iPhone nano with bubble icons? [Updated]

How likely do you think it is that Apple would announce a new, smaller iPhone that's heavily inspired by the UI of the 7th gen iPod nano?

I started to think it may be possible, but only if Apple believed that a much smaller device would be able to offset the many trade offs in the minds of potential customers, almost entirely on size alone. Another huge challenge would be fitting the mic, speakers and antennas into the body, and retaining both the quality of those components and the device's compact form.

Without getting into price, I'd guess at an iPhone nano that, like the iPod nano, has no App Store and no way for the built in apps to utilise a virtual keyboard (which would never fit), meaning no Safari, iMessage or Mail, though Siri could be a saving grace in that regard. I could definitely see FaceTime being a massive selling point to counterweight the lack of text-based communication.

I'm going to go ahead and predict it, just for the boost it would give to FaceTime (data allowance permitting). What do you think? Impossible, dumb idea anyway, or imminent?

[Update]

Thanks for the feedback everyone. After talking about it, I realised there were a few important things I had missed, the biggest of which is the fact that a secondary phone wouldn't be able to share a number with the primary one. Not without the network providers bending over backwards to support that kind of arrangement anyway.

So, I'll stop predicting a tiny phone from Apple now. Instead, would you expect Apple to announce an iPod nano with cellular Internet? As people mainly use the iPod nano outdoors, I think it would make some sense for Apple to consider adding Internet-based apps to the current nano.

The stand-out feature of that device would, I think, still be FaceTime. The ability to send-receive voice or video calls on something so compact could be a good experience, just not if a built in speaker is being used. On a device that small, audio would be too tinny, so for that reason it's probably best to leave audio to the EarPods. On that note, it might also be a good idea to include a microphone with the EarPods. Not to say the iPod should stay without a mic, there's probably enough room left for that.

What really would be a challenge to add is the FaceTime camera. On the iPhone 5, the camera was probably the most difficult component to get so thin, as many other smartphones let their camera stick a few mm out from the backplate. I'd like to hear what people think on this subject, like what sort of quality we might expect from a camera small enough to fit flush into a nano sized device.

So, with Internet connectivity added, what sort of apps would you want on the nano? Other than FaceTime, I would like to see Maps included and then tied in to the Nike fitness app. Apart from that, I'm not too sure. Siri maybe, but on that kind of device I don't see it getting much real use, other than basic app control. And possibly, find my friends, so a voice briefly mentions that a contact is nearby. Any other ideas?