Nokia denies Microsoft deal delay over Indian tax troubles

Chris Davies - Feb 14, 2014
Nokia denies Microsoft deal delay over Indian tax troubles

Nokia has denied any risk of potential delay to its deal with Microsoft, despite tax issues in India threatening to scupper the transfer of a handset manufacturing facility as part of the phone division acquisition. While the Delhi High Court had previously given Nokia the go-ahead to include the Chennai plant, local tax authorities stepped in and claimed Nokia still owed income tax amounting to around $3.4bn.

Activity at the plant, which employs around 30,000 people, was also halted in December 2013, something Nokia has warned could threaten the job security of all staff there. Nokia took particular issue with new conditions the Delhi High Court added which could have left it unable to argue its case should tax inspectors decide to further raise their demands.

Despite all that, the deal with Microsoft – which will see Nokia’s phone business handed over to the Windows Phone creator – is still expected to go ahead as planned, with a closing of the deal imminent.

“Nokia would like to stress that recent developments in India related to ongoing tax proceedings are not expected to affect the timing of the closing nor the material deal terms of the anticipated transaction between Nokia and Microsoft, announced on September 3, 2013” the Finnish firm said in a statement.

“The transaction is still expected to close in the first quarter of 2014, subject to regulatory approvals and other customary closing conditions, irrespective of the proceedings in the Indian tax case” it argued.

Whether that will include the factory in India – which is one of Nokia’s largest – remains to be seen, with interim CEO Risto Siilasmaa pointing out that if it can’t transfer ownership as part of the agreement, it will have no use for the facility.

“If we are not allowed to transfer, we will have a factory, but we will not have a business” Siilasmaa warned. “And if we don’t have a business, we can’t manufacture anything in the factory. And that would be detrimental to our employees and we care deeply for our employees. So we are trying to explore all possible means of finding a solution to this issue.”

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