Nokia and China Huaxin Post & Telecommunication Economy Development Center (‘China Huaxin’) on 28 August 2015 signed a memorandum of understanding (MoU) confirming their intention to combine Nokia’s telecommunications infrastructure businesses in China (Nokia China) and Alcatel-Lucent Shanghai Bell (ASB) into a new joint venture. As agreed under the MoU, Nokia expects to hold 50% plus one share in the new joint venture, with China Huaxin holding the remaining shares. Fair value compensation would be received for the contribution of relevant assets to the joint venture.
China Huaxin is a state-owned Chinese investment company which has a similar with France’s Alcatel-Lucent. Nokia is also in the process of closing of the proposed combination between Nokia and Alcatel-Lucent.
The new joint venture is conditional on and would be formed after the closing of Nokia’s planned combination with Alcatel-Lucent, at which point Nokia would own 50% plus one share of ASB. Nokia China and ASB will until then continue to operate as two independent companies. The new joint venture is expected to be a strong national asset based in China capable of delivering value for both parties. Nokia China and ASB are leaders in the Chinese telecommunications infrastructure market and both are long-standing contributors to the development of China and innovation in the country.
The JV would operate under the English name of Nokia Shanghai Bell and would be registered in the China (Shanghai) Pilot Free Trade Zone. The new joint venture would have one board of directors, one management team, unified customer and business functions, and one integrated product portfolio and R&D platform.
Rajeev Suri, President and CEO of Nokia Corporation, said: “Today’s agreement demonstrates Nokia’s deep commitment to China. Together with China Huaxin, Nokia will be in an excellent position to support strategic initiatives of the Chinese government such as ‘Internet Plus’ and provide a strong link between Europe and China. We look forward to joining with China Huaxin and ASB to drive innovation for customers in China, and to help accelerate the country’s shift to an innovation-driven economy. With this MoU now in place, we will also work closely with our new partners to make the case for swift approval of the proposed combination between Nokia and Alcatel-Lucent by the appropriate Chinese authorities.”
Yuan Xin, Chairman, China Huaxin, said: “We are pleased to have signed this agreement with Nokia, and firmly believe the proposed combination would reinforce our companies’ presence in China. By bringing these two entities together, the new company would possess greater capacity for innovation and outstanding R&D capabilities, delivering benefits to our customers and shareholders alike.”
Nokia and China Huaxin will now negotiate the final terms of how the new joint venture would be created. A deadlock mechanism exists within the MoU to ensure final agreement is reached between Nokia and China Huaxin regarding the terms of transfer and valuation of all relevant assets. This mechanism would deliver a resolution if definitive agreement has not been reached within nine months after completion of Nokia’s proposed combination with Alcatel-Lucent.
China Huaxin Post & Telecommunication Economy Development Center (“China Huaxin”) is an industrial investment company that seeks long-term commercial growth opportunities in the Information and Communications Technologies (ICT) sector. China Huaxin has extensive global operations and international investment experience.
Nokia China provides telecom infrastructure software, hardware and services to leading mobile operators in China. It has four R&D innovation hubs, two manufacturing facilities and one service delivery center, as well as offices across the country. In 2014, Nokia received the People’s Republic of China Friendship Award and the Marco Polo Award.
Alcatel-Lucent Shanghai Bell (ASB) provides end-to-end telecommunication solutions and high-quality services to customers in China and worldwide. It has a 30-year history in China and represents the first foreign investment joint venture in China’s high-tech sector.