Skype is developing a VOIP (voice over Internet Protocol) software client for Nokia's top-of-the-range N97 smartphone, executives of both companies said Tuesday.

Nokia will load the application onto phones before they ship. It will be integrated into the phone's address book, making it as easy to place a call to a contact's Skype username as to their regular phone number, said Skype Chief Operating Officer Scott Durchslag.

The Skype application will allow users to make voice calls, send instant messages and also to select it as a widget so they can see which of their friends are online, all the time, said Jose-Luis Martinez, Nokia's Vice President for Nseries phones. It will use Wi-Fi or cellular connections, as available.

The N97 runs Nokia's S60 software platform, but the application under development is specific to the N97 and will not initially be available for other S60 phones, Durchslag said.

Skype is still just designing the user interface, and the application code hasn't been written, said Durchslag. He expects to have something ready to demonstrate by June, with the final application ready for release some time in the third quarter.

That makes it likely that Skype will be missing from the first batch of N97 phones. Those will be in stores in June, Nokia Executive Vice President Kai Öistämö said at a Nokia event on Monday.

Including an application for a service like Skype is a good fit with Nokia's design philosophy for the N97.

"What makes it our flagship is the tight integration with services," Öistämö said, pointing to the way the applications on the phone work with Nokia's online navigation, entertainment and e-mail tools.

Skype has already developed applications for other mobile phones. Two are distributed exclusively by 3G (third generation) mobile network operator Three, under the 3 Skypephone brand. A third, the INQ1, is also sold through Three but its developer Inq Mobile hopes to find other operators interested in selling it this year.

On Monday, Skype announced an update to its Windows Mobile application. Version 2.5 is now final, after months in beta, while a new beta version, 3.0, is available with two new features: file transfer, and the ability to send SMS (Short Message Service) text messages at Skype rates abroad or while roaming.

In addition to Windows Mobile version, the forthcoming N97 application and the dedicated Skype phones, mobile Skype is also available as a "lite" version for Android phones and about 100 other Java-enabled mobile phones from LG, Motorola, Nokia, Samsung and Sony Ericsson. The lite version, still in beta testing, offers only basic Skype features including voice calling, instant messaging and presence notification, and won't work over Wi-Fi connections, making a flat-rate data service indispensable.

For the full featured application on the N97, "We are starting at the high end," said Durchslag, "but you will see it in the mid-tier. Below that it's hard to deliver a good quality experience," he said.

Nevertheless, when it comes to extending Skype calling to low-end phones, "Time is on our side. Processing power will have to move down market," he said.