Huawei opposition to Nokia sale of joint venture threatens Finnish firm’s exit as US-China tensions weigh on deal
- Huawei threatened to stop licensing its technology to TD Tech if Nokia sells its 51 per cent stake to a Shanghai-listed ink maker
- TD Tech, which has previously sold rebranded Huawei phones, is ‘nominally’ a joint venture but actually controlled by the Shenzhen tech giant, analyst says
Shanghai-listed New East New Materials (NENM) said in a stock filing on Sunday that it aims to acquire a 51 per cent stake in wireless technologies firm TD Tech from Nokia Solutions and Networks, a subsidiary of Nokia Group, for 2.1 billion yuan (US$305.2 million). The deal could fall through if Huawei does not agree to it, NENM said on Tuesday.
NENM’s clarification of the deal’s status came after Huawei, which owns 49 per cent of TD Tech, put out a statement on Sunday saying it has “zero intention or possibility of operating TD Tech with NENM”. The joint venture with Nokia was based on both parties’ technology prowess and global sales and service capabilities, Huawei said. Any suitor must have the same strategic capabilities to allow cooperation to continue, it added.
Huawei threatened to use its “right of first refusal”, liquidate its stake in TD Tech or terminate its licensing agreement with the company and its subsidiaries. The right of first refusal allows Huawei to buy Nokia’s shares before a third-party bidder.
Shares of NENM, whose main business is ink production, fell 10 per cent on Tuesday to 36.02 yuan. The cross-industry acquisition also triggered an inquiry from the Shanghai Stock Exchange into the rationale of the deal.
Huawei’s opposition to the deal is likely because maintaining the status quo of the joint venture is its best business option in the face of stringent US sanctions, according to Yang Guang, a senior principal analyst covering the telecoms sector at research firm Omdia.
“Although TD Tech is nominally a joint venture, it’s in fact basically controlled by Huawei,” Yang said. “The management are former Huawei employees, with product solutions based on Huawei products but fine-tuned for the industry market.”
