MICROSOFT will pay Nokia a staggering $1bn (£620m) upfront to develop handsets designed to run its Windows Phone 7 (WP7) operating system, it is understood.
Nokia will reportedly pay Microsoft a royalty fee for each WP7 licence it uses, although the exact figure has not been announced.
Nokia chief executive Stephen Elop, a former Microsoft employee, had previously said Nokia will receive “billions” in benefits from the tie-up, largely expected to be through discounted licences.
The two firms hope the deal will allow them to compete with Google’s fast-growing Android platform and Apple’s iOS.
Nokia was the biggest global handset manufacturer last year and its Symbian operating system was the most commonly used platform. But it saw its market share slip 7.5 per cent and Google’s Android overtook it in the fourth-quarter of last year, with the Scandinavian giant struggling to find a foothold in the increasingly dominant high-end market.
Nokia shares have dropped 26 per cent since the tie-up was announced last month. It is thought Microsoft was desperate to avoid Nokia penning a deal with Google, with whom it was also in talks.
Meanwhile, Nokia said it will start talks with Finnish employees over the company’s new strategy, which unions fear could cost more than 5,000 jobs in the Nordic country.