Flextronics will not buy Elcoteq's Russian plant

On February 25, 2008, Elcoteq signed an agreement with Flextronics International to divest the Elcoteq subsidiary ZAO Elcoteq and its plant in St. Petersburg, Russia. Among the conditions precedent for the closing of this transaction were that the purchaser would obtain the approval of the transaction by the Russian competition authorities. Also, that the purchaser would be able to close the negotiations related to certain specific issues with the Russian customs authorities. As these conditions were not met by the deadline stated in the agreement, Flextronics decided to use its right to terminate the transaction. Flextronics has paid Elcoteq non-refundable compensation of €1 million in accordance with terms in the transaction agreement relating to non-completion. Elcoteq is continuing with its plan to divest the St. Petersburg plant and is discussing this issue with new parties. The demand in the Russian real estate market is currently at a high level and prices are rising. At the same time Elcoteq continues negotiations with the Russian authorities concerning certain customs practices and will re-assess its long-term strategy in Russia based on these discussions. Demand for home communications related electronics manufacturing services in the Russian market is promising provided that the customs practices will change.