In a battle against arch-rival Nintendo, Sony Computer Entertainment Inc. teamed up with British Telecommunications and on Wednesday introduced software that allows turning Sony PlayStation Portable into a communication device that can make video and voice calls and also send instant messages. Separately, the company said it intends to release a navigation hardware and software for the PSP device.

BT, which unveiled plans for telecommunication services for Sony PlayStation Portable back in late May, said it would kick off the project in January 2008 in the UK, Germany, Spain and Italy, targeting 8.5 million PSP users in the European Union. Mobile gamers will have to subscribe to BT and install appropriate software.

The software itself is free, and customers do not need to have BT broadband to use the service, which allows for free calls from one PSP user to another, but customers have to pay for calls between PSP users and mobiles or landline phones, reports Telegraph.co.uk.  Although BT yet has to release a pricing structure, the group said today it would be similar to the Softphone charges.

Currently, local and national calls are £0.03 ($0.059) per minute using a BT Softphone, while calls to UK mobiles cost between £0.075 ($0.014) and £0.125 ($0.24) a minute. International calls cost up to £0.10 a minute ($0.19), plus a £0.06 ($0.11) call set-up fee.

BT will roll-out the VoIP PSP service in Europe, the Middle East, Africa and Oceania with the support of Sony Computer Entertainment Europe Ltd., Sony’s gaming division responsible for PlayStation products in territories that use the PAL television color system. However, since Sony is not strongly interested in the service, the feature may not be available in markets like Americas, Japan or Asia, it was earlier reported.

Separately, Sony Computer Entertainment Inc. said it would market a special global positioning (GPS) accessory for PSP starting February, 2008, further boosting functionality of its portable game console.