A number of companies have been applying their encryption technology to SMS. One of these companies is Masabi; see Encrypted SMS As a Backup for Mobile Data Applications (Cellular-news).
Is SMS encryption a must have? Do you think users care? Personally, I don’t think so.
The problem is lack of true integration with the native SMS inbox and thus are not transparent enough. These 3rd party SMS encryption solutions work as a separate application, meaning the end-user must invoke a native or Java ME application to send/receive encrypted SMS messages.
One of the issues with encryption is key management. To address this, these 3rd party solutions rely on a server to authenticate and perform some kind of key management; here the server must always be involved in the sending and receiving on the other end (which could be another handset or a server). Some may rely on public-key encryption (digital certificate), or hashing w/ salt, or maybe even exchanging a symmetric key directly. In either case, all those solutions rely on a data connection to a proprietary server for such secure SMS exchanges. Another thing to consider is that some encryption algorithms increases the size of the actual message, and complications may arise (including extra cost) if the resulting ciphertext exceeds 160 characters.
While I am not familiar with how Masabi works, it is my personal opinion that most solutions are not transparent enough and users will not use them, not to mention that the majority of people don’t care about encrypting their text messages.
ceo