Microsoft has teamed up with Orange to help it grab a slice of the mobile music market.

The Business reports that Microsoft chairman Bill Gates has persuaded Orange to develop a new phone (the SPV C550) that will be capable of playing songs in Microsoft's proprietary Windows Media format.

Like Apple's iTunes phone, the device will also let users transfer music from their PC to their mobile.

The new device will go on sale in HMV's flagship retail outlets next month. HMV launched its low-cost digital music store last week.

"Microsoft plans to topple Apple's iTunes from its position as the world's best-selling digital music service and make Windows Media Audio the industry standard," the report claims.

“The Microsoft-powered phone will do everything that an iPod can but will be incompatible with Apple's products.”