UPDATE 1-Elcoteq cancels sale of unit to Flextronics

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HELSINKI, June 24 (Reuters) - Finnish electronics manufacturer Elcoteq (ELQAV.HE) said on Tuesday it would not sell a subsidiary to Flextronics (FLEX.O) after the U.S. firm failed to obtain approval from Russian competition authorities.

Elcoteq said in February it had agreed to sell its ailing ZAO Elcoteq subsidiary to Flextronics in an effort to revamp operations and cut costs.

But the U.S. company failed to obtain the necessary approval, especially as related to Russian customs practices, Elcoteq said in a statement. "As these conditions were not met by the deadline stated in the agreement, Flextronics decided to use its right to terminate the transaction," it said.

In May, Russian business paper Vedomosti quoted Russia's Federal Antimonopoly Service (FAS) as saying Flextronics had failed in its application to present data about its beneficiaries.

Shares in Elcoteq were down 2 percent at 4.90 euros by 1430 GMT, while Flextronics shares were trading 1 percent lower.

Elcoteq said it would still seek to divest the St. Peterburg plant and was in talks with other parties.

As laid out in the transaction agreement, Flextronics has paid Elcoteq a non-refundable compensation of 1 million euros ($1.56 million). (Reporting by Agnieszka Flak; Editing by David Cowell)