Updated at 2:45 p.m. PST with Fring details.
Apple may have a new mobile phone to compete with--one that runs on its iPod Touch.
The MP3 player can be transformed into a mobile phone with the help of a free application from Internet telephone company Truphone.
The Truphone application allows users with a Wi-Fi connection to make and receive phone calls via voice over Internet Protocol, or VoIP, with other iPod Touch owners, users of the Google Talk's messaging service, and customers of Truphone's Internet telephone service. The company said it expects to add the ability to handle landline calls.
The app creates a virtual keyboard on the second-generation iPod Touch to dial calls, and requires the addition of a headset and microphone.
However, Apple doesn't appear to be too threatened by Truphone; the application is available for free download at Apple's App Store.
While the app could work with any device with Wi-Fi access, the company said it has decided to focus on devices with connections to an application store.
"We've decided to focus on devices that are Wi-Fi-enabled and have an app store," Truphone CEO Geraldine Wilson told the BBC. "For the consumer, there has to be an easy way of downloading an application."
Other planned features include the ability to phone and instant-message Skype and MSN VoIP users, and to check and set Twitter and Facebook connections.
Fring offers a similar service, allowing access to Skype users.