Ericsson Buys a Supplier

Ericsson has signed an agreement with Elcoteq for part of its manufacturing operations in Estonia for €30 million

June 17, 2009

1 Min Read

TALLINN, Estonia -- Ericsson (NASDAQ:ERIC) has signed an agreement with Elcoteq, a supplier to Ericsson, for part of its manufacturing operations in Estonia. The purchase price is EUR 30 million, relating to inventory and some minor assets. The agreement also includes transfer of about 1,200 employees. Ericsson does this in order to secure manufacturing capacity in Estonia.

Ericsson's decision is a result of Elcoteq's restructuring plan and consolidation of its manufacturing in Europe. Elcoteq is supplying radio access products to Ericsson's 2G and 3G base-stations together with optical- and transmission equipment.

Ericsson outsourced its volume production more than ten years ago. This strategy remains.

GSM continues to represent a large part of the mobile systems market, with the growth of 3G/WCDMA quickly accelerating. Enhanced use of mobile data and convergence to IP broadband networks are resulting in increased deployments of equipment for broadband access, routing and transmission.

The agreement includes transfer of the lease agreement concerning manufacturing premises.

The transaction is expected to close during 2009 and requires formal approval by relevant anti-trust authorities.

Ericsson AB (Nasdaq: ERIC)

Elcoteq Network Corp.

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