Orange, a division of France Telecom, will launch phones with the software before the end of the year in the U.K. and release them in other European countries in the following few months, said spokesman Stuart Jackson.
However, sources close to Microsoft's product strategy said the U.K. debut could come as early as this month. Orange has 12.8 million subscribers in the U.K. and 18.6 million in France.
Jackson could not give more information about the product or its pricing but said the new phones would be "very affordable" for U.K. customers, in line with standard cell phone prices. Jackson said the Orange devices will be manufactured by Taiwan-based HTC.
Microsoft's Smartphone 2002 software allows wireless phones to run personal digital assistant applications such calendars and contact lists. Microsoft has been trying to get partners for the software and has reached an with AT&T Wireless to produce a phone using the Smartphone 2002 operating system possibly in mid-2003.
British manufacturer Sendo International has planned toa device featuring the software in Hong Kong.
Cell phone-PDA combos have begun to catch on. Both cell phone makers likeand handheld manufacturers like have entered the arena.
Microsoft also makes software to enable PDAs to act like phones. That software is alreadyby companies such as Hewlett-Packard.
CNET News.com's Joe Wilcox contributed to this report.