Elcoteq Network Corporation, global provider of electronics manufacturing services (EMS) for the communications technology industry, has reached an agreement for its largest outsourcing and acquisition to date with Thomson, a provider of technology, systems and services to integrated media and entertainment companies. The deal includes the acquisition of Thomson’s manufacturing operation in Juarez, Mexico, and manufacturing cooperation in the set-top box business.

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This transaction is scheduled for closing on Dec. 31, 2004. The acquisition includes certain fixed assets and inventories of Thomson’s Juarez manufacturing operation. Thomson’s personnel in Juarez will continue in Elcoteq’s organization. Currently the plant employs about 2000 employees. Elcoteq will lease the required manufacturing space of 17,000 square meters and will take over the Juarez facility on Jan. 1, 2005.

Under the long-term manufacturing agreement, Elcoteq will become a preferred manufacturing partner with Thomson for the manufacture of set-top box products and will produce Thomson’s set-top boxes in Juarez, Mexico. In addition to manufacturing services, Elcoteq will offer other value-added services to Thomson such as component sourcing services.

The acquisition of the Juarez plant will double Elcoteq’s manufacturing capacity in Mexico. The Juarez plant is ideally located in the border region between Mexico and the United States and will provide a needed strategic location to develop business with Elcoteq’s current and prospective U.S. customers.

The cooperation with Thomson--a market leader in satellite and terrestrial set-top box products with over 30 percent global market share–-is a significant step toward executing Elcoteq’s communications technology strategy and accelerates its development of services for the home communications business. The agreement will make Thomson one of Elcoteq’s top ten customers and further diversify its customer and product base inside the communications technology segment.

The addition of manufacturing capacity in Mexico coupled with the earlier announced expansion into Brazil is part of Elcoteq’s strategic objective to balance its global footprint and organization geographically.