Nokia paying Microsoft €500m for using Windows Phone

Nokia's fees to Microsoft for using its mobile OS are expect to outstrip Microsoft's support payments to the handset maker to the tune of several hundred million euros.
Written by Liam Tung, Contributing Writer

Nokia's licence payments to Microsoft for Windows Phone are to cost it €500m more than the support payments it gets from Microsoft for using the OS.

Last quarter Nokia flagged that payments to Microsoft would "exceed" the $1bn a year it gets from Microsoft in the form of "platform support payments", but didn't detail to what extent. 

Under the arrangement in place since 2011, when Nokia began using Windows Phone as its primary smartphone platform, Microsoft pays Nokia $250m (€190m) a quarter to support it, while Nokia pays a minimum level of licence fees in return. Up until last quarter, Nokia's incoming support payments had exceeded its outgoing royalties to Microsoft, helping buoy Nokia's dwindling cash levels during its transition to Windows Phone.

In the company's full-year 20F filing with the SEC, published on Thursday, it predicted that for the rest of the duration of its deal with Microsoft, its licence payments to the company will be €500m ($654m) more than it receives in support.

"As of the end of 2012, the amount of platform support payments received by Nokia has exceeded the amount of minimum software royalty commitment payments made to Microsoft, thus the net cash flows have been in our favor. As a result, the remaining minimum software royalty commitment payments are expected to exceed the remaining platform support payments by a total of approximately €0.5bn over the remaining life of the agreement," the filing said.

Still, over the lifetime of the deal as a whole, Microsoft's support payments will be "slightly" larger than Nokia's minimum royalty payments to Microsoft, Nokia said, leaving it with net cash flow in its favour.

Nokia no doubt expects to increase sales of its Lumia devices, which run Windows Phone, well beyond the 4.4 million Windows Phone Lumias it shifted in Q4 2012.

Sales of the handsets are already on an upward trajectory - Nokia sold one million Lumias in 2011 (the devices were released in October of that year), and over 14 million in 2012.

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