NEC Corp., Matsushita Electric Industrial Co. Ltd. and Matsushita Communication Industrial Co. Ltd. are in the final stages of talks regarding an alliance on cellular handsets for third-generation (3G) mobile services.

The two companies have been discussing a tie-up but are yet to reach a deal, said Akiko Shikimori, a spokeswoman for NEC. “The talks cover the mobile terminal handset area but we cannot be more specific,” she said. An agreement is “not too far” off, said the spokeswoman.

The two companies are planning a joint news conference for Tuesday to announce specifics of the deal, a source has told IDG News Service.

In a report in its Monday morning edition, the Nihon Keizai Shimbun newspaper reported the three companies reached an agreement on Sunday covering cooperation in 3G terminals including cellular phones and wireless-enabled PDAs (personal digital assistants). The companies will jointly work on software development and design of hardware and could manufacture devices for one another, said the newspaper.

Such an alliance would create a force to be reckoned with, tying the companies with the number one and number two domestic market shares in cellular handsets. NEC and Matsushita are also leading the 3G field as the only two companies to have yet produced working 3G handsets for NTT DoCoMo Inc.’s current 3G trials.

NEC, in Tokyo, can be contacted at

. Matsushita Electric Industrial, in Osaka, can be at

. Matsushita Communication Industrial, in Yokohama, can be contacted at