Speech recognition technology could help telecoms companies escape their current woes, according to Nasdaq-listed Nuance, which has developed the voice technology behind a new, one-touch mobile.

"Differentiated services will be the salvation of telecoms operators, increasing both 'stickiness' and revenue," says Ron Croen, the company's president and chief executive. Speech recognition technology, he says, can create new products and services because speech is the simplest interface.

For example, a new mobile phone from San Francisco-based Telespree Communications, a wireless systems provider, will have just one main button to switch it on or off. Users will dial by simply speaking the number. For instance, "650 847 0000".

Users will also use their voice for other services, such as directory enquiries, as the phone has no numeric keypad. In this way the cost of the phone has been reduced to $30 for 30 minutes of calling time.

The idea is that the phone is cheap enough to turn prepaid mobile into a true mass market product. It could also be used as a disposable phone by people who have left their main mobile at home or run out of battery power, or by travellers to a country where their own mobile will not work.

However, the life of the phone can be prolonged, with extra airtime purchasable as "airclips" - units that can be clipped on to the back of the phone. Telespree says the phone is being tested with a US mobile operator and it plans to have outgoing call-only phones on sale by Christmas, with a two-way mobile available 12 months from now.

It hopes the phone will also appeal to stocking filler and promotional gift markets, with, say, car rental companies offering a free phone with access to spoken navigation services.

Mr Croen sees speech recognition as "enabling intelligent dialtone". He says: "You should be able to pick up the phone, ask 'what's available', and get a list of services to choose from."

Nuance's speech software is used when US customers want to check the progress of a delivery being made by United Parcel Service, or to buy or sell shares through Charles Schwab, Merrill Lynch or Fidelity Investments.

Since last August customers of the US mobile network Sprint PCS have been able to speak the number or name of the person they want to call rather than tap in the number on their keypad and Nuance technology can also be used to get traffic, restaurant and movie information from the Tellme voice portal.

Alternatively, the technology can help American Airlines passengers check if their flight is on time or use frequent flyer miles to upgrade a reservation. It can also be used to obtain business phone numbers from AT&T's toll-free phone directory.

Mr Croen says speech recognition technology is most useful for voice dialling, directory services, messaging (such as having e-mails read out), and for information and transaction-based services.

At present, speech recognition technology is good enough for situations where the user is making natural language requests that the system expects. For example, "Tell me the news, show me the sports results." Telespree says the accuracy of the system for voice dialling is over 94 per cent.

However, the technology is less good at understanding open-ended text, especially in a situation where there is background noise, which would normally be the case when using a mobile. For this reason, mobile subscribers cannot use it to dictate text messages.

However, Mr Croen says one of Nuance's partners is working on open-ended speech applications in a specific business area, but so far it has come up with 10,000 possible messages the system would have to recognise.

"There is technology in the laboratories that can cope with open-ended text, but a phone line is more constrained than applications where a user sits at a desktop PC dictating. I think it will be two or three years before we see open-ended text working well on a mobile," he says.

The Holy Grail for Nuance is to enable customers to request information, check on their buddy list, and carry out transactions all through a single call to its Voyager system. "Our research has shown that customers feel they are being more efficient if they can carry out more than one activity at a time," says Mr Croen.

Mobile commerce could be one of the activities to benefit from speech recognition technology. Nuance can easily collect a unique voiceprint of a customer and use that to authenticate credit card purchases.

In its most recent quarter ended March, Nuance had revenues of $11m, in line with expectations which it had lowered on March 15. This represented a 39 per cent increase over year-ago first quarter revenues of $7.9m.

First-quarter 2001 losses at the Menlo Park, California-based company, were $11.6m after operating expenses of $22.6m. This included research and development spending of $5.2m and the cost of opening new offices, including one at Guildford in the UK.

However, the company is taking steps to control its spending, including a salary freeze, and is well-funded. It has a cash pile of $206m and says its average cash burn rate is about $24m a quarter. Mr Croen expects the company to be profitable in 2002 and "reach break even when our revenues are north of $100m". They were $52m last year.