EBay's Skype and wireless carrier group 3 have announced the 3 Skypephone, a mobile handset which works both on conventional wireless networks and over VoIP provided by Skype. The 3 Skypephone thus allows free Skype instant messages and voice conversations, while maintaining normal prices for classic, non-Skype calls.

The 3 Skypephone has a separate calling button which enables the user to easily call a destination either on Skype or on a telephone. "We are optimistic that if you look at one or two years, (we will sell) millions rather than hundreds of thousands, but in the fourth quarter (2007) we are looking at several hundred thousand worldwide," Frank Sixt, finance director of 3-owner Hutchison Whampoa said, according to Reuters.

However, the handset only operates over 3G networks, and Skype Out, the low-cost calling feature to regular phones, is not enabled. However, there are hopes that Skype Out will be made available sometime next year, the two companies said. The new Skype-enabled phones will be available in Ireland and the U.K. on Friday with other seven markets following in the coming weeks. Australia and Italy will also be among those markets, with more to come soon.

Acting chief executive of Skype, Michael van Swaaij, said, "Skype began by offering free PC to PC calling and now we're doing the same with mobile calls with 3. Thanks to 3, Skype has now taken a giant step forward in the mobile arena. Skype is now truly mobile. This new handset is incredibly easy to use and lets you make free mobile Skype calls when you are on the move to other Skype users all over the world no matter where they are."

Swaaij also pointed out that a lot of carriers were reluctant of introducing Skype-enabled phones. Under the deal, Skype receives a royalty paid by 3 for the provision of its software and a share of the revenue on the new phone’s usage. Skype has nearly 250 million registered users.

The 3 Skypephone will be available free to 3’s 18-month contract holders and for £49.99 ($102.88) to its prepay users. It will be on sale in 3's stores beginning Nov. 2.