Reuters reports: “EBay Inc’s Skype is working with British cell phone service operator 3 to produce a handset that will allow users in Britain to make free calls on the Internet, a spokesman for the company said on Friday.”

“The phone is expected to work in the normal way but to include a Skype function to contact other Skype customers. The Skype spokesman did not give any further details but said the phone would be out later this year. 3 is the British cell phone business of Hong Kong conglomerate Hutchison Whampoa”