MobileMonday Global

^{USD 1,7 billion invested} Nokia gets OK to merge JVs in China

Nokia has received Chinese government approval to merge its four manufacturing joint ventures in the country, which is expected to boost the firm's business in the world's most-dynamic telecoms market.

That merger is widely expected to set an example for other multinationals, a great number of whom want to integrate their sprawling businesses in the competitive Chinese market.

Nokia plans to merge its four joint ventures into a new entity, which will be operational in January, said David Tang, vice-president of Nokia (China) Investment Co Ltd, according to China Business Weekly.

The restructuring involves a 50-50 joint venture between Nokia and China's handset maker Capitel; a telecoms gear manufacturing company in Beijing; a plant in Dongguan, in South China's Guangdong Province; and a joint venture in Suzhou, in East China's Jiangsu Province.

The firm, which will be based in Beijing, will become the largest manufacturing and exporting company in China's mobile telecoms sector.

Nokia will hold more than 60 per cent of the new firm, Tang said. He declined to specify on the firm's shareholding structure.

The firm's four Chinese partners will have stakes in the company, which will produce mobile phones and network equipment.

"Nokia is the first multinational in China to merge joint ventures across provinces, on a large scale," Tang said to China Business Weekly.

Multinationals have traditionally formed numerous joint ventures in China – mainly to achieve localization.

Local issues

Merging joint ventures, especially those across provinces, is not an easy task, as local governments fear they will lose tax revenues, the paper writes.

Nokia filed the necessary applications for the merger last January, and obtained approval from all relevant local governments in June. The central government issued its preliminary approval in August.

Tang said Nokia promised local governments it will increase investments in provinces or cities.

"The merger is aimed at strengthening the overall competitiveness of both Nokia and our partners in China and the global market, and in better adapting to the fast-growing telecom market," Tang says.

As of January, China, including Hong Kong and Taiwan Province, has been ranked as one of Nokia's five key regional strategic markets. China is the firm's only country market.

Nokia's other key markets are North America, South America, Europe/Africa/Middle East and Asia-Pacific.

Reporting to Espoo

Nokia's mobile operations in China now report directly to the firm's global headquarters, rather than the Asia-Pacific headquarters in Singapore. That signifies the increasing importance of the Chinese market and provides for closer contacts with, and better access to, Nokia’s global headquarters, research and development (R&D) and resources.

Nokia has five global R&D facilities in China. The firm by last August had applied for 2,100 patents in the country and received 500 patents.

About 40 per cent of the global handset shipment of Nokia's Mobile Phones Business Group are developed by its Beijing product development center.

Localization almost done

By 2003, Nokia had invested 1.7 billion euros in China. The firm's exports from the country, in the past four years, has exceeded 8 billion euros.

Nokia has "basically" realized the localization of its manufacturing, outsourcing and R&D in China, Tang said.

Nokia's outsourcing in China last year exceeded USD 1.8 billion.

Nokia is the top vendor in China's overall cell phone market, indicate the latest statistics released by GFK Asia and JP Morgan.

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