It's *NOT* going to happen. Absolutely not in the cards. It would be cool, though, if we're throwing reality to the wind and just speaking strictly of wild fantasy. A Nintendo phone would be cool.
Nintendo more than has their hands full already with 3DS and Wii software ,so there's no way they could properly supply a third platform with unique software. Maybe if the phone is merely backward-compatible with 3DS software as a form of emulation, and is mainly used for Android apps then it would work.
I was talking about a Nintendo phone in a thread a few months ago, and basically the idea was an Android phone, but built proprietary for Nintendo, and not an open platform phone like other Android phones. By that I mean, apps from other Android devices can all run on this Nintendo phone, but apps made for the Nintendo phone could not run on any other non-Nintendo phone. In that manner, Nintendo could keep with their tradition of platform exclusivity, yet still get in on the extremely lucrative smartphone market.
Whether or not something like this ever happens is probably more a matter of when, not if, but certainly I wouldn't expect any concrete information or even hints about such a device until toward the end of the 3DS's lifespan, sometime around 2016 or later. I do think that 3DS is Nintendo's last dedicated handheld game machine. That doesn't mean no more buttons or circle pads, it just means their handheld business will take form in a different way once they're finished with 3DS, such as this smartphone idea.