Fujitsu and Toshiba confirmed today that they have reached a basic agreement to merge their mobile operations, a move that will create Japan’s second-largest handset maker. According to a Wall Street Journal report, Fujitsu, the larger of the two, will take a majority stake in the new joint venture to be launched in October. “Our handset business is profitable and strong as it is, but we can’t assume it will remain so,” said Fujitsu spokesman Etsuro Yamada. According to data from the Tokyo-based research firm, MM Research Institute, a merger of the mobile phone operations of third-ranked Fujitsu and eighth-ranked Toshiba would give the combined entity a market share in Japan of about 18.7 percent. This would put it in second place behind Sharp, which had a 26.2 percent share of the Japanese market in the year ended March 2010, but ahead of Panasonic Mobile on 15.1 percent. However, on a global basis, the merged entity would have an estimated market share of less than 1 percent. There has been a series of mergers in the Japanese handset space in recent years as the overcrowded market has sought to consolidate to cope with falling sales.

Fujitsu currently makes handsets exclusively for Japan’s largest mobile operator, NTT Docomo, while Toshiba supplies all three of the country’s major mobile firms. For Toshiba, the merger is an attempt to distance itself from unprofitable operations by letting Fujitsu effectively oversee its mobile business, notes the report. “For us, this [merger] agreement is one of our restructuring steps,” said Toshiba spokesman Keisuke Ohmori. In the fiscal year ended March, Toshiba’s mobile phone business made an unspecified operating loss, while its revenue dropped 44 percent to about JPY90 billion (US$985 million). The two companies will continue to discuss the specific details of the deal, and will sign a final accord around the end of July.