According to a report in the Japanese Newspaper Asahi Shimbun, the PlayStation Phone is set to be released in Europe and North America as soon as Spring 2011. The phone will combine Google's Android phone OS with Sony's PSP go design, according to the report.
The report seems to imply that a release in Japan is an afterthought, with the phone coming out in North America and Europe first. Sony has not officially announced the phone for any markets, but more and more news reports confirm that it does exist.
Could a PSP that doubles as a phone save Sony's struggling hand-held brand? I guess we'll have to wait and see, but at this point it is pretty doubtful.