Toshiba and Fujitsu agree Japanese mobile merger

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Toshiba and Fujitsu have agreed a deal to merge their mobile phone businesses in Japan to become the country's second biggest handset maker.

The partial merger will see Toshiba transfer its mobile phone operation to a new company set for launch in October, which Fujitsu will then acquire the majority of shares in.

The deal is designed to strengthen both sides' respective positions and save on research and development in a bid to take on market leader Sharp. It is expected the Toshiba-Fujitsu operation will be worth a 18.7 per cent market share in the Japanese domestic market, second only to Sharp's 26.2 per cent.

“By combining their mobile phone development know-how and technological strengths, Fujitsu and Toshiba intend on enhancing their handset development capabilities and at the same time improving business efficiency,” the firms said in a joint statement.

The merger will see little ground lost in terms of overlapping interest, with Fujitsu making handsets for Japan's number one carrier, NTT DoCoMo, and Toshiba catering for the number two network KDDI, though it does also supply handsets for NTT DoCoMo and Softbank.

As of now, the companies have signed a “memorandum of understanding”, with the full deal expected to be inked next month.

The deal is seen as one of the few ways forward in a Japanese domestic market that has reached saturation point. According to IDC Japan, an ageing population led to the domestic phone market shrinking by 19 per cent last year, though it is expected to recover somewhat this year. However, increased competition from outside interests such as the Apple iPhone are increasing the pressure on Japanese firms to cut costs.

The greater challenge is to expand beyond the Japanese market, where growth is still strong. The problem is that Japan has effectively isolated itself by pushing its mobile infrastructure so far ahead that it is completely out of sync with the rest of the world, and so few smartphones released on the Japanese market ever see the light of day anywhere else.

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