NTT DoCoMo is developing an Android-based smartphone with an aim to launch it next year, a spokesperson with the Japanese operator confirmed to AFP via Business Standard. The phone could help the carrier compete with its smaller rival Softbank, which has been growing customers at a faster rate since launching the iPhone in July.

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An earlier report from Japanese financial newspaper the Nikkei picked up by Reuters, said that the phone would be co-developed by DoCoMo’s Korean partner KT Freetel. DoCoMo owns a 10 percent stake in the Korean carrier, and in the past the two have procured handsets together to get better prices. But the company’s spokesperson said that they hadn’t yet decided on any partners, nor was it confirmed if the handsets would sell in Korea.

The handset will be the first Android phone to be launched in Japan, where mobile devices are already among the most sophisticated in the world. DoCoMo lost out on the iPhone after months of talks with Apple (NSDQ: AAPL), which reportedly broke down after the Japanese carrier balked over the high revenue sharing terms that Apple was demanding to let it sell the handset exclusively.

But an Android-based phone may actually prove to be a better bet for DoCoMo (NYSE: DCM). Though Apple has helped lure subscribers to Softbank, it hasn’t sold spectacularly in Japan, where users apparently still want features particular to the local market—including mobile payments and digital broadcast TV. It’s been reported that Japanese consumers who have bought the iPhone also tote around a second phone that give them access to these features—which could be potentially included in an Android-based phone. DoCoMo and Google (NSDQ: GOOG), meanwhile, already have an “alliance” in place, when early this year DoCoMo agreed to integrate its search and email into its content service i-Mode.

The Nikkei also reported that DoCoMo would price the Android-based phone at about 20 percent lower than existing smartphones, since it would save costs on software development as Android is free.