Govt fears Nokia impasse may hit telecom exports

India's telecom exports may drop by about 40 per cent if uncertainty about Nokia's plant near Chennai continues and production is affected, the Telecom Equipment & Services Export Promotion Council said.

"This year, we saw a dip in telecom equipment exports due to lower contribution from Nokia, which generally accounts for about 70 per cent of handset exports.

In case the uncertainty continues regarding their plant, we apprehend there may be a drastic decline in exports," TEPC Secretary R K Pathak said at an event organised by Singapore Exhibitions Services here.

The Finnish handset major plans to close its $7.2 billion deal to sell its mobile devices and services business to Microsoft on April 25.

The handset and other asset components will be handed over to Microsoft's Finnish entity Microsoft Mobile Oy.

It's not clear if the transaction will include the Chennai plant, which is at the centre of a Rs 21,000 crore tax dispute with Indian authorities over royalty payments. The facility is one of Nokia's biggest globally.

The company has previously indicated that the transfer of the Chennai plant may be adversely impacted if the tax dispute remains unresolved.

According to TEPC data, telecom equipment exports from India declined about 7 per cent to Rs 19,654 crore in 2013-14 from Rs 21,075 crore in the previous year.

"Handsets account for more than half of the exports from India, dominated by Nokia," Pathak said.

Mobile phone exports dropped to Rs 11,918 crore in 2013-14 from Rs 14,870 crore in 2012-13.

According to Nokia India Employees Union honorary president A. Soundararajan, output at the Chennai plant has fallen to 400,000 mobile handsets a day from about 1 million.

Nokia's shipments from India were valued at about Rs 8,000 crore, as per TEPC data, which is about 40 per cent of telecom equipment exports.

A Nokia spokesperson declined to comment on the figures.

On the future of the Chennai plant, the Nokia spokesperson said the situation is complicated and it is continuing to weigh its options as there is still time before the deal closes.

"With Chennai, it is worth remembering that we have said we will consider a services agreement with Microsoft should our Indian assets not be able to transfer at the close of the global deal," the spokesperson added.

Contract manufacturing facility likely.

With Finnish handset maker Nokia stating the $7.2 billion deal with IT major Microsoft for sale of its mobile devices and services business might conclude by this week, the Chennai plant could become a contract manufacturing facility.

Nokia had on Monday said it expects the deal to conclude on April 25 and hoped it would continue to operate the Chennai plant under a "service agreement".

The plant at Sriperumbudur near Chennai is one of Nokia's biggest facilities in the world, employing about 8,000 persons directly and about 12,000 indirectly.