Skype beefs up competition against AT&T and Verizon with iPhone application.

Skype announced a new iPhone application set to be rolled out on Tuesday that will allow users with an iPhone make free Skype-to-Skype calls over Wi-Fi to other Skype users worldwide.

With the Skype iPhone app, users will also be able to make reduced price calls to traditional landline phones, a move that will place Skype in more direct competition with AT&T Inc. and Verizon Wireless.

The application will also work on second generation iPod touch with a compatible headset and microphone. Skype said a version for the BlackBerry available in May. Mobile versions of Skype are already available for Nokia, Windows Mobile, and Google Android phones.

Users will also be able to send and receive instant messages, receive calls to a personal online number on Skype and see when your Skype contacts are online.

Scott Durchslag, Skype’s Chief Operating Officer, said that Skype for iPhone provides the same simplicity that the desktop app provides to its users.

Skype, which began in 2003, is currently adding 350,000 users a day and has over 405 million registered users. The Estonian company was bought by EBay in 2005 for $2.6 billion.