Nokia Excludes India Plant From Microsoft Deal

Nokia is to exclude a major manufacturing plant in India from its €5.44 billion  (£4.47bn) deal to sell its handset business to Microsoft, scheduled to conclude on Friday.

The plant, based in Chennai, in south-eastern India, is one of Nokia’s largest manufacturing facilities, but its fortunes have declined as Nokia was displaced from its once dominant position in the mobile phone industry.

Legal complications

Moreover, the plant is the target of two tax disputes, one over royalty payments and another involving a sales tax claim by the Tamil Nadu government, and these were the immediate reason for the factory’s exclusion, according to reports.

Last month Nokia was ordered by India’s Supreme Court to guarantee its tax liabilities by depositing 22.5 billion rupees (£219m) into an escrow account and agreeing to pay any tax dues following litigation before it could transfer the plant to Microsoft.

For the time being, the factory will remain a part of Nokia India, and will work as a contract manufacturer for Microsoft, according to reports in the Indian press. No details were given as to how long the arrangement could last or at what capacity the plant is to operate.

Employee limbo

The Chennai factory has 5,200 permanent employees as well as nearly 700 trainees. Employees have reportedly been offered a voluntary retirement scheme, which some view as a step toward eventual closure of the plant.

The factory, which at its peak produced about 13 million handsets per month, exporting to around 75 countries, has seen production drop to between 2 and 4 million units, with production lines reduced from 20 to 10.

India is Asia’s third-largest economy and is the world’s largest mobile phone market after China.

Microsoft has said that a Nokia manufacturing plant in South Korea will also be excluded from the deal.

The company is reportedly planning to change the mobile phone handset business’ name to Microsoft Mobile after the acquisition.

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