Nokia Said to Offer India $487 Million to Transfer Factory

Nokia Oyj is ready to pay at least 355 million euros ($487 million) to India’s tax authorities to enable the transfer of a factory in the country to Microsoft Corp., according to two people familiar with the matter.

Nokia is willing to deposit at least 270 million euros on top of an already announced amount of 85 million euros if India’s government allows the shifting of assets including the manufacturing plant in Chennai, said the people, who asked not to be identified because the offer isn’t public.

The assets were frozen by the state in September because of a tax dispute. Earlier that month, Nokia agreed to sell its mobile-phone business to Microsoft in a 5.44 billion-euro transaction to focus on network equipment. Nokia might need to find a new buyer for the assets, which are part of the handset unit, unless it can start the transfer this week, the people said.

In an e-mailed statement, Nokia said it’s committed to getting its assets unfrozen and called on India’s government and tax agency to work with urgency toward a solution.

The company’s factory in India, which was started in 2006, may not transfer to Microsoft when the deal is completed in the first quarter if the freeze continues beyond Dec. 12, Nokia said in a separate statement.

The Delhi High Court will rule on the status of Nokia’s assets at a hearing scheduled for today.

Missing Taxes

India’s government has ordered Nokia to pay about 20.8 billion rupees ($342 million) in missing taxes in the dispute stemming from businesses between the company and its Indian unit, Espoo, Finland-based Nokia has said. India is also in a tax dispute with Vodafone Group Plc, saying the U.K. carrier owes $2.2 billion due to changes in tax laws applied retroactively.

Once the biggest mobile-phone maker, Nokia saw its shares plummet over the past years after failing to offer alternatives to Apple’s iPhone in 2007 and devices running Google Inc.’s Android. While Nokia had a market share of the smartphone market topping 50 percent, the company now ranks outside the top five with about 3 percent share.

Nokia’s Stephen Elop, who joined as chief executive officer three years ago from Microsoft, scrapped the phonemaker’s own operating system in favor of his former employer’s Windows software. Elop, who now heads the device unit that will go to Microsoft, cut more than 21,000 jobs and shuttered production facilities in an attempt to make Nokia profitable.

Network Equipment

The sale lets Nokia concentrate on its network-equipment unit. The deal is the largest strategic change for Nokia since it stopped making rubber boots and tires and left businesses such as paper more than two decades ago.

“Continuing our existing strategy would have resulted in great difficulties,” Chairman Risto Siilasmaa told investors last month. “We have no doubt that this is the right decision.”

Nokia shares have almost doubled since the announced deal with Microsoft. The stock was little changed at 5.91 euros at 10:16 a.m. in Helsinki trading, valuing the company at 22 billion euros.

(Updates with market share in eighth paragraph.)
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