WSJ: Will Nokia Abandon India?

Wall Street Journal: Will Nokia Abandon India?
August 23, 2013
By: R. Jai Krishna and Sven Grundberg

According to a report in the Indian Express newspaper, the Finnish handset maker has told New Delhi that India has become “the least favorable market” and it would rather exit and export its handsets from China.

Nokia couldn’t confirm the contents of a letter apparently submitted to the government and cited by the report, but Nokia spokesman Brett Young said Friday the company has been in discussions with the central Indian government and the state government over ways to bring “greater clarity to the business environment in India.”

“The country is a priority market for us, and Chennai plays an integral part in our global manufacturing strategy.”

But the report comes after the company ran into tax issues in India. In late May, Nokia lost an appeal against an order for 20.8 billion ($323.4 million) in retrospective taxes on software the Indian unit supplied to its parent firm. The company contends it has not received a tax refund it was promised as part of a pact with the southern Indian state of Tamil Nadu.

The Helsinki-based company cited  “political risk” of operating in the country that could impact its future investment decisions, the newspaper reported, citing a letter written by the company to India’s trade ministry in June.

Nokia has a facility to make handsets near Chennai, in Tamil Nadu, where the company said it has invested $285 million in manufacturing operations.

Nokia is the latest among foreign companies that have raised concerns about the increasing risks of operating in India across several sectors ranging from steel to retail. The concerns come at a time when Asia’s third largest economy is opening up its markets for foreign investments in a bid to curtail slowing growth, which hit a decade low of 5% during the last fiscal year that ended March 2013.

On Thursday, during the launch of its latest Lumia 925 and 625 handsets, Nokia India’s marketing director Viral Oza said the country ranks among the top three markets for its Lumia smartphone handsets, suggesting an outright exit from the country wouldn’t be a smart move.

Nokia was dethroned as the number one handset maker by revenue in India last fiscal year after a decade by South Korea’s Samsung Electronics Co. according trade publication Voice & Data.  Nokia’s revenue from India also dropped 18% to 97.80 billion ($ 1.52 billion)  in the year that ended March 31, Voice & Data said.

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