Nokia Corporation (NYSE: NOK) disclosed a possible compliance issues at its Alcatel-Lucent business, which it acquired for €15.6 billion in 2016.
The Finnish network maker said it started an internal investigation and reported the matter to regulators. It also warned that the probe could lead to civil or criminal penalties.
In its annual filing with the U.S. Securities and Exchange Commission (SEC), Nokia wrote, “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.”
“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.”
Following its disclosure, NOK shares declined 6 percent to $5.88 each at the NYSE on Friday.
Kimmo Stenvall, an analyst at OP Markets told CNBC, “The last night comment on possible fines stemming from business transactions of Alcatel-Lucent is hurting the stock. The market is really sensitive about Nokia these days.”
Nokia wants to ensure complete compliance and transparency
In a separate comment on Friday, Nokia clarified the context of its disclosure related to the investigations into the compliance issues at its Alcatel-Lucent business. The company said it is not expecting the probe to have a material impact.
“We have seen no evidence that would suggest that criminal penalties would apply in this case, and we believe it is highly likely that any penalties that might apply would be limited and immaterial,” wrote Nokia.
In addition, the company stressed, “To ensure complete compliance, we are now scrutinizing certain transactions in the former Alcatel-Lucent business. Out of an abundance of caution and in the spirit of transparency, Nokia has contacted the relevant regulatory authorities regarding this review.”
Furthermore, the company said, “We are proud of our reputation as one of the world’s most ethical companies and this level of openness, transparency and cooperation is what you would expect from Nokia.”