Nokia unit may make phones for Microsoft

Amid the uncertainty surrounding Nokia’s manufacturing facility near Chennai, Nokia has said if the plant isn’t transferred to Microsoft, one of the options the company is considering is converting it into a contract manufacturing unit for Microsoft.

However, employee unions have said they will ‘fight to death’ if the management shuts the factory or doesn’t fulfill its promise that from January, the employees would be on the rolls of Microsoft.

Finnish mobile maker Nokia is involved in a legal tussle with the Income Tax Department over alleged tax liability of Rs 6,500 crore (Rs 65 billion). The matter is being heard by the Delhi High Court.

Saying the I-T department’s claim wasn’t acceptable, Nokia offered to pay a deposit of Rs 2,250 crore and (Rs 22.5 billion) urged the court to unfreeze its assets before December 12 this year.

This, it said, would pave the way to including its facility near Chennai in the $7.3-billion deal with Microsoft.

In September this year, Microsoft agreed to buy Nokia’s mobile phone business, including the brand and manufacturing facilities.

It is expected Nokia’s devices and services businesses will be part of Microsoft by the end of the quarter ending March 2014.

On Tuesday, Erkki Tuomioja, Finland’s foreign minister, said, “There is an agreement between Nokia and Microsoft that unless this dispute is solved and the assets of its Chennai plant unfrozen before December 12, the Chennai plant would be left outside of the Nokia-Microsoft agreement.”

In an email response to a Business Standard query, a Nokia spokesperson said, “Nokia remains firmly committed to moving its Indian assets to Microsoft, and will continue to cooperate with Indian authorities to ensure a successful transfer.

“But time is the essence. Nokia calls on the Indian government and tax authority to work with urgency so that the uncertainty about the site’s future can be dispelled before the deadline of December 12. . . In case the asset isn’t allowed to be transferred, Nokia will seek a contract manufacturing agreement with Microsoft for a period of up to 12 months.”

Through a notice, a copy of which is available with Business Standard, this was also communicated to workers at the factory near Chennai.

“Since the I-T department has frozen our assets, we are not able to transfer our assets here to Microsoft. We are at a critical situation and should be united to face this.

“The next three weeks are hard and important and need to be handled calmly and carefully,” said in the notice (in Tamil) signed by the human resource

department.

But the question of what will happen after 12 months remains unanswered, considering the facility, Nokia’s largest for manufacturing feature phones, will have a new owner.

In a notice to workers at the factory, the company said if the legal dispute wasn’t sorted, the facility might become a contract manufacturer for Microsoft.

While questioning about the life of employees after 12 months, Saravanakumar, president, Nokia India Thozhilar Sangam, which claimed to have the support of about 4,800 employees, said, “We will fight to death if there is any move to close the factory.

“We will also explore legal options against these decisions and will not let this plant close at any cost.”

He also urged the management to fulfill its promise of ensuring the workers became Microsoft employees from January.

About 8,000 employees work at the unit, half of them women.

Their average age is 22-24 years.

Company officials said of the 8,000 staff, 7,000 were permanent.

Saravanakumar said based on the ruling of the Delhi High Court on December 9, the workers might take a legal recourse to press for their demands.

The employees’ union has already written to Prime Minister Manmohan Singh, Finance Minister P Chidambaram and Tamil Nadu Chief Minister J Jayalalithaa, seeking their intervention in the matter.

MICROSOFT MAKES A CALL

• Reuters reported on Monday US antitrust regulators had approved Microsoft's deal to buy Nokia's mobile phone business on November 29
• The next step will be for the companies to win approval in Europe for the proposed $7.3-billion transaction, which Reuters reported was most likely
• Nokia in September agreed to sell its devices and services business and license its patents to Microsoft in a $7.3-billion deal. The major factories that will be transfered to Microsoft include those in Sriperumbudur (near Chennai) in India, China, Vietnam and South Africa, focused on feature phones
• On November 19, Nokia's shareholders approved the sale of what was once Finland's biggest brand, at one point of time worth four per cent of the national GDP

The Nokia Special Economic Zone

• Notification: 2005
• Location: Sriperumbudur, Chennai
• Employees: 30,000 direct and indirect -- 8,000 working inside Nokia factory and half of them are women
• Investment: Nokia Telecom SEZ attracted $500 million, of which $310 million was from Nokia and the rest from suppliers Foxconn, Wintek, LOM and Salcomp
• Performance: Physical exports of Rs 12,137 crore in FY07-FY12. Till July 2012, since its inception in Sriperumbudur, 700 million phones made, the fastest ramp-up for Nokia globally