Elcoteq SE has signed a Letter of Intent with Chinese industrial investor, Kaifa, on equity investment of 50 MEUR and plans to restructure debt

Elcoteq
SE
Stock Exchange Release
July 22, 2009, at 8.45 am (EET)

Elcoteq has signed a conditional Letter of Intent with Chinese
technology company Shenzhen Kaifa Technology, a separately listed
company of China Electronics Corporation (CEC) Group, concerning an
equity investment of 50 MEUR. CEC has been Elcoteq's successful joint
venture partner in China since 2002. The intended transaction
together with the required debt restructuring would significantly
strengthen Elcoteq's financial situation, increase company's
financial capability to manage existing and new customer projects,
and hence ensure Elcoteq's turnaround back to growth and profits.

Elcoteq and Shenzhen Kaifa Technology Company Limited ("Kaifa") have
signed a Letter of Intent concerning a major equity investment. Kaifa
belongs to the CEC Group of technology companies. The CEC Group
consists of more than 200 different technology companies; from
semiconductor, computer and mechanics companies to software
development.

As an equity investment Kaifa would subscribe new shares to be issued
by Elcoteq with the amount of 50 MEUR. Elcoteq and Kaifa are also
negotiating about further financing, which is subject to certain
financial performance criteria.

Kaifa's investment is depending on Elcoteq's creditors agreeing on
restructuring of current debt, which will include partial
debt-to-equity swap and it needs shareholders' approvals. The actual
number of shares to be issued to Kaifa will be determined after the
negotiations with the creditors have been completed, aiming at Kaifa
becoming the biggest single shareholder of Elcoteq with a minimum
ownership of 30%. The definitive agreement is planned to be signed
during the third quarter of 2009.

Pohjola Corporate Finance has been engaged to advice the company in
these debt negotiations.

"This transaction gives us the strengthened financial basis for
future growth. It also makes perfect business sense by providing us
with a very influential partner in China - Kaifa being part of the
CEC Group. Hence this co-operation creates a very solid platform for
developing our service offering into various new areas", says Mr.
Jouni Hartikainen, President and CEO of Elcoteq. "Elcoteq brings us a
global manufacturing network which helps us to serve our Asian and
other customers wishing to expand their operations worldwide, so it
is a logical step in our strategy", says Mr. Tam Man Chi, Chairman of
the Board and President of Kaifa.

About Kaifa

Kaifa was established in 1985 and is publicly listed in Shenzhen
Stock Exchange (Stock Code 000021SZ). It employs approximately 7,400
persons. The Group's principal activities are developing,
manufacturing and selling computer and electronic communication
products with annual net sales of approximately 1.44 billion euros
(2008). Major products include magnetic head of computer disc
drivers, hard disk plates, computer hardware and software systems and
equipment, communications equipment, electrical apparatus and spare
parts, household computers and video games. Kaifa's products are sold
in the People's Republic of China but majority are exported to other
Asia Pacific countries and America. Kaifa's branches and R&D teams
cover sites in Hong Kong, Singapore and USA. For more information,
please visit www.kaifa.com.cn and www.cec.com.cn.


ELCOTEQ SE

Minna Aila
Director, Investor Relations and Corporate Responsibility

Further information:
Jouni Hartikainen, President and CEO, +358 10 413 11
Mikko Puolakka, CFO, tel. +358 10 413 1287
Minna Aila, Director, Investor Relations and Corporate
Responsibility, tel. +358 10 413 1908

About Elcoteq
Elcoteq SE is a leading electronics manufacturing services (EMS)
company in the communications technology field. Elcoteq's global
service offering covers the entire lifecycle of products, from
product development to after market services. By further combining
mechanics expertise into its service offering, Elcoteq's vision is to
be a leading integrated electronics manufacturing services (IEMS)
company.

Elcoteq provides global end-to-end solutions consisting of product
development services, supply chain management, NPI, manufacturing,
and after market services for the whole lifecycle of its customers'
products. These products include Personal Communications products
such as mobile phones and their parts, Home Communications products
such as set-top boxes and flat panel TVs as well as Communications
Networks products such as base-stations, tower-top amplifiers, and
microwave systems.

Elcoteq's consolidated net sales for 2008 totaled 3.4 billion euros.
Elcoteq SE is listed on the Nasdaq OMX Helsinki Ltd.  For more
information visit the Elcoteq website at www.elcoteq.com.