Why Nokia Corporation (ADR) (NYSE:NOK) Has Formed Joint Venture With China Huaxin ?


Nokia Corporation (ADR) (NYSE:NOK) understands how difficult it can be to get merger approvals in China, and the company has acted to eliminate potential hurdles. The company has formed a joint venture with a Chinese firm called China Huaxin before it gets approval for the proposed merger with Alcatel Lucent SA (ADR) (NYSE:ALU) in the country. Nokia will own more than 50% of the stake in the joint venture with Huaxin.

Nokia Corporation (ADR) (NYSE:NOK) appears to understand Chinese politics or business regulations, which, on a bad day can ruin a potentially lucrative deal. As the company seeks the nod of Chinese regulators to merge with Alcatel Lucent, Nokia has moved ahead to team up with a domestic company.

Majority stake in the joint venture

Nokia has formed a joint venture with Huaxin, which is a Chinese investment firm. The memorandum of understanding between the two companies states that Nokia will have a majority stake in the joint venture of 50% plus one share.

Speeding up approval in China

According to Nokia’s CEO, Rajeev Suri, the whole issue of combining with Huaxin is to trigger swift approval of the merger with Alcatel Lucent by Chinese authorities. Additionally, Suri said that the joint venture with Huaxin demonstrates how Nokia is deeply committed to its Chinese operations. As such, Suri believes that the agreement with Huaxin will put Nokia in a much better position to support Chinese government initiatives such as the “Internet Plus” after closing the merger.

Strengthening regional ties

Moreover, the combined entity of Nokia and Alcatel Lucent, coupled with the agreement with Huaxin, is expected to strengthen ties between China and Europe.

Towards the union with Alcatel Lucent, Nokia Corporation (ADR) (NYSE:NOK) has already secured regulatory approval in Europe, the U.S. and other markets. China remains one of the key markets where Nokia has yet to get the regulatory nod for the proposed merger with ALU.

Nokia Corporation (ADR) (NYSE:NOK) has offered to buy Alcatel Lucent for 15.6 billion Euros. The transaction is expected to lead to the creation of the second-largest network equipment company in the world. Ericsson (ADR) (NASDAQ:ERIC) is the largest network equipment vendor and China’s Huawei is another significant player.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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