In a nutshell, Simon's apparently got a bee up his nightgown over Pete taking part as a faux judge in Brit comedian Peter Kay's Britain's Got the Pop Factor ... and Possibly a New Celebrity Jesus Christ Soapstar Superstar Strictly on Ice last month.
The TV special's resulting single, "The Winner's Song" by Kay-as-trannie Geraldine, debuted at #2 on the U.K. a few week's back, keeping Leon Jackson's "Don't Call This Love" held at #3.
Waterman tells the Daily Telegraph, "Simon doesn't have a sense of humour, we're best mates but he's fallen out with me. I rang Simon so he could say, 'Your comedy acting is genius, Pete'. But it seems he doesn't think it's at all funny."
Meanwhile, Simon previously had Pete and Mike Stock work with last year's X Factor runner-ups Same Difference on a cover of Kylie Minogue's "Turn It Into Love," which is set to appear on their December 1 debut album Pop.
You don't need him, anyway, Pete. Now get to work putting Steps back together!