News Column

Nokia says India plant \ unlikely to be part of Microsoft deal\

April 27, 2014 Staff

Nokia has said that due to an ongoing tax dispute, its Indian mobile phone handset plant was unlikely to be included in the closing of the deal tomorrow with Microsoft, Reuters reported.

A spokeswoman for the Finnish company's Indian unit said on

Thursday that Nokia will instead operate the factory as a contract

manufacturing unit for Microsoft after the deal.

"It's highly unlikely that the plant will transfer,

given that the [deal] closing with Microsoft is tomorrow," the spokeswoman

said. "If the asset doesn't get transferred, we are entering into a service

agreement with Microsoft."

According to Reuters, Nokia has yet to agree to the

conditions set by the Indian court, including payment of a guarantee for

potential tax dues in a dispute with Indian authorities, before it transfers the

plant to Microsoft.

Nokia lawyers have previously told the Delhi High Court that

the company can run the plant as a contract manufacturer in case it is not

allowed to be transferred to Microsoft, but not beyond 12 months after closing

their $7.5 billion global deal.

The Economic Times, India, reported that this temporary solution,

of the Chennai factory becoming a contract manufacturing unit for Microsoft leaves

many unanswered questions such as at what capacity will the factory operate?

How many workers will it need? How long will this arrangement continue?

Described by the ET as an 'orphan factory' that neither

Nokia or Microsoft want, the plant, which is one of Nokia's biggest factories

globally, is down from producing 13 million handsets a month at its peak to two

to four million handsets and production lines are down from 20 to 10.

Employee, Arivazhagan was originally told about the handset

factory, which was the first in India, eight years ago while he was searching

for a job. He told the ET:

"Whenever we used to go home, our friends would

say, 'what a cool job you have. Now, your life is settled'. Now they don't even

come to meet us."

Hemalatha, who discontinued her studies and took up a job at

the company said: "They said we are part of one family- the Nokia family.

And suddenly, that 'family' has disappeared."

Earlier this month, Nokia India announced a voluntary

retirement scheme (VRS) for 5,200 workers (who are part of the Nokia India

Employees' Union) and over 700 trainees. It offered permanent employees a

compensation equivalent to three months of salary per year of employment, with

a cap of five years.

Several industry observers see the VRS as the

first step towards Nokia India cutting costs and eventually closing the plant.

"It came as a shock to us," says Lakshmi, one of the factory's first

workers. "They [the management] told us they have done all they could to

resolve the issues, and with no way out, they have offered the VRS."

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Source: (United Arab Emirates)