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Fitch may upgrade Nokia debt rating after Microsoft deal

The flagship store of Finnish mobile phone manufacturer Nokia is pictured in Helsinki September 7, 2012. REUTERS/Sari Gustafsson/Lehtikuva
The flagship store of Finnish mobile phone manufacturer Nokia is pictured in Helsinki September 7, 2012. REUTERS/Sari Gustafsson/Lehtikuva

HELSINKI (Reuters) - Credit rating agency Fitch said it may upgrade Nokia's speculative-grade debt rating after the company announced the sale of its handset business to Microsoft.

Fitch Ratings said it placed Nokia's senior unsecured ratings of "BB-" on "Ratings Watch Positive" because of an expected improvement in its finances following the 5.4 billion euro ($7.2 billion) deal announced on Tuesday.

Nokia has been struggling to reverse a decline in its cash position and fall in market share. In August, Fitch reaffirmed its "BB-" rating but said its long-term issuer default rating was negative, citing a lack of visibility in the devices and services (D&S) business.

"The sale of the D&S business brings to a close a period of extreme stress in the credit profile of the handset industry's former leading manufacturer," Fitch said in a statement.

Fitch said Nokia's remaining operations, including Nokia Solutions & Networks, a previous venture with Siemens which it bought out in early July, as well as a patent portfolio and navigation business, would hold strong capital and a significant net cash position.

The agency said a closure of the Microsoft deal would likely lead, at a minimum, to an affirmation of the current ratings at "BB-" with a stable outlook or a potential one-notch upgrade. One notch up from "BB-" would be "BB", still speculative grade.

($1 = 0.7601 euros)

(Reporting by Ritsuko Ando; Editing by Louise Heavens)

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