Microsoft mum as Nokia struggles to resolve tax tangle

Microsoft does not want to meddle with the legal tangle Nokia currently is in

                                   

Even as the Delhi High Court resumes hearing on the Nokia tax dispute on Monday, Microsoft, eager to settle the acquisition row without any hassles, is keeping its fingers crossed. The software major does not want to meddle with the legal tangle Nokia currently is in and wants to stay away from row till the issue is settled.

"As this is a Nokia dispute, Microsoft will not issue a comment on the matter," Waggener Edstrom, global communication consultant who handles Microsoft media account, said in an e-mail response to FE.

FE had sought response from Microsoft on the whole episode, and especially in the wake of the Chennai Nokia plant union's suggestion that either Microsoft or Nokia management give a commitment to the court to the effect they will settle the tax issue amicably once the deal, including the transfer of Chennai plant, is settled as per the agreement.

The $7.2-billion acquisition of Nokia by Microsoft has become a hot topic with the Chennai plant union deciding to move the Delhi HC to protect their jobs. Finland's foreign minister Erkki Tuomioja's said that if the tax dispute is not settled before the December 12 deadline, the Chennai plant would have to be kept out of the deal.

Nokia, too, told its workers that if the plant were to be kept outside the deal, it may have to go for contract manufacturing for Microsoft for at least 12 months.

An analyst, tracking mergers & acquisitions, told FE that it is pertinent for a global company like Microsoft to stay away from the heat generated during the legal recourse regarding Nokia's tax liabilities. There are certain binding rules as far as agreements are concerned. "Obviously they would want Nokia to come to the table with clean hands or else the Chennai assets would be kept out of the agreement for time being," he said on condition of anonymity.

Under the terms of the agreement of the deal announced in September, Microsoft is to transfer close to 32,000 people, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing,

Assembly and packaging of products worldwide to its own company rolls.

When the matter comes up on Monday, Nokia has to give details of its assets and liabilities as well as how much tax it has paid in the country.

The income-tax department had told HC that the offer of Nokia to pay a minimum deposit of Rs 2,250 crore to it, out of the company's total tax liability of nearly Rs 6,500 crore, was not acceptable. Nokia India, however, stuck to its offer.

In what could be termed as a fallout, a number of contract employees at the Chennai plant are being summoned by the management to inform them about the possibility of an impending retrenchment exercise.

"We have been called by the management only being told that we might get axed as the whole picture is very uncertain," said an employee. Out of the 8,000-odd workforce at the plant, close to 1,500 are contract employees.