Foxconn Not Pleased With Nokia’s Legal, Financial Issues

Foxconn seems not pleased with Nokia’s legal and financial crisis. With regards to taking over Nokia’s Chennai production plant, the Taiwanese multinational electronics contract manufacturing company, has laid down certain conditions, which include freedom from all financial and legal liabilities of the plant. The plant which is in the middle of a INR 21,000-crore tax liability dispute with the government would need its backing in order for the terms to go through. Some of the other key demands include Nokia seeking to convert part of the Special Economic Zone (SEZ) into a Domestic Tariff Area (DTA), so that the phones produced there can be sold within India. According to unnamed sources close to the development, “Some key demands include complete exclusion from legal issues and financial liabilities Nokia faces in India, getting assurance from the government on this account…besides lifting the asset freeze on the plant.” Another person is noted to have said “the SEZ, or part of it, would have to be converted into a DTA for making it usable for anyone.”

The factory being talked about is located in Sriperumbudur in Chennai, but was not a part of the $7.5 billion deal between Nokia and Microsoft, in which the latter bought over the phone making business of the Finnish brand. The reason for the same is the ongoing INR 21,000-crore tax liability dispute between the government authorities and the company. However, it does not make the factory any less valuable, as it is known to produce a 100 million handsets, especially during its peak performance. But the legal issues shut down this production capacity and lead to the loss of 12,000 jobs on site.

For any deal to go through or transfer as an asset, it would first need the defreezing of the facility by government. Then Nokia has to approach the government departments like revenue, income tax, commerce, electronics & IT, to sort out the other regulatory issues before making a fresh proposal to the Taiwan based Foxconn executives. Though Nokia has not revealed many details but the spokesperson is known to have said to the Economic Times, “We are hopeful that the Indian government will approve and fully support, without delay, the legal transfer of the facility should an agreement be reached between Nokia and a suitable buyer,” and spoke of an optimistic wave within the company to make the deal work, but behind a veil of secrecy. Meanwhile, Foxconn has refused to speak on the issue and have opted to only speak once the terms of the final deal get finalized.

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