The world’s largest phone maker is about to throw a hand grenade into the world of mobile communications. The Nokia N97 is a handset pre-configured to make calls for free, by routing them over the internet instead of mobile phone networks. The result will be a dramatic reduction in call charges for most users and even, for some customers, no bills at all.

It’s a clever move and one that is likely to see sales of the handset outstrip even those of its predecessor, the N95 — Britain’s most popular phone in 2007, when we snapped up more than 1m. Some telecoms analysts predict it will do for internet calling what the iPod did for music downloads, because while it’s not the first mobile phone to come with the necessary software pre-installed, it will be the first with wi-fi.

That means speech quality will be almost as good as a landline. The only existing dedicated internet phone in the UK, the 3 network’s S2, uses a slower system of data transfer (3G), which produces a tinnier, poorer voice quality.

The N97, then, which has 3G as well as wi-fi, could usher in a new era of better, cheaper communications. As always, however, there’s a snag, although it’s likely to be overcome by the time the phone arrives in Britain in the late summer. The N97 needs to connect to a 3G mobile network for those occasions when users are not in a wi-fi zone (many people have wi-fi at home, and it’s available in shops, airports, pubs, cafes and the like). But O2 and Orange have made it clear they will not carry internet calls over their 3G networks, or even offer the handset to their subscribers; of the big networks only Vodafone, the country’s second-largest service provider, appears not to be boycotting the phone.

It’s an understandable position: if the N97 catches on, as it almost certainly will, it could cause a collapse in call revenues. However, if the lesson of music downloads is anything to go by, the march of technology will prove irresistible and the big mobile networks will be forced to embrace it.

The N97’s ability to make free calls — and the cause of the standoff with O2 and Orange — hinges on a piece of software called Skype. Normal mobile voice calls are broadcast over dedicated radio networks, but Skype breaks down a call into a series of tiny data files. These files are uploaded to the internet via wi-fi or 3G, where they are picked up by Skype’s servers, converted back into speech and sent over public phone networks to a mobile or home handset. The recipient does not have to be running Skype or any other software; as far as they are concerned, it’s a simple phone call.

If the caller, armed with an N97, is in a free wi-fi hotspot — or like most 3G users has paid upfront for unlimited access to the internet — the mobile network will not charge for the call. Voice and video calls to Skype users worldwide are also free. Only calls to landlines and mobiles incur a charge from Skype, and even these are typically much less than normal rates.

The other breakthrough with the N97 is that Skype becomes easy to use. With the exception of 3’s S2, anyone in this country who has wanted to use the software has previously had to download, install and configure it themselves. That’s why, despite boasting more than 400m registered users worldwide, Skype remains largely a geek’s plaything.

The N97 is the first fruit of a partnership with Skype that will see the software pre-installed on all future Nokia smartphones. The tie-up is an intimate one: Skype will be integrated into the N97’s address book. Bring up a contact and you’ll be offered the choice of making either a traditional mobile phone call or a Skype one — possibly even by using a dedicated button.

The phone will also have “presence” enabled, which means it will allow you to see which of your Skype contacts are online and offer to send them a message. For free, naturally. The result could see Skype reaching critical mass — the moment when everyone suddenly seems to be using a service. Think of it as a worthwhile version of Facebook.

The N97’s other technical specifications are equally impressive. It will have a 5Mp camera, a massive 32GB of internal memory, will play music, show widescreen movies on its 3.5in display, have a slide-out qwerty keyboard, support the company’s N-Gage gaming technology and send TV pictures to a big screen.

Nokia’s Skype deal is just one of a series announced by the Finnish company that will eat into the revenue of other businesses. It has unveiled an online store, Ovi, that will sell software and entertainment content that was once a prerogative of the networks. It has called on record companies to allow it to distribute music free of digital rights protection over its Comes With Music service.

Nokia’s unstated plan is for users to start thinking of themselves not as belonging to a network, but to a phone maker. However, in this new era of free calls and messaging don’t expect the networks to continue to disguise the true cost of handsets. Last month an online retailer let slip what the N97 is expected to cost without any form of network subsidy: a whopping £700. It seems there genuinely may be no such thing as a free phone call.

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