STOCKHOLM—Ericsson AB and Cisco Systems Inc., two of the world's biggest telecom-equipment providers, have clinched a broad technology and commercial partnership that stops short of a full-blown merger but aims at an unusual level of cooperation in everything from research and development to customer service.

The two said Monday they would team up across the board, including jointly working on a wide range of products used in wireless networksand Internet infrastructure as the two face heightened competition from the â,¬15.6 billion takeover of Alcatel-Lucent SA by Nokia Corp., expected to be formally launched later this week.

The alliance will help add $1 billion or more in annual sales for each company by 2018, Ericsson and Cisco said.

For the Swedish company, the move could help it retain its position as the world's biggest telecom-equipment supplier by sales just as Nordic rival Nokia regains strength. Nokia's takeover of Alcalet-Lucent could create a powerful challenger to both Ericsson, a leader in wireless equipment, and Cisco, which dominates market for Internet gear.

Ericsson said the partnership with Cisco will allow it broaden its offering immediately, much faster than what it could have achieved through an acquisition or by developing Internet equipment in-house.

"This is a much more agile and efficient choice," Ericsson Chief Executive Hans Vestberg said in an interview. "We can start already tomorrow."

Mr. Vestberg said talks with Cisco had begun 13 months ago.

The U.S. company said pairing up with Ericsson will help it address a larger market, and didn't raise much of an overlap issue.

"Ericsson's portfolio is highly complementary to ours, there is no better combination we can think of," Cisco Chief Strategy Officer Hilton Romanski said in an interview.

Ericsson, which has around 37,000 patents and employs 116,240 staff world-wide, reported revenue of 228.0 billion Swedish kronor last year ($27.36 billion).

San Jose, CA-based Cisco reported revenue of $49.2 billion in its latest fiscal year to July 25.

Write to Jens Hansegard at jens.hansegard@wsj.com

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(END) Dow Jones Newswires

November 09, 2015 07:05 ET (12:05 GMT)