Nokia to bundle Skype with new handsets

Skype has signed a deal with Nokia to integrate its VoIP internet call technology onto Nokia handsets. The agreement promises to cause headaches for mobile operators, which are dependent on call charges and marks the latest push by Skype into the mobile space.

Skype will come loaded on Nokia's flagship N97 handset from Q3 onwards as a core part of the device's address book. Users will be able to see when other Skype contacts are online and use 3G and WiFi to make or receive free Skype-to-Skype voice calls and instant messages.

Skype first entered the mobile space in 2007, partnering with 3G and later releasing an application that runs on Windows Mobile and Symbian handsets handsets, including Nokia's S60. However, the Finnish phone maker claims the new partnership will boost the app's usability and uptake.

"Using Skype on your S60 device isn't new, but the level of integration with the service and the device is," Nokia said, following an announcement at the Mobile World Congress in Barcelona. "Skype won’t be running as a separate application, but actually plugged directly into your contacts, making the service a sleek and neat integration."

As well as Skype calls, users can use the service to make low-priced calls to landline and mobile phones, crucially threatening to take revenues away from mobile operators. While free voice packages are offered as a part of most operators' call plans, calling abroad is still charged at a premium. With the rising popularity of unlimited mobile data plans, Skype mobile users could feasibly bypass their mobile operator completely, making all calls and related payments directly through Skype.

Commentators claim mobile operators in the US, such as AT&T, Verizon Wireless, and Sprint Nextel, will be unwilling to carry the N97 on contract for fear of losing profits. Apple's iPhone, which dominates the smartphone market in the US, does not support the Skype app.

As well as integrating Skype, the N97, which launches in June, will also be Nokia's first device to seamlessly connect to its Ovi App store. The N97 is the company's great hope for breaking ground on the high-end market currently dominated by Apple and Research In Motion.

While it is arguable how much uptake for the device will be affected by the Skype access an operator stand-off could prove disastrous.

Nokia's Q4 2008 profits plummeted by 69% year-on-year, amid wider than expected losses. Although it is still the largest phone maker in the world, with a 37% share of the market, most 2008 sales came from China and India – countries where sales of high-end smartphones are lower.

At the Mobile World Congress this week, Sony Ericsson also announced that its high-end Xperia X1 handset will now also support Skype.