Ericsson harms Estonia's largest exporter

TALLINN - Ericsson's decision to sell its mobile-phone production operation to U.S. company Flextronics International will probably affect Estonian export as the country's largest exporter, Elcoteq, will stop producing Ericsson mobiles within six months.

Analysts have given a negative assessment of the effect that the decision would have on the Estonian economy, Trigon Markets analyst Toomas Reisenbuk told the Baltic News Service.

"Elcoteq has lately accounted for a very large part of Estonian export growth and played a significant role in economic growth," Reisenbuk said.

Elcoteq Eesti is a branch of Elcoteq Networks Corporation, an electronics manufacturing company operating in 13 countries and providing 11,000 jobs. The company's consolidated net sales last year totaled 2.2 million euro ($2.02 million).

Osmo Kommonen, Elcoteq vice president for communications and investor relations, said that taking into account the announcement made by Ericsson on Jan.26, Elcoteq had revised the company's forecast for 2001.

"Elcoteq's previous contract with Ericsson calling for a significant increase in mobile phone production volumes in our Estonian and Hungarian plants won't materialize," said Kommonen.

Production of Ericsson mobile phones at these plants appears likely to be gradually phased out during the first half of 2001, and the company is preparing to adjust its capacity in Estonia and Hungary to meet lower demand, according to Kammonen.

Ericsson mobile phones have been manufactured in Tallinn since 1997, and in Pecs, Hungary since 2000.

Nevertheless, Elcoteq Eesti plans to open a new factory in Tallinn next April to cope with the anticipated expansion of the Estonian market despite Ericsson's decision to halt production of its phones here. Ilmar Petersen, head of Elcoteq Eesti, said it is too early to predict the effect of Ericsson's decision either on the Estonian economy or Elcoteq's Tallinn facility. According to Petersen, the new facility to start operations in April will mostly deal with telecommunication infrastructure devices.