Aiming to target smaller towns, Idea Cellular recently launched two branded smartphones. The company believes the use of 3G services would rise if handsets are affordable.

"We are sowing the seeds for smartphones so that 3G becomes popular," said Himanshu Kapania, managing director, Idea Cellular. The operator has priced its handsets at Rs 5,850 and Rs 7,992, and these would be bundled with data plans of around Rs 3,500.

Experts say Tier-II and Tier-III cities and smaller towns have a role to play in growth in smartphone sales. Mritunjay Kapur, managing director, Protiviti Consulting, said, "There is definitely a market in Tier-II, Tier-III and Tier-IV towns. Smartphones are fast becoming important as a business communication tool. This is especially true for sales people, and 'fleet-on-the-street'," he said.

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Currently, only about 10 million of India's nearly 900 million mobile customers use smartphones. As social networking and entertainment catches up in smaller towns, it is fuelling the growth of data and handsets.

"There is a lot of hunger for smartphones in smaller towns. After all, subscribers in Tier-II and Tier-III cities are going online for the first time on their mobile handsets," said Vikas Jain, chief executive officer, Micromax.

It is believed users' need to download more applications would facilitate the upgradation to smartphones. "Around 67 per cent of our subscriber base already has 3G-enabled feature phones. We would want them to upgrade to smartphones," said Sashi Shankar, chief marketing officer, Idea Cellular. Today, among phones that support 3G, 65-75 per cent is smartphones, and the rest feature phones.

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Idea 3G smartphones are based on the 2.2 Android operating system and have a 3.2 megapixel camera, a touchscreen, a GPS navigator software, FM radio, an MP3 Player, WiFi, bluetooth, social media apps such as Facebook, Twitter, Orkut, and have Google and Youtube pre-loaded, besides a range of other high-end smartphone features and Idea TV. The handset devices can operate as mobile phones, mini computers, and also as a Wi-Fi router.

"Phones which boast of e-mail, entertainment and applications like booking tickets would see traction," said Kapur of Protiviti Consulting. Micromax's Jain, too, says for a price of up to Rs 6,000, a number of feature phone users would be willing to upgrade to smartphones.

According to CyberMedia Research, the value of smartphone shipments would match that of feature phones by late 2013 or early 2014. "The reason for the higher adoption of smartphones is the drop in average sales value, from nearly Rs 18,000 in 2009 to Rs 12,250 in 2010, and to below Rs 11,000 in the January-September period.

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This trend is expected to continue in the foreseeable future, as more original equipment manufacturers and service providers enter the smartphone market with attractively-priced models, bundled with free data services," said Tarun Pathak, telecom analyst, CyberMedia Research.

"Our handset would be sold across 1,700 towns," said Shankar. Smartphones would help operators see increased data consumption, a shift that can help companies improve their margins, as prices of calls and text messages dropped due to competition in the market.

An average smartphone user spends two-and-a-half hour everyday with his phone, and spends less time on voice calls and texts, compared to others. "Around 72 per cent of the time is spent on activities such as gaming, entertainment, applications and internet-related content," said a report by Nielsen Informate Mobile Insights.