Microsoft’s Nokia Deal Said to Face China Limits on Patent Fees

Chinese mobile phone makers asked regulators to make sure Microsoft Corp. (MSFT)’s 5.44 billion euro ($7.5 billion) bid to take over Nokia Oyj (NOK1V)’s handset business doesn’t result in higher patent fees on wireless technology, said two government officials with knowledge of the matter.

Huawei Technologies Co. and ZTE Corp. (000063) asked China’s Ministry of Commerce to set conditions on the deal making sure Microsoft doesn’t raise patent licensing fees afterward, said the people, who asked not to be identified because they weren’t authorized to speak publicly about the matter. The ministry is conducting an anti-monopoly review of the deal.

Microsoft and Nokia announced the planned transaction in September as the two seek to join forces in the smart-phone market where both have failed to gain traction amid the dominance of Apple Inc.’s iPhone, and devices running Google Inc.’s Android platform. Microsoft won European Union approval for the bid on Dec. 4, while regulators said they would monitor Nokia’s licensing practices.

David Dai, a spokesman for Shenzhen-based ZTE, declined to comment. Huang Man, a Shenzhen-based spokeswoman for Huawei, and Joanna Li, a Beijing-based spokeswoman for Microsoft, said they didn’t immediately have information available on the matter. Calls to the commerce ministry’s press office weren’t immediately answered.

Photographer: Nelson Ching/Bloomberg

Stephen Elop, chief executive officer of Nokia Oyj, speaks during the launch of the company's Lumia Windows smartphones in Beijing, China. Close

Stephen Elop, chief executive officer of Nokia Oyj, speaks during the launch of the... Read More

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Photographer: Nelson Ching/Bloomberg

Stephen Elop, chief executive officer of Nokia Oyj, speaks during the launch of the company's Lumia Windows smartphones in Beijing, China.

The European Commission “will remain vigilant and closely monitor Nokia’s post-merger licensing practices under EU antitrust rules,” the commission said in a statement at the time of its approval. Microsoft and Nokia face an EU antitrust complaint filed by Google last year that alleged the companies were using patents to thwart competition.

Market Share

While Samsung and Apple dominate global smartphone shipments, Chinese vendors make up four of the top seven producers worldwide, market researcher IDC reported in October.

Samsung had a 31 percent share of the market in the third quarter, while Apple accounted for 13 percent, according to IDC. Huawei ranked third with 4.8 percent and Lenovo Group Ltd. (992) was fourth with 4.7 percent, IDC reported. The fifth place producer was South Korea’s LG Electronics Inc., followed closely by two more Chinese companies: the Coolpad brand of China Wireless Technologies Ltd. and then ZTE, according to IDC.

Both Huawei and ZTE make devices running Android and Windows operating systems. On the day Microsoft announced its plan to buy the Nokia business, both Huawei and ZTE said they remained committed to making Windows phones after the deal.

“This does not impact our cooperation with Microsoft,” Huawei spokesman Scott Sykes said in a Sept. 3 e-mail.

ZTE would continue to develop more Windows phones because it’s an open ecosystem and consumers need the choice that Windows phones represent, ZTE’s Dai said at the time.

To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net; Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Nicholas Wadhams at nwadhams@bloomberg.net

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