While Apple continues to deny any intention to create a mobile phone/iPod hybrid, it looks like mobile manufacturers are moving to create such multi-functioned devices.

Motorola demonstrated its sophisticated new mobile phone, the E398, this week at Sun's JavaOne conference. It offers a built-in MP3 player, vibrating stereo speakers, an oversize colour screen for playing MPEG-4 video clips and rhythmic flashing lights, Cnet reports.

Music is portable, and what are wireless handsets but portable?" said Michael Goodman an analyst at The Yankee Group. "They see a great convergence in trends here."

The move comes as European telcos such as T-Mobile and Orange begin to launch their own music download services, and as RealNetworks explore new relationships with phone providers to deliver such services.

In Japan, music labels are working with mobile providers to deliver RealTones – high-quality ring tones with equivalent tonal qualities to the original songs. OD2 has confirmed it is looking to this market with interest.

"Someday we'll get to the miracle iPod phone, but that day is not happening in the next 18 months," Mark Mooradian, senior director for MusicNet said.