Nokia finally has a green light from China to sell its mobile phone business to Microsoft.
China’s Ministry of Commerce handed Nokia approval to sell its devices and services business to Microsoft for 5.4 billion euro ($7.4 billion), Nokia announced today.
Nokia and Microsoft originally forecasted a deal closure date within the first quarter of 2014, but they delayed to April after facing pushback from Asian antitrust regulators.
Microsoft announced its intention to buy Nokia’s handset business over seven months ago. The deal has since received approvals from the European Commission, the U.S. Department of Justice, and other jurisdictions.
Nokia, which will continue to hold the bulk of its patents, won’t have to substantially change its patent licensing practices, the company said. It pledged to honor fair, reasonable, and non-discriminatory (FRAND) patent licensing principles, adding that no authority has suggested Nokia failed to comply with those principles prior to the deal. Some Chinese handset makers, including Lenovo, Xiaomi, and ZTE, reportedly raised concerns with Chinese authorities that the Nokia-Microsoft deal could prompt Nokia to charge higher patent fees.
Microsoft agreed to similar terms to secure China’s consent. For the next eight years, Microsoft will make its standards-setting patents available under FRAND principles, and it will also make non-exclusive licenses available for Android smartphones. Android smartphones depend on 200 patent families controlled by Microsoft, according to the company.
But why do Microsoft and Nokia — American and Finnish companies respectively — need approval from China at all?
“China may not be able to stop some of these mergers if they disapprove, but they certainly could make life very difficult for Microsoft to do business locally if they wanted to,” explained Jack Gold, principal analyst and founder at J.Gold Associates, in an email to VentureBeat. “So the issue for Microsoft, who would like to grow in emerging markets, is to make sure the Chinese regulatory bodies don’t get in the way. It’s difficult enough doing business there and overcoming the challenge of growing the market, but if the government decides you are not ‘in favor,’ it’s almost impossible.”
With China’s approval in the bag, Nokia must now turn its gaze toward India, where it faces a tax dispute with Indian authorities. Nokia has said that the ongoing tax dispute won’t affect the closing of the Microsoft deal.