THE last time he appeared at the Mobile World Congress in Barcelona three years ago, Steve Ballmer, the chief executive of Microsoft, was exuberant at the prospect of the software giant pursuing new growth in the mobile-phone industry.

His return this week to deliver a keynote address promises to be a little more muted, and not just because Microsoft has much to do to gain ground on the must-have appeal of Apple’s iPhone and Research in Motion’s Blackberry devices.

The economic downturn means that times have changed, changed, even for mobile firms, which had become used to uninterrupted growth. Although the mobile industry celebrated making its four bil-lionth connection last week, Gartner forecasts a 5% fall in handset sales this year, the first decline since 2001.

Nokia, the market leader, is more bearish, with predictions of a 10% industry fall. Heavy-weights including Vodafone’s Vittorio Colao and Carl-Henric Svanberg of Ericsson will debate how to deal with a new austerity when even emerging markets growth is slowing.

“The environment is different from the past,” said Orange chief Olaf Swantee. “Customers are changing devices less and purchasing Sim-only packages more. There is less footfall, but at the same time more effective footfall. People are coming into shops with a purpose.”

Consultants Booz & Company cite figures suggesting that UK voice and data sales – both mobile and fixed line – will fall from £33.5 billion in 2008 to £32.5 billion in 2012. Analysts think that while consumers are unlikely to give up their mobiles, they have the potential to cut back. Some are being encouraged not to upgrade their phones by operators if it means they can get away without subsidising new handsets to the tune of £200 each.

“A third of mobile revenues come from prepay,” said James Barford of Enders Analysis. “A lot of that is discretionary. In addition, people are looking to save money and may spin down from contracts.” The Barcelona event’s sober mood will be reflected by fewer than 50,000 delegates in attendance, a decline from last year’s 55,000.

However, the industry believes that it has grounds to harbour hope. In his speech on Tuesday, Cesar Alierta, the chairman of Telefonica, which owns the mobile firm O2, is expected to call for the tele-coms industry to play a key role in reversing the global economic decline.

Given the right regulatory environment, he wants to build on a sector that contributed €374 billion (£334 billion) to the European Union economy in 2007, using its “multiplier effect” to create jobs and research spending.

Part of that comes from investment in new technology, including fourth-generation LTE networks, capable of supporting fast mobile broadband, video surveillance and high-definition video.

“I think it goes without saying that companies are planning with a degree of caution how they deal with their capital expenditure,” said Richard Lowe, president of carrier networks at Nortel, the tele-coms kitmaker that last month went into Chapter 11 bankruptcy protection.

He predicts that spending on networks will be flat or down next year, a trend which has forced companies like his to slash capacity. Nortel will be showing off equipment with download speeds of 50 mega-bits a second.

In western Europe, one in five mobile accounts are someone’s second connection, typically hooking up a Blackberry to the internet or laptop using a dongle as demand for mobile data accelerates.

To capitalise, Orange is partnering with Hewlett-Packard to market a range of new notebooks that will be sold with mobile or fixed broadband access.

Swantee also wants to bolster customer care, helping with transferring data between old and new phones and offering to recycle old handsets in store.

It is all part of a plan to broaden the appeal of the mobile internet. Swantee said that 10% of users accounted for 90% of data usage.

Together with fewer phone sales, it is easy to see why the industry’s focus is swinging from hardware to software.

Google’s Android operating system is gaining traction with handset makers. Meanwhile, Microsoft’s Ballmer is expected to unveil My Phone, a wireless service that synchronises information such as photos, messages and contact lists with a website, making it easier to back up mobile files.

Both Microsoft and Nokia are due to reveal applications stores similar to Apple’s that let consumers download tools including games and mapping software. It marks the latest attempt by Nokia, the world’s leading mobile-phone maker, to derive more income from mobile services.

In fact, members of the Mobile Entertainment Forum, who provide social networking, music and games to phone users, have perhaps the most optimism heading into the congress. They predict average revenue growth of 27% this year. Analysts reckon hard times mean that fractious players are likely to work harder on collaborations.

“Surviving 2009 means it is definitely not the time to fight with one another,” said Gartner’s mobile analyst, Carolina Milanesi. “It is really about working together.”

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