After fending off a Finnish buyback campaign and gaining stamps of approval from American and EU regulators for Microsoft’s acquisition, Nokia’s US$7.2 billion devices and services deal may be in jeopardy because of a factory in India.
Local Indian authorities are imposing a tax that could amount to as high as $3.4 billion on one of Nokia’s factories in the Indian city of Chennai. Back in February, Nokia was served with a claim of $340 million worth of taxes and penalties, but a Delhi High Court hearing yesterday raised that number to include penalties for a 7-year fiscal period starting back in 2006.
The Chennai factory is Nokia’s largest manufacturing center worldwide, employing 8,000 workers who assemble basic mobile phones. It makes up a large part of the devices and services operations Nokia is handing over to Microsoft.
India froze Nokia’s assets in the country back in September to make sure the company had enough funds to pay the taxes, and although the factory is still operational, it cannot be sold until the tax claim is resolved.
If the asset freeze stays in place beyond Thursday, Dec. 12, Nokia has said it won’t be able to include the Chennai plant in the Microsoft asset transfer. This may either hold up the deal, or force Nokia to keep operating the factory until the issue is resolved (while the rest of the deal goes through).