The Finnish firm’s sales entity in India will be transferred

Finnish handset maker Nokia will not transfer its Chennai plant, which has become the focal point of two tax disputes, to Microsoft on Friday.

On Friday, April 25, Microsoft will finish acquiring Nokia’s mobile unit. Nokia will now continue to make products for Microsoft as part of a service agreement and will operate the Chennai plant for the U.S software giant for a certain period of time, according to a company spokesperson.

“We approached the union yesterday and informed them that a services agreement would kick on day zero, which is when the acquisition would be closed,” a Nokia spokesperson said.

Nokia India’s sales and marketing operations, however, will be transferred on Friday. In January 2013, Nokia India had restructured its India operations, and hived off its sales and marketing operations into a separate entity called Nokia India Sales Pvt. Ltd., which has close to 400 employees. The manufacturing entity, called Nokia India Pvt. Ltd., is the one that will not be transferred and will be operated as a contract manufacturer instead.

The Chennai plant, which employs close to 7,500 people, was blocked from being part of the Microsoft deal after tax authorities froze the plant over tax dispute. There has already been a small reduction in the workforce—around 700 trainees—after Nokia launched a voluntary retirement scheme earlier this month.

According to several Nokia India workers, who did not wish to be named, there would be, in all likelihood, no change in the salary structure. However, there could be a further drop in production for a certain period of time as Microsoft decides which products to be manufactured.

The Nokia-Microsoft deal, which only recently received approval from Asian regulators, has been delayed by close to a month now. Some of this has been due to the fact that Nokia is involved in two separate tax disputes, one with the Centre and one with the Tamil Nadu Government.

(This article is un updated version).