Toshiba and Fujitsu have announced their intention to merge their mobile phone businesses in October this year.
The move would create Japan's second-largest mobile phone provider.
The two electronic companies said they would use their competitive advantage to develop next-generation smartphones with the aim of becoming Japan's biggest provider.
In a joint statement, the companies said that they aimed to sign a final merger contract at the end of July. Fujitsu will hold a majority stake in the merged business.
The BBC reports the agreement is the latest in a series of consolidations in Japan's mobile phone market.