The Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) / Microsoft Corporation (NASDAQ:MSFT) deal has finally been granted approval from the Ministry of Commerce in China (MOFCOM). Owing to the delay, Nokia had to shift the expected closure date from the first quarter of 2014 to April. In a report on Apri 8th 2014, Credit Suisse analysts Kulbinder Garcha, Achal Sultania, Talal Khan, Matthew Cabral, Ray Bao and Andrew Ruben “see no anti-competitive reasons to block the deal.”
Nokia Microsoft deal on track to conclude in April
In March, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) stated that the deal with Microsoft is due to get approval from a few of the antitrust authorities in Asia. Analysts believe that the approval from the Chinese authorities was considered a “major delaying factor for the deal.” The deal has already been cleared by EU Commission, US DoJ, and now the Chinese approval has put “the deal back on track” to conclude in April.
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As of now, there has been no information from Nokia on the regions where the deal is still to get approval; however, analysts believe that the countries could be Taiwan and/or Korea.
Excess cash after the deal
After the deal has been concluded, analysts believe that Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) would once again focus on the company’s long term potential in the IPR business. The revenues from the segment, according to analysts, have the potential to increase from €600 million in 2014 to €1.45 billion by 2017. For pocketing such revenues, Nokia has to charge a royalty rate of around 0.50% from the smartphone makers compared to the current rate of 0.20%. The Finnish company will surely renegotiate terms from the existing licensees, and would sign new agreements with the players who do not have any licensing relationships with the company.
The analysts also believe that after the deal is concluded, Nokia would have around €3.2 billion of excess cash or 15% of its market cap. As a part of the deal with Microsoft, the Finnish firm will receive €5.4 billion, which the company “can potentially distribute over the next 12-18 months,” believe analysts.
Credit Suisse has an Outperform rating on Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) with a price target of €7. Analysts estimate €9.3 billion value for NSN, €8.7 billion for IPR and €850 million for HERE.