IPhone 4 software issue. Cannot hear or be heard when making call

Hi there,
A few days ago, out of the blue, I lost the ability to be able to hear or be heard when on a call on my iPhone 4.
On a call, no matter which output I use, earpiece, earphones or speaker, I cannot hear the person on the other end speaking, and they cannot hear me talking. My phone will ring if someone is calling, and if I call someone their phone will connect, but from there I am completely muted/in silence.
I do not believe this is a hardware related issue as I have tested both the microphone and speaker/s by making a Skype call to a friend which worked absolutely fine. I can also play music from my phone successfully through all of the iPhone outputs mentioned above.
This is a super frustrating issue as I haven't dropped the phone or damaged any of the hardware.
The only one software related thing I notice that is out of the ordinary is that when I do make a call, the 'speaker' icon is selected by default. Obviously I have attempted to deselect it, but have had no success in this making any difference.
Any ideas?
Of course where I live I don't have access to an Apple Store, and everywhere I take it locally I get the response - 'Sorry, we don't repair iPhones'
Thanks,
Jeff

I forgot to mention that I have reset all settings and restored the phone twice - once as a restore from a back up, and then a restore as a new phone. None of these methods worked and I'm still stuck with the same issue!
Looks like I might be posting my phone to Apple

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IPhone 4 software issue. Cannot hear or be heard when making call

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