Nokia to suspend Chennai plant operations from November 1

Finnish (rpt) Finnish telecom firm Nokia Corp today decided to suspend operations in its Chennai mobile handset plant from November 1 after Microsoft terminated an agreement to buy mobiles from the unit, throwing the future of about 1,100 employees into uncertainty.
"Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from 1 November 2014. In absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility from 1st November," Nokia said in a statement.
The company also said that the asset freeze imposed by the tax department prevents Nokia from exploring potential opportunities for the transfer of the factory to a successor to support the long term viability of the established, fully functional electronics manufacturing ecosystem.

The Helsinki-based company was forced to keep the factory out of a USD 7.5 billion deal for sale of its handset business to Microsoft Corp, due to tax dispute with Indian authorities.
Tax authorities allege that Nokia avoided paying taxes by wrongfully claiming an exemption on software exports. Nokia has challenged the claims of tax department in courts.
The deal was completed on April 25, 2014, but Chennai facility could not be transferred to Microsoft because of legal issues related to tax demand by Indian government.
Nokia started manufacturing at Chennai plant in January 2006 and exported products to overseas markets, including the Middle East and Africa, Asia, Australia and New Zealand.