TOKYO: Japanese high-tech makers NEC Corp., Hitachi Ltd. and Casio Computer Co. said Monday that they had agreed to merge their mobile phone businesses in a bid to improve profitability.

Together they would have the second biggest slice of the Japanese mobile telephone handset market, ahead of Panasonic Corp. but behind Sharp Corp.

The firms said that by pooling their technological know-how and resources, they aim to come up with appealing new products and boost their future growth.

The joint venture will develop, produce and sell mobile telephone handsets. It will initially be owned 66 percent by NEC, 17.34 percent by Casio and 16.66 percent by Hitachi.

They aim to merge the operations by April 2010 and pump extra capital into the firm, boosting the stake of NEC to 70.74 percent and that of Casio to 20 percent. Hitachi's share will drop to 9.26 percent.

Hitachi is restructuring after losing 787.3 billion yen (8.7 billion dollars) in the year to March -- the biggest ever loss for a Japanese manufacturer.

It tied up with Casio in mobile handsets in 2004, but the venture fell into the red during the current global economic downturn.

Most Japanese already own a mobile telephone and operators and handset manufacturers are facing growing challenges to boost revenue in a crowded market, particularly given the weak economy and shrinking population.

Competition is also emerging from foreign handset makers such as Apple, whose iPhone was launched in Japan by number three operator Softbank last year.

NEC makes mobile phones for Japanese operators NTT DoCoMo and Softbank while Casio-Hitachi produce handsets for Japan's KDDI Corp and SoftBank, as well as Verizon Wireless of the United States and LG Telecom of South Korea.

NEC Corp., which lost 296.6 billion yen in the year to March, is cutting 20,000 jobs worldwide and withdrawing from the personal computer business in North America and Europe.