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The booming wireless industry is feeling the pinch.

Sales growth for cellphones and some smart phones is slowing, manufacturers such as Motorola Inc. are being forced to lay off thousands of employees, and carriers concede that it's getting tougher in the industry.

Observers agree sales of smart phones, which allow users to also customers to also surf the Internet and send e-mails, will continue to rise as users opt for multifunction devices over traditional cellphones. But observers do see declining growth rates among manufacturers and carriers.

"People will hesitate before buying a new handset this year," said Kevin Restivo, lead mobile device tracker analyst in Canada for IDC, a research firm. "The trend to smart phones is still afoot; however, we expect it to slow."

Bell Canada yesterday cited the economic climate for tripping up wireless subscriber growth.

Even shares of Research In Motion Ltd., which yesterday issued a forecast that called for strong growth in subscribers for the fourth quarter, was pummelled by investors because of concerns over its profitability.

Shares of RIM plunged 15 per cent on the Toronto Stock Exchange yesterday after the BlackBerry maker provided investors with an updated financial forecast that projected gross margin and earnings per share for the fourth quarter would come in near the low end of its previously forecast range. RIM said revenue for the quarter would be at the mid-point of its guidance.

"RIM achieved a very strong start to the holiday buying season and the momentum carried on stronger than expected during the past seven weeks, despite a seasonally slower time frame and the challenging economic environment," RIM's co-chief executive officer Jim Balsillie said in a statement.

RIM is trying to manage market turbulence by expanding its product line and being more things to more people. But investors wonder what RIM's new wider product focus will do to its traditionally fat gross margins, Mr. Restivo said.

At the same time, RIM said it expected to add 20 per cent more new BlackBerry subscribers in the current quarter than the 2.9 million it forecast during its last earnings call in December.

Investors began to worry in September that RIM's new focus on the consumer market - where smart phones cost less and thus generate less profit per device - was hurting the company's gross margin.

But RIM's newest BlackBerry devices - the 3G Bold and the touch screen Storm - are experiencing better momentum than expected from carriers, which is helping to stabilize the company's gross margin, said RBC Dominion Securities analyst Mike Abramsky.

"Those recently launched products [Bold and Storm] are lower margin than RIM's older products, just because they have more complexity to them," he said. "So it's a little counterintuitive, but the reality is that because those products are doing better, they skewed margins off a little bit."

At Canada's largest phone company, there is a recognition that the easy money in wireless has been made.

"Growth hides all sins, and wireless has had nothing but growth for the last 20 years," said George Cope, president and CEO of BCE Inc. and its main subsidiary, Bell Canada.

The phone giant began an overhaul of all its operations when Mr. Cope took the helm last summer, and the wireless unit implemented its own cost cutting. As a result, the average cost the company incurs to attract a new subscriber fell by 5 per cent to $373 last year.

At the same time, it is also looking more seriously at the discount market.

Bell added 117,000 net new wireless customers in the last three months of the year, 40 per cent fewer than a year earlier. Wireless revenue, however, rose by 2 per cent to $1.14-million. The driver was higher revenue from services, primarily data traffic, which increased 5 per cent to $1.03-billion. But at the same time, sales of handsets tumbled 18 per cent in the quarter to $92-million.

Analyst Greg MacDonald of National Bank Financial expects Telus Corp. to report about 155,000 net new wireless customers for the fourth quarter, which would amount to 10-per-cent growth. A year earlier, the company added 161,400 new subscribers.

Rogers Communications Inc., which has exclusive rights to sell Apple Inc.'s smart phone in Canada, said in January that sales of the device fell almost 50 per cent in the fourth quarter from the third. Overall subscribers, however, increased by 199,000.

BCE's plan

Debt: Plans to be self-financing over the next two years, when $2.5-billion of long-term debt comes due. BCE will retire that debt using cash on hand, after which it expects to be able to self-fund debt repayments for many years.

Capital expenditures: Goal of between 15 per cent and 16 per cent of revenue, with the emphasis on improving its wireless network and fibre networks that run into residential neighbourhoods.

Dividend: No one-time payment to compensate investors for suspended dividend payments last year, but the company boosted its annual common share dividend by 5 per cent to $1.54 a share.

Pension: Pension investments fell nearly 20 per cent in 2008, the worst performance in its history. BCE will pump an extra $300-million into pension funding this year, bringing the total for 2009 to $500-million.