Yahoo’s agreement to be the exclusive mobile search service provider for T-Mobile’s European customers could be a milestone for the entire industry.

The deal to put Yahoo’s services and advertising on mobile phones in 11 EU countries by the end of March was announced after the search engine rejected an unsolicited $44.6bn (£22.4bn) buyout offer from Microsoft. It also knocks Google, the market’s other big player, off the T-Mobile homepage.

Mobile devices are becoming a key battleground for software giants keen to build applications to push lucrative advertising onto millions of handsets.

“Combined with its deal to sell advertising space for T-Mobile, Yahoo’s announcement will be an important boost to its position as the operators’ friend in the hazardous world of the mobile internet,” said Ovum analyst John Delaney.

Companies have not invested heavily in mobile advertising campaigns because they are unsure about the numbers and type of customers available.

But a collaboration announced last week between all five UK mobile companies ­ Vodafone, O2, Orange, T-Mobile and 3 ­ could deliver the necessary user data, and pave the way for higher volumes of mobile advertising.

The Mobile Advertising Programme will be independently run by the GSM Association (GSMA).

“The commitment of all five operators is critical for the development of mobile as an advertising channel,” said GSMA chief executive Rob Conway.

The idea is that ad revenues will help reduce the cost of mobile voice and data tariffs, say operators.