how they price (services for) the Supersonic, Harris said.

Headline speakers at CTIA include AT&T's chief executive, Randall Stephenson, and its mobile chief, Ralph de La Vega, as well as Sprint CEO Dan Hesse and Clearwire CEO William Morrow.

Other speakers include Rene Obermann, CEO of T-Mobile USA's parent Deutsche Telekom, and J.K. Shin, president of the mobile phone unit of Samsung Electronics.

(Reporting by Sinead Carew; Editing by Tiffany Wu)

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