Nokia battles setbacks on bumpy path to India revival

Nokia is on the hunt for a new head of operations for India, West Asia and Africa, whose biggest priority will be to resolve a US$383 million tax bill in India, and reverse a 25 percent revenue drop over the past two years.
Written by Mahesh Sharma, Correspondent

Nokia's head of operations for India, West Asia and Africa, D. Shivakumar has resigned and will leave the company at the end of June.


In an interview with The Economic Times (ET) last week, Nokia's emerging markets head confirmed his resignation. He will leave the company's Dubai office, where he oversees the mobile maker's efforts in over 90 countries, to return to his native India--where he first joined Nokia eight years ago.

The opportunities and growth are in India, he told ET.

"When I joined Nokia, India had about 80 million mobile phone subscribers, today it is over 900 million. I believe that Nokia too had a role to play in this along with mobile operators."

Shivakumar will advise the company in the coming months before his departure, as the company faces some of its biggest challenges in almost two decades of operation on the subcontinent.

Last week, Nokia was ordered to pay over 20.8 billion rupees (US$383 million) for taxes owed in the five years since 2006/2007, a charge that has been stayed by the Delhi High Court.

"Nokia reiterates its position that it is in full compliance with local laws as well as the bilaterally negotiated tax treaty between the governments of India and Finland and will defend itself vigorously," the company stated in a statement provided to Reuters.

In its recent annual report, the company admitted to investors the looming tax investigation could have financial consequences.

"During early 2013 Nokia became subject to a tax investigation in India, apparently focusing on Indian tax consequences of payments made within Nokia for the supply of operating software from its parent company in Finland," the company wrote.

"Such proceedings can be lengthy, involve actions that can hinder local operations and the outcome of such proceedings is difficult to predict. Negative developments or outcome in such proceedings could have adverse effects to our cash flows, income statements and to our financial position."

The tax bill is another blow for the Finnish phone maker in its second biggest market in terms of sales, with revenues plunging 25 percent to 2.23 billion euros (US$2.85 billion) in 2012, from a high of 2.95 billion euros (US$3.78 billion) in 2010.

Nokia hopes a new range of low-cost, Windows 8 based smartphones will return its former glory, and it also remains committed to its US$330 million factory in Chennai--its largest mobile device productive capacity in the world at 35,323 square meters--where it recently increased wages by up to 200 percent.

The company warned that the could be a bumpy ride with more obstacles ahead in India.

"Nokia Siemens Networks, as well as its competitors, were adversely affected in 2010 by the implementation of security clearance requirements in India which prevented the completion of product sales to customers, and could be similarly affected again in future periods, leading to ongoing uncertainty in that market," the handset maker said in its annual report.

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