Motorola Inc. said on Tuesday it signed a deal with China's Huawei Technologies Co. Ltd. to develop and market wireless network equipment based on faster versions of GSM, the mobile network standard dominant in Europe.

The move comes amid speculation by analysts that Motorola, the world's second largest cellphone maker, could be forced to sell its network business, or make a large acquisition to increase the size of the unit as its rivals merge and it faces competition from companies like Huawei.

"We'll hopefully have some progress in the next year in the business," Motorola Chief Executive Ed Zander said at the company's analyst day.

Huawei is viewed as one of the toughest competitors in the wireless network equipment business. But Motorola and its partner still face the challenge of working together as such collaborations have not always been successful.

In June, Nortel Networks said it was talking to Huawei on how they could work together after the two rivals scrapped a joint venture. Huawei also has a venture with 3Com Corp. 

Zander said Motorola's network gear focus is switching to high-speed versions of GSM (Global System for Mobile Communications) as the company has already grown as much as it could in its business based on CDMA (Code Division Multiple Access), a rival technology used in the United States and parts of Asia.

"We are not interested in getting more CDMA business. We've got 20 percent of the market," Zander said.

Following Alcatel's agreement to merge with Lucent Technologies Inc., and Nokia's development of a network equipment joint venture with Siemens, some analysts say Motorola needs to expand.

"It helps Motorola compete on price," Oppenheimer analyst Lawrence Harris said, noting that Huawei could contribute lower cost manufacturing. He added that, depending on what technologies China decides to implement, it could "put Motorola in a lead position in China."

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