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.

You don't need a fistful of dollars to make an international call, just a computer with a microphone, speakers, and one of the six applications we gathered together for you in this collection of free voice-chat apps (some offer upgrades to premium services.) As a bonus, all of these fine downloads offer video calls to let you put a face to a voice.

Voice chat for free on your PC

The company, which is owned by eBay, announced a partnership with Nokia, the largest cell phone maker in the world, to put the Skype Internet calling software onto its phones. Nokia will initially offer Skype on its high-end smartphones, the N-series. The N97, Nokia's flagship device that goes on sale in June, will be the first to have Skype embedded. The Skype feature will start shipping on the device in the third quarter of 2009.

Skype will be integrated into the N97 address book, enabling users to see when Skype contacts are online. It will also let people use Skype's instant-messaging client. Most importantly, N97 users will be able to make free and low-cost phone calls over the Internet whether they are on a 3G cellular network or a Wi-Fi network. The Skype-to-Skype voice calls are free. And the SkypeOut service, which allows calls from Skype to landlines and mobile devices, offers low rates.

Nokia's not the only handset maker to announce a deal with Skype at Mobile World Congress. On Monday, Sony Ericsson announced it would be offering a Skype "panel" on the Windows Mobile Xperia1 device.

Adding Skype to smartphones is a great benefit for consumers, especially people who travel internationally or have friends and family overseas. While pricing on domestic voice services has been dropping like a brick from a third-story window, international rates have remained high.

As a consumer who likes to travel and who happens to be traveling internationally right now for this trade show, I am annoyed and almost angered at the outrageous prices mobile operators charge when customers roam in other countries or make international calls from the U.S. They all try to sell "international" plans to help defray the cost, but the plans themselves cost consumers an extra fee every month regardless of whether they're traveling that month or not.

Skype and other VoIP services offer users a more cost-effective alternative. And Skype on a mobile phone, when accessed on a low-cost data network, could help people who travel frequently or make lots of international calls save tons of money.

Of course, the two smartphone makers Skype has announced as partners here are manufacturers that are already struggling to get their high-end devices on American mobile networks. And my guess is that adding Skype won't do much to convince these operators to offer these phones and subsidize them so that American consumers will buy them.

The reason is pretty simple. AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile USA know that a wide-scale deployment of Skype on their phones could cannibalize their international voice services and potentially hurt their domestic voice service.

So if by chance, Nokia or Sony Ericsson manages to win approval from a U.S. operator to get these phones on their networks, I wouldn't be surprised if the Skype feature is stripped from the device in the U.S. version.

Skype rival Jajah has announced a new application that would potentially allow users to turn their iPod Touch into an iPhone.

The move would allow Touch users to call and text using Voice-over-IP. All users would require is a Wi-Fi connection and the application to start making the calls.

"It's great for young users especially in colleges who have an iPod Touch and Wi-Fi everywhere," says Trevor Healy, CEO of Jajah.

But here's the catch. The product isn't available yet. Jajah is looking to partner with telecom carriers to offer it to users with a monthly subscription fee attached.

The company says it is also considering releasing it on the iPhone App store. But it is not clear if Apple will allow Jajah to bypass the telecom carrier on the iPhone.

Skype, for instance, is not available as an app in the iPhone store. But Apple has allowed Fring, an application that allows users to chat across multiple messengers including Skype.

Despite Jajah's promise, it is unlikely that the application will eat into iPhone sales. An 8GB iPod Touch costs $230 compared to the iPhone's AT&T subsidized $200. It also doesn't promise full connectivity as with a cellphone. Users have to stay connected in a Wi-Fi zone at all times to send and receive calls.

Jajah says it would prefer to 'white label' the application, which means carriers can launch the application under their own brand. "They can set a $10 or $20 monthly fee for the service," says Healy.