By Janet Guyon

(FORTUNE, June 12) -- On the streets of major European capitals you see them everywhere: scores of well-dressed, seemingly well-adjusted people holding animated conversations with nobody whatsoever. Look closer, though, and you'll see that Europe's professional classes have not really gone collectively balmy. There's a thin wire snaking around the speaker's ear, connecting a tiny earpiece to a mobile phone the size of a cigarette lighter in a pocket or purse. If you look even closer, you'll see a telltale little bulge in that wire at about mouth height, which is, of course, the microphone.

If anyone still has any doubts about the ubiquity of the mobile phone, the sight of half the citizens of cosmopolitan Europe in rapt conversation with the ether ought to put those doubts to rest. In eight countries, including Finland, Portugal, and Italy, the number of mobile phones now outstrips the number of fixed-line phones. A J.D. Power survey says 45 percent of the British population wants to junk fixed-line phones for a mobile. Globally, industry experts predict that one billion people will be yakking on mobiles by 2003, up from 473 million now. Most of them, by the way, will be outside the U.S., the only developed nation that has yet to grasp the necessity of being in touch with anyone anywhere.

But if you thought the rage for mobile phones was going to settle down, you're wrong. Having flooded the streets of Europe with gibbering yuppies, having thrust you repeatedly into private conversations you didn't want to hear on the train, in bank queues, and in airports, the mobile phone is now gearing up to change how you do business. If it hasn't already, wireless technology will soon be able to put the Internet in your pocket, replace almost all of your company's fixed-line phones, render your office superfluous--and then buy you a Coke. And of course, it will make a number of people very, very rich. Every day seems to bring the founding of a new software applications company dedicated to adapting fixed Internet sites to WAP (for wireless application protocol), a cut-down version of the Internet code that lets you see on your cell phone screen a miniversion of what you can see on your PC. Few of the companies are public yet, but the Netscape of the wireless world, Phone.com in Redwood City, California, has seen its share price more than quadruple since going public a year ago.

Even without WAP the mobile has already changed the face of business in Europe to a degree that Americans--with their outdated cellular technology and fragmented transmission standards--find hard to imagine. Wherever the single European GSM standard is in place, leaving the office without a mobile phone has become as unthinkable as going out without your business card--or even your watch. After a client lunch in London the other day, Doug Hawkins, Nomura International's head of telecom research, noticed that nearly everyone immediately reached in his pocket and turned on his mobile, not just to check for missed calls, but to check the time. Thomas Engstroem, a customer-service rep who travels throughout Sweden for French systems integrator Bull, couldn't do his job without a mobile phone. "Customers can always reach me. It's mandatory," he says. And don't forget: One of the biggest telecom deals ever might never have happened without cell phone technology. Only a year and a half ago Vodafone chief Chris Gent, getting wind of AirTouch's talks to sell out to Bell Atlantic, whipped out his mobile while watching cricket in Australia and launched negotiations with AirTouch's Sam Ginn, who was finishing a round of golf in Hawaii. That call set in motion the $62 billion that made Vodafone AirTouch the world's largest cell phone operator.

The key to the mobile phone's popularity is its ability to turn downtime--commutes, interludes between meetings, weekends away from the office--into opportunities for productive interaction. "It's very clear that consumers perceive that mobiles increase productivity, but whether they really do, we don't know," says Johan Karlberg, Ericsson's director of product and market research. Britain's Inland Revenue Service believes they really do: Last year it stopped taxing employees whose companies provided them with cell phones, putting mobiles in the same category as PCs or fixed-line telephones. And five mobile companies in Britain bid a total of $35 billion in April for new allocations of cellular transmission frequencies from the government. The British auction caused other European countries to reconsider their practice of giving frequencies away.

The Valhalla of a cellular society

But if you really want to see where the mobile telephone can take your business, go to Scandinavia, the Valhalla of early adopters of cellular technology. Well over half of all Danes, Swedes, and Norwegians carry mobile phones. In Finland, 70 percent of the population goes wireless, the highest rate in the world.

In the southern Swedish town of Karlskrona, Mats Ljunggren and Ulf Johansson founded a mobile-phone company a decade ago called Europolitan. Today Europolitan, which caters specifically to business customers, has 846,000 subscribers and the highest average revenue per subscriber of any cell phone company in Europe. Its price/cash flow multiple historically has been 30 percent higher than that of its peers.

But what really makes Ljunggren and Johansson's company stand out is its pioneering development of the wireless office. This is exactly what it sounds like. Europolitan, 71 percent owned by Vodafone, persuaded several corporate customers to ditch their fixed-line phones entirely. Instead, everyone has a mobile. "We thought, Why should mobiles be a complement to fixed phones?" says Europolitan's top marketing executive, Mikael Kluge. "Why shouldn't they be a substitute for them?" Besides cutting telecom costs--Europolitan offers special rates for its wireless office--switching everyone to a mobile cuts the cost of moving offices, not an insubstantial matter when on average Swedes migrate to a new office within their company every 1 1/2 years. "The biggest hurdle is getting people to accept that the quality is equally good," says Kluge. Europolitan customers say that indeed it is, and the freedom from fixed lines has been liberating.

Bull, the French information systems company, became a Europolitan wireless office client when it redesigned its Stockholm office two years ago. With half the work force in the field as technicians, consultants, or sales reps, Bull jettisoned all of its fixed-line phones, except for a few to be used for conference calls and by visitors. "We had so many phone numbers, it was a pain in the neck," says Bo Pettersson, Bull's IT manager in Sweden. Potential customers who couldn't locate a Bull contact on one number might try another--but could just as easily call a competitor. "We wanted to have one person, one phone number," says Pettersson.

To a Bull employee, the wireless system works much the same way as the old land-line version--except it's more convenient. Workers can connect with one another's mobile phones using their old internal phone numbers. Business cards list both a fixed line and a mobile number but only because "we didn't want to have a 30-minute conversation with people on how our phone system works," says Pettersson. When outsiders call Bull employees at their fixed phone number, the incoming call routes directly to the employee's mobile.

At Postnet, the Swedish postal service's Internet subsidiary, wirelessness is not just a technical advance but part of the culture. There are no desks at Postnet, just tables with electrical and data-connection cables. Few people work at the same table from one day to the next. Most simply pick any free table, plug in a laptop, and get down to business. "When people go home, the only thing left on the tables is the cables," says Lisbeth Gustafsson, Postnet's CEO. Gustafsson spends most of her day walking around the office carrying her mobile, which is connected via Europolitan to the postal system's main switchboard. "If I had a fixed phone, I would have to be in a fixed place, and that's not part of our concept. The concept here is mobility," says Gustafsson. If Postnet people want to work from home, they can--and the customer (and most fellow workers) will never know the difference.

Dialing a day trade

To really tap the potential of cell phones, however, it's necessary to start transmitting data as well as voice. For a glimpse of what's to come, visit Turin, Italy, where an online broker, Directa, has adapted its software to work on Nokia Communicators. Slightly bigger than a Palm, these devices are part cell phone and part personal organizer. Directa's innovation allows its clients to trade stocks over the cell phone network as easily as over PCs. For some people, trading via cell phone is more convenient than using a PC.

In fact, Directa's new technology is what turned Daniele Turigliatto, 43, into a day trader. Turigliatto's main business is selling containers for auto parts for Fiat. But he has some spare time to play the market. Last fall he switched his brokerage account from a bank--where commissions were high and trading cumbersome--to Directa, where he maintains two accounts worth a total of $423,000. Every morning at 9:30, Turigliatto turns on his Nokia and dials his Internet service provider through the cell phone network, tapping into Directa's Web site. After logging in with his personal code, he checks the Milan market and the real-time prices of stocks in his portfolio. He dials in again at lunchtime, after the Nasdaq opens in New York, and again at 5:15, just before the Milan market closes at 5:30 p.m.

On April 4, after Judge Thomas Penfield Jackson ruled against Microsoft in the antitrust case, Turigliatto was on his Nokia as soon as the Nasdaq opened. At the time he happened to be in his car on the way to the post office. He bought 200 shares of STMicroelectronics, the big French-Italian semiconductor maker, as tech stocks tanked late that day in Italy.

The following morning he sold the shares, netting a profit of about $700 between the time the Milan market closed on April 4 and the time it opened higher on April 5. Directa's commission was 9 euros, or about $10. Turigliatto figures his cell phone charge per trade is less than $1. "Going through the banks, I had a bad experience because they would buy at prices I didn't like," he says. "With this system, I have much more control." In his first five months of trading, he made about 20 trades a day in a total of 13 stocks, and his portfolio grew by 50 percent.

Turigliatto's experience brings us to the question of WAP, the wireless dialect of the Internet language. WAP's fans say it will enable cell phones to supersede PCs as the main entry point to the Internet. It certainly seems plausible in Italy, where 45 percent of the population have cell phones but only 20 percent are on the Net. Valerio Bianco, 41, an insurance-company computer technician and another Directa client, surfs the Net and trades on his Nokia Communicator "because we don't have the Internet at the office, and it's simpler than using a PC. I hate having all these plugs [that you have with PCs]," says Bianco. In fact, the Nokia is his only phone; he has no fixed line at home.

Even so, WAP has a long way to go before it turns phones into replacements for the PC. At current transmission speeds, all a WAP user can get are lines of text without graphics, video, or sound. It's far more likely that WAP will give people in countries with high cell phone penetration their first Internet experience, and they will eventually trade up to a PC, much as Americans traded up from black-and-white to color TVs in the 1960s. That's what Turigliatto did recently. He still uses his Nokia, but when he trades at home now, he uses a PC.

Serving customers on the go

WAP's real impact will be felt not by individual Web surfers but rather by businesses searching for new ways to serve customers. DHL in Stockholm, for example, has just put its package-tracing service on WAP. You call up DHL's WAP server through your cell phone and enter the airway bill number for the package you're looking for. A number of dates and times will then appear on your phone's screen, showing you where the package is at each step of its journey. If the package has been delivered, the phone also tells you who signed for it.

You can do the same thing on DHL's public Web site, but you'd have to sit deskbound at a PC, which isn't always practical. Let's say you're on your way to Amsterdam to make a big presentation, and you're wondering whether the materials being shipped from New York have arrived. Tap into DHL's WAP site and you can find the answer without chasing down a customer-service representative or whoever in your New York office was supposed to send the package.

Nordisk Solar, a company based in Kolding, Denmark, that is one of Europe's biggest electric-component wholesalers, has likewise found that it pays to reach out and WAP customers. For more than a decade Nordisk customers (electricians mainly) have been able to order supplies electronically through the company's proprietary PC system. About 45 percent of Nordisk's clients still do so. But now the ordering system is on WAP, which means electricians can order directly from the site without returning home or to the office. If they get their orders in by 6 p.m., Nordisk guarantees delivery at the construction site by the next morning. "Everyone is running around with a mobile phone today," says Finn Kristensen, who runs Nordisk's electronic ordering system. "Why shouldn't they place an order that way as well? If we can help electricians order products from where they are, it will put us farther in front of our competitors."

Bohemia Flowers, a flower-delivery service in Prague, thinks WAP will help it sell more blooms. Bohemia has an Internet site, but it doesn't draw much traffic despite expensive advertising. It's far better to insert ads in cell phone bills, says founder Rob Carter, since more Czechs have cell phones than PCs. Even those who have computers spend more time with their phones than they do at their keyboards. "People have their mobile phones with them 24 hours a day," says Carter. "Sending flowers is a real emotional, impulse purchase. People think, What can I get this person? Flowers. With a call to our WAP site, boom, boom, boom, the flowers are there. It makes it incredibly easy to buy."

Not surprisingly, perhaps, the advent of WAP is creating a whole new industry. Companies such as Aspiro in Malmoe, Sweden, are sprouting up to write software that will integrate corporate systems with WAP technology. One system Aspiro is now testing will enable a trucking company to manage its fleet by sending data from its dispatching system directly to its drivers' WAP phones. Samba, a small company in Prague, is setting up Bohemia Flowers' WAP site.

For now it's hard to see any limit to the applications of cellular technology. In the Helsinki airport, Europeans could actually buy a soft drink by dialing a toll-free number posted on a vending machine under a pilot program operated by Coca-Cola last year. The machine would then dispense the drink, and a debit would appear on the thirsty traveler's mobile-phone bill. Sweden's Electrolux is embedding cellular technology in its next generation of industrial kitchen appliances, so that when maintenance is needed, the machines can automatically dial Electrolux and ask a technician to stop by. Pretty clever. It's enough to make you walk around talking to yourself.