Unfortunately, the companies have encountered setbacks and development has temporarily slowed or halted. The device was originally supposed to hit shelves late this year, but will probably be pushed back until early next year instead. The cause of the delay isn't known, but Kumar speculates that if it's software-related, it could affect other manufacturers.
All of this goes against Microsoft's repeated denial of plans to make its own phone, and nothing is official. For what it's worth, Electronista reports that Asus built the reference phone used at Microsoft's MWC keynote.