Well, that is the rumour anyway. Like all rumours this may again fall by the wayside.

This time, the rumour started when the Daily Telegraph was told that Microsoft intend holding an Autumn conference on the 2st October to officially launch handsets installed with the operating system.
However, other mobile phone analysts are disputing this stating that the only confirmed date for any conference is in fact 11th October.
Whatever the outcome of this latest rumour, Microsoft has certainly aroused excitement about the new upgrade. That said, one senior commentator, Jonathan Leggett of Top10.com, the mobile phone and broadband comparison website said in a press release: “If Windows Phone 7 is to have any chance of clawing back into contention with the likes of Apple’s iOS and Google’s Android operating systems, it just won’t suffice to simply be as good as them, it needs to be something better – and different.
“And that’s where the integration with Xbox Live comes in. There is still a major void in the portable device market where online gaming has yet to take off, and whether or not Microsoft is able to capitalise on this will largely decide its fate in the smartphone market.”
Microsoft is pinning its hopes that Xbox Live integration will win over those who might switch from Android. As an added bonus, handsets featuring Windows 7 will also have a facility to download music and films via Microsoft’s Zune Marketplace.

As for the rumour, Microsoft simply said: “We have nothing to share at this time.”