Update was expected to arrive before years end.
Although it was originally expected to launch before 2013 arrives, Microsoft has confirmed that the Windows Phone 7.8 update will launch early next year.
The update will bring several notable features, including the inclusion of Windows 8's Start screen that will allow users to utilize the resizable Live Tiles feature.
Windows Phone 7.8 will also see the number of themes and colors doubling to 20, accompanied by new lockscreen features including the Bing Picture of the Day and a password lock to prevent accidental swiping.
Popular apps such as Angry Birds Space and Angry Birds Star Wars will be included, as will services like Xbox Music and SmartGlass.
The Redmond-based company also confirmed it aims to expand the upcoming OS into more markets by shipping new Windows Phone 7.8 devices globally soon.

I mean all day long we get bombarded with Win 8 this and Win 8 that...
and then out of a sudden there is a Phone with Windows 7.8 on it.
Sounds like last years model being unloaded to the uninformed masses.
The only logical market for Windows 7.8 is the waste bin. Unless Microsoft believes it can sucker OEMs to make WP 7.8 phones.
Its an update for people who already have a Win Phone 7.
Win 7.5 phones are fast and responds quicly to commands. There is very good reason to make these upgrades to those phones!
WP7 phones here start at $150. Perfect for the little tacker that won't stomp panting about a lack of smart phone in his life.
They'd rather sell WP8 devices. But they're still releasing updates for WP7 devices. This could also be good for countries where phones are costly. A basic entry-level WP7 phone would be much much cheaper than any WP8 model. So this update is nice for them too.