The agreement may make Yahoos mobile search product the default software on phones sold by Newbury, England-based Vodafone in Europe, said one person, who asked not to be named because no contract has been signed. Vodafone has a distribution deal with Google Inc. that expires this year, and Yahoo isnt the only party the carrier is talking to, the people said.

Yahoo, striving to close the gap on Google in Internet advertising, agreed to power Web searches on T-Mobile USAs phones in November after striking a similar deal with AT&T Inc. in September. Yahoo already has such partnerships in Europe with wireless operators including Deutsche Telekom AGs T-Mobile unit and Telefonica SAs O2 unit, Zealous Wiley, a Yahoo spokesman, said by telephone yesterday.

Yahoo is in talks with “a number of operators around the world, including Europe,” about its mobile search product, Wiley said. Those talks are with carriers Yahoo currently doesnt have a distribution deal with, he said.

Simon Gordon, a Vodafone spokesman, declined to comment and didnt say whether the deal with Google will expire this year. Anthony House, a U.K.-based spokesman for Google, said the companys agreement with Vodafone from 2006 is “still active.”

Existing Contract

A potential search deal between Vodafone, the worlds biggest mobile-phone company, and Yahoo would add to existing agreements between the two companies. The companies in 2006 signed a contract for Yahoo to sell advertising on Vodafones handsets in the U.K.

Search companies aim to extend their offerings to new platforms such as cellular phones, while operators are keen to expand and offer new services to boost data traffic to make up for falling prices in the traditional voice business. About three years ago, Vodafone agreed to include Googles search functions in the Vodafone Live! Web service, the default Internet access product for phones sold by the carrier.

Consumers can also use those search products by surfing to the providers Web sites on their mobile phones or by downloading applications, which are offered by both Google and Yahoo. Sunnyvale, California-based Yahoo has more than 70 distribution deals for mobile search worldwide, Wiley said.

Vodafone fell 1.8 percent to 119.9 pence at 3:57 p.m. in London trading. Before today, the stock had lost 12 percent since the start of the year, compared with an 18 percent slide in the U.K. benchmark FTSE 100 Index. Yahoo fell 3.4 percent to $12.71 at 10:58 a.m. New York time in Nasdaq Stock Market trading.

Vodafone has a market value of $88.8 billion, while Yahoo is worth $17.7 billion.

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