Rumours that Facebook could be working on a dedicated Facebook Phone or dedicated phone OS surfaced on Sunday before being shut down with a flat out denial by the social networking site.

However journalists on both West and East coasts are having none of it.

Techcrunch started the rumours on Sunday suggesting that a "source who has knowledge of the project" had spilled the beans to the site telling it that the company was working on "building the software for the phone and working with a third party to actually build the hardware."

Apart from citing employees supposedly working on the project, details on the supposed leak were incredibly thin, but INQ, the mobile phone company with a social focus are name checked in the piece as wild speculation.

Meanwhile Silicon Alley Insider is citing that Facebook is using Google's Android operating system as the basis for its phone software, according to a "plugged-in Silicon Valley source" while also reading between the lines of Erick Tseng's recent tweets - the new Facebook employee who was previously Google's Senior Product Manager of Android.

Silicon Alley Insider suggests that the move to create a mobile platform is a logical one for Facebook because of the amount of mobile users the service has.

However once the rumours started gaining momentum, Facebook issued a statement to social networking news site Mashable saying the Techcrunch story isn't accurate:

“The story, which originated in Techcrunch, is not accurate. Facebook is not building a phone. Our approach has always been to make phones and apps more social. Current projects include include everything from an HTML5 version of the site to apps on major platforms to full Connect support with SDKs to deeper integrations with some manufacturers.  

Our view is that almost all experiences would be better if they were social, so integrating deeply into existing platforms and operating systems is a good way to enable this. For an example, check out Connect for iPhone and the integration we have with contact syncing through our iPhone app.  Another example is the INQ1 phone with Facebook integration (the first so-called ‘Facebook Phone’).

The people mentioned in the story are working on these projects. The bottom line is that whenever we work on a deep integration, people want to call it a ‘Facebook Phone’ because that’s such an attractive soundbite, but building phones is just not what we do.”

Interesting then that Facebook only denies that it is making a phone, rather than that it is developing a mobile phone platform.

What do you think? Is Facebook about to create a dedicated mobile phone? Let us know in the comments below.