Elcoteq Launches Restructuring Plan to Secure Profitability, Starts Process to Strengthen Balance Sheet and Gives Preliminary Information on Q4/2008 Results

The Board of Directors of Elcoteq SE has decided to launch an intense restructuring plan during the first quarter to prepare the company for the exceptionally uncertain market situation and general economic development in 2009. This plan is the next step in the company’s drive to increase profitability, cost-efficiency and operational excellence. The restructuring plan does not imply changes in the company’s strategy; it merely consists of preparatory measures to adjust to the anticipated changes in the market conditions and to secure profitability in 2009 and beyond.

The plan contains several elements. The first measure is to close the plants in Arad (Romania), Richardson (USA) and St. Petersburg (Russia) as well as to consolidate the plant in Shenzhen (China) to the plant in Beijing (China). Secondly, Elcoteq has started the process of reducing personnel at several plants globally. It is anticipated that these measures together will result in personnel cuts of approximately 5,000. Elcoteq currently employs approximately 21,000 persons worldwide. Thirdly, the plan consists of several other cost-savings measures, including selling machinery and equipment, terminating facility and machinery lease agreements as well as cutting external services. Even with these measures, Elcoteq will maintain its global footprint and continue manufacturing operations for its customers in Mexico, Brazil, Estonia, Hungary, China and India.

The plan targets annual savings in the range of 80 - 100 million euros. The savings will start having a positive effect gradually from the second quarter of 2009 onwards and will significantly improve Elcoteq’s full-year profitability. The total one-time costs related to the restructuring plan are approximately 24 million euros. The company estimates that 15 million euros will be booked in December 2008, and the rest during the first quarter of 2009. The estimated total cash effect is 10 million euros.

“When the market situation is as tight as it is at the moment, many companies start outsourcing more. The hard decisions we are making now will prepare us to be cost-competitive and ready to grasp these new business opportunities,” says Mr. Jouni Hartikainen, President and CEO of Elcoteq.

Strengthening the Balance Sheet

Elcoteq has executed consistent actions to balance its customer portfolio and improve its profitability. This new business set-up gives a good basis for strong growth opportunities in the electronics outsourcing market.

In order to respond to these growth opportunities, Elcoteq has started a process to strengthen its balance sheet. The planned capital raise is expected to be implemented through a structured equity linked instrument during the first half of 2009. The Board of Directors of Elcoteq SE has mandated Berhan Ltd (Finland), Fredericks Michael & Co. (New York, USA) and Avista Advisory Partners Pte. Ltd. (Singapore) as its exclusive advisors for the process.

Preliminary information on the results of the fourth quarter of 2008

Elcoteq maintains its full-year 2008 guidance published in its January - September Interim Report, excluding the one-time costs described above. According to preliminary information, fourth-quarter net sales are approximately 889 million euros (1,062.4 in the fourth quarter of 2007) and operating income excluding the above mentioned one-time restructuring costs is approximately 1 million euros positive (-24.9 in the fourth quarter of 2007 and excluding restructuring costs -9,6 million euros).

The company has been able to create significant positive cash flow in the fourth quarter and clearly reduce its inventory levels.

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 electronics for flat panel TVs as well as Communications Networks products such as base-stations, tower-top amplifiers, and microwave systems.

Elcoteq operates in 15 countries on four continents and employs some 21,000 people. The Group’s consolidated net sales for 2007 totaled 4.0 billion euros. Elcoteq SE is listed on the Nasdaq OMX Helsinki Ltd. For more information visit the Elcoteq website at www.elcoteq.com.