Although location-based services (LBS) for mobile handsets have fallen far short of expectations the technology is poised for a renaissance, industry watchers have predicted.

By 2007, the European LBS market will be valued at €200m (£133m), with LBS-enabled services accounting for 10 per cent of mobile value-added services, according to research from Frost & Sullivan.

But this still accounts for less than one per cent of mobile data revenues, said the analyst firm.

The study blames the lacklustre performance of LBS since its European debut in 1999 on poor technology and the lack of network infrastructure.

But by offering localised marketing and improved customer relationship management - such as special offers, impulse buys and last-minute deals - for retail brands, restaurants and cinemas, LBS presents an effective marketing tool for enterprises, the analyst said.

At present, the business sector represents the most profitable area for LBS applications because of efficiency and cost benefits in comparison to alternative technologies such as GPS devices.

LBS is also set to have particular appeal for business customers in the freight and logistics verticals, with fleet management and security applications poised to become the highest revenue-generating usage areas.

"LBS can also be used as an enabler to enhance the users' experience of existing services, such as directory services, presence and diary management, unified messaging and information services such as traffic and travel news," said Frost & Sullivan consultant analyst John Younghusband, in a statement.