China Pushes Anti-trust Probe of Nokia-Microsoft Acquisition To II Phase, To Protect Local Brands

While the Microsoft’s acquisition of Nokia has already been given the green light in other countries, including the United States and Europe and the two companies are expected to close it in the first quarter of 2014, the anti-trust probe of this acquisition is taking more than usual time in China i.e. longer than the 30 days. The extra prudence shown by the Chinese authorities stems mainly upon requests from domestic mobile phone-makers, who are worried the completion of the deal could lead to potential licensing fee hike and tighter patent enforcements by Nokia.

Prior to the acquisition, Nokia had adopted a loose system for patent protection in China . Not only Nokia charged a few of the country’s phone-makers, it charged a meager patent fee of about 2% of a device’s selling price. Later, however, as Windows Phone became an exclusive Microsoft platform, it is signaled that the Chinese mobile device market will have to shell out as much as $1.1 billion as patent licensing income for Nokia (now Microsoft). This is because Nokia plans to expand its licensing programs to generate revenues post selling off its handset business to Microsoft and might also use its patent portfolio to boost the revenues from licensing fees in the country. So Chinese authorities are apprehensive and have taken the probe of the Microsoft- acquisition in the second phase.

Windows Phone market has expanded worldwide amidst the highly competitive global smartphone market but didn’t rise in China year-over-year. In China, Android platform still remains dominant and a mighty share of this growth goes to China’s local brands.  Chinese consumers clearly favor a high-spec local brand over a low-spec global equivalent. As such, android-supporting ZTE, Huawei, Xiaomi, Lenovo and Coolpad  are “particularly popular” brands outside of China’s largest cities, citing the value they offer.

Chinese government maintains a strong stance in support of the local mobile brand manufacturers and the consumers. Considering that consumers in China are splurging huge amount of money into buying smartphones and with more demand of it being met by local brands, this high investment remains in the country and consumers also get the best value for their money, it is a good move. The message for global mobile manufactures like Nokia (now owned by Microsoft) is, thus, clear. The brands that will emerge as winners will be those that understand and address the needs of consumers in terms of price and quality.

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