updated 2/14/2006 12:13:01 PM ET 2006-02-14T17:13:01

Sanyo and Nokia announced Tuesday they will set up a joint venture to make advanced cell phones, underlining the ambitions of the Japanese and Finnish manufacturers to grow globally in the competitive mobile market.

At a news conference in Tokyo, both sides said they will sign a deal in the second quarter of this year, and the new business will start in the third quarter of this year.

Together they will control about 20 percent of the world’s CDMA market, rivaling current leader Samsung Electronics Co. of South Korea, they said.

However, Nokia Corp. and Sanyo Electric Corp. provided no details on mutual stakes, manufacturing plans, branding or financial targets.

The new company will cover only cell phones that use CDMA, a new kind of “third-generation” wireless technology that relays data much faster than older cell phones, allowing people to download video clips and music.

Although there are competing third-generation formats, CDMA, which stands for “code division multiple access,” is widely used in the United States by Verizon Wireless and Sprint Nextel Corp., as well as in Japan, India, China and South Korea.

The venture will have major operations in the western Japan cities of Osaka and Tottori as well as in San Diego, Calif., but the officials did not say where the headquarters will be.

Sanyo hopes the partnership will boost its flagging fortunes. The Osaka-based company is projecting a 233 billion yen ($1.98 billion) loss in the fiscal year ending March 31, and has announced a major overhaul by cutting jobs, reducing factory space and dropping some businesses.

Sanyo Senior Officer Takenori Ugari acknowledged Japanese makers were struggling because the cell-phone market here has grown so competitive. Japanese handsets are niche-oriented with fancy features that don’t make them suited for overseas markets, making global growth difficult, he told reporters.

“Japanese cell phone makers are all getting left behind,” Ugari said at a Tokyo hotel.

For its part, Nokia, which controls 33 percent of the global cell-phone market but hardly sells any handsets in Japan, sees the Sanyo partnership as an opportunity to gain a better foothold in Japan, Nokia Senior Vice President Timo Ihamuotila said by telephone from New York.

The agreement will be forged in “a spirit of equal partnership,” he said, while declining to give details.

Nokia, based in Espoo, Finland, also has been struggling to boost profitability in recent months as growing sales of low-priced handsets depress revenue. Nokia’s net profit for the October-December quarter fell 1 percent to 1.07 billion euros ($1.32 billion), as sales grew 9 percent to 10.3 billion euros ($12.66 billion).

By signing the deal, Nokia’s brand power as the world’s biggest mobile phone maker will be complemented by Sanyo’s strength in the Japanese and the U.S. markets, company officials said.

Also, the companies’ strengths don’t overlap because Nokia is strong in entry-level and mid-range CDMA handsets, while Sanyo is strong in high-end handsets, the companies said.

Nokia spokeswoman Arja Suominen said the companies would embark on wide-ranging talks between various departments in both companies, expected to last until the middle of the year.

“The aim is to agree on the details during the first half of the year and then in the third quarter the new company (joint venture) would start to function,” Suominen said.

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