Now it gets interesting. Caught on the back foot by the introduction of Apple’s iPhone two years ago, Nokia recently launched its own – albeit inferior – touch-screen handset, the N97. Then on Wednesday the Finnish group announced a deal to install Microsoft’s Office Mobile software on its phones, with the aim of winning over business customers reluctant to forgo Research in Motion’s popular BlackBerry. Microsoft, meanwhile, gets potential access to Nokia’s millions of customers as it squares off against Google in the the market for mobile phone software.

The battle is hotting up because this year the smartphone market is the only game in town. Also out on Wednesday were figures from market research company Gartner, showing shipments of phones that allow web surfing, e-mail and run other popular software applications rose 27 per cent in the second quarter – while overall handset sales remain on track for their first full-year decline. Even during the recession, consumers are abandoning dumb phones when, for just a little more money, they can get a pocket-sized computer instead.