LUXEMBOURG -- A deal calling for Shenzhen Kaifa Technology Co. Ltd. to invest tens of millions in Elcoteq is off.

The EMS firm had signed a conditional letter of intent with Kaifa on July 22 whereby the China based company would invest $71 million in exchange for an undetermined number of shares in Elcoteq. That deal would have made Kaifa's parent company, China Electronic Corp., Elcoteq's largest shareholder, with a stake of at least 30%.

This week, however, after mutual re-assessment, the parties announced that the sufficient prerequisites for entering into a definitive agreement will not be met and negotiations concerning an equity investment have ended.

Instead, Elcoteq has signed a non-binding letter of intent with another, undisclosed Asian strategic investor. This transaction aims at
strengthening Elcoteq's financial position and it also offers clear business synergies, Elcoteq said.

The company will disclose further details, including the anticipated transaction timetable and the name of the new investor, within one week.

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