Google appears to be aiming to extend its dominance of online advertising to handheld devices through the launch of an own-brand mobile phone handset. The internet giant is believed to be working on plans for a “Gphone”, powered by its own Google operating system.

The device will target the growing online advertising market by offering sophisticated search services to consumers on the move. Eric Schmidt, the Google chief executive, has suggested that mobile services should be free, subsidised by advertising revenues.

Yesterday, as speculation about Google’s plans swept the internet, the company declined to comment. However, it is understood that recently it had talks with Orange, the French-owned mobile operator. A Google executive is also said to have touched on plans for a mobile phone at CeBIT, the industry trade fair, in Germany last week.

The group has entered into tie-ups with mobile operators, including Vodafone, which allow consumers to tap into its search engine through handsets. The two split the advertising revenues earned from Google searches.

Google has also partnered Samsung, the Korean handset maker, which is preinstalling Google tools, such as Google Maps and the group’s mobile e-mail service, on its handsets.

However, Google is thought to be looking now at building its own mobile operating system, as well as commissioning a Google-branded handset. Both HTC, the Taiwan-based group, and Samsung have been named as potential handset partners.

Such a move would pit Google against mobile manufacturers such as Nokia and Motorola, as well as RIM, the company behind the BlackBerry e-mail device.

A move to develop its own operating system would also pitch Google against players such as Microsoft, which operates a special version of Windows for mobile phones, and Symbian, which provides Nokia’s operating system.

Google is the latest in a series of high-profile internet companies to seek to extend its dominance into the mobile sphere. Its eagerness has been fuelled by predictions of a boom in take-up of mobile advertising. Informa Telecoms & Media, for example, believes that the mobile advertising industry will be worth $11 billion by 2011.

Phone operators say that advances in the speed of mobile networks and in handset technology and display quality means that the time is ripe for offering internet services on the move. Arun Sarin, Vodafone’s chief executive, has told other mobile operators that unless they moved quickly to offer better internet services, rivals such as Google would “eat our lunch”.

Simeon Simeonov, of Polaris Venture Partners, said recently that Google had a 100-strong team working on software linked to a phone project.

Google would have to balance any move into mobiles against its alliance with Apple, which in January unveiled its long-awaited iPhone device. Mr Schmidt, who is also on the Apple board, has claimed that Google and Apple were looking to extend their tie-up.

Over the weekend, Steve Ballmer, the Microsoft chief executive, criticised Google’s emphasis on search at a student event at Stanford University. “Google built one very good business,” he said. “Everything else is sort of cute.”

Calling card

Nokia

— 36.2 per cent market share in the fourth quarter of last year

— Up 1.2 per cent from a year earlier

— Sold 103 million phones in the period

Motorola

— 22 per cent in fourth quarter

— Up 4.2 per cent from a year earlier

— Sold 61 million phones

Samsung

— 11.3 per cent in fourth quarter

— Down 0.8 per cent from a year earlier

— Sold 32 million phones

Sony Ericsson

— 9 per cent in fourth quarter

— Up 2 per cent from a year earlier

— Sold 26 million phones

LG

— 6.3 per cent in fourth quarter

— Down 0.8 per cent from a year earlier

— Sold 17 million phones

Source: Gartner

Unknown quantity

Apple iPhone

— Targeting sales of ten million next year

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