Nokia admits there may still be some Alcatel Lucent skeletons in the closet

Finnish kit vendor Nokia has filed its annual report with the SEC and in it flagged up some legacy issues from Alcatel Lucent that may still be a problem.

In the lengthy ‘risk factors’ section, Nokia indicates that, even years after it completed the acquisition of Alcatel Lucent, it’s still digging up stuff that may present some kind of threat to the company. Here’s the relevant passage in full.

“During the course of the ongoing integration process, we have been made aware of certain practices relating to compliance issues at the former Alcatel Lucent business that have raised concerns. We have initiated an internal investigation and voluntarily reported the matter to the relevant regulatory authorities, with whom we are cooperating with a view to resolving the matter. The resolution of this matter could result in potential criminal or civil penalties, including the possibility of monetary fines, which could have a material adverse effect on our business, brand, reputation or financial position.”

Asked for further comment on the matter Nokia just stressed that “although this investigation is in a relatively early stage, out of an abundance of caution and in the spirit of transparency, Nokia has contacted the relevant regulatory authorities regarding this review.” There’s no reason not to take that statement at face value at this stage, but while the extent of the material effect this could have on Nokia remains uncapped it will surely remain a significant concern.

Iran is also addressed in the risks section, with Nokia noting the dilemma that, while Europe is relaxing its sanctions against the country, the US is moving in the other direction and ramping them up. “As a European company it will be quite challenging to reconcile the opposing foreign policy regimes of the US and the EU,” it laments.

Since the US has shown an unlimited capacity for vindictiveness towards companies that do business with Iran Nokia has sensible decided not to do any more business there for the time being. “Although we evaluate our business activities on an ongoing basis, we currently do not intend to accept any new business in Iran in 2019 and intend to only complete existing contractual obligations in Iran in compliance with applicable economic sanctions and other trade-related laws,” said the filing.

Lastly the risks section also mentions HMD Global, which licenses the Nokia brand to put on its smartphones. It doesn’t make reference to any specific case but notes “Nokia has limitations in its ability to influence HMD Global in its business and other operations, exposing us to potential adverse effects from the use of the Nokia brand by HMD Global or other adverse development encountered by HMD Global that become attributable to Nokia through association and HMD Global being a licensee of the Nokia brand.” How timely.