Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) said Thursday that due to ongoing tax disputes, its Chennai plant is unlikely to be included in a deal to be concluded with Microsoft Corporation (NASDAQ:MSFT) on Friday.
Such a move is expected to put a question mark over the fate of the 8,000-employee phone plant in India’s southern state of Tamil Nadu.
Nokia’s tax trouble
Last year, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) was on the hook for about $375 million in taxes to be paid to India’s tax department. That claim was in connection with payments Nokia’s subsidiary in India made to Nokia itself in Finland. That dispute started last year after Indian officials raided Nokia’s main facility in Chennai.
Last month, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has been slapped with a $414 million sales tax bill from the Tamil Nadu government, alleging its handsets from the Chennai plant were not exported but sold in India.
To finalize Microsoft deal by Friday
As reported earlier, Microsoft Corporation (NASDAQ:MSFT) is closing in on their Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) acquisition after eight months on Friday. Both companies jumped through financial and regulatory hoops. Despite the fact that the deal was officially announced late last summer, there have been several hold-ups that have kept the two companies from meeting the first quarter closing deadline.
Since Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is unable to solve the tax disputes with Indian authorities, it said Thursday it is unlikely that it would be able to include a massive phone plant in India in a wider deal to transfer its phone business to Microsoft Corporation (NASDAQ:MSFT).
Both the companies expect to formally conclude the transfer, valued at 5.4 billion euros ($7.5 billion) on April 25, thereby putting the fate of its employees at Chennai plant into question.
Nokia’s spokesman Brett Young said Thursday that there is a ‘very strong likelihood’ that it won’t be able to include the factory in the wider deal. Since there is little time left before the deal closes, it would be surprising if the issue was resolved before Friday.
A spokeswoman for the Finnish company’s Indian unit said Thursday if the asset doesn’t get transferred, the company is going to enter into a service agreement with Microsoft Corporation (NASDAQ:MSFT).