10-Q

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TABLE OF CONTENTS

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001.

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to               .

COMMISSION FILE NUMBER 000-29661

UTSTARCOM, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE (State of Incorporation)	52-1782500 (I.R.S. Employer Identification No.)
1275 HARBOR BAY PARKWAY, ALAMEDA, CALIFORNIA (Address of principal executive offices)	94502 (zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 864-8800

    Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /x/  No / /

    As of April 27, 2001, there were 96,578,995 shares of the Registrant's Common Stock outstanding, par value $0.00125.

TABLE OF CONTENTS

		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheet as of March 31, 2001 and December 31, 2000 (unaudited)	3
	Condensed Consolidated Statement of Operations for the three month periods ended March 31, 2001 and March 31, 2000 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2001 and March 31, 2000 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	36
PART II.	OTHER INFORMATION
Item 2.	Changes in Securities and Use of Proceeds	38
Item 4.	Submission of Matters to a Vote of Security Holders	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
	SIGNATURES	40

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PART I—FINANCIAL INFORMATION

ITEM 1—CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UTSTARCOM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share data)

			March 31, 2001			December 31, 2000
ASSETS
Current assets:
	Cash and cash equivalents		$	175,535		$	149,112
	Short-term investments			32,949			83,858
	Accounts receivable, net of allowances for doubtful accounts of $13,629 and $12,835 at March 31, 2001 and December 31, 2000, respectively			169,708			161,330
	Receivable from related parties			857			406
	Inventories			153,142			118,995
	Other current assets			36,399			17,674
Total current assets				568,590			531,375
Property, plant and equipment, net				28,494			21,999
Long-term investments				13,132			12,397
Goodwill and intangible assets, net				27,975			20,238
Other long term assets				3,863			5,828
	Total assets		$	642,054		$	591,837
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	39,937		$	44,564
	Debt			55,427			43,381
	Amounts payable to related parties			1,335			—
	Income taxes payable			5,026			7,170
	Deferred revenue			43,989			31,678
	Other current liabilities			38,984			34,721
Total current liabilities				184,698			161,514
Long-term liabilities				22,748			12,048
Minority interest in consolidated subsidiaries				5,844			5,956
	Total liabilities			213,290			179,518
Stockholders' equity:
Common stock: $.00125 par value; authorized: 250,000,000 shares; issued and outstanding: 95,872,924 at March 31, 2001 and 95,032,657 at December 31, 2000				122			120
Additional paid-in capital				432,207			426,665
Deferred stock compensation				(5,129	)		(6,491	)
Retained earnings (cumulative deficit)				1,554			(7,808	)
Notes receivable from shareholders				(292	)		(314	)
Other comprehensive income				302			147
Total stockholders' equity				428,764			412,319
		Total liabilities and stockholders' equity	$	642,054		$	591,837

See accompanying notes to condensed consolidated financial statements.

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UTSTARCOM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)

		Three months ended March 31,
		2001			2000
Net sales		$	119,181		$	58,587
Cost of sales			77,768			37,974
Gross profit			41,413			20,613
Operating expenses:
	Selling, general and administrative expenses (includes stock compensation expense of $681 and $1,802)		14,131			11,064
	Research and development expenses (includes stock compensation expense of $578 and $4,595)		12,412			10,909
	Amortization of intangible assets		1,471			1,223
Total operating expenses			28,014			23,196
Operating income			13,399			(2,583	)
Interest income			2,350			1,354
Interest expenses			(861	)		(757	)
Other income (expenses)			(1,037	)		175
Equity in net loss of affiliated companies			(244	)		(279	)
Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle			13,607			(2,090	)
Income tax expense			3,652			918
Income (loss) before minority interest			9,955			(3,008	)
Minority interest in earnings of consolidated subsidiary			(593	)		(261	)
Income (loss) before cumulative effect of change in accounting principle			9,362			(3,269	)
Cumulative effect of change in accounting principle			—			(980	)
Net income (loss)		$	9,362		$	(4,249	)
Basic earnings (loss) per share:
Income (loss) before cumulative effect of change in accounting principle			0.10			(0.09	)
Cumulative effect of change in accounting principle			—			(0.03	)
Net income (loss) per share		$	0.10		$	(0.12	)
Diluted earnings (loss) per share:
Income (loss) before cumulative effect of change in accounting principle			0.09			(0.09	)
Cumulative effect of change in accounting principle			—			(0.03	)
Net income (loss) per share		$	0.09		$	(0.12	)
Weighted average shares used in per-share calculation:
	— Basic		95,873			35,867
	— Diluted		104,262			35,867

See accompanying notes to condensed consolidated financial statements.

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UTSTARCOM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

			Three months ended
			March 31, 2001			March 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)			$	9,362		$	(4,249	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
	Cumulative effect of change in accounting principle			—			980
	Depreciation and amortization			3,293			2,040
	Net loss on sale of assets			18			83
	Impairment of long-term investment			1,000			—
	Stock compensation expense			1,272			6,430
	Increase in allowance for doubtful accounts			794			1,819
	Increase in inventory reserve			1,674			800
	Equity in net loss of affiliated companies			244			279
	Minority interest in earnings of consolidated subsidiary			593			261
	Changes in operating assets and liabilities:
		Accounts receivable and receivable from related parties		(9,622	)		(11,089	)
		Inventories		(35,822	)		(23,769	)
		Other current and non-current assets		(18,461	)		(9,975	)
		Accounts payable and payable to related party		(3,291	)		(4,190	)
		Income taxes payable		796			(207	)
		Deferred revenue		12,310			1,237
		Other current liabilities		4,263			3,249
Net cash used in operating activities				(31,577	)		(36,301	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment				(4,549	)		(1,442	)
Investment in affiliates, net of cash acquired				(1,979	)		—
Proceeds from disposal of property				38			90
Sales and (purchases) of short-term investments				51,064			(8,566	)
Net cash provided by (used in) investing activities				44,574			(9,918	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock, net of expenses				2,685			195,448
Proceeds from borrowing, net				10,711			25,059
Proceeds from repayments of shareholder notes				30			11
Net cash provided by financing activities				13,426			220,518
Net increase in cash and cash equivalents				26,423			174,299
Cash and cash equivalents at beginning of period				149,112			87,364
Cash and cash equivalents at end of period			$	175,535		$	261,663

See accompanying notes to condensed consolidated financial statements.

5

UTSTARCOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF PRESENTATION:

    The accompanying unaudited condensed consolidated financial statements include the accounts of UTStarcom, Inc. (the "Company") and its wholly and majority (over 50 percent) owned subsidiaries, except for the Guangdong manufacturing subsidiary ("GUTS") which is accounted for using the equity method as the Company does not have voting control over all significant matters. All significant intercompany accounts and transactions have been eliminated in preparation of the consolidated financial statements. Minority interest in consolidated subsidiaries and equity in affiliated companies are shown separately in the consolidated financial statements. Investments in affiliated companies, of which none represent greater than 10 percent ownership, are accounted for using the cost method.

    The accompanying financial data as of March 31, 2001 and for the three months ended March 31, 2001 and March 31, 2000, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The December 31, 2000 balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. These condensed consolidated financial statements should be read in conjunction with the Company's audited December 31, 2000 financial statements including the notes thereto, and the other information set forth therein included in the Company's Annual Report on Form 10K/A.

    In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation of the Company's financial condition, the results of its operations and its cash flows for the periods indicated. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the operating results for the full year.

2.  REVENUE RECOGNITION

    Revenue from sales of equipment is recognized on delivery when contractual obligations are substantially complete, remaining obligations are inconsequential and perfunctory, and collection of the resulting receivable is reasonably assured. Revenue recognition from equipment sales with installations are recognized on final acceptance when contractual obligations are substantially complete, remaining obligations are inconsequential and perfunctory, and collection of the resulting receivable is reasonably assured. Where multiple elements exist, revenue is allocated to the different elements based upon verifiable objective evidence and recognized on completion of the element.

3.  ACCOUNTING CHANGE (in thousands):

    Effective January 1, 2000, the Company adopted Staff Accounting Bulletin 101 ("SAB 101") issued by the Securities and Exchange Commission in December 1999. As a result of adopting SAB 101, the Company changed the way it recognizes revenue in certain contracts that had previously led to revenue being recognized as contract stages were completed and accepted. The Company changed its method of revenue recognition to the point of contractual final acceptance for these contracts. In addition, certain contracts include service requirements for which revenue was previously recognized, and costs accrued, on contractual acceptance. In consideration of SAB 101, revenues associated with these service requirements are being deferred until the service obligations are completed. The Company recorded a cumulative adjustment of $980 for the effect of the change on prior years in first quarter fiscal 2000.

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No revenue was recognized in the three months ended March 31, 2001 that was included in the cumulative effect of change in accounting principle. The combined impact of the cumulative adjustment and the retroactive adjustment resulted in a reduction in net income of $286 or $0.01 per share for the three months ended March 31, 2000.

4.  EARNINGS (LOSS) PER SHARE (in thousands, except per share data):

    Basic earnings (loss) per share is computed by dividing net income or loss applicable to common stockholders by the weighted average number of shares of the Company's common stock outstanding during the period. Diluted earnings (loss) per share is determined in the same manner as basic earnings (loss) per share except that the numbers of shares is increased by potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of employee stock options, warrants and restricted stock. Dilutive potential shares are not included during periods when the Company experienced a net loss, as the impact would be anti-dilutive.

    The following table presents the calculation of basic and diluted earnings (loss) per share:

	Three Months Ended
	March 31, 2001		March 31, 2000
Numerator:
Income (loss) before cumulative effect of a change in accounting principle	$	9,362	$	(3,269	)
Cumulative effect of a change in accounting principle		—		(980	)
Net income (loss)	$	9,362	$	(4,249	)
Denominator:
Weighted average shares outstanding—basic		95,873		35,867
Weighted average shares outstanding—diluted		104,262		35,867
Basic earnings (loss) per share:
Income (loss) before cumulative effect of a change in accounting principle	$	0.10	$	(0.09	)
Cumulative effect of a change in accounting principle	$	—	$	(0.03	)
Net income (loss) per share	$	0.10	$	(0.12	)
Diluted earnings (loss) per share:
Income (loss) before cumulative effect of a change in accounting principle	$	0.09	$	(0.09	)
Cumulative effect of a change in accounting principle	$	—	$	(0.03	)
Net income (loss) per share	$	0.09	$	(0.12	)

5.  COMPREHENSIVE INCOME/(LOSS) (in thousands):

    Statement of Financial Accounting Standards ("SFAS") No. 130 requires disclosure of total non-stockholder changes in equity, which include unrealized gains and losses on securities classified as available-for-sale under SFAS No. 115, foreign currency translation adjustments accounted for under SFAS No. 52, and minimum pension liability adjustments made pursuant to SFAS No. 87.

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    The reconciliation of net income (loss) to comprehensive income (loss) for the three months ended March 31, 2001 and 2000 is as follows (in thousands):

	Three Months Ended
	March 31, 2001		March 31, 2000
Net income (loss)	$	9,362	$	(4,249	)
Cumulative translation adjustments		—		429
Unrealized gains (losses) on investments		155		—
Total comprehensive income (loss)	$	9,517	$	(3,820	)

6.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (in thousands):

	Three Months Ended
	March 31, 2001		March 31, 2000
Cash paid during the period for:
Interest	$	802	$	725
Income taxes	$	3,141	$	1,240

    Non-cash investing and financing activities were as follows:

	Three Months Ended
	March 31, 2001		March 31, 2000
Unrealized foreign exchange gain	$	—	$	429
Non-qualified stock option exercise tax benefits	$	2,940	$	4,376
Liability to issue common stock in conjunction with an acquisition	$	10,700	$	—
Liability arising in conjunction with an acquisition	$	1,335	$	—

7.  CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (in thousands):

    All of the Company's cash equivalents and short-term investments are classified as available-for-sale. At March 31, 2001, $92,752 of available-for-sale securities was included in cash equivalents and $32,949 of available-for-sale securities was included in short-term investments. These available-for-sale securities consisted of government sponsored entities' notes, commercial paper, floating rate corporate bonds and fixed income corporate bonds.

8.  INVENTORIES (in thousands):

    Inventories as of March 31, 2001 and December 31, 2000 consist of the following:

	March 31, 2001			December 31, 2000
Raw materials	$	51,563		$	41,876
Work-in-process		31,032			23,432
Finished goods		81,423			62,888
	$	164,018		$	128,196
Less allowance for obsolete inventory		(10,876	)		(9,201	)
	$	153,142		$	118,995

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9.  DEBT (in thousands):

    The following represents the outstanding borrowings at March 31, 2001 and December 31, 2000:

Note	Rate	Maturity	March 31, 2001		December 31, 2000
Bank of China (1)	From 5.56% to 5.85%	From 05/01 to 03/02	$	38,554	$	28,917
China Merchants Bank (2)	6.44%	03/02		6,024		3,614
Commercial Bank of Hangzhou (3)	6.21%	06/10		12,048		12,048
Industrial & Commercial Bank of China (4)	5.85%	05/01		6,024		6,024
China Construction Bank (5)	6.44%	06/01		4,819		4,819
Other	Various	Various		6		7
Total debt			$	67,475	$	55,429
Long-term bank borrowings				12,048		12,048
Short-term bank borrowings			$	55,427	$	43,381

(1)

Guaranteed by the Company and the minority shareholder of HUTS. This represents drawings on the Company's line of credit with the bank. This line allows for borrowings of up to $108,433.

(2)

Guaranteed by HUTS. This line allows for borrowings of up to $6,024 and matures in March 2002.

(3)

Guaranteed by UTStarcom-China. This line allows for borrowings of up to $24,096 and matures in June 2010.

(4)

Guaranteed by HUTS. This line allows for borrowings of up to $6,024 and matures in May 2001.

(5)

Guaranteed by HUTS. This line allows for borrowings of up to $4,819 and matures in June 2001.

10. ACQUISITIONS (in thousands):

    On July 24, 2000, the Company entered into an agreement with Stable Gain International Ltd. ("Stable Gain") to purchase intellectual property and certain related fixed assets, and to transfer development employees to the Company for $10,700. The terms of the purchase agreement provide that the Company will pay Stable Gain consideration of $10,700 in the form of common stock of the Company, provided certain government approvals and other deliverables, as defined in the agreement, are obtained within twelve months. The final approvals were obtained in March 2001, and the transfer of the common stock is expected to be completed in the second quarter of fiscal 2001. At March 31, 2001, $10,700 in respect of the purchase consideration is included in long-term liabilities. On August 18, 2000, the Company entered into a separate agreement to purchase certain related fixed assets for a total consideration of $319. The total purchase consideration of $11,019 was allocated to property and equipment, intangible assets and goodwill under the purchase method of accounting. Goodwill totaling $7,449 was recorded on acquisition.

    The following represents the allocation of the purchase price for Stable Gain:

Fair value of net assets acquired	$	2,430
Fair value of identified intangible assets		1,140
Excess of costs of acquiring Stable Gain over fair value of net assets acquired		7,449
	$	11,019

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    The Company, as part of its business operations in China, formed NST, a joint venture company with Zhejiang Nan Tian, and acquired a 65% holding. On February 5, 2001, the Company entered into an agreement to acquire the remaining 35% ownership in the joint venture company for a total consideration of $1,335 payable in cash. The purchase price was allocated to property and equipment and goodwill under the purchase method of accounting. Goodwill totaling $619 was recorded on acquisition. At March 31, 2001, the obligation in respect of the purchase consideration of $1,335 is included in related party payables.

    The following represents the allocation of the purchase price for NST:

Fair value of net assets acquired	$	716
Excess of costs of acquiring NST over fair value of net assets acquired		619
	$	1,335

    Had the acquisitions of Stable Gain and NST occurred on January 1, 2001, proforma net income for the three months ended March 31, 2001 would have been $8,805 or $0.09 per share basic, $0.08 per share fully diluted. There was no impact on proforma revenues for the three months ended March 31, 2001. Proforma adjustments have been added to record the amortization of fixed assets, goodwill and other intangible assets as if the transaction occurred on January 1, 2001.

11. LONG TERM INVESTMENTS

    During 2000, the Company formed a joint venture with SOFTBANK Corporation ("SOFTBANK") to invest $100 million in Softbank China Holdings Pte. Ltd. ("Softbank China"), an investment fund. The Company's share in the joint venture was 10%. As of March 31, 2001, the Company had invested $10 million in Softbank China. This fund focuses on investments in Internet companies in China. SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" requires that a decline in value other than a temporary decline, be included in earnings. Based upon a review of the carrying value of the fund investments, the Company and SOFTBANK decided to write down the investment by approximately $11 million of which $1 million has been recognized as an impairment charge by the Company during the three months ended March 31, 2001, representing the Company's share in the joint venture.

12. SEGMENT REPORTING (in thousands):

    The Company provides communications equipment through an integrated suite of network access systems, optical transmission products and subscriber terminal products. The Company primarily operates in two geographic areas, China and Other regions. Substantially all the Company's revenues are attributable from China. The chief operating decision makers evaluate performance, make operating decisions, and allocate resources based on consolidated financial data. Gross profit, operating income, income from operations, and income taxes are not allocated to specific individual departments within the organization. In accordance with SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information", the Company is considered a single reportable segment. We are required to disclose certain information about our product revenues, information about geographic areas, information about our major customers, and information about long-lived assets. Revenues from Shaoxing Telecommunications Bureau accounted for 14.0% of consolidated revenues during the three months ended March 31, 2001. Revenues from Hangzhou Telecommunications Bureau accounted for 39.6% of consolidated revenues during the three months ended March 31, 2000. Corporate assets consist of cash and cash equivalents, short- and long-term investments and deferred tax assets. As of March 31, 2001, $346,197 or approximately 91.5% of non-corporate assets were located in China and $32,106 or 8.5% of non-corporate assets were located in the United States. Corporate assets at March 31, 2001 were $263,691. As of March 31, 2000, $283,909 or approximately 90.4% of

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non-corporate assets were located in China and $29,951 or 9.5% of non-corporate assets were located in the United States. Corporate assets at March 31, 2000 were $277,931.

    Geographical area data and product data are as follows (in thousands):

	Three Months Ended March 31, 2001						Three Months Ended March 31, 2000
	Communications Equipment		Subscriber Handsets		Total		Communications Equipment		Subscriber Handsets		Total
Revenues:
China	$	83,354	$	33,424	$	116,778	$	42,940	$	15,235	$	58,175
Other		2,403		—		2,403		412		—		412
Total revenues	$	85,757	$	33,424	$	119,181	$	43,352	$	15,235	$	58,587

    Revenue attributable to North America was insignificant during the three months ended March 31, 2001 and March 31, 2000.

    Long-lived assets are as follows (in thousands):

	March 31, 2001		December 31, 2000
China	$	32,185	$	17,855
U.S.		24,284		24,382
Total long-lived assets	$	56,469	$	42,237

13. RECENT ACCOUNTING PRONOUNCEMENTS:

    In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivatives and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. In July 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 deferred the effective date of SFAS No. 133 until fiscal years beginning after June 15, 2000. The Company adopted SFAS No. 133 on January 1, 2001, and the adoption had no impact on the financial statements.

    In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires entities that have securitized financial assets to provide specific disclosures. SFAS 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Company adopted SFAS No. 140 on January 1, 2001, and the adoption had no impact on the financial statements.

14. COUNTRY RISKS:

    Almost 98% of the Company's sales for the three months ended March 31, 2001 were made in China. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in China, and by the general state of China's economy. The Company's operations in China are subject to special considerations and significant risks not typically associated with companies in the United States. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company's results may be adversely affected by, among other things, changes in the political, economic and social conditions in China, and by changes in governmental policies with respect

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to laws and regulations, changes in China's telecommunications industry and regulatory rules and policies, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation.

    Beginning in January 1, 1999, China's government required that all manufacturers of telecommunications equipment connected to public or private telecommunications networks within China obtain a network access license for each of its products. Sellers are prohibited from selling or advertising for sale equipment for which its manufacturer has not obtained a network access license and may be liable for penalties in an amount up to three times earnings from the sale of any equipment sold beginning January 1, 1999 without a license. Failure to obtain the required licenses could permit the authorities to force the Company to remove previously installed equipment and could preclude the Company from making further sales of the unlicensed products in China, which would substantially harm the Company's business.

    In June 2000, the Ministry of Information Industry issued an internal notice concluding its review of PHS-based equipment. The Company's PAS system will continue to be allowed in China's county-level cities and counties, which are the Company's primary markets for the Company's PAS system. In large and medium-sized cities, the Company's PAS system may be used on a limited basis where there is a high concentration of population, such as campuses, commercial buildings and special development zones. New citywide PAS system deployments will not be allowed in large and medium-size cities. The evaluation group for access networks under the Ministry of Information Industry has recommended that the Ministry of Information Industry issue a license for the Company's PAS system. However, the Company does not yet have this network access license and the Company cannot provide any assurance that such a license will be issued for the Company's PAS system. In addition, there is no assurance that the Ministry of Information Industry will not conduct any further review/evaluation of PHS-based equipment or change its order regarding PHS-based system in the future. Management has also applied for network access licenses for other products, which the Company is no longer manufacturing but had previously sold. However, the Company has not yet received these access licenses and has no any assurance that a license will be issued. Management believes that no penalties or fines will be payable for non-compliance with the licensing requirements for both the PAS system and other products and that there will be no adverse effect on the Company's business or financial condition.

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ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

    This Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These statements include those concerning the following: our expectation regarding continued growth in our business and operations; our expectation that our PAS network access system will continue to be allowed in China's county-level cities and counties; our expectation that there will be fluctuations in our overall gross profit, gross margin, product mix and selling prices; our plans for expanding the direct sales organization and our selling and marketing campaigns and activities; our expectation that we will build additional manufacturing facilities, most likely in China; our expectation that there will be increases in selling, marketing, research and development, general and administrative expenses; our expectation that we will continue to invest significantly in research and development; our expectation that we will fill the majority of its current backlog orders; our expectation regarding our future investments; our expectation that we will develop the capacity to manufacture our own handsets; and our expectation that existing cash and cash equivalents will be sufficient to finance the Company's operations for at least the next 12 months. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially. For a detailed discussion of these risks and uncertainties, see the "Factors Affecting Future Operating Results" section of this Form 10-Q. UTStarcom undertakes no obligation to update the forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q.

OVERVIEW

    We provide communications equipment including network access systems, optical transmission products and subscriber terminal products for service providers that operate wireless and wireline networks. Our operations are conducted primarily by our foreign subsidiaries that manufacture, distribute, and support our products in international markets, principally the People's Republic of China ("China").

    We provide communications equipment for service providers that operate wireless and wireline networks in rapidly growing communications markets. To date, substantially all of our sales have been to service providers in Mainland China. Our integrated suite of network access systems, optical transmission products and subscriber terminal products allows service providers to offer efficient and expandable voice, data and Internet access services. Because our systems are based on key international communications standards, service providers can easily integrate our systems into their existing networks and deploy our systems in new broadband, Internet Protocol ("IP"), and wireless network rollouts.

    On March 3, 2000, we sold 11,500,000 shares of common stock, which included the underwriters' over-allotment option, at $18.00 per share. The sale of the shares of common stock generated aggregate gross proceeds of approximately $207.0 million. The aggregate net proceeds were approximately $189.4 million, after deducting underwriting discounts and commissions and related expenses. The net proceeds may be used for general corporate purposes, including working capital and capital expenditures. A portion of the net proceeds may also be used to acquire or invest in complementary businesses, technologies or product offerings; however, there are no current material agreements or commitments with respect to any such activities. As of March 31, 2001 the Company has not used any of the net proceeds and the entire amount of net proceeds remains in our cash and cash equivalents and short-term investments accounts.

    To date, we have derived substantially all of our revenues from sales of communications equipment to service providers in China. Each of the Telecommunication Bureaus to whom we sell our equipment in China is part of the China Telecom system and subject to its ultimate control. However, equipment

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purchasing decisions are generally made at the individual Telecommunications Bureau level. Our customers often make a large initial purchase of our equipment followed by supplemental purchases of enhancements and upgrades. As a result, our largest revenue-producing customers typically vary from period-to-period.

    Almost 98% of our sales for the three months ended March 31, 2001 were made in China. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legal environment in China, and by the general state of China's economy. Our operations in China are subject to special considerations and significant risks not typically associated with companies in the United States. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. Our results may be adversely affected by, among other things, changes in the political, economic and social conditions in China, and by changes in governmental policies with respect to laws and regulations, changes in China's telecommunications industry and regulatory rules and policies, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation.

    Specifically, remittances from China, which are of a capital nature, such as the repayment of bank loans denominated in foreign currencies, require approval from appropriate governmental authorities before Renminbi can be used to purchase foreign currency. Although the payment of cash dividends is permitted so long as our subsidiaries have sufficient reserves and adequate amounts of Renminbi to purchase foreign currency, regulations restrict the ability of our subsidiaries to transfer funds to us through intercompany loans and advances.

    We sell our products in China through a direct sales force. The evaluation period for our products may span a year or more. Revenue from sales of equipment is recognized on delivery when contractual obligations are substantially complete, remaining obligations are inconsequential and perfunctory, and collection of the resulting receivable is reasonably assured. Revenue recognition from equipment sales with installations are recognized on final acceptance when contractual obligations are substantially complete, remaining obligations are inconsequential and perfunctory, and collection of the resulting receivable is reasonably assured. Where multiple elements exist, revenue is allocated to the different elements based upon verifiable objective evidence and recognized on completion of the element.

    Cost of sales consists primarily of material costs, third party commissions, costs associated with assembly and testing of products, costs associated with installation and customer training and overhead and warranty costs. Cost of sales also includes import taxes on components.

    Our gross profit has been affected by material costs, product mix, average selling prices, and the type of distribution channel through which we sell our products. Our gross profit, as a percentage of net sales, varies among our product families. The gross profits, as a percentage of net sales, on our mobile phone handsets are very low. We expect that our overall gross profit, as a percentage of net sales, will fluctuate from period to period as a result of shifts in product mix, anticipated decreases in average selling prices and our ability to reduce product costs.

    Selling, general and administrative expenses include compensation and benefits, professional fees, sales commissions, provision for uncollectible accounts receivable and travel and entertainment costs. We intend to pursue aggressive selling and marketing campaigns and to expand our direct sales organization and, as a result, our sales and marketing expenses will increase in future periods. We also expect that in support of our continued growth and our operations as a public company general and administrative expenses will continue to increase for the foreseeable future.

    Research and development expenses consist primarily of salaries and related costs of employees engaged in research, design and development activities, the cost of parts for prototypes, equipment depreciation and third party development expenses. We believe that continued investment in research

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and development is critical to our long-term success. Accordingly, we expect that our research and development expenses will increase in future periods.

    No net deferred compensation expense was recorded during the three months ended March 31, 2001 in connection with the grant of stock options to employees. We recorded net deferred compensation of $3.6 million during the three months ended March 31, 2000, representing the difference between the deemed fair value of common stock for accounting purposes and the option exercise price for these options at the date of grant. Deferred compensation is presented as a reduction of stockholders' equity, with amortization recorded over the vesting period of the option, which is generally four years. We recorded stock compensation expense of approximately $1.3 million during the three months ended March 31, 2001 and $6.4 million during the three months ended March 31, 2000. At March 31, 2001, approximately $5.1 million remained to be amortized.

    Amortization of intangible assets consists primarily of the amortization of intangible assets associated with acquisitions in China, the acquisition of the minority interest in Wacos, Inc. and the acquisition of Stable Gain International Ltd. ("Stable Gain").

    Consolidated equity in net income (loss) of affiliated companies comprises our share of the earnings from our Guangdong manufacturing subsidiary, which is accounted for using the equity method, as we do not have voting control over all significant matter.

    Under current regulations in China, foreign investment enterprises that have been accredited as technologically advanced enterprises are entitled to additional tax incentives. These tax incentives vary in different locales and could include preferential national enterprise income tax treatment at 50% of the usual rates for different periods of time. All of our active subsidiaries in China were accredited as technologically advanced enterprises.

    Minority interest in (earnings) loss of consolidated subsidiaries represents the share of earnings in our Zhejiang manufacturing joint venture that is owned by our subsidiary partner.

RECENT DEVELOPMENTS

    On July 24, 2000, we entered into an agreement with Stable Gain to purchase intellectual property and certain related fixed assets, and to transfer development employees to our company for $10.7 million. The terms of the purchase agreement provide that we will pay Stable Gain consideration of $10.7 million in the form of common stock, provided certain government approvals and other deliverables, as defined in the agreement, are obtained within twelve months. The final approvals were obtained in March 2001, and the transfer of the common stock is expected to be completed in the second quarter of fiscal 2001. At March 31, 2001, the obligation in respect of the purchase consideration is included in long-term obligations. On August 18, 2000, we entered into a separate agreement to purchase certain related fixed assets for a total consideration of $0.3 million. The total purchase consideration of $11.0 million was allocated to property and equipment, intangible assets and goodwill under the purchase method of accounting. Goodwill totaling $7.4 million was recorded on acquisition.

    As part of our business operations in China, we formed a joint venture company named Hangzhou Nantian Starcom Telecommunication Equipment Ltd. ("NST") with Zhejiang Nan Tian and we acquired a 65% holding in February 1996. On February 5, 2001, we entered into an agreement to acquire the remaining 35% ownership in the joint venture company for a total consideration of $1.3 million payable in cash. The purchase price was allocated to property and equipment and goodwill under the purchase method of accounting. Goodwill totaling $0.6 million was recorded on acquisition. At March 31, 2001 the obligation in respect of the purchase consideration of $1.3 million is included in related party payables.

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RESULTS OF OPERATIONS

QUARTERS ENDED MARCH 31, 2001 AND 2000

NET INCOME (LOSS)

    For the three months ended March 31, 2001 we reported net income of $9.4 million as compared to a net loss of $4.2 million for the three months ended March 31, 2000.

NET SALES

    Our net sales increased 103% to $119.2 million for the three months ended March 31, 2001 from $58.6 million for the corresponding period in 2000. Sales of communications equipment for the three months ended March 31, 2001 were $85.8 million, an increase of $42.4 million or 98%, as compared to the three months ended March 31, 2000. Sales of subscriber handsets for the three months ended were $33.4 million, an increase of $18.2 million or 120%, as compared to the three months ended March 31, 2000. Sales of communications equipment and sales of subscriber handsets increased due to the continued growth in spending on telecommunications infrastructure in China, as China continues to modernize its telecommunications infrastructure. For the three months ended March 31, 2001, sales to Shaoxing Telecommunications Bureau accounted for 14.0% of our net sales. For the three months ended March 31, 2000, sales to Hangzhou Telecommunications Bureau accounted for 39.6% of our net sales.

    Effective January 1, 2000, we adopted Staff Accounting Bulletin 101 ("SAB 101") issued by the Securities and Exchange Commission in December 1999. As a result of adopting SAB 101, we changed the way we recognize revenue in certain contracts that had previously led to revenue being recognized as contract stages were completed and accepted. We changed our method of revenue recognition to the point of contractual final acceptance for these contracts. In addition, certain contracts include a service requirement for which revenue was previously recognized, and costs accrued, on contractual acceptance. In consideration of SAB 101, revenues associated with these service requirements are being deferred until the service obligations are completed. The Company recorded a cumulative adjustment of $1.0 million for the effect of the change on prior years in first quarter fiscal 2000. No revenue was recognized in the three months ended March 31, 2001 that was included in the cumulative effect of change in accounting principle. The combined impact of the cumulative adjustment and the retroactive adjustment resulted in a reduction in net income of $0.3 million or $0.01 per share for the three months ended March 31, 2000.

GROSS PROFIT

    Gross profit increased 101% to $41.4 million for the three months ended March 31, 2001 from $20.6 million for the corresponding period in 2000. Gross profit, as a percentage of net sales, decreased to 34.7% for the three months ended March 31, 2001 from 35.2% for the three months ended March 31, 2000. The decrease in gross profit, as a percentage of net sales, was primarily due to increases in sales of lower margin handsets, which comprised 28.0% of sales for the three months in 2001 compared to 26.0% in 2000.

SELLING, GENERAL AND ADMINISTRATIVE

    Selling, general and administrative expenses increased 27.7% to $14.1 million for the three months ended March 31, 2001 from $11.1 million for the corresponding period in 2000. The increase in selling, general and administrative expenses was primarily due to increased sales and administrative personnel and related expenses, including sales commissions, associated with the growth in net sales and the expansion of our overall level of business activities. Selling, general and administrative expenses as a

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percentage of net sales decreased to 11.9% for the three months ended March 31, 2001 from 18.9% for the corresponding period in 2000. The decrease in selling, general and administrative expenses as a percentage of net sales were primarily due to economies of scale associated with the significant increases in net sales. We expect our selling, general and administrative expenses to increase in absolute dollar amounts in future periods as sales and marketing activities increase and we further invest in infrastructure and incur additional expenses related to anticipated growth of our business and operation as a publicly held company.

RESEARCH AND DEVELOPMENT

    Research and development expenses increased 13.8% to $12.4 million for the three months ended March 31, 2001 from $10.9 million for the corresponding period in 2000. The increase in research and development expenses was primarily due to the hiring of additional technical personnel, increased prototype expenses and licensing fees to support our research and development efforts. As a percentage of net sales, research and development expenses decreased to 10.4% for the three months ended March 31, 2001 from 18.6% for the corresponding period in 2000, primarily due to the significant increases in net sales. We expect our research and development expenses to increase in absolute dollar amounts in future periods as we expand our research and development organization to support new product development.

AMORTIZATION OF INTANGIBLE ASSETS

    Amortization of intangible assets was $1.5 million for the three months ended March 31, 2001 and $1.2 million for the three months ended March 31, 2000. The increase in amortization of intangible assets was due to amortization of additional goodwill that was recognized upon the acquisition of Stable Gain.

INTEREST INCOME (EXPENSES), NET

    Net interest income was $1.4 million for the three months ended March 31, 2001 and $0.6 million for the corresponding period in 2000. The increase was primarily due to increased interest income from higher average cash balances as a result of the completion of our initial public offering in March 2000.

OTHER INCOME (EXPENSES), NET

    Other income (expense) was $(1.0) million for the three months ended March 31, 2001 and $0.2 million for the corresponding period in 2000. The decrease was primarily due to an impairment charge of $1.0 million relating to our investment in the Softbank China fund, based upon a review of the carrying value of this long-term investment.

EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANIES

    Consolidated equity in the net loss of affiliated companies was $0.2 million for the three months ended March 31, 2001 and consolidated equity in the net loss of affiliated companies was $0.3 million for the corresponding period in 2000. The net loss at our Guangdong manufacturing subsidiary remained constant, as demand for its main product remained constant.

INCOME TAX EXPENSE

    Income tax expense was $3.7 million for the three months ended March 31, 2001 and $0.9 million for the corresponding period in 2000. The increase in the income tax expense was due to our increasing income.

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MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES

    Minority interest in earnings of consolidated subsidiaries was $0.6 million for the three months ended March 31, 2001 and $0.3 million for the corresponding period in 2000. The change between the two periods was primarily due to the increased profitability at our Zhejiang subsidiary.

LIQUIDITY AND CAPITAL RESOURCES

    Prior to our initial public offering we financed our operations through the sales of preferred stock and, to a lesser extent, bank lines of credit. In November and December 1999, we secured private equity financing totaling $55.0 million. In March 2000, we raised $189.4 million in net proceeds from our initial public offering. We have available lines of credit totaling $161.4 million as of March 31, 2001. As of March 31, 2001, total borrowings were $67.5 million under these lines of credit, and of this amount, $12.0 million is included in long-term debt. As of March 31, 2001, we had working capital of $383.9 million, including $175.5 million in cash and cash equivalents, $32.9 million of short-term investments and $55.4 million of Renminbi-denominated bank borrowings.

    As of March 31, 2001, we had invested $10.0 million in an investment fund established by SOFTBANK focused on investments in Internet companies in China. Our investment constitutes 10% of the funding for Softbank China, with SOFTBANK contributing the remaining 90%. We are a passive investor and have no decision-making authority with respect to investments by the fund. The fund has a separate management team, and none of our employees is employed by the fund. One of our directors serves as the Chief Executive Officer of the fund, and our Chief Executive Officer is the chairman of the board of the fund. We are not obligated to pay, nor do we receive, any fees in connection with services provided to the fund. We do not know what material fees will be paid to or by SOFTBANK or any other parties in connection with services provided to the fund. Many of the fund's investments will be in privately held companies, many of which can still be considered in the start-up or development stages. These investments are inherently risky as the market for the technologies or products the companies have under development are typically in these early stages and may never materialize. During the three months ended March 31, 2001, based upon a review of the carrying value of this investment, an impairment charge of $1.0 million was recognized to provide for the decline in the fair value below the carrying value of this investment. Due to the risky nature of these investments, we may experience further losses in connection with this investment in Softbank China.

    Net cash used in operations for the three months ended March 31, 2001 was $31.6 million, which was primarily due to an increase in inventories, accounts receivable and other current and non-current assets of $34.1 million, $8.8 million and $18.5 million respectively, and a decrease in accounts payable of $3.3 million. The uses of cash were partially offset by depreciation and amortization expense of $3.3 million, amortization of deferred stock compensation expense of $1.3 million, a long-term investment impairment charge of $1.0 million, an increase in income taxes payable and other current liabilities of $5.1 million and an increase in deferred revenue of $12.3 million.

    Net cash provided by investing activities for the three months ended March 31, 2001 of $44.6 million was primarily due to sales and maturities of short-term investments of $51.1 million, offset by the acquisition of property, plant and equipment of $4.5 million, and investment in affiliates of $2.0 million. Proceeds from sales and maturities of short-term investments were used to finance working capital requirements.

    Net cash provided by financing activities for the three months ended March 31, 2001 of $13.4 million was primarily due to net proceeds of $10.7 million from borrowing under our lines of credit and $2.7 million from the issuance of common stock through the exercise of stock options.

    Our international sales are generally denominated in local currencies. Due to the limitations on converting Renminbi, we are limited in our ability to engage in currency hedging activities in China.

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Although the impact of currency fluctuations to date has been insignificant, we cannot guarantee that fluctuations in currency exchange rates in the future will not have a material adverse effect on revenues from international sales and, correspondingly, on our business, financial condition and results of operations. We also have contracts negotiated in Japanese Yen for purchasing portions of our inventories and supplies. We have a multi-currency bank account in Japanese Yen for purchasing portions of our inventories and supplies. The balance of this Japanese Yen account as of March 31, 2001 is approximately $7.0 million.

    We believe that our existing cash and cash equivalents, short-term investments and cash from operations will be sufficient to finance our operations through at least the next 12 months. If additional financing is needed, there can be no assurance that such financing will be available to us on commercially reasonable terms, or at all.

FACTORS AFFECTING FUTURE OPERATING RESULTS:

OUR FUTURE SALES ARE UNPREDICTABLE, OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE FROM QUARTER TO QUARTER, AND IF WE FAIL TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS OR INVESTORS, OUR STOCK PRICE COULD DECLINE SIGNIFICANTLY

    Our quarterly and annual operating results have fluctuated in the past and are likely to fluctuate in the future due to a variety of factors, some of which are outside of our control. As a result, period to period comparisons of our operating results are not necessarily meaningful or indicative of future performance. Furthermore, it is likely that in some future quarters our operating results will fall below the expectations of securities analysts or investors. If this occurs, the trading price of our common stock could decline.

    Factors that may affect our future operating results include:

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the timing, number and size of orders for our products, as well as the relative mix of orders for each of our products, particularly the volume of lower margin telephone handsets;



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the evolving and unpredictable nature of the economic, regulatory and political environments in China and other countries in which we market or plan to market our products;



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aggressive price reductions by our competitors;



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currency fluctuations;



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market acceptance of our products and product enhancements;



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the lengthy and unpredictable sales cycles associated with sales of our products combined with the impact of this variability on our suppliers' ability to provide us with components on a timely basis; and



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longer collection periods of accounts receivable in China and other countries.

    The limited performance history of some of our products, our limited forecasting experience and processes and the emerging nature of our target markets make forecasting our future sales and operating results difficult. Our expense levels are based, in part, on our expectations regarding future sales, and these expenses are largely fixed, particularly in the short term. In addition, to enable us to promptly fill orders, we maintain inventories of finished goods, components and raw materials. As a result, we commit to considerable costs in advance of anticipated sales. In the past, a substantial portion of our sales in each quarter resulted from orders received and shipped in that quarter, and we have operated with a limited backlog of unfilled orders. Accordingly, we may not be able to reduce our costs in a timely manner to compensate for any unexpected shortfall between forecasted and actual

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sales. Any significant shortfall of sales may require us to maintain higher levels of inventories of finished goods, components and raw materials than we require, thereby increasing our risk of inventory obsolescence and corresponding inventory write-downs and write-offs. Although we have reserved against inventory obsolescence, we cannot guarantee that these reserves will be adequate to offset all write-downs or write-offs.

WE HAVE A HISTORY OF LOSSES

    We sustained losses prior to the first quarter of fiscal 2001. At December 31, 2000, we had an accumulated deficit of $7.8 million. As of March 31, 2001, we had retained earnings of approximately $1.6 million. We anticipate continuing to incur significant sales and marketing, research and development and general and administrative expenses and, as a result, we will need to generate higher revenues to remain profitable. Numerous factors could negatively impact our results of operations, including a decrease in sales, price pressures and a fixed cost structure, which could limit our ability to respond to declining revenues. Although our sales have grown in recent quarters, our past results should not be relied on as indications of our future performance. We cannot assure you that we will be able to remain profitable in future periods.

COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED PRICES, REVENUES AND MARKET SHARE

    We face intense competition in our target markets and expect competition to increase. Our principal competitors in our various product lines include:

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PAS: Lucent Technologies, Inc. and Zhongxing Telecommunications Equipment.



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AN-2000: Advanced Fibre Communications, Inc.; Alcatel Alsthom CGE, S.A.; Huawei Technology Co., Ltd.; Lucent; NEC Corporation; and Zhongxing.



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WACOS SYSTEM: Alcatel; Cisco Systems, Inc.; Clarent Corporation; Ericsson LM Telephone Co.; Huawei; Lucent; Motorola, Inc.; Nokia Corporation; Nortel Networks Corporation; Nuera Communications, Inc.; Siemens AG; and Vienna Systems Corp.

    We are increasingly facing competition from domestic companies in China. We believe that our strongest competition in the future may come from these companies, many of which operate under lower cost structures and more favorable governmental policies and have much larger sales forces than we do. Furthermore, other companies not presently offering competing products may also enter our target markets. Many of our competitors have significantly greater financial, technical, product development, sales, marketing and other resources than we do. As a result, our competitors may be able to respond more quickly to new or emerging technologies and changes in service provider requirements. Our competitors may also be able to devote greater resources than we can to the development, promotion and sale of new products. These competitors may also be able to offer significant financing arrangements to service providers, in some cases facilitated by government policies, which is a competitive advantage in selling systems to service providers with limited financial and currency resources. Increased competition is likely to result in price reductions, reduced gross profit as a percentage of net sales and loss of market share, any one of which could materially harm our business, financial condition and results of operations.

    Moreover, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties, including Telecommunications Administrations, Telecommunications Bureaus and other local organizations, to increase the ability of their products to address the needs of prospective customers in our target markets. Accordingly, alliances among competitors or between competitors and third parties may emerge and rapidly acquire significant market share. To remain competitive, we believe that we must continue to partner with

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Telecommunications Administrations and other local organizations, maintain a high level of investment in research and development and in sales and marketing, and manufacture and deliver products to service providers on a timely basis and without significant defects. If we fail to meet any of these objectives, our business, financial condition and results of operations could be harmed.

    The introduction of inexpensive wireless telephone service or other competitive services in China may also have an adverse impact on sales of our PAS system in China. We cannot assure you that we will be able to compete successfully against current or future competitors or that competitive pressures in the future will not materially adversely effect our business, financial condition and results of operations.

    We believe that the principal competitive factors affecting the market for our network access products include:

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total initial cost of solution;



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short delivery and installation intervals;



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design and installation support;



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ease of integration with the backbone network;



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flexibility in supporting multiple interfaces and services;



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life-cycle cost determined by reliability; and



•

manageability of the solution and scalability.

    We believe we have in the past generally competed favorably with offerings of our competitors on the basis of these factors. However, we may not be able to compete effectively against current and future competitors based on these or any other competitive factors in the future, and the failure to do so would have a material adverse effect on our business, financial condition and results of operations.

THE SUCCESS OF OUR BUSINESS DEPENDS ON A RELATIVELY SMALL NUMBER OF LARGE SYSTEM DEPLOYMENTS, AND ANY CANCELLATION, REDUCTION OR DELAY IN THESE DEPLOYMENTS COULD HARM OUR BUSINESS

    Our business is characterized by large system deployments for a relatively small number of service providers. In the three months ended March 31, 2001, one customer, Shaoxing Telecommunications Bureau, accounted for 14.0% of our net sales. Our dependence on large system deployments makes our ability to provide systems in a timely and cost-effective manner critically important to our business. We have in the past experienced delays and encountered other difficulties in the installation and implementation of our systems. Various factors could cause future delays, including technical problems and the shortage of qualified technicians. Any delays or difficulties in deploying our systems, or the cancellation of any orders by service providers, could significantly harm our business.

WE DO NOT HAVE SOME OF THE LICENSES WE ARE REQUIRED TO HAVE TO SELL OUR NETWORK ACCESS PRODUCTS IN CHINA

    Beginning January 1, 1999, China's government required that all telecommunications equipment connected to public or private telecommunications networks within China be approved by the Ministry of Information Industry and the manufacturer of the equipment obtain a network access license for each of its products. Sellers are prohibited from selling or advertising for sale equipment for which its manufacturer has not obtained a network access license and may be liable for penalties in an amount up to three times earnings from the sale of any equipment sold beginning January 1, 1999 without a license. In addition, any unlicensed equipment may be required to be removed from the network. Failure to obtain the required licenses could require us to remove previously installed equipment and

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would prohibit us from making further sales of the unlicensed products in China, which would substantially harm our business.

    The regulations implementing these requirements are not very detailed, have not been applied by a court and may be interpreted and enforced by regulatory authorities in a number of different ways. Accordingly, we have obtained an opinion from our counsel in China as to which licenses we are required to obtain. Based upon this counsel's advice, we believe that we have obtained the required network access licenses for our AN-2000 system, bundled OMUX product and standard OMUX product. We have applied for a network access license for our PAS system. In June 2000, the Ministry of Information Industry issued an internal notice concluding its review of PHS-based equipment. Our PAS system will continue to be allowed in China's county-level cities and counties, which are our primary markets for our PAS system. In large and medium-sized cities, our PAS system may be used on a limited basis where there is a high concentration of population, such as communities, commercial buildings and special development zones. New city-wide PAS system deployments will not be allowed in large and medium-size cities. The evaluation group for access networks under the Ministry of Information Industry has recommended that the Ministry of Information Industry issue a license for our PAS system. However, we do not yet have this network access license and we cannot provide any assurance that such a license will be issued for our PAS system. In addition, there is no assurance that the Ministry of Information Industry will not conduct any further review/evaluation of PHS-based equipment or change its order regarding PHS-based system in the future. We have also applied for network access licenses for other products which we are no longer manufacturing but had previously sold to service providers in China. Network access licenses will be required for any additional products that we may develop for sale in China, including our WACOS system. Based upon verbal inquiries made by our counsel in China to the Ministry of Information Industry, we believe that for products which we sold before January 1, 1999, such as the PAS system, no penalties will be imposed by the Ministry of Information Industry for sales we have made or will make during the period in which an application for a network access license is pending. However, our counsel in China has advised us that China's governmental authorities may interpret or apply the regulations with respect to which licenses are required and the ability to sell a product while an application for a network access license is pending in a manner that is inconsistent with the verbal representation received by our counsel in China, either of which could have a material adverse effect on our business and financial condition.

    The State Council issued the Telecommunications Regulations of the People's Republic of China on September 25, 2000 ("Telecom Regulations"). The Telecom Regulations restate that the government implements license systems for telecommunications terminal equipment, wireless communications equipment and equipment used in network interconnection that is connected to public telecommunications networks.  The above equipment must meet government standards, and a network access license must be obtained. The Telecom Regulations require that telecommunications equipment producers must ensure that the quality of the telecommunications equipment for which they have obtained a network access license is stable and reliable and they may not lower the quality or performance of their products. The State Council's product quality supervision department in concert with the Ministry of Information Industry shall perform spot checks to track and supervise the quality of telecommunications equipment for which a network access license has been obtained and publish the results of such spot checks. Because the Telecom Regulations are new and quite general and have not been further interpreted by the government, we have been unable to ascertain detailed guidance on the license system for telecommunications equipment connected to the network.

OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO COLLECT PAYMENTS FROM OUR CUSTOMERS ON A TIMELY BASIS

    Our customers often must make a significant commitment of capital to purchase our products. As a result, any downturn in a customer's business that affected the customer's ability to pay us could

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harm our financial condition. Moreover, accounts receivable collection cycles historically tend to be much longer in China than in other markets. The failure of any of our customers to make timely payments could require us to write-off accounts receivable or increase our accounts receivable reserves, either of which could adversely affect our financial condition.

A DECLINE IN BUSINESS ACTIVITY DURING CHINA'S LUNAR NEW YEAR MAY RESULT IN DECREASED SALES DURING OUR FIRST QUARTER

    Business activity in China declines considerably during the first quarter of each year in observance of the Lunar New Year. As a result, sales during the first quarter of our fiscal year have in the past typically been lower than sales during the fourth quarter of the preceding year and we expect this trend to continue in the future. We will continue to face this seasonality in the future and do not have the ability to forecast with any degree of certainty the impact of the decreased business activity during the Lunar New Year on our sales and operating results.

OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE, AND TO COMPETE EFFECTIVELY, WE MUST CONTINUALLY INTRODUCE NEW PRODUCTS THAT ACHIEVE MARKET ACCEPTANCE

    The emerging market for communications equipment in developing countries is characterized by rapid technological developments, frequent new product introductions and evolving industry and regulatory standards. Our success will depend in large part on our ability to enhance our network access and switching technologies and develop and introduce new products and product enhancements that anticipate changing service provider requirements and technological developments. We may need to make substantial capital expenditures and incur significant research and development costs to develop and introduce new products and enhancements. If we fail to timely develop and introduce new products or enhancements to existing products that effectively respond to technological change, our business, financial condition and results of operations could be materially adversely affected.

    From time to time, our competitors or we may announce new products or product enhancements, services or technologies that have the potential to replace or shorten the life cycles of our products and that may cause customers to defer purchasing our existing products, resulting in inventory obsolescence. Future technological advances in the communications industry may diminish or inhibit market acceptance of our existing or future products or render our products obsolete.

    Even if we are able to develop and introduce new products, we cannot assure you that they will gain market acceptance. Market acceptance of our products will depend on various factors including:

•

our ability to obtain necessary approvals from regulatory organizations;



•

the perceived advantages of the new products over competing products;



•

our ability to attract customers who have existing relationships with our competitors;



•

product cost relative to performance; and



•

the level of customer service available to support new products.

    Specifically, sales of our AN-2000 system outside of China depend, in part, on the adoption of the V5.2 standard in these markets. Additionally, sales of our Personal Access System, or PAS, the mobile component of our PAS wireless system, will depend in part upon consumer acceptance of the mobility limitations of this service. The introduction of inexpensive wireless telephone service or other competitive services in China may have a material adverse effect on sales of our PAS systems in China. If our existing or new products fail to achieve market acceptance for any reason, our business could be seriously harmed.

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OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO DELIVER QUALITY PRODUCTS ON A TIMELY AND COST EFFECTIVE BASIS

    Our operating results depend on our ability to manufacture products on a timely and cost effective basis. In the past, we have experienced reductions in yields as a result of various factors, including defects in component parts and human error in assembly. If we experience deterioration in manufacturing performance or a delay in production of any of our products, we could experience delays in shipments and cancellations of orders. Moreover, networking products frequently contain undetected software or hardware defects when first introduced or as new versions are released. In addition, our products are often embedded in or deployed in conjunction with service providers' products, which incorporate a variety of components produced by third parties. As a result, when a problem occurs, it may be difficult to identify the source of the problem. These problems may cause us to incur significant warranty and repair costs, divert the attention of our engineering personnel from our product development efforts and cause significant customer relation problems or loss of customers, any one of which could harm our business.

    If future demand for our products requires additional manufacturing capacity, we may invest in and build additional manufacturing facilities, most likely in China. However, we cannot assure you that the new manufacturing facilities will attain the same quality or level of efficiencies as our existing facilities. Alternatively, or in addition, we may contract with third party manufacturing facilities over which we may be unable to exercise the same degree of quality control as we can over our own facilities. We currently have no arrangements with any independent manufacturing facility, and we may not be able to obtain independent manufacturing sources on commercially attractive terms if and when needed.

WE DEPEND ON SOME SOLE SOURCE AND OTHER KEY SUPPLIERS FOR HANDSETS, COMPONENTS AND MATERIALS USED IN OUR PRODUCTS, AND IF THESE SUPPLIERS FAIL TO PROVIDE US WITH ADEQUATE SUPPLIES OF HIGH QUALITY PRODUCTS AT COMPETITIVE PRICES, OUR COMPETITIVE POSITION, REPUTATION AND BUSINESS COULD BE HARMED

    Some components and materials used in our products are purchased from a single supplier or a limited group of suppliers. If any supplier is unwilling or unable to provide us with high quality components and materials in the quantities required and at the costs specified by us, we may not be able to find alternative sources on favorable terms, in a timely manner, or at all. Our inability to obtain or to develop alternative sources if and as required could result in delays or reductions in manufacturing or product shipments. Moreover, these suppliers may delay product shipments or supply us with inferior quality products. If any of these events occur, our competitive position, reputation and business could suffer.

OUR ABILITY TO SOURCE A SUFFICIENT QUANTITY OF HIGH QUALITY HANDSETS AND OTHER COMPONENTS USED IN OUR PRODUCTS MAY BE LIMITED BY CHINA'S IMPORT RESTRICTIONS AND DUTIES AS WELL AS OUR ABILITY TO OBTAIN SUFFICIENT DOMESTIC MANUFACTURING CAPACITY

    We require a significant number of imported components to manufacture our products in China. Imported electronic components and other imported goods used in the operation of our business are subject to a variety of permit requirements, approval procedures and import duties. Failure to obtain necessary permits or approvals, administrative actions by China's government to limit imports of certain components, or non-payment of required import duties could subject us to penalties and fines and could adversely affect our ability to manufacture and sell our products in China. In addition, import duties increase the cost of our products and may make them less competitive.

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    In particular, an integral component of our PAS system is the handset used by subscribers to make and receive mobile telephone calls. Our inability to obtain a sufficient number of high quality handsets could severely harm our business. A worldwide shortage of handsets existed in 2000, and there continues to be a shortage in low-priced handsets, which we have found to be popular with many consumers in China. Although we have contracted with Japanese vendors to manufacture handsets under the UTStarcom label, we cannot assure you that they will be able to supply adequate quantities of handsets. Moreover, we must pay an import duty on each handset that we import into China, which may result in a competitive cost advantage for our competitors who produce handsets in China. As a result, we are evaluating various manufacturing alternatives within China. We are in the early stages of utilizing third parties to manufacture handsets for us in China. However, these manufacturers may be unable to produce adequate quantities of high-quality handsets to meet the demand of our customers. We continue to develop the capacity to manufacture our own handsets. However, we may be unsuccessful in our efforts to do so.

IF WE ARE UNABLE TO EXPAND OUR DIRECT SALES OPERATION IN CHINA AND INDIRECT DISTRIBUTION CHANNELS ELSEWHERE OR SUCCESSFULLY MANAGE OUR EXPANDED SALES ORGANIZATION, OUR OPERATING RESULTS MAY SUFFER

    Our distribution strategy focuses primarily on developing and expanding our direct sales organization in China and our indirect distribution channels outside of China. We may not be able to successfully expand our direct sales organization in China and the cost of any expansion may exceed the revenue generated from these efforts. Even if we are successful in expanding our direct sales organization in China, we may not be able to compete successfully against the significantly larger and better-funded sales and marketing operations of current or potential competitors. In addition, if we fail to develop relationships with significant international resellers or manufacturers' representatives, or if these resellers or representatives are not successful in their sales or marketing efforts, we may be unsuccessful in our expansion efforts outside China.

WE EXPECT AVERAGE SELLING PRICES OF OUR PRODUCTS TO DECREASE WHICH MAY REDUCE OUR REVENUES, AND, AS A RESULT, WE MUST INTRODUCE NEW PRODUCTS AND REDUCE OUR COSTS IN ORDER TO MAINTAIN PROFITABILITY

    The average selling prices for communications access and switching systems and subscriber terminal products, such as handsets, in China have been declining as a result of a number of factors, including:

•

increased competition;



•

aggressive price reductions by competitors;



•

rapid technological change; and



•

price and performance enhancements.

    We have in the past experienced and expect in the future to experience substantial period-to-period fluctuations in operating results due to declining average selling prices. We anticipate that average selling prices of our products will decrease in the future in response to product introductions by us or our competitors or other factors, including price pressures from customers. Therefore, we must continue to develop and introduce new products and enhancements to existing products that incorporate features that can be sold at higher average selling prices. Failure to do so could cause our revenues and gross profit, as a percentage of net sales, to decline.

    Our cost reduction efforts may not allow us to keep pace with competitive pricing pressures or lead to improved gross profit, as a percentage of net sales. In order to be competitive, we must continually reduce the cost of manufacturing our products through design and engineering changes. We

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may not be successful in redesigning our products or delivering our products to market in a timely manner. We cannot assure you that any redesign will result in sufficient cost reductions to allow us to reduce the prices of our products to remain competitive or to improve or maintain our gross profit, as a percentage of net sales.

SHIFTS IN OUR PRODUCT MIX MAY RESULT IN DECLINES IN GROSS MARGIN PERCENTAGE OF NET SALES

    Our gross profit margin percentage of net sales varies among our product groups. Our gross margin percentage of net sales is generally higher on our access network system products and our gross margin percentage of net sales is significantly lower on our handset products. We also anticipate that the gross margin percentage of net sales may be lower for our newly developed products due to start-up costs and may improve as unit volumes increase and efficiency can be realized. Our overall gross margin percentage of net sales has fluctuated from period to period as a result of shifts in product mix, the introduction of new products, decreases in average selling prices for older products and our ability to reduce product costs. As a result of a growth in sales of handset products over the past few quarters, we have experienced a sustained product shift toward a greater percentage of handset products resulting in a decline in overall gross margin percentage of net sales. In addition, we expect to introduce new products in the future periods. As a result of these recent trends, a potential decrease in overall gross margin percentage of net sales may be experienced.

SERVICE PROVIDERS SOMETIMES EVALUATE OUR PRODUCTS FOR LONG AND UNPREDICTABLE PERIODS WHICH CAUSES THE TIMING OF PURCHASES AND OUR RESULTS OF OPERATIONS TO BE UNPREDICTABLE

    The period of time between our initial contact with a service provider and the receipt of an actual purchase order may span a year or more. During this time, service providers may subject our products to an extensive and lengthy evaluation process before making a purchase. The length of these qualification processes may vary substantially by product and service provider, making our results of operations unpredictable. We may incur substantial sales and marketing expenses and expend significant management effort during this process, which ultimately may not result in a sale. These qualification processes often make it difficult to obtain new customers, as service providers are reluctant to expend the resources necessary to qualify a new supplier if they have one or more existing qualified sources.

OUR INABILITY TO EXERCISE COMPLETE CONTROL OVER OUR SUBSIDIARIES MAY BE DETRIMENTAL TO OUR BUSINESS

    A considerable portion of our operations is and will continue to be conducted through direct and indirect subsidiaries. For example, we own an 88% interest in a joint venture which operates the Zhejiang manufacturing facility and a 51% interest in a joint venture which operates the Guangdong manufacturing facility. Even though we may own a majority interest in these joint ventures, we do not have sole power to control all of the policies and decisions of these jointly-owned subsidiaries.

    Under the law of China governing Sino-foreign joint ventures, equity holders exercise rights primarily through the board of directors, which constitutes the highest authority of the joint venture. Although we own a majority of the Guangdong joint venture, we are only entitled to appoint a minority of the directors to the joint venture's board of directors, which prevents us from controlling the actions of the board. Moreover, even though we hold a majority of the board seats in the Zhejiang joint venture, China law requires unanimous approval of the board of directors for some significant corporate actions, including:

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amendment of the Articles of Association of the joint venture;



•

liquidation or dissolution of the joint venture;

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•

any increase, decrease or transfer of equity interests of any party to the joint venture; and



•

a merger of the joint venture with another economic entity.

    Our operating results and cash flow depend on the operating results and cash flow of our subsidiaries and the payment of funds by those subsidiaries to us. These subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay dividends or otherwise provide financial benefits to us. Moreover, with respect to our Guangdong manufacturing joint venture, any payment of dividends to us must be agreed to by our joint venture partner, whose interests in receiving dividend distributions may not coincide with ours. In addition, applicable law in some countries including China limits the ability of a subsidiary to pay dividends for various reasons including the absence of sufficient distributable reserves. In the event of any insolvency, bankruptcy or similar proceedings, creditors of the subsidiaries would generally be entitled to priority over us with respect to assets of the affected subsidiary. In addition, because our joint venture partners in both Zhejiang and Guangdong provinces are affiliated with the provincial Telecommunications Administrations that operate the telecommunication networks in these areas, if we fail to maintain these joint ventures, sales to our customers located in these areas may decrease.

OUR MULTI-NATIONAL OPERATIONS SUBJECT US TO VARIOUS ECONOMIC, POLITICAL, REGULATORY AND LEGAL RISKS

    We market and sell our products in China and other markets. The expansion of our existing multi-national operations and entry into additional international markets will require significant management attention and financial resources. Multi-national operations are subject to inherent risks, including:

•

difficulties in designing products that are compatible with varying international communications standards;



•

longer accounts receivable collection periods and greater difficulty in accounts receivable collection;



•

unexpected changes in regulatory requirements;



•

changes to import and export regulations, including quotas, tariffs and other trade barriers;



•

delays or difficulties in obtaining export and import licenses;



•

potential foreign exchange controls and repatriation controls on foreign earnings;



•

exchange rate fluctuations and currency conversion restrictions;



•

the burdens of complying with a variety of foreign laws and regulations;



•

difficulties and costs of staffing and managing multi-national operations;



•

reduced protection for intellectual property rights in some countries;



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potentially adverse tax consequences; and



•

political and economic instability.

    Multinational companies are required to establish intercompany pricing for transactions between their separate legal entities operating in different taxing jurisdictions. These intercompany transactions are subject to audit by taxing authorities in the jurisdictions in which multinational companies operate. An additional tax liability may be incurred if it is determined that intercompany pricing was not done at arm's length. We believe we have adequately estimated and recorded our liability arising from intercompany pricing, but we cannot assure you that an additional tax liability will not result from audits of our intercompany pricing policies.

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    In markets outside of China, we rely on a number of original equipment manufacturers, or OEMs, and third-party distributors and agents to market and sell our network access products. If these OEMs, distributors or agents fail to provide the support and effort necessary to service developing markets effectively, our ability to maintain or expand our operations outside of China will be negatively impacted. We cannot assure you that we will successfully compete in these markets, that our products will be accepted or that we will successfully overcome the risks associated with international operations.

    Our international sales are generally denominated in local currencies. Due to the limitations on converting Renminbi, we are limited in our ability to engage in currency hedging activities in China. Although the impact of currency fluctuations to date has been insignificant, fluctuations in currency exchange rates in the future may have a material adverse effect on our results of operations. We have a multi-currency bank account in Japanese Yen for purchasing portions of our inventories and supplies. As of March 31, 2001, this Japanese Yen bank account is valued at $7.0 million.

OUR FAILURE TO MEET INTERNATIONAL AND GOVERNMENTAL PRODUCT STANDARDS COULD BE DETRIMENTAL TO OUR BUSINESS

    Many of our products are required to comply with numerous government regulations and standards, which vary by market. As standards for products continue to evolve, we will need to modify our products or develop and support new versions of our products to meet emerging industry standards, comply with government regulations and satisfy the requirements necessary to obtain approvals. Our inability to obtain regulatory approval and meet established standards could delay or prevent our entrance into or force our departure from markets.

OUR RECENT GROWTH HAS STRAINED OUR RESOURCES, AND IF WE ARE UNABLE TO MANAGE AND SUSTAIN OUR GROWTH, OUR OPERATING RESULTS WILL BE NEGATIVELY AFFECTED

    We have recently experienced a period of rapid growth and anticipate that we must continue to expand our operations to address potential market opportunities. If we fail to implement or improve systems or controls or to manage any future growth and expansion effectively, our business could suffer.

    Our expansion has placed and will continue to place a significant strain on our management, operational, financial and other resources. Many of the members of our management team have limited experience in the management of rapidly growing companies. To manage our growth effectively, we will need to take various actions, including:

•

enhancing management information systems and forecasting procedures;



•

further developing our operating, administrative, financial and accounting systems and controls;



•

maintaining close coordination among our engineering, accounting, finance, marketing, sales and operations organizations;



•

expanding, training and managing our employee base; and



•

expanding our finance, administrative and operations staff.

OUR SUCCESS IS DEPENDENT ON CONTINUING TO HIRE AND RETAIN QUALIFIED PERSONNEL, AND IF WE ARE NOT SUCCESSFUL IN ATTRACTING AND RETAINING THESE PERSONNEL, OUR BUSINESS WOULD BE HARMED

    The success of our business depends in significant part upon the continued contributions of key technical and senior management personnel, many of whom would be difficult to replace. In particular, our success depends in large part on the knowledge, expertise and services of Hong Liang Lu, our

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President and Chief Executive Officer, and Ying Wu, our Executive Vice President and Chief Executive Officer of China Operations. The loss of any key employee, the failure of any key employee to perform satisfactorily in his or her current position or our failure to attract and retain other key technical and senior management employees could have a significant negative impact on our operations.

    To effectively manage our recent growth as well as any future growth, we will need to recruit, train, assimilate, motivate and retain qualified employees. Competition for qualified employees is intense, and the process of recruiting personnel with the combination of skills and attributes required to execute our business strategy can be difficult, time-consuming and expensive. We are actively searching for research and development engineers and sales and marketing personnel, who are in short supply. Additionally, we have a need for and have experienced difficulty in finding qualified accounting personnel knowledgeable in U.S. and China accounting standards. If we fail to attract, hire, assimilate or retain qualified personnel, our business would be harmed.

    Competitors and others have in the past and may in the future attempt to recruit our employees. In addition, companies in the communications industry whose employees accept positions with competitors frequently claim that the competitors have engaged in unfair hiring practices. We may be the subject of these types of claims in the future as we seek to hire qualified personnel. Some of these claims may result in material litigation and disruption to our operations. We could incur substantial costs in defending ourselves against these claims, regardless of their merits.

ANY ACQUISITIONS THAT WE UNDERTAKE COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE OUR STOCKHOLDERS AND HARM OUR OPERATING RESULTS

    We have acquired and may continue to acquire complimentary businesses, products and technology. There can be no assurance that any anticipated benefits of an acquisition may be realized. We will continue to evaluate acquisition prospects that would complement our existing product offerings, augment our market coverage, enhance our technological capabilities, or that may otherwise offer growth opportunities. Acquisitions of other companies may result in dilutive issuances of equity securities, the incurrence of debt and the amortization of expenses related to goodwill and other intangible assets. In addition, acquisitions involve numerous risks, including difficulties in the assimilation of operations, technologies, products and personnel of the acquired company, diversion of management's attention from other business concerns, risks of entering markets in which we have no direct or limited prior experience, and the potential loss of key employees of ours and the acquired company.

WE MAY EXPERIENCE DIFFICULTY IN IDENTIFYING, FORMING AND MAINTAINING NEW BUSINESS VENTURES THAT ARE IMPORTANT TO THE DEVELOPMENT OF OUR BUSINESS, AND INVESTMENTS IN THESE VENTURES MAY NOT GENERATE RETURNS

    We have invested, and expect to continue to invest, significant capital in new business ventures that are important to the development of our business. We cannot assure you that we will be able to continue to identify suitable parties for new ventures and investments in the future. The failure to form or maintain new ventures, or to identify suitable investment opportunities, could significantly limit our ability to expand our operations. Many of our investments have been in privately held companies, many of which can still be considered in the start-up or development stages. These investments are inherently risky as the market for the technologies or products they have under development are typically in the early stages and may never materialize. We have recognized an impairment charge in respect of our long-term investments; there can be no assurance that we will not incur future investment losses. Moreover, these new ventures or investments require significant management time and will present significant challenges. We cannot assure you that these activities will be successful or that we will realize returns on these activities. Additionally, if any venture or investment fails, our business could be negatively impacted.

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WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY AND MAY BE SUBJECT TO CLAIMS THAT WE INFRINGE THE INTELLECTUAL PROPERTY OF OTHERS, EITHER OF WHICH COULD SUBSTANTIALLY HARM OUR BUSINESS

    We rely on a combination of patents, copyrights, trade secret laws and contractual obligations to protect our technology. Although we have applied for several patents in the United States, one of which has been issued, as well as in other countries, we cannot assure you that any additional patents will be issued as a result of pending patent applications or that our issued patents will be upheld. Moreover, we have not yet obtained patents in China. We can give no assurance that we will be able to obtain patents in China on our products or the technology that we use to manufacture our products. Our subsidiaries and joint ventures in China rely upon our trademarks, technology and know-how to manufacture and sell our products. We cannot guarantee that these and other intellectual property protection measures will be sufficient to prevent misappropriation of our technology or that our competitors will not independently develop technologies that are substantially equivalent or superior to ours. In addition, the legal systems of many foreign countries, including China, do not protect intellectual property rights to the same extent as the legal system of the United States. If we are unable to adequately protect our proprietary information, our business, financial condition and results of operations could be materially adversely affected.

    The increasing dependence of the communications industry on proprietary technology has resulted in frequent litigation based on allegations of the infringement of patents and other intellectual property. In the future we may be subject to litigation to defend against claimed infringements of the rights of others or to determine the scope and validity of the proprietary rights of others. Future litigation also may be necessary to enforce and protect our trade secrets and other intellectual property rights. Any intellectual property litigation could be costly and could cause diversion of management's attention from the operation of our business. Adverse determinations in any litigation could result in the loss of our proprietary rights, subject us to significant liabilities or require us to seek licenses from third parties which may not be available on commercially reasonable terms, if at all. We could also be subject to court orders preventing us from manufacturing or selling our products.

BUSINESS INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS

    Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure and other events beyond our control. We do not have a detailed disaster recovery plan. Our headquarters facility in the State of California is currently subject to electrical blackouts as a consequence of a shortage of available electrical power. In the event these blackouts continue or increase in severity, they could disrupt the operations at our headquarters. In addition, we do not carry sufficient business interruption insurance to compensate us for losses that may occur and any losses or damages incurred by us could have a material adverse effect on our business.

RISKS RELATING TO CONDUCTING OPERATIONS IN CHINA

    Sales in China account for substantially all of our sales. Approximately $116.8 million, or 98.0%, of our sales for the three months ended March 31, 2001, $364.0 million, or 98.8%, of our sales in fiscal 2000, and $186.1 million, or 99.3%, of our sales in fiscal 1999, occurred in China. Additionally, a substantial portion of our fixed assets are located in China. Of our total fixed assets, approximately 76.8% as of March 31, 2001, 75.0% as of December 31, 2000, and 53.7% as of December 31, 1999 were in China. We expect to make further investments in China in the future. Therefore, our business, financial condition and results of operations are to a significant degree subject to economic, political and social events in China.

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DEVALUATION IN THE VALUE OF THE RENMINBI AND FLUCTUATIONS IN EXCHANGE RATES COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS

    Exchange rate fluctuations could have a substantial negative impact on our financial condition and results of operations. We purchase substantially all of our materials in the United States and Japan and a significant portion of our cost of goods sold is incurred in U.S. dollars and Japanese yen. A significant portion of our operating expenses are incurred in U.S. dollars. At the same time, most of our sales are denominated in Renminbi. The value of the Renminbi is subject to changes in China's governmental policies and to international economic and political developments. Although the official exchange rate for the conversion of Renminbi to U.S. dollars has remained stable, with the Renminbi appreciating slightly against the U.S. dollar since 1994, the exchange rate experienced significant volatility prior to 1994 including periods of sharp devaluation. There can be no assurance that exchange rates will not become volatile or that the Renminbi will not devalue again against the U.S. dollar.

    In the past, financial markets in many Asian countries have experienced severe volatility and, as a result, some Asian currencies have experienced significant devaluation from time to time. The devaluation of some Asian currencies may have the effect of rendering exports from China more expensive and less competitive and therefore place pressure on China's government to devalue the Renminbi. Any devaluation of the Renminbi could result in an increase in volatility of Asian currency and capital markets. Future volatility of Asian financial markets could have an adverse impact on our ability to expand our product sales into Asian markets outside of China. Moreover, due to the limitations on the convertibility of Renminbi, we are limited in our ability to engage in currency hedging activities in China and do not currently engage in currency hedging activities with respect to international sales outside of China.

CURRENCY RESTRICTIONS IN CHINA MAY LIMIT THE ABILITY OF OUR SUBSIDIARIES AND JOINT VENTURES IN CHINA TO OBTAIN AND REMIT FOREIGN CURRENCY NECESSARY FOR THE PURCHASE OF IMPORTED COMPONENTS AND MAY LIMIT OUR ABILITY TO OBTAIN AND REMIT FOREIGN CURRENCY IN EXCHANGE FOR RENMINBI EARNINGS

    China's government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Under the current foreign exchange control system, sufficient foreign currency may not be available to satisfy our currency needs. Shortages in the availability of foreign currency may restrict the ability of our Chinese subsidiaries to obtain and remit sufficient foreign currency to pay dividends to us, or otherwise satisfy their foreign currency denominated obligations such as payments to us for components which we export to them and for technology licensing fees. We may also experience difficulties in completing the administrative procedures necessary to obtain and remit needed foreign currency. Moreover, we cannot assure you that China's government will continue the policy of making the Renminbi convertible under current accounts. Our inability to convert and remit our sales received in Renminbi into U.S. dollars and make necessary remittances could have a material adverse effect on our business, financial condition and results of operations.

    Our business could be substantially harmed if we are unable to convert our sales received in Renminbi into U.S. dollars. Under existing foreign exchange laws, Renminbi held by our China subsidiaries can be converted into foreign currencies and remitted out of China to pay current account items such as payments to suppliers for imports, labor services, payment of interest on foreign exchange loans and distributions of dividends so long as the subsidiaries have adequate amounts of Renminbi to purchase the foreign currency. Expenses of a capital nature such as the repayment of bank loans denominated in foreign currencies, however, require approval from appropriate governmental authorities before Renminbi can be used to purchase foreign currency and then remitted out of China. This system could be changed at any time by executive decision of the State Council to impose limits on current account convertibility of the Renminbi or other similar restrictions. Moreover, even though

31

the Renminbi is intended to be freely convertible under the current account, the State Administration of Foreign Exchange, which is responsible for administering China's foreign currency market, has a significant degree of administrative discretion in implementing the laws. From time to time, the State Administration of Foreign Exchange has used this discretion in ways which effectively limit the convertibility of current account payments and restrict remittances out of China. Furthermore, in many circumstances the State Administration of Foreign Exchange must approve foreign currency conversions and remittances. Under the current foreign exchange control system, sufficient foreign currency may not be available at a given exchange rate to satisfy our currency demands.

CHANGES WITHIN CHINA'S COMMUNICATIONS MARKET COULD HARM OUR BUSINESS

    We derive substantially all of our sales from local telecommunications service providers in China which utilize network access equipment in the continued expansion and upgrading of China's communications infrastructure. The continued development of the communications infrastructure in China correspondingly depends, in part, on the demand for voice and data services in China and China's governmental policy. Although this industry has grown rapidly in the past, we cannot assure you that it will continue to grow in the future.

    Any reduced demand for voice and data services, any other downturn or other adverse changes in the China communications industry or the adoption or enforcement of government policies that limit or prohibit our ability to manufacture, market or sell our products could severely harm our business.

CHINA'S TELECOMMUNICATIONS INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND HAS RECENTLY BEEN RESTRUCTURED, WHICH HAS LED TO UNCERTAINTY

    China's telecommunications industry is heavily regulated by the Ministry of Information Industry. The Ministry of Information Industry controls the 33 provincial Telecommunications Administrations that exercise regulatory responsibility over the telecommunications industries in their respective provinces. The Ministry of Information Industry has broad discretion and authority to regulate all aspects of the telecommunications and information technology industry in China including managing spectrum bandwidths, setting network equipment specifications and standards and drafting laws and regulations related to the electronics and telecommunications industries.

    As part of the Chinese government's industry restructuring initiatives, the regulatory functions of the Ministry of Information Industry and the Telecommunications Administrations were separated from the operational functions of the state-owned companies under their control. Following this separation, the Ministry of Information Industry acts exclusively as the industry regulator and will no longer manage the day-to-day operations of telecommunications service providers in China.

    China does not yet have a national telecommunications law. The Ministry of Information Industry, under the direction of the State Council, is currently preparing a draft of the Telecommunications Law of the People's Republic of China for ultimate submission to the National People's Congress for review and adoption. It is unclear if and when the Telecommunications Law will be adopted. If the Telecommunications Law is adopted, we expect it to become the basic telecommunications statute and the source of telecommunications regulations in China. Although we expect that a Telecommunications Law would have a positive effect on the overall development of the telecommunications industry in China, we do not know the nature and scope of regulation that it would create. Accordingly, we cannot predict whether it will have a positive or negative effect on us or on some or all aspects of our business.

    The Telecom Regulations are deemed as the basic telecommunications regulations covering telecommunications services and market regulations, pricing, interconnection and connection, as well as telecommunications construction and security issues. Although we expect that the Telecom Regulations

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would have a positive effect on the overall development of the telecommunications industry in China, the enforcement and interpretation of these regulations by government authorities may negatively affect our business.

    The Ministry of Information Industry has broad discretion to apply standards in deciding what types of equipment may be connected to the national telecommunications networks, the forms and types of services that may be offered to the public and the content of material available in China over the Internet. If the Ministry of Information Industry sets standards with which we are unable to comply, our ability to sell product in China may be limited, resulting in substantial harm to our operations. For example, at the end of May 2000, we became aware of an internal notice, circulated within the Ministry of Information Industry, announcing a review of PHS-based telecommunications equipment for future installation into China's telecommunications infrastructure in which the Ministry of Information Industry requested service providers to temporarily halt new deployments of PHS-based telecommunications equipment, including our PAS system, pending conclusion of the Ministry of Information Industry review. Subsequently, at the end of June 2000, we learned that the Ministry of Information Industry had issued an internal notice concluding its review of PHS-based equipment and allowing the continued deployment of our PAS system in China's county-level cities and counties, the primary markets for our PAS system. In addition, deployments in large and medium-sized cities will be allowed on a limited basis where there is a high concentration of population, such as campuses, commercial buildings and special development zones, however, new city-wide deployments of our PAS system will not be allowed in such large and medium-sized cities. Failure of the Ministry of Information Industry to allow the deployment of our PAS system in the future could have a material adverse effect on our business and financial condition.

CHINA CLOSELY RESTRICTS ACTIVITIES OF FOREIGN INVESTORS IN THE TELECOMMUNICATIONS INDUSTRY

    China's government and its agencies, including the Ministry of Information Industry and the State Council, regulate foreign investment in the telecommunications industry through the promulgation of various laws and regulations and the issuance of various administrative orders and decisions. Foreign investment enterprises, companies and individuals are prohibited from investing and participating in the operation and management of telecommunications networks without special approval by the State Council. We cannot assure you that China will not promulgate new laws or regulations, or issue administrative or judicial decisions or interpretations, which would further restrict or bar foreigners from engaging in telecommunications-related activities. The promulgation of laws or regulations or the issuance of administrative orders or judicial decisions or interpretations restricting or prohibiting telecommunications activities by foreigners could have a substantial impact on our ongoing operations.

MOST OF OUR CUSTOMERS IN CHINA ARE PART OF THE CHINA TELECOM SYSTEM AND ARE SUBJECT TO ITS ULTIMATE CONTROL

    Each of the local Telecommunications Bureaus in China which comprise most of our existing or potential customers is part of the China Telecom system and subject to its ultimate control. Accordingly, China Telecom may issue policy statements or make other decisions which govern the equipment purchasing decisions of most of our customers in China. For example, in late 1999 China Telecom prohibited all Telecommunications Bureaus from purchasing PHS systems, such as our PAS systems, which are classified as low-mobility wireless access systems for implementation in large cities. In June 2000, the Ministry of Information Industry issued an internal notice concluding its review of PHS-based equipment. Our PAS system will continue to be allowed in China's county-level cities and counties, which are our primary markets for our PAS system. In large and medium-sized cities, our PAS system may be used on a limited basis where there is a high concentration of population. New city-wide PAS system deployments will not be allowed in large and medium-size cities. As virtually all of our

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sales are generated from our operations in China, a change of this decision of China Telecom and the Ministry of Information Industry or other decisions by China Telecom and the Ministry of Information Industry could cause substantial harm to our business.

CHANGES IN TELECOMMUNICATIONS TARIFFS MAY RESULT IN DECREASED DEMAND FOR OUR PRODUCTS

    In November 2000, the Ministry of Information Industry announced significant changes in telephone rates in China. While long distance, international, leased line and Internet connection fees were cut by up to 70%, the rates for local telephone services, which include certain types of wireless access services were increased, from approximately $0.01 per minute to approximately $0.02 per minute. The increase in rates may result in a reduced demand for our PAS system and other wireless access products. Additionally, the Ministry of Information Industry may implement future rate changes for wireline or wireless services in China, any of which may lead to reduced demand for our systems and products and result in a material adverse effect on our business or results of operations.

CHINA'S GOVERNMENT POLICIES COULD IMPACT OUR BUSINESS

    Since 1978, China's government has been and is expected to continue reforming its economic and political systems. These reforms have resulted in and are expected to continue to result in significant economic and social development in China. Many of the reforms are unprecedented or experimental and may be subject to change or readjustment due to a number of political, economic and social factors. We believe that the basic principles underlying the political and economic reforms will continue to be implemented and provide the framework for China's political and economic system. New reforms or the readjustment of previously implemented reforms could have a significant negative effect on our operations. Changes in China's political, economic and social conditions and governmental policies which could have a substantial impact on our business include:

•

new laws and regulations or the interpretation of those laws and regulations;



•

the introduction of measures to control inflation or stimulate growth;



•

changes in the rate or method of taxation;



•

the imposition of additional restrictions on currency conversion and remittances abroad; and



•

any actions which limit our ability to develop, manufacture, import or sell our products in China, or to finance and operate our business in China.

CHINA'S ECONOMIC POLICIES COULD IMPACT OUR BUSINESS

    The economy of China differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development in various respects such as structure, government involvement, level of development, growth rate, capital reinvestment, allocation of resources, self-sufficiency, rate of inflation and balance of payments position. In the past, the economy of China has been primarily a planned economy subject to one- and five-year state plans adopted by central government authorities and largely implemented by provincial and local authorities which set production and development targets.

    Since 1978, increasing emphasis had been placed on decentralization and the utilization of market forces in the development of China's economy. Economic reform measures adopted by China's government may be inconsistent or ineffectual, and we may not in all cases be able to capitalize on any reforms. Further, these measures may be adjusted or modified in ways which could result in economic liberalization measures that are inconsistent from time to time or from industry to industry or across different regions of the country. China's economy has experienced significant growth in the past

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decade. This growth, however, has been accompanied by imbalances in China's economy and has resulted in significant fluctuations in general price levels, including periods of inflation. China's government has implemented policies from time to time to increase or restrain the rate of economic growth, control periods of inflation or otherwise regulate economic expansion. While we may be able to benefit from the effects of some of these policies, these policies and other measures taken by China's government to regulate the economy could also have a significant overall impact on economic conditions in China with a resulting negative impact on our business.

CHINA'S EXPECTED ENTRY INTO THE WTO CREATES UNCERTAINTY AS TO THE FUTURE ECONOMIC AND BUSINESS ENVIRONMENTS IN CHINA

    China is expected to enter the World Trade Organization some time in 2001. Although China has been reducing tariff levels over the past several years, entry into the WTO will require China to further reduce tariffs and eliminate other trade restrictions. While China's entry into the WTO and related relaxation of trade restrictions may lead to increased foreign investment, it may also lead to increased competition in China's markets from international companies. Whether or not China is accepted into the WTO, the impact on China's economy and our business is uncertain.

IF TAX BENEFITS AVAILABLE TO OUR SUBSIDIARIES LOCATED IN CHINA ARE REDUCED OR REPEALED, OUR BUSINESS COULD SUFFER

    Our subsidiaries and joint ventures located in China enjoy tax benefits in China which are generally available to foreign investment enterprises, including full exemption from national enterprise income tax for two years starting from the first profit-making year and/or a 50% reduction in national income tax rate for the following three years. In addition, local enterprise income tax is often waived or reduced during this tax holiday/incentive period. Under current regulations in China, foreign investment enterprises that have been accredited as technologically advanced enterprises are entitled to additional tax incentives. These tax incentives vary in different locales and could include preferential national enterprise income tax treatment at 50% of the usual rates for different periods of time. All of our active subsidiaries in China were accredited as technologically advanced enterprises. These tax incentives may be repealed or reduced in the future. If these tax incentives are abolished before our subsidiaries in China can take full advantage of them, the tax liability of these subsidiaries will increase, which will negatively impact our financial condition and results of operations.

CHINA'S LEGAL SYSTEM EMBODIES UNCERTAINTIES THAT COULD NEGATIVELY IMPACT OUR BUSINESS

    China has a civil law legal system. Although often used by judges for guidance, decided court cases do not have binding legal effect on future decisions. Since 1979, many new laws and regulations covering general economic matters have been promulgated in China. Despite this activity to develop the legal system, China's system of laws is not yet complete. Even where adequate law exists in China, enforcement of existing laws or contracts based on existing law may be uncertain and sporadic and it may be difficult to obtain swift and equitable enforcement, or to obtain enforcement of a judgment by a court of another jurisdiction. The relative inexperience of China's judiciary in many cases creates additional uncertainty as to the outcome of any litigation. Further, interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes.

    China has adopted a broad range of related laws, administrative rules and regulations that govern the conduct and operations of foreign investment enterprises and restrict the ability of foreign companies to conduct business in China. These laws, rules and regulations provide some incentives to encourage the flow of investment into China, but also subject foreign companies, and foreign investment enterprises including our subsidiaries in China, to a set of restrictions which may not always apply to domestic companies in China. Although China is increasingly according foreign companies and

35

foreign investment enterprises established in China the same rights and privileges as Chinese domestic companies in anticipation of China's entry into the WTO, these special laws, administrative rules and regulations governing foreign companies and foreign investment enterprises may still place us and our subsidiaries at a disadvantage in relation to Chinese domestic companies and may adversely affect our competitive position. Moreover, as China's legal system develops, the promulgation of new laws, changes to existing laws and the pre-emption of local regulations by national laws may adversely affect foreign investors and companies.

    Many of our activities and products in China are subject to administrative review and approval by various national and local agencies of China's government. Because of the changes occurring in China's legal and regulatory structure, there can be no assurance that we will be able to secure the requisite governmental approval for our activities and products. Failure to obtain the requisite government approval for any of our activities or products could substantially harm our business.

STOCK PERFORMANCE

OUR STOCK PRICE IS HIGHLY VOLATILE

    The trading price of our common stock has fluctuated significantly since our initial public offering in March 2000. Our stock price could be subject to wide fluctuations in the future in response to many events or factors, including those discussed in the preceding risk factors relating to our operations, as well as:

•

actual or anticipated fluctuations in operating results;



•

changes in expectations as to future financial performance or changes in financial estimates or buy/sell recommendations of securities analysts;



•

our, or a competitor's, announcement of new products, services or technological innovations; and



•

the operating and stock price performance of other comparable companies.

    General market conditions and domestic or international macroeconomic factors unrelated to our performance may also affect our stock price. For these reasons, investors should not rely on recent trends to predict future stock prices or financial results. In addition, following periods of volatility in a company's securities, securities class action litigation against a company is sometimes instituted. This type of litigation could result in substantial costs and the diversion of management time and resources.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

    UTStarcom is exposed to the impact of interest rate changes and changes in foreign currency exchange rates.

    Interest Rate Risk.  Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. The fair value of our investment portfolio would not be significantly affected by either a 10% increase or decrease in interest rates due mainly to the short term nature of our investment portfolio. However, our interest income can be sensitive to changes in the general level of U.S. interest rates since the majority of our funds are invested instruments with maturities less than one year. Our policy is to limit the risk of principal loss and ensure the safety of invested funds by limiting market risk. Funds in excess of current operating requirements are invested in government sponsored entities notes, commercial paper, floating rate corporate bonds and fixed income corporate bonds.

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    The table below represents carrying amounts and related weighted-average interest rates of maturity of our investment portfolio at March 31, 2001:

    (In thousands, except interest rates)

Cash and cash equivalents	$	175,535
Average interest rate		2.9	%
Short-term investments		32,949
Average interest rate		5.7	%
Total investment securities		208,485
Average interest rate		3.3	%

    Foreign Exchange Rate Risk.  We are exposed to foreign exchange rate risk because our sales to China are denominated in Renminbi and portions of our accounts payable are denominated in Japanese Yen. Due to the limitations on converting Renminbi, we are limited in our ability to engage in currency hedging activities in China. Although the impact of currency fluctuations of Renminbi to date has been insignificant, fluctuations in currency exchange rates in the future may have a material adverse effect on our results of operations. We have a multi-currency bank account in Japanese Yen for purchasing portions of our inventories and supplies. The balance of this Japanese Yen account as of March 31, 2001 is approximately $7.0 million.

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PART II—OTHER INFORMATION

ITEM 2—CHANGES IN SECURITIES AND USE OF PROCEEDS

    We completed our initial public offering ("IPO") on March 3, 2000 pursuant to a Registration Statement on Form S-1 (File No. 333-93069). In the IPO, we sold an aggregate of 11,500,000 shares of common stock (including an over-allotment option of 1,500,000 shares) at $18.00 per share.

    The managing underwriters of the offering were Merrill Lynch & Co., Banc of America Securities LLC, U.S. Bancorp Piper Jaffray, Merrill Lynch Japan Inc., and E-TRADE Securities Co., Ltd. The sale of the shares of common stock generated aggregate gross proceeds of approximately $207.0 million. The aggregate net proceeds were approximately $189.4 million, after deducting underwriting discounts and commissions of approximately $14.5 million and expenses of the offering of approximately $3.1 million. None of such amounts were direct or indirect payments to our directors or officers or their associates, to persons owning 10 percent or more of any class of our equity securities or to our affiliates.

    The net proceeds are expected to be used for general corporate purposes, including working capital and capital expenditures. The amounts actually expended for such purposes may vary significantly and will depend on a number of factors, including our future revenues and cash generated by operations and the other factors described under "Factors Affecting Future Operating Results". Accordingly, we retain broad discretion in the allocation of the net proceeds of the offering. A portion of the net proceeds may also be used to acquire or invest in complementary businesses, technologies or product offerings. As of March 31, 2001 we have not used any of the net proceeds and the entire amounts of net proceeds remains in our cash and cash equivalents and short-term investments accounts. In addition, at March 31, 2001, there are no material agreements or commitments with respect to any acquisition or investment activities.

ITEM 4—SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.

ITEM 5—OTHER INFORMATION

    From time to time, our directors, officers, or employees may enter into good faith trading plans pursuant to SEC Rule 10b5-1(c) (effective October 23, 2000).

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ITEM 6.—EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits:

NUMBER		EXHIBIT DESCRIPTION
10.56 (1	)	Assignment Agreement between UTStarcom, Inc. and Stable Gain International Limited dated July 24, 2000.
10.57 (1	)	Amendment No.1 to July 24, 2000 Assignment Agreement between UTStarcom, Inc. and Stable Gain International Limited, dated March 2, 2001.
10.58 (1	)	Loan Agreement between China Merchant Bank and UTStarcom (China) Co., Ltd., dated March 14, 2001.
10.59 (1	)	Technical Service Agreement between UTStarcom (China) Co., Ltd. and Hainan Xinhuangpu Investment Co., Ltd., dated August 18, 2000.
10.60 (1	)	Assets Transfer Agreement between Hainan Xinhuangpu Investment Co., Ltd. and UTStarcom (China) Co., Ltd., dated August 18, 2000.
10.61 (1	)	Equity Transferring Agreement between Zhe Jiang Nantian Telecommunication Development Group Share Company and UTStarcom, Inc., dated February 5, 2001.
10.62 (1	)	Sales Contract between Zhejiang Telecom Co. and UTStarcom (China) Co., Ltd., dated March 23, 2001.
10.63 (1	)	Manufacturing License Agreement between Himachal Futuristic Communications Ltd. and UTStarcom, Inc., dated March 6, 2001.

(1)

Certain information in this Exhibit has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

(b)

Reports on Form 8-K:

    No reports on Form 8-K were filed during the quarter.

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UTSTARCOM, INC.

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 11, 2001
	UTSTARCOM, INC. (Registrant)
	BY:
	/s/ Hong Liang Lu Hong Liang Lu President, Chief Executive Officer and Director
	/s/ Michael J. Sophie Michael J. Sophie Chief Financial Officer and Assistant Secretary

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EX-10.56

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[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.56

ASSIGNMENT AGREEMENT

    This Assignment Agreement (the "Agreement") is entered into as of the 24th day of July, 2000 (the "Effective Date") by and among UTStarcom, Inc., a Delaware company, with its principal place of business at 1275 Harbor Bay Parkway, Suite 100, Alameda, California 94502 ("UTStarcom") and Stable Gain International Limited, a British Virgin Islands company, with its principal place of business at 8/F Baskerville House, 22 Ice House St. Central, Hong Kong ("Stable Gain").

RECITALS

    WHEREAS, UTStarcom desires to receive from Stable Gain an assignment of all Intellectual Property Rights (as defined below) of Stable Gain to the Technology (as defined below) and Stable Gain desires to assign to UTStarcom all of its Intellectual Property Rights to the Technology in accordance with the terms and conditions of this Agreement.

    NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and agreements contained herein, the parties hereto agree as follows:

    1.  DEFINITIONS.

    1.1  Assignment.  "Assignment" shall have the meaning specified in Section 2.1 hereof.

    1.2  Average Share Price.  "Average Share Price" means the average share price of UTStarcom Common Stock, calculated by dividing (i) the sum of the closing prices of UTStarcom Common Stock, as reported at the end of trading on each day during the Valuation Period, by (ii) [***].

    1.3  Closing Date.  "Closing Date" means the date of this Agreement.

    1.4  Delivery Date.  "Delivery Date" means the date on which the items set forth in Exhibit B are delivered to UTStarcom in form and substance acceptable to UTStarcom; provided, however, such Delivery Date shall not be more than [***] after the Closing Date.

    1.5  Escrow Fund.  "Escrow Fund" shall have the meaning specified in Section 8.2 hereof.

    1.6  Escrow Shares.  "Escrow Shares" shall have the meaning specified in Section 8.2 hereof.

    1.7  Intellectual Property Rights.  "Intellectual Property Rights" or "IP" means any and all technologies, procedures, processes, designs, inventions, discoveries, know-how and works of authorship, and documentation thereof, in, to or for the Technology, and all copyrights, current and future patents and proprietary rights thereto and any other intellectual property rights in existence at the date of this Agreement, whether or not worldwide, and all applications and registrations with respect to any of the foregoing.

    1.8  Principal Market.  "Principal Market" shall mean the Nasdaq National Market, which is the principal trading exchange and market for the common stock of UTStarcom.

    1.9  Purchase Price.  "Purchase Price" means [***].

    1.10  Technology.  "Technology" means the technology listed and described in Exhibit A, attached hereto, as well as any updates, upgrades, improvements, revisions, error corrections, new versions and follow-on versions (collectively, "Improvements") thereto.

    1.11  Trading Day.  "Trading Day" means any day during which the Principal Market is open for business.

    1.12  UTStarcom Common Stock.  "UTStarcom Common Stock" means the common stock of UTStarcom traded under the ticker symbol "UTSI" on the Principal Market.

    1.13  Valuation Period.  "Valuation Period" means the period covering [***] Trading Days immediately preceding the Closing Date.

    2.  Assignment of Rights.

    2.1 For good and valuable consideration, the sufficiency of which is hereby acknowledged, Stable Gain hereby [***] assigns and transfers to UTStarcom and agrees to assign to UTStarcom all of its right, title and interest in and to the Intellectual Property Rights, and UTStarcom hereby accepts such assignment (the "Assignment").

    2.2 On and after the Closing Date, Stable Gain shall, [***] and promptly upon request by UTStarcom, in order to effect and perfect the Assignment contained herein or to enable UTStarcom to obtain the full benefits of this Agreement and the transactions contemplated hereby, (i) deliver to UTStarcom records, data or other documents relating to the Intellectual Property Rights that are in the possession of Stable Gain and its affiliates or will be in the possession of Stable Gain and its Affiliates, (ii) execute and deliver assignments, licenses, consents, documents or further instruments of transfer, and (iii) take other actions, render other assistance and execute other documents as requested by UTStarcom. Stable Gain will also assist UTStarcom in filing and prosecuting United States and foreign patent, copyright and trademark applications claiming the Intellectual Property Rights.

    2.3 UTStarcom, in the exercise of its sole discretion, may add to, subtract from, arrange, rearrange, revise, adapt and translate all or any part of the Technology, and/or combine the Technology with any other work by any other person(s); and/or change or substitute the title of the Technology. Stable Gain hereby waives any so-called "droit moral" or "moral rights of authors" or any similar rights in and/or to the Intellectual Property Rights. Stable Gain shall not institute, support, maintain or permit any action or lawsuit on the ground that any version of the Technology, or any part thereof, as produced, used, exhibited or exploited by or on behalf of UTStarcom in any manner whatsoever (i) constitutes a violation of any of Stable Gain's "moral rights" or other rights in any country of the world, (ii) defames or mutilates the Technology or any part thereof, (iii) contains unauthorized variations, alterations, modifications, changes or translations or (iv) defames or injures Stable Gain in any manner.

    2.4  Delivery.  Stable Gain shall deliver to UTStarcom, the materials set forth on Exhibit B as Stable Gain deliverables upon the Delivery Date under this Agreement. The adequacy of the deliverables is subject to UTStarcom's approval.

    3.  PAYMENTS.

    3.1  UTStarcom One-time Purchase Payment.  As consideration for the Assignment, and provided that Stable Gain shall perform all the terms and conditions required of it under this Agreement, UTStarcom agrees to pay to Stable Gain that number of shares of UTStarcom Common Stock determined by dividing the Purchase Price by the Average Share Price (the "Shares") as of the Closing Date set forth in Exhibit C, attached hereto, subject to the provisions of Article 8 hereof.

    4.  REPRESENTATIONS AND WARRANTIES.

    4.1  Stable Gain Representations and Warranties.

2

    (a) Stable Gain hereby represents and warrants that Stable Gain has the full right and authority to enter into this Agreement and, as of the Delivery Date, shall have the full right and authority to grant the Intellectual Property Rights to the Technology herein provided for; that the consent of no other person or entity is necessary for Stable Gain to enter into and fully perform this Agreement; that Stable Gain is not subject to any obligation or disability that will or might hinder or prevent the full completion and performance by Stable Gain of any of the covenants and conditions to be kept or performed by Stable Gain hereunder; that Stable Gain has not made nor will Stable Gain make any grant, arrangement or agreement which will or might conflict or interfere with UTStarcom's complete enjoyment of the rights granted to UTStarcom hereunder; that the Technology does not infringe the copyright, patent trademark, the publicity rights, common law rights or any other right of any other party or constitute defamation, invasion of privacy or other tortious injury to any third party; that Stable Gain shall be, as of the Delivery Date, the sole and exclusive owner of all the Intellectual Property Rights in and to the Technology, including, without limitation all copyrights and all renewals and extensions of copyright, or has obtained all rights necessary from third parties to make the assignment of Intellectual Property Rights to UTStarcom herein and will provide UTStarcom with satisfactory documentation evidencing all such third party assignments upon request; that Stable Gain has not taken and will not take any action which might prevent or impair the exercise of the Intellectual Property Rights to be assigned hereunder by UTStarcom or its licensees; that, as of the Delivery Date, UTStarcom shall have perpetual quiet title to the Intellectual Property Rights assigned hereunder, and there are no claims, liens, encumbrances, security interest or other rights or charges to or on the Intellectual Property Rights assigned hereunder or any element thereof; that there is no claim or litigation pending or threatened involving the Technology; there are no agreements with or rights in any third party which would require UTStarcom to pay any royalty, compensation or other sums whatsoever by reason of the distribution or other exploitation of the Technology or which would require UTStarcom to obtain any consent or permission to exercise all rights to the Technology; that all of Stable Gain's warranties hereunder will be valid, true and correct at the Delivery Date and perpetually thereafter. All of the foregoing representations and warranties with respect to the Intellectual Property Rights to the Technology are also deemed made by Stable Gain with respect to the deliverables to be prepared by Stable Gain hereunder.

    (b) All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the People's Republic of China (the "PRC"), or any other relevant jurisdiction, that are required in connection with the lawful acquisition by Stable Gain of the Intellectual Property Rights to the Technology from Hainan Hua Gao Investment Co., Ltd. ("Hua Gao") shall be duly obtained and effective on the Delivery Date.

    (c) Stable Gain shall use [***] to fulfill the conditions set forth in this Article 4 at the earliest possible date, but in any case, no later than [***] after the Closing Date.

    (d) Stable Gain shall indemnify and hold harmless UTStarcom, [***] from and against any and all liability, loss, damages and expense (including without limitation reasonable attorneys' fees) arising out of or connected with any breach or alleged breach of any provision of this Agreement or any claim which is inconsistent with any of the representations, warranties or agreements made by Stable Gain in this Agreement.

    4.2  UTStarcom Representations and Warranties.  UTStarcom represents and warrants to Stable Gain that UTStarcom has the power and authority to enter into this Agreement.

    5.  RESTRICTIONS ON STABLE GAIN.

3

    5.1  No Competing Products or Services.  Stable Gain agrees not to develop any products or services which competes with the Technology or Improvements purchased by UTStarcom or further use any Intellectual Property Rights or Technology following the Closing Date without first obtaining the written consent of UTStarcom.

    6.  STABLE GAINS' REPRESENTATIONS WITH REGARD TO THE SHARES.

    In connection with Stable Gain's acquisition of the Shares, Stable Gain hereby represents and warrants to UTStarcom as follows:

    6.1  Investment Intent; Capacity to Protect Interests.  Stable Gain is acquiring the Shares solely for investment and not with any present intention of selling or otherwise disposing of the Shares or any portion thereof in any transaction other than a transaction exempt from registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Stable Gain also represents that the entire legal and beneficial interest of the Shares is being acquired, and will be held, for Stable Gain's account only, and neither in whole nor in part for any other person.

    6.2  Residence.  Stable Gain's principal business address indicated beneath Stable Gain's signature below.

    6.3  Information Concerning UTStarcom.  Stable Gain has had the opportunity to discuss the plans, operations, and financial condition of UTStarcom with its officers and has received all information Stable Gain has deemed appropriate to enable Stable Gain to evaluate the financial risk inherent in investing in the Shares.

    6.4  Economic Risk.  Stable Gain realizes that the purchase of the Shares involves a high degree of risk, and Stable Gain is able, without impairing its financial condition, to hold the Shares for an indefinite period of time and to suffer a complete loss of the value of the Shares.

    6.5  Restricted Securities.  Stable Gain understands and acknowledges that:

     (i) the Shares have not been registered under the Securities Act, and the Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available (such as Rule 144 promulgated under the Securities Act ("Rule 144")) and UTStarcom is under no obligation to register the Shares;

    (ii) the share certificates representing the Shares will be stamped with the legends specified in Section 7.8 hereof; and

    (iii) UTStarcom will make a notation in its records of the aforementioned restrictions on transfer and legends.

    6.6  Regulation S Representations.  Stable Gain, identified as a non-U.S. Person, hereby makes to UTStarcom the following additional representations and warranties:

     (i) Stable Gain has been advised and acknowledges: (i) that the Shares have not been, and such Shares, when issued, will not be registered under the Securities Act, the securities laws of any state of the United States or the securities laws of any other country; (ii) that in issuing and selling the Shares to Stable Gain pursuant hereto, UTStarcom is relying upon the "safe harbor" provided by Regulation S promulgated under the Act by the U.S. Securities and Exchange Commission ("SEC") for offers and sales of securities occurring outside the United States ("Regulation S") and/or on Section 4(2) under the Act; (iii) that it is a condition to the availability of the Regulation S safe harbor that the Shares not be offered or sold in the United States or to a U.S. Person until the expiration of a period of one year following the Closing Date; (iv) that, notwithstanding the foregoing, prior to the expiration of one year after the Closing Date (the "Restricted Period"), the Shares may be offered and sold by the holder thereof only if such offer and sale is made in compliance with the terms of this Agreement

4

and either: (A) if the offer or sale is within the United States or to or for the account of a U.S. Person (as such terms are defined in Regulation S), the securities are offered and sold pursuant to an effective registration statement or pursuant to Rule 144 under the Act; or (B) the offer and sale is outside the United States and to other than a U.S. Person. The foregoing restrictions are binding upon subsequent transferees of the Shares, except for transferees pursuant to an effective registration statement.

    (ii) As used herein, the term "United States" means and includes the United States of America, its territories and possessions, any State of the United States, and the District of Columbia, and the term "U.S. Person" means: (i) a natural person (regardless of citizenship) resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate or trust of which any executor, administrator or trustee is a U.S. Person; (iv) any agency or branch of a foreign entity located in the United States; (v) any nondiscretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person (whether or not the dealer or other fiduciary is a U.S. Person); (vi) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated and (if an individual) resident in the United States; and (vii) a corporation or partnership organized under the laws of any jurisdiction other than the United States by a U.S. Person principally for the purpose of investing in securities that have not been registered under the Act, unless organized or incorporated and owned entirely by accredited investors (as defined in Rule 501(a)) under the Act who are not natural persons, estates or trusts.

    (iii) Subject to Section 7.7 herein, Stable Gain agrees that with respect to the Shares, until the expiration of the Restricted Period: (i) Stable Gain nor any agent or representative of Stable Gain has not and will not solicit offers to buy, offer for sale or sell any of the Shares or any other shares of UTStarcom, or any beneficial interest therein in the United States or to or for the account of a U.S. Person.

    (iv) Stable Gain has not engaged, nor is it aware that any party has engaged, and Stable Gain will not engage or cause any third party to engage in any directed selling efforts (as such term is defined in Regulation S) in the United States with respect to the Shares.

    (v) Stable Gain: (i) is domiciled and has its principal place of business outside the United States; and (ii) certifies it is not a U.S. Person and is not acquiring the Shares for the account or benefit of any U.S. Person; and (iii) at the time of the closing, Stable Gain or persons acting on Stable Gain's behalf in connection therewith will be located outside the United States.

    (vi) At the time of offering to Stable Gain and communication of Stable Gain's order to purchase the Shares and at the time of Stable Gain's execution of this Agreement, Stable Gain or the persons acting on Stable Gain's behalf in connection therewith were located outside the United States.

   (vii) Stable Gain is acquiring the Shares either: (i) for its own account; or (ii) for the account and benefit of clients of whom none is a U.S. Person and for whom Stable Gain has, and for the entire Restricted Period will continue to have, full investment discretion with respect to the purchase, holding and disposition of the Shares.

   (viii) Stable Gain is not a "distributor" (as defined in Regulation S) or a "dealer" (as defined in the Act).

    6.7  Further Limitations on Disposition.  Without in any way limiting its representations set forth above, Stable Gain further agrees that Stable Gain shall in no event make any disposition of all or any portion of the Shares unless and until (i) there is then in effect a registration statement

5

under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, (ii) the resale provisions of Rule 144(k) are available in the opinion of counsel to UTStarcom or (iii) (A) Stable Gain shall have notified UTStarcom of the proposed disposition and shall have furnished UTStarcom with a detailed statement of the circumstances surrounding the proposed disposition, (B) Stable Gain shall have furnished UTStarcom with an opinion of Stable Gain's counsel to the effect that such disposition will not require registration of such stock under the Securities Act and (C) such opinion of Stable Gain's counsel shall have been concurred in by counsel for UTStarcom, and UTStarcom shall have advised Stable Gain of such concurrence.

    6.8  Legends.  All certificates representing any of the Shares shall have endorsed thereon legends in substantially the following form:

"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD BY THE HOLDER HEREOF EXCEPT: (A) IF THE OFFER OR SALE IS WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OF A U.S. PERSON (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")), THE SECURITIES ARE OFFERED AND SOLD PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO RULE 144 UNDER THE ACT; OR (B) IF THE OFFER OR SALE IS OUTSIDE THE UNITED STATES AND TO OR FOR THE ACCOUNT OF OTHER THAN A U.S. PERSON."

    7.  INDEMNIFICATION AND ESCROW.

    7.1  Indemnification by Stable Gain.  Stable Gain shall defend, indemnify and hold harmless UTStarcom [***] under this Agreement from and against any and all claims losses, costs, liabilities and expenses, including reasonable fees of attorneys and other professionals, arising out of or related to any breach or claimed breach of any of Stable Gain's representations and warranties contained in Article 4, Section 5.1, Article 6 or Article 7. UTStarcom agrees to provide to Stable Gain prompt written notice of any third party claim covered by the foregoing indemnity that is made against and received by UTStarcom and to provide Stable Gain, [***] with such reasonable cooperation and assistance as Stable Gain may request from time to time in the defense or settlement thereof. In the event the Technology or part thereof is held to, or if Stable Gain reasonably believes is likely to be held to, violate or infringe a copyright, patent or other intellectual property right, Stable Gain shall, [***] obtain for UTStarcom a license to continue using and distributing the products incorporating or made with the Technology or part thereof pursuant to the terms and conditions of this Agreement.

    7.2  Escrow Arrangements.

    (a) Escrow Fund. Immediately following the Closing Date, but prior to the Delivery Date, [***] of the Shares (the "Escrow Shares"), without any act of Stable Gain, will be deposited with the Secretary of UTStarcom as escrow agent (the "Escrow Agent"), such deposit to constitute an escrow fund (the "Escrow Fund") to be governed by the terms set forth herein and at [***] cost and expense.

    (b) Survival Period; Distribution upon Termination of Escrow Fund. Subject to the following requirements, the Escrow Fund shall remain in existence for a period of [***] following the Closing Date or until the occurrence of the Delivery Date, whichever occurs first (the "Survival Period"). Upon the termination of the Survival Period, the Escrow Fund shall terminate and the Escrow Agent shall distribute the Escrow Shares as follows:

     (i) on the Delivery Date, subject to the provisions of Subsection 8.2(d) hereof, [***] of the Escrow Shares shall be distributed to Stable Gain; or

6

    (ii) if the Survival Period terminates without the occurrence of the Delivery Date, subject to the provisions of Subsection 8.2(e) hereof, [***] of the Escrow Shares shall be returned to UTStarcom.

    (c) Protection of Escrow Fund. The Escrow Agent shall hold and safeguard the Escrow Fund during the Survival Period, shall treat such fund as a trust fund in accordance with the terms of this Agreement and not as the property of UTStarcom and shall hold and dispose of the Escrow Fund only in accordance with the terms hereof.

    (d) Release of Escrow Shares to Stable Gain. The Escrow Agent shall release the Escrow Shares to Stable Gain upon receipt by the Escrow Agent, at any time on or before the last day of the Survival Period, of the following certificates:

     (i) a certificate signed by an officer of UTStarcom certifying that (A) all of the items set forth in Exhibit B have been received and are acceptable to UTStarcom; and (B) the Escrow Agent may release the Escrow Shares to Stable Gain and terminate the Escrow Fund (a "UTStarcom Delivery Certificate"); and

    (ii) a certificate signed by an officer of Stable Gain certifying that the Escrow Agent may release the Escrow Shares to Stable Gain and terminate the Escrow Fund (a "Stable Gain Delivery Certificate").

    (e) Release of Escrow Shares to UTStarcom. The Escrow Agent shall release the Escrow Shares to UTStarcom upon receipt by the Escrow Agent at any time after the last day of the Survival Period of a certificate signed by an officer of UTStarcom certifying that (A) the Delivery Date has not occurred; (B) the Survival Period has expired; and (C) the Escrow Agent may release the Escrow Shares to UTStarcom and terminate the Escrow Fund (a "UTStarcom Termination Certificate").

    (f)  Objections to Claims. At the time of delivery of either a UTStarcom Delivery Certificate, a Stable Gain Delivery Certificate or a UTStarcom Termination Certificate (collectively, the "Certificates") to the Escrow Agent, a duplicate copy of such Certificate shall be delivered to the non-certifying party and for a period of [***] after such receipt (the "Waiting Period"), the Escrow Agent shall make no delivery to either UTStarcom nor Stable Gain of any Escrow Shares, pursuant to Section 8.2(d) or 8.2(e) hereof until after both the expiration of the Waiting Period and the failure of the non-certifying party to deliver to the Escrow Agent a written objection to such Certificate before the expiration of the Waiting Period.

    (g) Resolution of Conflicts; Arbitration.

     (i) In case either Stable Gain or UTStarcom shall so object in writing to any claim or claims made in any Certificate, Stable Gain and UTStarcom shall attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims. If Stable Gain and UTStarcom should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties and shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum and distribute amounts from the Escrow Fund in accordance with the terms thereof.

    (ii) If no such agreement can be reached after good faith negotiation, either UTStarcom or Stable Gain may demand arbitration of the matter unless the amount of the damage or loss is at issue in pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration; and in either such event the matter shall be settled by binding arbitration in accordance with the American Arbitration Association. The decision of the

7

arbitrator(s) as to the validity and amount of any claim in such Certificate shall be binding and conclusive upon the parties to this Agreement, and notwithstanding anything in Section 8.2(f) hereof, the Escrow Agent shall be entitled to act in accordance with such decision and make or withhold payments out of the Escrow Fund in accordance therewith. Such decision shall be written and shall be supported by written findings of fact and conclusions which shall set forth the award, judgment, decree or order awarded by the arbitrator(s).

    (h) Escrow Agent's Duties.

     (i) The Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein, and as set forth in any additional written escrow instructions which the Escrow Agent may receive after the date of this Agreement which are signed by an officer of each of UTStarcom and Stable Gain, and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed to be genuine and to have been signed or presented by the proper party or parties, in accordance with this Article 8. The Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow Agent while acting in good faith and in the exercise of reasonable judgment, and any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith.

    (ii) The Escrow Agent is hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person, excepting only orders or process of courts of law, and is hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case the Escrow Agent obeys or complies with any such order, judgment or decree of any court, the Escrow Agent shall not be liable to any of the parties hereto or to any other person by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

    (iii) The Escrow Agent shall not be liable for the expiration of any rights under any statute of limitations with respect to this Agreement or any documents deposited with the Escrow Agent.

    (iv) The Escrow Agent may resign at any time upon giving at least [***] written notice to UTStarcom and Stable Gain; provided, however, that no such resignation shall become effective until the appointment of a successor escrow agent which shall be accomplished as follows: UTStarcom and Stable Gain shall use their best efforts to mutually agree upon a successor agent within [***] after receiving such notice. If the parties fail to agree upon a successor escrow agent within such time, UTStarcom shall have the right to appoint a successor escrow agent authorized to do business in California. The successor escrow agent selected in the preceding manner shall execute and deliver an instrument accepting such appointment and it shall thereupon be deemed the Escrow Agent hereunder and it shall without further acts be vested with all the estates, properties, rights, powers, and duties of the predecessor Escrow Agent as if originally named as Escrow Agent. Thereafter, the predecessor Escrow Agent shall be discharged for any further duties and liabilities under this Agreement.

    8.  CONFIDENTIALITY.

    8.1  Confidential Information.  As used herein, "Confidential Information" means trade secrets, technology, know-how and other confidential business and technical information. The parties agree that the Technology is Confidential Information. Each party (the "Receiving Party")

8

may be given access to Confidential Information of the other party (the "Disclosing Party") pursuant to this Agreement.

    8.2  Restriction of Confidential Information.  The Receiving Party shall hold and maintain the Disclosing Party's Confidential Information in confidence using the same degree of care that it uses with respect to its own Confidential Information, but in no event less than a reasonable degree of care, and shall not use or disclose the Confidential Information of the Disclosing Party except as permitted by this Agreement.

    8.3  Exceptions.  The foregoing restrictions will not apply to any such Confidential Information that is (i) required to be disclosed by court order or decree or in compliance with applicable law, (ii) in the public domain or enters the public domain other than through a breach hereof by the Receiving Party, (iii) except in the case of Technology assigned hereunder, known to the Receiving Party prior to its receipt from the Disclosing Party hereunder and not subject to a confidentiality obligation, (iv) independently developed by the Receiving Party, as shown by documents in the Receiving Party's files at the time of disclosure or (vi) received by the Receiving Party from a third party and not subject to a confidentiality obligation.

    9.  GENERAL.

    9.1  Limitation of Liability.  NEITHER PARTY SHALL HAVE ANY LIABILITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT FOR INDIRECT, CONSEQUENTIAL, EXEMPLARY, OR INCIDENTAL DAMAGES OR LOST PROFITS, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

    9.2  Survival.  The provisions of Sections 4, 5, 6, 7, 8 and 9 shall survive the termination of this Agreement.

    9.3  Confidentiality of Agreement.  Each party agrees to keep confidential and not to disclose to any third party the terms and conditions of this Agreement or the fact that the parties have entered into this Agreement; provided, however, that each party may disclose the terms and conditions of this Agreement (i) in confidence, to its banks, lawyers, accountants, other professional advisors, and potential investors, (ii) in connection with its enforcement of rights under this Agreement, and (iii) as may be required by law.

    9.4  Notices.  Any notice or communication required or permitted to be given hereunder shall be sufficiently given when mailed by certified mail, postage prepaid, return receipt requested, or sent by facsimile transmission or overnight courier, charges prepaid, in each case properly addressed to the addresses of the parties indicated on the first page of this Agreement, or to such other address as may hereafter be furnished in writing by either party hereto to the other party, and such notice shall be deemed to have been given when received or, if receipt is not accomplished by reason of some fault of the addressee, when tendered.

    9.5  Modifications.  This Agreement may not be modified or amended except by written instrument duly executed by both parties.

    9.6  Invalidity.  If any provision of this Agreement is invalid under any applicable statute or rule of law, it shall be replaced with a valid provision that most nearly effects the parties' intent in entering into this Agreement and the remaining provisions of this Agreement shall in no way be affected or impaired thereby.

    9.7  No Joint Venture.  Neither party is and neither party shall represent itself to be the agent, employee, franchise, joint venturer, officer or partner of the other party. Nothing herein contained shall be construed to place the parties in the relationship of partners or joint venturers, and neither party shall have the power to obligate or bind the other party in any manner whatsoever.

9

    9.8  Waiver.  The failure of either party to exercise in any respect any right provided for herein shall not be deemed a waiver of such right or any other right hereunder.

    9.9  Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute one and the same instrument.

    9.10  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California. Each party hereby irrevocably consents to the exclusive jurisdiction of the state and federal courts located in Santa Clara County, California, in any action arising out of or relating to this Agreement and waives any other venue to which it may be entitled by domicile or otherwise.

    9.11  Entire Understanding.  This Agreement expresses the full, complete and exclusive understanding of the parties with respect to the subject matter hereof and supersedes all prior proposals, representations, agreements and understandings, whether written or oral.

    IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first written above.

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UTSTARCOM, INC.	STABLE GAIN INTERNATIONAL LIMITED
By:	By:
Print Name:	Print Name:
Title:	Title:
	Address:

11

EXHIBIT A

Technology

•

Wireless Application Protocol Gateway—A system to convert WAP protocol data into HTTP protocol data, enabling mobile accessibility to the Internet.



•

Virtual Private Network System—A system to provide virtual private network services for telecom service providers.



•

Voice Mail System—A system to provide voice messaging services in telecommunications networks.



•

Securities Application System—A system to provide securities-related data services for securities brokerage companies.



•

Calling Card System—A system to allow telecom service providers to provide prepaid telephony services to customers.



•

Call Center System—A system to provide customers of telecom service providers with access to banks and securities brokerage companies.



•

Short Message Service Center—A system to provide Short Message Service for users of the Global System for Mobile Communications (GSM).



•

Telebanking Application—A system to provide banking services over telephone lines.



•

Internet Billing System—A system that generates billing record information for Internet Service Providers.

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EXHIBIT B

Deliverables

Stable Gain Deliverables:

1.

An opinion from counsel to Stable Gain, in form and substance acceptable to UTStarcom and counsel to UTStarcom, opining that all authorizations, approvals or permits of any governmental authority or regulatory body of the People's Republic of China, or any other relevant jurisdiction, that are required in connection with the lawful acquisition by UTStarcom and Stable Gain of the Intellectual Property Rights to the Technology have been duly obtained and are in effect.

2.

A certificate of an officer of Stable Gain stating that all the representations and warranties contained in Section 4.1 are true and correct as of the Delivery Date.

3.

The subject Technology described in Exhibit A, including: the source code for each described technology, and any associated user manuals.

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EXHIBIT C

Shares

Purchaser Price	Average Share Price	Shares
[***]	[***]	[***]

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QuickLinks

Exhibit 10.56

ASSIGNMENT AGREEMENT
RECITALS
EXHIBIT A
Technology
EXHIBIT B
Deliverables
EXHIBIT C
Shares

EX-10.57

QuickLinks -- Click here to rapidly navigate through this document

[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.57

UTSTARCOM, INC.

AMENDMENT NO. 1 TO

ASSIGNMENT AGREEMENT

    Effective as of March 2, 2001

    This Amendment No. 1 to the Assignment Agreement (the "Amendment") is entered into as of March 2, 2001 and amends that certain Assignment Agreement dated as of July 24, 2000 (the "Assignment Agreement"), by and among UTStarcom, Inc., a Delaware corporation (the "Company") and Stable Gain International Limited, a British Virgin Islands company ("Stable Gain").

WITNESSETH:

    WHEREAS, the Company and Stable Gain desire to amend the Assignment Agreement; and

    WHEREAS, the Assignment Agreement may be amended as set forth in Section 9.5 thereof.

    NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein, the parties hereby agree as follows:

1.

Amendment to the Assignment Agreement.

(a)

Section 1.2 shall be amended in its entirety as follows:

"Average Share Price." "Average Share Price" means the average share price of UTStarcom Common Stock, calculated by dividing (i) the sum of the closing prices of UTStarcom Common Stock, as reported at the end of trading on each day during the Valuation Period, by (ii) [***]."

(b)

Section 1.13 shall be amended in its entirety as follows:

"Valuation Period." "Valuation Period" means the period covering [***] Trading Days immediately preceding the Closing Date."

(c)

Exhibit C to the Assignment Agreement shall be amended in its entirety as set forth on Appendix 1 attached hereto.

2.

Miscellaneous.

    Except as amended by this Amendment, the Assignment Agreement shall remain in full force and effect.

    Capitalized terms in this Amendment not otherwise defined shall have the same meaning as in the Assignment Agreement.

    This Amendment will be governed by and construed in accordance with the laws of the State of California without giving effect to the conflicts of law principles thereof.

    This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

    IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Assignment Agreement as of the date written above.

UTSTARCOM, INC.

By:    Hong Lu, Chief Executive Officer

STABLE GAIN INTERNATIONAL LIMITED

By:    Wang Jin, Vice President

APPENDIX 1

Exhibit C

Shares

Purchaser Price	Average Share Price	Shares
[***]	[***]	[***]

QuickLinks

Exhibit 10.57

UTSTARCOM, INC.
AMENDMENT NO. 1 TO
ASSIGNMENT AGREEMENT
WITNESSETH
APPENDIX 1
Exhibit C
Shares

EX-10.58

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[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.58

[Translation]

Loan Agreement

    Contract Number: 2001 ChaoLiuZi No.005

Lender:	China Merchants Bank, Beijing Branch, Chao Yang Men Subranch
Legal Representative:	Xiu Xiangqun	Position:  President
Address:	No.6 ChaoYangMen Bei Da Jie, Dongcheng district, Beijing
Telephone:	85282361
Borrower:	UTStarcom (China) Co., Ltd.
Address:	Fll No.6 ChaoYangMen Bei Da Jie, Beijing Beijing
Legal Representative:	Hong Lu	Position:  Chairman
Telephone:	65542030

    WHEREAS: Party A desires to borrow working capital loan from the Lender for business operation. In accordance with the related laws and stipulations, in consideration of the mutual promise and to clarify the rights and obligations of each party, both parties agree to enter into this agreement and execute under this agreement.

1.

Variety: Short term Revolving Fund.



2.

Loan Amount: Reiminbi 50 million.



3.

Purpose: The loan is used in working Capital Turnover and can not be appropriated for other purpose without the written approval of the Lender.



4.

Loan Term: The duration of the loan under this agreement is twelve months which from March 14, 2001 to March 14, 2002.



5.

Interest rate and calculation of Interest:

    5.1  Interest rate: [***]

    During the loan term, the interest rate will be adjusted in accordance with the provisions of the People's Bank in the event the People's Bank adjust the loan interest rate.

    5.2  Calculation of Interest:

    Interest shall accrue from draw-down date and be calculated [***]. The due date is [***] of very month ("due date").

    5.3  Payment of interest:

    The Borrower shall pay off [***] interest on the due date. The Lender have the right to deduct the interest from the Borrower's bank account in the Lender. The Lender could collect compound interest in the event the Borrower fails to pay the interest on time.

6.

Repayment of Loan:

    6.1  The Borrower shall repay the principal and the interests pursuant to the provisions of this contract.

    6.2  The Borrower could advance the repayment with the approval from the Lender.

7.

Guarantee

    7.1  The principal, interest and other related expenses are guaranteed by UTStarcom (Hangzhou) Telecommunication Co., Ltd. and issues an irrevocable guaranty to the Lender.

8.

Rights of the Borrower

    8.1  Draws and use the loan;

    8.2  Declines other terms except this contract;

    8.3  Assigns the debt to any third party upon the approval of the Lender.

9.

Obligations of the Borrower

    9.1  Provides true information upon the request by the Lender including all bank accounts, accounts number and balance of the accounts, assists the Lender to inspect review and check.

    9.2  Accepts the supervision of the Lender regarding the use of loan and the status of manufacturing and finance.

    9.3  Uses the loan pursuant to the provision of this contract.

    9.4  Repay the due principal and interests on time.

    9.5  Assigns the all or partial debts under this agreements to any third party upon the written approval of the Lender.

    9.6  Advance notice to the Lender when the Borrower involves in contract, leasing, joint operation, consolidate (merger), liquidation, reorganization, joint venture or cooperate with foreign company, equity sales, share reformation and change of business operation manner including but no limited to contract, lease, joint venture, acquisition, liquidation, present and conversion into share company; The Borrower shall cooperate with the Lender to make efforts to make the Lender collect the principal and interests on time.

10.

Rights of the Lender.

    10.1  Requests the Borrower to repay the principal and interests on due date according to the stipulations of this agreement;

    10.2  Requests the Borrower to provide the information related with the loan;

    10.3  Knows the Borrower's manufacturing and financial status;

    10.4  Supervises the use of the loan in accordance with the term of this agreement;

    10.5  Deducts the outstanding principal and interest from the Borrowers bank account;

    10.6  In the event the Borrower fail to perform the payment obligation under this agreement, the Lender have right to request the Borrower to recall the loan ahead of time, cease in extending the loan;

    10.7  When the Borrower involves in contract, leasing, joint operation, consolidate (merger), liquidation, reorganization, joint venture or cooperate with foreign company, equity transference, share reformation, the Lender shall have right to request the Borrower clear of principal and the

2

loan interest ahead of time, assign this loan to assignee confirmed by the Lender or provide acceptable guaranty to the Borrower.

11.

Responsibility of the Lender

    11.1  Extends the loan in accordance with the stipulations of this agreement;

    11.2  Holds the Borrower's debts, financial, operational information in confidential except special provisions in Law.

12.

Warranty of the Borrower

    12.1  The Borrower is a company duly organized and validly existing under the law of the People's Republic of China and has power and authority to sign and perform this Contract;

    12.2  Signature and performance this contract is full authorized by the board or other authorization;

    12.3  The documents, information and files provided by the Borrower is true, correct, complete and effective without any material mistakes and missing.

    12.4  The Borrower respects the Lender's operational policy which deposit and lending, credit and settlement is equal important. The Borrower warrants that its unused funds will deposit in the Bank account in Lender and entrust the Lender handle the Borrower's foreign currency settlement.

13.

Extension of the Loan

    In case the Borrower could not to repay the loan under this contract and need to extend the loan, the Borrower shall apply to Party B for the extension of the loan within [***] prior to maturity of the loan. The parties sign an extension loan agreement in written upon the approval of the Lender after the inspection made by the Lender. If the Lender disagrees to the extension of the loan, the Borrower shall repay the principal and the interest in accordance with the stipulations set forth in this contract.

14.

Expenses

    The Borrower shall reimburse the Lender for [***] expenses in connection with [***]. The Lender is empowered to deduct the [***] expense [***]. In the event that the money is not sufficient in the Borrower's account, the Borrower shall clear the balance upon the notice from the Lender [***]

15.

Liabilities of Breach contract

    15.1  In the event the Borrower fails to perform the obligations set forth in section 9.1 or 9.2 in this agreement, if it is material or the Borrower does not cure it timely, the Lender shall have right to cease in extending the loan and recall partial or total loan ahead of time.

    15.2  The Borrower fails to perform the obligation set forth in section 9.3, the Lender shall have right to collect an interest at the rate of [***] for the amount misappropriated; If the matter is serious, the Lender shall have right to cease in extending the loan and recall partial or total loan ahead of time.

    15.3  If the Borrower fails to perform the obligation set forth in section 9.4, the Lender is entitled to collect an interest at the rate of [***] for the default amount.

    15.4  If the Borrower fails to perform the obligation set forth in section 9.5 and 9.6, the Lender fails to collect the repayment, the Lender shall have right to cease in extending the loan, recall the loan ahead of time. The Borrower shall compensate the Lender partial or all damage incurring from above default.

16.

Amendments And Termination of Contract

3

    This contract could be amended and terminated upon the written agreements conclude by the parties. The contract shall be effective before the written amendment is made. The contract could not be changed, amended and terminated by one part without approval of the other part.

17.

Miscellaneous

    17.1  During the term of this contract, any tolerance, extension for the Borrows breach of contract and delay for excise any rights and benefit could not impair, affect and limit the Lender to excise its rights in accordance with this contract and related laws and regulation. It should not be construed that the Lender permit or recognize the Borrower's behaviors and waive current or future rights to take action to defend the Borrower.

    17.2  In the event this contract or partial provisions contained in this Contract should be invalid, the Borrower shall perform the repayment responsibility. In the event aforesaid, the Lender shall have right to terminate this contract and immediately request the Borrower to repay the loan, interest and other expenses.

    17.3  The notice and other communications required to be given by any party shall be in written. Telex and Telegram shall be deemed effectively given on the moment of transmission. Letter shall be deemed effectively given on the receipt of the post office.

    17.4  The evidence of debt, the amendment, modification of the contract shall be made in written. Such documents shall be regard as the appendices of this contract and integral part of this Agreement.

18.

Governing Law and Dispute resolution

    18.1  The conclude, interpretation and dispute resolution shall be subject to the Laws of the People's Republic of China. The rights of the parities shall be safeguarded by the Laws of the People's Republic of China.

    18.2  The disputes arising from execution of this contract shall be settled through friendly consultation by the parties. In case no settlement can be reached, the disputes shall be submitted to the People's Court of Beijing for judgment.

    18.3  After this contract is empower compulsory execution with legal effectiveness by notarization, the Lender may apply to the People's court with jurisdiction to execution the contract.

19.

Miscellaneous Provisions

    19.1  This contract become effective after signed by the authorized representatives of both parties and go through the guaranty formality under Article 7 of this contract until the loan and the interests and other related expenses be cleared up.

    19.2  This contract is executed in three original and be equally authentic. Each of the Borrower, the Lender and the Guarantor shall hold one copy.

4

Lender: China Merchants Bank, Beijing Branch, Chao Yang Men Subranch

(signature)

Borrower: UTStarcom (China) Co., Ltd.

(signature)

March 14, 2001

Translation Verification

    The foregoing represents a fair and accurate English translation of the original Chinese document.

Dated: May 11, 2001

By:	/s/ SHAO-NING J. CHOU
Name:	Shao-Ning J. Chou
Title:	Executive Vice President and Chief Operating Officer, China Operations

QuickLinks

Exhibit 10.58

[Translation]
Loan Agreement
Translation Verification

EX-10.59

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[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.59

[Translation]

Technical Service Agreement

    This technical service agreement ("this Agreement") is made between and by the following parties in Beijing on August 18, 2000.

Party A:	UTStarcom (China) Co., Ltd.
Address:	11th Floor, CNT Manhattan Building, No. 6 Beidajie, Chaoyangmen, Dongcheng District, Beijing
Party B:	Hainan Xinhuangpu Investment Co., Ltd.
Address:	Floor 16, Huaneng Mansions, No. 36 Datong Road, Haikou, Hainan

    WHEREAS Party A agrees to provide Party B with the relevant technical services and Party B agrees to accept the said technical services; therefore, the parties reach the following agreement through friendly consultations:

ARTICLE 1

    Party A agrees to provide Party B with the relevant technical services listed in Attachment I of this Agreement, and Party B agrees to accept the foregoing technical services.

ARTICLE 2

    The parties agree that Party B shall pay [***] for the technical services provided by Party B. Party B shall wire transfer the foregoing technical service fees to the account designated by Party A within [***] upon execution of this Agreement.

ARTICLE 3

Confidentiality Clause

    The parties agree the information or materials that one party learned or got hold of during the performance of this Agreement, which would otherwise not be obtained from the other party shall constitute the other party's commercial secrets. Unless for the purpose of implementing this Agreement, no party shall be allowed to use the other party's commercial secrets. No party shall disclose, grant or transfer the said commercial secrets to any third party unless prior consent is obtained from the other party. Upon expiration or termination of the term of this Agreement, either party shall return or destroy of its own the documents, information or software loaded with the other party's commercial secrets, delete the other party's commercial secrets from memory equipment and refrain from using such commercial secrets any more.

    The parties agree that this section shall continue to be valid within [***] upon expiration or termination of the valid term of this Agreement.

ARTICLE 4

Representation and Guarantee

4.1

Party represents and guarantees as follows:

    (a) Party A is a company incorporated and validly existing pursuant to the Chinese laws;

    (b) Party A is entitled to the ownership of the assets listed in Attachment I hereto and has not placed mortgage or any third party's interests against such ownership, nor does it impose any obstacle to Party B for the obtainment of the title of such assets.

    4.2 Party B represents and guarantees as follows:

    (a) Party A is a company incorporated and validly existing pursuant to the Chinese laws; and

    (b) By executing and performing this Agreement, Party B does not violate the relevant laws and contracts that have a binding force on it, and has obtained the proper authorization and all the necessary approval of executing and performing this Agreement.

ARTICLE 5

Liability for Breach of Agreement

    5.1 If one party to this Agreement ("the Breaching Party") fails to implement its obligations under this Agreement (including violation of the provisions involving representation and guarantee), and fails to adopt effective measures to correct such violation within [***] upon receipt of a written notice by the other party ("the Non-Breaching Party") for such correction within the stipulated time, the non-breaching party has the right to terminate this Agreement and claim compensation from the breaching party for the losses sustained therefrom.

    5.2 If Party B violates the provisions of Article 2 of this Agreement by any failure to pay or pay in time the service fees, it shall pay a find equal to [***] of the total service fees [***] of delay in addition to the full payment of service fees to Party A.

ARTICLE 6

Settlement of Dispute

    Any dispute arising out of or in connection with this Agreement shall be settled by the parties through consultations. If it cannot be settled through consultations, any party may submit the said dispute to China International Economic and Trade Arbitration Commission for arbitration in Beijing according to its valid rules of arbitration. The arbitration award is final and shall be binding over the parties.

ARTICLE 7

Force Majeure

    A force majeure event refers to any event that cannot be foreseen and its occurrence and consequences cannot be avoided or overcome at the time when this Agreement is executed. Any party to this Agreement shall not bear the liabilities for breach of this Agreement if it is prevented from implementing all or any part of the responsibilities associated with the provisions of this Agreement. The party that is affected with such a force majeure event shall notify the other party of the effects of such event within [***] after its occurrence, and present certification by the local notarization organ.

ARTICLE 8

Transfer of Agreement

    No party shall transfer its rights and obligations under this Agreement to any third party unless consented by the other party in writing.

2

ARTICLE 9

Separability of Agreement

    If any article or section of this Agreement becomes invalid or unenforceable, it will not affect the validity and enforceability of other articles or sections.

ARTICLE 10

Amendment and Supplement of Agreement

    The parties may amend or supplement this Agreement in writing. The amendment and supplement to this Agreement shall constitute an inseparable part of this Agreement and be equally authentic to this Agreement.

ARTICLE 11

Miscellaneous

    11.1 This Agreement shall come to force upon execution by the authorized representatives of the parties and fixation of their official seals all of the date first seen in this Agreement. The term of this Agreement is [***]. This Agreement may be renewed upon expiration of the term subject to the parties' approval through consultations.

    11.2 This Agreement has two original copies, of which each party holds one, and they are equally authentic.

3

Party A: UTStarcom (China) Co., Ltd.
(Official Seal)

Authorized Representative:

(Signature)

Party B: Hainan Xinhuangpu Investment Co., Ltd.
(Official Seal)

Authorized Representative: Xue Weibin

(Signature)

Translation Verification

    The foregoing represents a fair and accurate English translation of the original Chinese document.

Dated: May 11, 2001

By:	/s/ SHAO-NING J. CHOU
Name:	Shao-Ning J. Chou
Title:	Executive Vice President and Chief Operating Officer, China Operations

QuickLinks

Exhibit 10.59

[Translation]
Technical Service Agreement
ARTICLE 1
ARTICLE 2
ARTICLE 3
Confidentiality Clause
ARTICLE 4
Representation and Guarantee
ARTICLE 5
Liability for Breach of Agreement
ARTICLE 6
Settlement of Dispute
ARTICLE 7
Force Majeure
ARTICLE 8
Transfer of Agreement
ARTICLE 9
Separability of Agreement
ARTICLE 10
Amendment and Supplement of Agreement
ARTICLE 11
Miscellaneous
Translation Verification

EX-10.60

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[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.60

[Translation]

Assets Transfer Agreement

    This assets transfer agreement ("this Agreement") is made between and by the following parties in Beijing on August 18, 2000.

Party A:	Hainan Xinhuangpu Investment Co., Ltd.
Address:	Floor 16, Huaneng Mansions, No. 36 Datong Road, Haikou, Hainan
Party B:	UTStarcom (China) Co., Ltd.
Address:	11th Floor, CNT Manhattan Building, No. 6 Beidajie, Chaoyangmen, Dongcheng District, Beijing

    WHEREAS Party A agrees to assign to Party B the assets concerned to Party B and Party B agrees to accept the said assets; therefore, the parties reach the following agreement through friendly consultations:

ARTICLE 1

    Party A agrees to assign the assets listed in Attachment I of this Agreement, and Party B agrees to accept the foregoing assets.

ARTICLE 2

    The parties agree that Party A will complete all the procedures necessary for the transfer of the assets listed in Attachment I hereto from Party A to Party B within [***] upon execution of this Agreement (excluding the day of execution for this Agreement), which include but are not limited to the hand-over of certification of ownership for such assets and the handling of registration procedures (if applicable).

ARTICLE 3

    Party B will pay Party A an assignment fee of [***] for the assets assigned by Party A.

ARTICLE 4

    The parties agree that the title of the assets listed in Attachment I hereto will be transferred to Party B on the [***] upon execution of this Agreement. Party A shall be responsible for all the liabilities and risks involving the title transfer of the assets listed in Attachment I hereto prior to such transfer (no matter such liabilities and risks are claimed before or after the transfer of such title), for which Party B shall bear no liabilities and obligations. In case Party B does not receive the foregoing assets within [***] upon execution of this Agreement, Party A shall compensate in [***].

ARTICLE 5

Representation and Guarantee

5.1

Party represents and guarantees as follows:

    (a) Party A is a company incorporated and validly existing pursuant to the Chinese laws;

    (b) By executing and performing this Agreement, Party A does not violate the relevant laws and contracts that have a binding force on it, and has obtained the proper authorization and all the necessary approval of executing and performing this Agreement; and

    (c) Party A is entitled to the ownership of the assets listed in Attachment I hereto and has not placed mortgage or any third party's interests against such ownership, nor does it impose any obstacle to Party B for the obtainment of the title of such assets.

5.2

Party B represents and guarantees as follows:

    (a) Party A is a company incorporated and validly existing pursuant to the Chinese laws; and

    (b) By executing and performing this Agreement, Party B does not violate the relevant laws and contracts that have a binding force on it, and has obtained the proper authorization and all the necessary approval of executing and performing this Agreement.

ARTICLE 6

Liability for Breach of Agreement

6.1

If one party to this Agreement ("the Breaching Party") fails to implement its obligations under this Agreement (including violation of the provisions involving representation and guarantee), and fails to adopt effective measures to correct such violation within [***] upon receipt of a written notice by the other party ("the Non-Breaching Party") for such correction within the stipulated time, the non-breaching party has the right to terminate this Agreement and claim compensation from the breaching party for the losses sustained therefrom.

6.2

If Party A violates the provisions of Articles 2 and 5 of this Agreement, Party B has the right to seek return of all the payment and a penalty equal to [***] of the total price from Party A.

ARTICLE 7

Settlement of Dispute

    Any dispute arising out of or in connection with this Agreement shall be settled by the parties through consultations. If it cannot be settled through consultations, any party may submit the said dispute to China International Economic and Trade Arbitration Commission for arbitration in Beijing according to its valid rules of arbitration. The arbitration award is final and shall be binding over the parties.

ARTICLE 8

Force Majeure

    A force majeure event refers to any event that cannot be foreseen and its occurrence and consequences cannot be avoided or overcome at the time when this Agreement is executed. Any party to this Agreement shall not bear the liabilities for breach of this Agreement if it is prevented from implementing all or any part of the responsibilities associated with the provisions of this Agreement. The party that is affected with such a force majeure event shall notify the other party of the effects of such event within [***] after its occurrence, and present certification by the local notarization organ.

2

ARTICLE 9

Transfer of Agreement

    No party shall transfer its rights and obligations under this Agreement to any third party unless consented by the other party in writing.

ARTICLE 10

Separability of Agreement

    If any article or section of this Agreement becomes invalid or unenforceable, it will not affect the validity and enforceability of other articles or sections.

ARTICLE 11

Amendment and Supplement of Agreement

    The parties may amend or supplement this Agreement in writing. The amendment and supplement to this Agreement shall constitute an inseparable part of this Agreement and be equally authentic to this Agreement.

ARTICLE 12

Miscellaneous

    12.1 This Agreement shall come to force upon execution by the authorized representatives of the parties and fixation of their official seals as of the date first seen in this Agreement.

    12.2 This Agreement has two original copies, of which each party holds one, and they are equally authentic.

3

Party A: Hainan Xinhuangpu Investment Co., Ltd.

(Official Seal)

Authorized Representative: Xue Weibin

(Signature)

Party B: UTStarcom (China) Co., Ltd.
(Official Seal)

Authorized Representative:

(Signature)

Translation Verification

    The foregoing represents a fair and accurate English translation of the original Chinese document.

Dated: May 11, 2001

By:	/s/ SHAO-NING J. CHOU
Name:	Shao-Ning J. Chou
Title:	Executive Vice President and Chief Operating Officer, China Operations

Attachment I
List of Assets for Assignment

[***]

2

QuickLinks

Exhibit 10.60

[Translation]
Assets Transfer Agreement
ARTICLE 1
ARTICLE 2
ARTICLE 3
ARTICLE 4
ARTICLE 5
Representation and Guarantee
ARTICLE 6
Liability for Breach of Agreement
ARTICLE 7
Settlement of Dispute
ARTICLE 8
Force Majeure
ARTICLE 9
Transfer of Agreement
ARTICLE 10
Separability of Agreement
ARTICLE 11
Amendment and Supplement of Agreement
ARTICLE 12
Miscellaneous
Translation Verification
Attachment I List of Assets for Assignment

EX-10.61

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[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.61

[Translation]

EQUITY TRANSFERRING AGREEMENT

    This Agreement is made by and between the following parties:

Seller:	Zhe Jiang Nantian telecommunication development group share company
Purchaser:	UTStarcom, Inc.,

    Whereas:

1.

Seller and Purchaser jointly invested to set up the sino-foreign joint venture named Hangzhou Nantian Starcom telecommunication equipment Co., Ltd. (the "company") in 1993. Till November 30, 2000, the paid in capital for the company is [***], net assets is [***].



2.

Before execution of this agreement, Seller's contribution to the company accounts for [***] of the company. Purchaser's contribution to the company accounts for [***].



3.

Seller agrees to transfer its all equities to Purchaser, and Purchaser agrees to purchase the equities. After the closing of transference, the company will be a wholly-owned subsidiary of Purchaser.

    In accordance with the Law of People's Republic of China on sino-foreign joint venture enterprise and some regulations on equities change of investment of foreign investment enterprise, adhering to the principle of equality and through friendly consultations, with honest, confident and mutual benefit, both party agree to transfer the shares under the term and condition as follows:

1. The status of the parties:

Seller:	Zhe Jiang Nantian telecommunication development group share company
With resident at:	Hangzhou WuLin Square East Science & Cooperate Building Rm 17-18
Legal representative:	Liu Aifu
Title:	Chairman of the board of directors
Nationality:	P.R.C. China
Purchaser:	UTStarcom, Inc., with resident at 1275 Harbor Bay Parkway, Suite 100 Alameda, CA 94502 U.S.A.
Legal representative:	Ying Wu
Title:	President
Nationality:	U.S.A.

2. TRANSFER OF EQUITIES

    2.1 Seller contributed [***] to the company, accounting for [***] of the total amount of investment and registered capital. Purchaser contributed [***] to the company, accounting for [***] of the total amount of investment and registered capital.

    2.2 Seller agrees to transfer equities account for [***] of the company to Purchaser, and Purchaser agrees to purchase the equities account for [***] of the company.

    2.3 After the closing of transference, the company will be a wholly-owned subsidiary of Purchaser.

    2.4 The total amount of investment and registered capital of the company will be no change.

3. PRICE AND PAYMENT TERM

    3.1 The Seller hereby agrees to sell to Purchaser [***] Equities of the company at price of [***] under the condition of this agreement.

    3.2 Purchaser hereby agree to pay to Seller before [***] in [***] to the Seller.

4. After the closing of transferring, the company shall change from a joint venture company to a wholly foreign owned company of Purchaser. Purchaser shall take the liabilities of the shareholder in accordance with the revised article of association, the board of directors shall be appointed by Purchaser.

5. WARRANTY

    5.1 Seller hereby warranties to Purchaser that the equities transferred to Purchaser is owned by Seller and Seller has full power to transfer the shares to Purchaser. Seller warranties to Purchaser that Purchaser will not make the Purchaser to be prosecuted.

    5.2 Seller hereby warranties that the execution of this Agreement and performance of this agreement have been duly and validly authorized and approved by Seller's relevant administration authority.

    5.3 Purchaser hereby warranties that the execution of this agreement have been duly authorized.

    5.4 Purchaser hereby warranties to pay the said purchase price to Seller in accordance with the provisions set forth herein this agreement.

    5.5 Purchaser hereby warranties to apply for approval of the local authority and change the registration record for the share transference. Seller shall cooperate.

6. TERMINATION

    6.1 This agreement shall be terminated in case one party terminates operation before the effective of this agreement or fails to receive the approval of the relevant authorities.

    6.2 The agreement shall be terminated if it is failed to get the approval from the related authority [***] from the date of this agreement. The parties shall agree to liquidate the company.

7. DISPUTATION SETTLEMENT

    Any disputes arising from the execution or in connection with the contract shall be settled through friendly consultations between both parties. In case no settlement can be reached through consultations, the disputes shall be submitted to Hangzhou Arbitration Commission for arbitration in accordance with its rules of procedure. The arbitral award is final and binding upon both parties. During the arbitration, the contract shall be executed continuously by both parties except for matters in disputes.

8. APPLICABLE LAW

    This agreement shall be governed by the related laws of the People's Republic of China.

    9.  The present Agreement becomes executive on the date signed or stamped by the legal person or representative of both party, and this agreement shall come into force beginning from the date of approval of the original authority.

    The present Agreement is made in four originals. Each party keep one original and others shall be sent to the relevant authorities for filing. All originals shall be equally authentic.

3

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date following written.

Zhe Jiang Nantian telecommunication development group share company

Representative: Bao Rongqing

Date: February 5, 2001

UTSTARCOM, INC.

Representative: Ying Wu

Date: February 5, 2001

Translation Verification

    The foregoing represents a fair and accurate English translation of the original Chinese document.

Dated: May 11, 2001

By:	/s/ SHAO-NING J. CHOU
Name:	Shao-Ning J. Chou
Title:	Executive Vice President and Chief Operating Officer, China Operations

QuickLinks

Exhibit 10.61

[Translation]
EQUITY TRANSFERRING AGREEMENT
Translation Verification

EX-10.62

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[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.62

[Translation]

CONTRACT

CONTRACT NO.: UTAHZ2001032311
The Buyer:	The Seller:
Zhejiang Telecom CO.,
NingBo Branch	UTStarcom (China) Ltd.
	11th floor CNT Manhattan Building, No.6 ChaoYang Men Bei Da Jie St. Beijing, 100027
TEL:	TEL01065542030
FAX:	FAX (010) 65542058

This contract is made between the BUYER and the SELLER, whereby the BUYER agrees to buy and the SELLER agrees to sell the under-mentioned commodities and services according to the terms and conditions as stipulated hereafter:

1

TOTAL CONTRACT PRICE: [***]



2

NAME of COMMODITIES, or SERVICES:
[***] network equipment
(Quantity, Specifications and Unit price as specified in Appendix)



3.1

PLACE OF MANUFACTURING AND MANUFACTOR:
Hangzhou    UTStarcom



3.2

DATE OF DELIVERY:
Partial delivery according to the project schedule



3.3

PLACE OF SHIPPING:
Hangzhou

4

PLACE OF DESTINATION
Designed by NingBo telecom Co., Ltd.



5

PACKING

    5.1  The goods shall be packed in new strong case(s) suitable for long distance transportation and well protected against dampness, moisture, shock, and rust. The Sellers shall be liable for any damage to the goods on account of improper packing.

    5.2  Detailed Packing List shall be placed in each case which shall indicate the name of goods, total of cases, installation and maintenance manual. Related technical documents shall be shipped with the goods.

6

SHIPPING MARK

    On the surface of each package, the package number, measurements, the lifting positions, such cautions as "DO NOT STACK UP SIDE DOWN", "HANDLE WITH CARE", "KEEP AWAY FROM MOISTURE" and the shipping mark.

7

DELIVERY

    7.1  After the arrival of the goods at the place of destination, the packages shall be opened by the Buyers in the presence of the Seller, shall be checked and signed jointly by the representatives of the Buyer and Seller as the acceptance of the goods. The transport documents shall be the certificates of acceptance.

    7.2  The Seller shall bear all expenses and risks involved in the handling of the goods until the moment the goods has been delivered. The title to the goods and the risks of the goods are transferred to the buyer upon delivery.

    7.3  In case of missing parts or damage due to the Seller's faulty packing, the Buyer shall make a detailed record on the site, or apply for reinspection by the China Commodity Inspection Bureau, or the representatives of the Buyer and Seller make and sign a protocol, Such protocol may be utilized as proper evidence for replacement of missed or damaged parts. If the Buyer opens the package without presence of the Seller, or fails to make the application in written to for replacement of missed or damaged parts within [***] after the arrival of the goods at the destination, the Buyer shall be deemed to accept the goods.

8

INSURANCE

    The insurance shall be effected by the Seller for [***] of the Contract Amount.

9

PAYMENT TERMS:

    All payments by the Buyer to the Seller shall be paid by telegraphic transfer to the RiTanLu Office, ChaoYang Branch, Beijing, I&C Bank of China, account number is [***].

    9.1  The payment conditions for equipment are as follows:

    9.1.1  Down Payment:

    [***] down payment of the total contract price for goods being [***] shall be paid by the Buyer to the Seller within [***] from the date of signing of this contract. If the down payment is delayed, the date of shipment will be delayed accordingly.

    9.1.2  [***] of the total contract price for goods being [***] shall be paid by the Buyer within [***] from the date of arrival of goods and completion.

    9.1.3  [***] of the total contract price for goods being [***] shall be paid within [***] after the completion of installation, debugging and running.

    9.1.4  [***] of the total contract price for goods being [***] shall be paid by the Buyer within [***] from the date of running.

    9.2  In the event that a payment required by 10.1 isn't made by the Buyer within the time period specified, the Buyer shall pay to the Seller, in addition to the amount owed, a late payment fee of [***] of the amount owed per [***] or part thereof for each [***] the payment is delayed. The total amount of penalty shall not exceed [***] of the total delayed payment.

10

INSTALLATION

    10.1  The Buyer takes responsibility of [***].

    10.2  The Seller takes responsibility of [***] during the period of installation.

11

WARRANTY

    11.1  The Seller warrants items supplied hereunder to be free from defects in workmanship and material. The Seller's warranty for Equipment and Material will commence upon delivery of

2

the goods and will continue for a period of [***]. During the Warranty period the Seller will, [***] either repair or replace items not conforming to the above warranty. If the Buyer determines that any items should be returned, the Seller shall bear [***] for items returned to the Seller in the PRC and return of the repaired or replaced items to the installation site.

    11.2  The Seller warrants to provide debug for the software.

    11.3  The foregoing warranty does not extend to any items which has:

    11.3.1  Been damaged by misusing, accident;

    11.3.2  Been wired, repaired or altered by anyone other than the Seller or its representative;

    11.3.3  Been improperly installed, stored, handled or maintained by anyone other than the Seller or its representative;

    11.3.4  Been removed from its original site of installation, or to expendable components such as fuses, light bulbs, motor brushes and the like.

12

CLAIMS

    Within [***] after the goods delivered, the Buyer shall have right to make a claim to the Seller if the quality, specifications or quantities of the goods is not in conformity with what has been stipulated in the contract.

13

FORCE MAJEURE:

    The Seller shall not be liable for any loss, damage, delay or failure of performance resulting directly or indirectly from any cause which is beyond its reasonable control including, but not limited to the laws, regulations, acts or failure to act of any governmental authority.

14

LATE DELIVERY AND PENALTY:

    In case of delayed shipment, except for force majeure, the Seller shall pay to the Buyer for every [***] of delay a penalty amounting to [***] of the total value of the goods whose shipment has been delayed. Any fractional part of a [***] is to be considered as a full [***]. The total amount of penalty shall not, however, exceed [***] of the total value of the goods involved in late shipment and is to be deducted from the amount due at the time of payment.

15

ARBITRATION

    Both parties shall strictly execute the contract in accordance with the relevant laws and regulations of P.R.C. All disputes in connection with the execution of the contract hereof shall be settled through mutual understanding and friendly negotiation. In case no settlement can be reached through negotiations, either party can apply to the appropriate organization for arbitration or mediation. The arbitration fee shall be borne by the losing party.

16

LIMITATION OF LIABILITY

    16.1  In the event of any breach of this Contract by Seller, or of any loss or injury to the Buyer arising out of this Contract for which the Seller is liable to the Buyer, the Seller's total cumulative liability for all such breaches, losses, and injuries shall be the [***] of:

    a  The [***] value of the injury or loss to the Buyer.

    b  The [***] payments made to the Seller.

    16.2  The Seller shall not be liable for any consequential or incidental loss or damage resulting from this Contract.

3

17

VALIDITY, TERMINATION OF THE CONTRACT AND MISCELLANEOUS.

    17.1  This Contract will come into force after being sealed by both parties and signed by the representatives of both parties.

    17.2  This Contract will be terminated after both parties have fulfilled their respective duties and obligations.

    17.3  Seller hereby licenses the software contained within the products for use by the Buyer. The Buyer or its representatives shall not decompile, disassemble or reverse the software without the prior written permission of the Seller.

    17.4  This Contract may be amended only by an instrument in writing signed and sealed by the duly authorized representative of each party.

    17.5  During implementation of this Contract, all notices between the parties shall be by certified mail, telex or facsimile.

    17.6  Technical proposal, equipment pricelist shall be part of this contract.

18

REMARKS

    This Contract is made in five original copies, one copy to be held by the Seller, four copies to the Buyer.

The Buyer: Zhejiang telecom Co. NingBo Branch
Representative:

Date: March 23, 2001

The Seller: UTStarcom (China) Co., Ltd.
Representative:

Date: March 23, 2001

4

Translation Verification

    The foregoing represents a fair and accurate English translation of the original Chinese document.

Dated: May 11, 2001

By:	/s/ SHAO-NING J. CHOU
Name:	Shao-Ning J. Chou
Title:	Executive Vice President and Chief Operating Officer, China Operations

5

Technical Proposal for PAS^TM Xiao Ling Tong wireless network

Ningbo Telecommunication
Branch Co.
PAS^TM Xiao Ling Tong Wireless
Connection Network

Technical Proposal

UTStarcom (China) Co. Ltd.

Contents

CHAPTER 1  OVERVIEW			3
	1.1	Purpose	3
	1.2	Background	3
	1.3	Features and advantages of PASTM	3
	1.4	Definition	6
CHAPTER 2  NETWORKING PRINCIPLE			7
	2.1	Coverage priority	7
	2.2	Averaged calling volume in busy hours	7
	2.3	Assumption of calling loss	7
	2.4	Coverage method	8
	2.5	Frequency planning	8
CHAPTER 3  NETWORKING SOLUTION FOR PASTM SYSTEM OF NINGBO TELECOMMUNICATION BRANCH CO.			9
	3.1	City Introduction	9
	3.2	Division of coverage	9
	3.3	Introduction of division	9
	3.4	Network structure as shown in the following graph:	12
	3.5	Analyses of network capacity	12
	3.6	Statistics of transmission links	13
	3.7	Determination of ATC and [***] port number	15
	3.8	System redundancy	15
	3.9	Roaming analysis	15
	3.10	Network management system	16
		3.10.1  Constitution of network management	16
		3.10.2  Design of network management network	17

2

Chapter 1  Overview

    With the increasing demands on communication service and opening of China's telecommunication market, personal wireless communication that caters for popular requirements is gradually becoming the trend for the development of telecommunication.

    In order to help telecommunication enterprises to increase their competitiveness and solve the problems associated with telephone, UTStarcom Co. developed its PAS™ (Personal Access phone System) Xiao Ling Tong wireless telephone system to making use of the potential of current telephone resource.

1.1 Purpose

    This technical Proposal is made for Ningbo Telecommunication Branch Co. to facilitate the selection of wireless telephone project.

1.2 Background

    User:  Ningbo Telecommunication Branch Co.

    Supplier:  UTStarcom (China) Co. Ltd.

    Upon accomplishment of this project, it will greatly increase the competitiveness of Ningbo Telecommunication Branch Co. in the telecommunication business and effectively use the existing telephone resource.

1.3 Features and advantages of PAS™

    PAS™ wireless telephone system is an extension and supplement to the local telephone network by using high quality digital technology to connect wireless telephone XiaoLingTong system to the local telephone network, it makes conventional wire-type local telephone to be mobile within its coverage range and can freely dial any local, domestic and international telephone numbers without any restriction. In addition, it adopts one-side billing method that is equivalent to the conventional telephone billing standard. This makes the Wireless Telephone XiaoLingTong to be a cheap and convenient personal wireless telephone.

(1)

PAS™ system is an extension and supplement to local telephone network;

(2)

PAS™ is the new business shining point of local telephone and secondarily develop the resource of the local telephone system;

(3)

Dynamic frequency allocation with no need for frequency planning and short period of network construction [***];

(4)

Low cost and quick return of investment;

(5)

Support high density telephone business and is flexible for various coverage requirements;

(6)

Support high-speed data business[***];

(7)

"Green mobile phone" with low power [***], small but with high quality and long waiting hours;

(8)

Provide multiple value-added businesses: e.g. short messages, calling telephone number display, positioning of 110 warning.

(9)

Mixed networking of high and low power Radio Ports

By combining high and low power Radio Ports, coverage can be solved by high power Radio Ports, while calling volume by low power Radio Ports.

3

(10)

Support large calling volume

Using low power Radio Ports and group control technology can satisfactorily solve the problem of large calling volume.

(11)

Short construction period and easy to construct

As low power Radio Ports use twisted pairs to supply power, it greatly increases the easiness of construction and thus shortens construction period.

(12)

Radio Ports use remote power supply

Radio Ports using remote power supply facilitate to lower the overall cost of system and construction complexity.

(13)

With V5 connection, it facilitates upgrading to the next generation of network

(14)

WACOS technology

With the increasing demands for the new business of the current telecommunication network, more and more manufacturers and business operators are seeking new network architecture to construct multimedia business network with low cost and complexity.

PAS network-based WACOS system provides users with voice business and at the same time support multi-business IP connection, which is an ideal solution for the next generation network and facilitates to upgrade the current wireless local telephone system to the next generation telecommunication network.

(18)

Adjustability of Radio Ports

Facilitate to construct dedicated network, virtual network and increase calling volume.

(19)

Can provide multiple value-added businesses

(20)

Versatility of mobile phones

Can choose various mobile phones of different manufacturers.

(21)

High telecommunication channel and law cost ratio

Low construction cost per telecommunication channel.

    PAS^TM utilize the existing telephone resource and make it possible to communicate within the whole urban area and thus opens new business opportunity for telecommunication departments. PAS^TM has now been widely used in Southeast Asia and multiple provinces of China. In July 1996, PAS^TMparticipated in the connection network test organized by Telecommunication General Bureau; in March 1999, it passed the appraisal of connection network experts from Telecommunication Management Bureau of Ministry of Information Industry; PAS^TM uses a frequency range of 1900-1920MHz that is in conformance with the wireless connection frequency range by TDMA/TDD method approved by the National Wireless Committee.

    PAS^TM system has gained good results in some areas, for example, in Yuhang and Zhaoqing cities, [***] of users holds the wireless telephones as their second telephone, and the calling volume of each user increased [***]. With the development of the market, the income of wireless telephone business will increased rapidly. Within [***], the new users with wireless telephones increased [***] of the original wire-type telephone number. PAS^TM system has been installed in more than ten provinces in China with a capacity of more than [***] lines. The system has been welcomed for its stability.

4

1.4 Definition

    Explanations to some abbreviated English phases:

PAS	Personal access phone system
PS	Personal system handset
RP	Radio Port
RPC	Radio Port controller
RT	Local terminal
ATC	Air channel controller
LE	local exchanger
CDR	Detailed calling record

Chapter 2  Networking principle

2.1 Coverage priority

Priority	Type
Most important	Government organization; stores; main streets; living houses; professional market;
Important	Entertainments; streets; schools
Normal	Plants; hotels; open spaces

2.2 Averaged calling volume in busy hours

    The design requirement on averaged calling volume in busy hours is different for different range of a city, e.g. there will be more calling volume in the urban area and less calling volume in the sparsely lived suburb areas.

    The solution takes the following indexes:

Dense area [***]

Sub-dense area [***]

Normal area [***]

5

2.3 Assumption of calling loss

    The solution assumes

loss of air calling [***]

loss of wireless system [***]

2.4 Coverage method

    The solution uses mixed big and small stations with a consideration of range division.

2.5 Frequency planning

The system uses frequency range approved by Ningbo Wireless Committee for the PAS wireless connection network of Ningbo Telecommunication Branch Co.

Frequency range approved by the Wireless Committee

Frequency requirement of PAS^TM system:

Control carrier frequency(C-ch):[***]

Control carrier frequency(C-ch)  [***]

Voice carrier frequency(T-ch):[***] (excluding control carrier frequency)

6

Chapter 3  Networking solution for PAS^TM system of Ningbo Telecommunication Branch Co.

3.1 City Introduction

    Ningbo city is one of the 14 opening-up port cities, it has a long history and under its jurisdiction are Qingxian, Xiangshan and Linghai counties, and Yuyao, Cixi and Hongfa three county-level cities. The city proper consists of Haishu, Jiangdong, Jiangbei, Zhenhai and Zhaolun boroughs with a population of 5.3 million and an area of 9000 km².

3.2 Division of coverage

    The PAS Xiao Ling Tong solution covers the majority of Ningbo city, The coverage area shall be as follows: [***].

3.3 Introduction of division

    Each zone has different geographical environment and social environment, for example, some zones are busy commercial areas, some are residential areas, some are sparsely populated development zones and suburb areas, and some are densely populated old urban areas. In order to properly use the frequency resources and station equipments, we must first a clear planning as to the whole network and designate different expected calling volume and service priorities for different areas.

    Division definition: In the range has the same wireless environment and calling density is homogeneous and calling directions are generally the same.

    According to the status of Ningbo city, the coverage of urban area can be divided into three level's calling model:

A: [***]
B: [***]
C: [***]

Zone A: [***]

Calling density

    In this zone are some busy commercial areas such as bazaars, governmental organizations and commercial streets etc., and places such as commerce, schools, finance, hospitals, organization, and bus and railway stations. It features large population flow and high population density. Therefore, the geographical environment is relatively complex and calling volume is large.

    Zone A is mainly distributed in [***].

    As to zone A, we should consider both calling volume and coverage. Therefore, in this zone we use relatively more small power stations and at the same time adopt relatively higher group control ratio.

    In this zone we use [***]. In total we will use [***].

7

Zone B: [***]

Calling density:

    Relative to [***] calling volume is relatively small. In this zone are numerous residential areas, some department stores and supermarkets etc. It features good indoor coverage and relatively low calling volume, however, there may exist some local big calling volume demand.

    The [***] zone of Ningbo city mainly includes: [***].

    As to zone B, the main concentration is on coverage and also on calling volume for some local areas. We will use both high and low power stations and at the same time partly use group control method.

    In this zone we use [***]. In total we will use [***].

Zone C: [***]

Calling density:

    Relative to [***] mainly consists of areas with more open spaces. In this zone are plants, small building of 1~3 floors and even some open spaces. The zone features [***] calling volume, and therefore coverage is the main consideration.

    The [***] of Ningbo city the area excluding [***] with an area of around [***].

    As to the zone, we will only consider coverage and use [***].

    In this zone we will use [***]. In total we will use [***].

Coverage statistics

    The PAS project covers areas of types A, B and C with a total area of [***]. The system will use [***] with specifics as shown in the following table:

	Coverage	RPC number	200mwRP number	10mwRP number
Zone A	[***]	[***]	[***]	[***]
Zone B	[***]	[***]	[***]	[***]
Zone C	[***]	[***]	[***]	[***]
Total	[***]	[***]	[***]	[***]

3.4 Network architecture as shown in the following graph:

    [***]

Note: [***] and network management of Ningbo city urban area, Qingxian county, Zhaobei and Zhenghai will be located in [***] of Ningbo city. [***] will be connected by using Ethernet network. There will be a [***] interface for each RT, and the link is [***]. The connection of each RT to each [***] is [***] and to

8

commonly connected [***] is [***]; the connection of each [***] to each RT is [***]; PGTS1 connects to [***] by [***] respectively; the connection of [***] is by [***]; the connection of [***] of Yuyao city and Cixi city to PGTC is by [***] respectively. It is used to handle [***] roaming among [***].

3.5 Analyses of network capacity

    As to the high power station of wireless telephone system that usually installed on top of high building (above 25 meter), it features large coverage that spans the nearby [***] stations. According to the air interface protocol of PAS^TM system, mobile phones can at most use the business channels of the two nearby stations, therefore, the usable channel number within its coverage is [***].

    According to statistics analysis of UTStarcom Co. on coverage of high power station system, on average [***] of stations can use the nearby two stations, [***] of stations can use the nearby one station and only [***] of stations work individually. A system with [***] stations and [***] channels can provide a calling volume of [***], A system with [***] stations and [***] channels can provide a calling volume of [***] and A system with only [***] station and [***] channels can provide a calling volume of [***].

    Zone A:  As to a total of [***] power stations of zone A, the supplied calling volume is [***]. As to [***] power stations, in addition to [***] stations, there will another [***] complimentary stations that use group controls of [***] stations. As a result, supplied calling volume is [***]. The total calling volume for Zone A is [***].

    According to rules of chapter 3, on average each user has [***], the total supported users is:

[***]

    Zone B:  As to a total of [***] power stations of zone B, the supplied calling volume is [***]. As to [***] power stations, in addition to [***] stations, there will another [***] complimentary stations that use group controls of [***] stations. As a result, supplied calling volume is [***]. The total calling volume for Zone A is [***].

    According to rules of chapter 3, on average each user uses [***], the total supported users is:

[***]

    Zone C:  As to a total of [***] high power stations of zone C, the supplied calling volume is

[***].

    The total calling volume for Zone B is [***].

    According to rules of chapter 3, on average each user uses [***], the total supported users is:

[***]

9

The capacity of the whole system is shown in the following table:

Zones	RPC number	Station number	RT number	ATC number	Erl.	User number
Zone A	[***]	[***]	[***]	[***]	[***]	[***]
Zone B	[***]	[***]	[***]	[***]	[***]	[***]
Zone C	[***]	[***]	[***]	[***]	[***]	[***]
Total	[***]	[***]	[***]	[***]	[***]	[***]

3.6 Statistics of transmission links

[***]

Branch name	RP number	RPC number	E1 links between RPC-RTs
Integrated building	[***]	[***]	[***]
Jiangdong branch	[***]	[***]	[***]
Zhilan	[***]	[***]	[***]
Zheng Da Fang	[***]	[***]	[***]
Wangchun	[***]	[***]	[***]
Shuguang	[***]	[***]	[***]
Minglou	[***]	[***]	[***]
Zijuan	[***]	[***]	[***]
Qiwen	[***]	[***]	[***]
Wenjiao	[***]	[***]	[***]
Total	[***]	[***]	[***]

Note: The control room for actually storing RPCs should be in conformance with the project's requirements.

3.7 Determination of ATC and [***] port number

    Total number of [***] supported by the system/user number supported by each [***] interface. The capacity of each [***] interface can support is [***] and the system capacity is [***].

    As a result, [***] interface number = [***]. Considering the initial telephone number subscribed is not very large, the solution provide [***] interfaces and it can be extended after demands increase (there exists sufficient redundancy in [***]).

10

3.8 System redundancy

    In total the system has [***],[***] RTs and [***] ATCs, among which each RPC can at most connect [***] RPs, each RTs can at most connect [***] RPCs and RTs, ATCs can connect [***] E1s. Thus, the system has a redundancy of [***] RPs and [***] RPCs;each RT has a redundancy of [***] E1s.

3.9 Roaming analysis

    The system roaming can be classified as [***] roaming, i.e., [***].

    [***] roaming with the same zone is realized by using [***]. The connection of each [***] within [***] to [***] is by [***], the calling volume provided by [***] is [***], the calling volume supported by each [***] is [***], the total calling volume supported by [***] is [***]. Considering the calling-in and dailing-out effects, the roaming calling volume supported by the network is [***].At this stage, the designed calling volume for [***] is [***], therefore, the roaming rate is [***].

    Inter-city roaming is realized by using [***]. For roaming between [***], connections between [***]are by [***], the calling volume supported by [***] is [***]. Suppose that on average the calling volume per user is [***], then the supported roaming user numer is [***].

3.10 Network management system

3.10.1 Constitution of network management

    The network management system consists of operation maintenance management, data management, warning management and wireless connection management.

    The software used in network management is the network management platform NETMAN from UTStarcom Co. (As to specific functions, please refer to the technical manual)

(1)

Main features and functions of NETMAN platform:

•

Based on Windows 95/Windows NT operating system



•

Adopt 100 BASE-T/10 BASE-T Ethernet interface and RS232 & V.24 interface.



•

With user-friendly interfaces, vivid mapping images of network and equipments.



•

Easy to operate and with low cost.



•

Support remote dialing-in equipment monitoring.



•

Use multiple series interfaces and support multiple sub-network monitoring.



•

Multi-task management of communication system, and support synchronizing and asynchronizing commands.

    Operating functions of NETMAN system:

•

Editing and monitoring for multiple sub-network system mapping images of [***].



•

Remote monitoring and multi-function management.

11

•

Monitoring of warning, Trap login and fault analysis.



•

Get/set system configuration and running mode for each node.



•

Routing control and loop setup for equipments



(2)

Management of NETMAN to [***]

•

Connect and interrupt a [***].



•

Set a communication interface and [***].



•

Block/open [***].



•

Set maintenance mode for [***].



•

Reset [***].



•

Designate [***].



•

Collect and display the running status for the following equipments:

[***]
[***]
[***]
[***]
[***]
[***]

•

Collect communication business volume data per hour for [***].



•

Enquire the configuration data of control channel for [***].



•

Enquire the current warning status of [***].



•

Enquire the past warning data of system.



•

Install and edit running data, setup group control mode, [***].

3.10.2 Design of network management network

    The network management system of Ningbo city adopts the modulized design philosophy, and the LAN is constructed by using Ethernet bridge and Ethernet switch.

    The software used for maintenance terminal and calling terminals are based on TCP/IP protocol, the communication connection of Netman and CDR platform to each [***] constitutes the [***] of network management system. As [***] are concentrated in the integrated building, they are connected with LAN by using Ethernet network connection. The network management system of Ningbo city adopts the modulized design method, initially, all [***] in [***] are located in the

12

same building, [***] can be connected to [***] with LAN. [***] uses 10 BASE-T Ethernet interface, and [***] uses 100 BASE-T Ethernet interface, as is shown in the following graph:[***]

NinBo Telecom Branch PAS Wireless Access Network Equipment and Price List

1 Radio Port Controller(RPC)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

2 GPS Systme(GPS)[***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

3 Radio Port(RP)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

4 Wireless Access Equipment RT

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

5 Air Traffic Control (ATC,S-ATC) and Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

13

6 PAS Roming Gateway(PGTS/PGTC) And Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

7 S-ATC Hareware [***] and Software

		Sales Price (No Discount)
Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		No Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

8 NetMan software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

9 Netman system Hardware [***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

NingBo City ZhenHai District Telecom Branch PAS Wireless Access Equipment and Price List

1 Radio Port Controller(RPC)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

2 GPS System(GPS) [***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		No Discount (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

14

3 PR(RP)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

4 Wireless Access Equipment RT

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

5 Netman System Equipment [***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

Ci Xi city Telecom Branch PAS Wireless Access Network Equipment and Price List

1 Radio Port Control(RPC)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

2 GPS System(GPS)[***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	No discount (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

3 Radio Port (RP)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

15

4 Wireless Access Equipment RT

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	(31% Discount Price) (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

5 Air Roaming Module (ATC,S-ATC) and Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

6 PASRoaming Gateway (PGTS/PGTC) and Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

7 NetMan SystemSoftware

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

8 NetMan SystemHardware [***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		No Discount (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

YuYao City Telecom Branch PAS Wireless Access Equipment and Price List

1 Radio Port Control(RPC)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

16

2 GPSSystem (GPS)[***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	No Discount (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

3 Radio Port (RP)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

4 Wireless Access Equipment RT

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

5 Air Roaming Module (ATC,S-ATC) and Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

6 PASRoaming Gateway (PGTS/PGTC) and Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

7 NetMan System Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

8 NetMan System Hardware [***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		No Discount (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

17

NingBo City BeiLun District Telecom Branch PAS Wireless Access Equipment and Price List

1 Radio Port Control(RPC)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

2 GPS System(GPS)[***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	No Discount (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

3 Radio Port (RP)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

4 Wireless Access Equipment RT

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

NetMan System Hardware [***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

Jin County Telecom Branch PAS Wireless Access Equipment and Price List

1 Radio Port Control(RPC)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

18

2 GPS System (GPS)[***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	No Discount (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

3 Radio Port (RP)

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

4 Wireless Access Equipment RT

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

5 Air Roaming Module (ATC,S-ATC) and Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

6 PASRoaming Gateway (PGTS/PGTC) and Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)	Discount Price	Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

7 NetMan System Software

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		Discount Price (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

19

8 NetMan System Hardware [***]

Description	Deployment Description	Product Number	Unit Price(USD)	Quantity	Total (USD)		No Discount (USD)
[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]

District	Price after [***] Discount(USD)	User
[***]	[***]	[***]

PRICE SUERVEY PER SYSTEM 16-Mar-01

SYSTEM		Total Price (USD)	Total price (RMB) at the rate of: [***]
	Sub-Total for Equipment	[***]	[***]
2. SERVICE	[***]	[***]	[***]
		[***]	[***]
		USD	RMB
TOTAL PRICE (FOB Hangzhou)		[***]	[***]

20

QuickLinks

Exhibit 10.62

[Translation]
CONTRACT
Translation Verification
Contents
NinBo Telecom Branch PAS Wireless Access Network Equipment and Price List
NingBo City ZhenHai District Telecom Branch PAS Wireless Access Equipment and Price List
Ci Xi city Telecom Branch PAS Wireless Access Network Equipment and Price List
YuYao City Telecom Branch PAS Wireless Access Equipment and Price List
NingBo City BeiLun District Telecom Branch PAS Wireless Access Equipment and Price List
Jin County Telecom Branch PAS Wireless Access Equipment and Price List

PRICE SUERVEY PER SYSTEM 16-Mar-01

EX-10.63

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[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.63

MANUFACTURING LICENSE AGREEMENT

    THIS AGREEMENT DATED THIS 6TH DAY OF MARCH 2001 IS MADE BETWEEN:

HIMACHAL FUTURISTIC COMMUNICATIONS LTD, a company incorporated under the Companies Act, 1956, having its principal office at No. 8, Commercial Complex Masjid Moth, Greater Kailash II, New Delhi 110048, India (hereinafter referred to as "HFCL"), which expression shall unless repugnant to the context or meaning hereof, mean and include its successors and permitted assigns of the one Part;

AND

UTStarcom, Inc. a company established under laws of Delaware in the United States of America, having its principal office at 1275 Harbor Bay Parkway, Suite 100, USA (hereinafter referred to as "UTStarcom"), which expression shall unless repugnant to the context or meaning hereof, mean and include its successors and permitted assigns of the other Part.

    HFCL and UTStarcom are hereinafter collectively referred to as the "Parties", and individually as a "Party".

WHEREAS:

    A. UTStarcom designs, develops, manufactures, markets and sells digital loop carriers, including the Product (as hereinafter defined);

    B. HFCL is in the business of manufacturing and supplying telecommunications equipment and wishes to manufacture and distribute the Product;

    C. For this purpose, HFCL wishes to obtain from UTStarcom a license to manufacture and sell the Product in India;

    D. UTStarcom is willing to license to HFCL the right to manufacture the Product in India for sale in India;

    E. HFCL has explained to UTStarcom the need to manufacture the Product on a [***] basis in order to be competitive; and

    F. The Parties intend that with respect to manufacturing the Product on a [***] basis, HFCL will require to obtain components and material from [***] sources and other [***] sources wherever possible.

    For valuable consideration, including the mutual promises contained in this Agreement, the Parties agree to the following terms and conditions:

1.  DEFINITIONS

    Unless the context otherwise requires, the following expressions shall have the following respective meanings and terms defined in the text of this Agreement shall have the meanings respectively indicated:

    1.1 "Agreement" shall mean this Agreement between HFCL and UTStarcom including any and all appendices attached to this Agreement.

    1.2 "Effective Date" means:

    (a) the date of this Agreement, or

    (b) the date on which all consents, licenses, permits and approvals of any relevant governmental or non-governmental agency or body necessary to consummate the transactions contemplated in this Agreement including Secretariat for Industrial Assistance/Reserve Bank of India approval in terms of Article 7, have been obtained, released or issued, as the case may be, whichever is later.

    1.3 "Improvements" means:

    (a) all information, of a nature similar to the Technical Information, that UTStarcom acquires or puts into use during the term of this Agreement for purposes of manufacturing the Product ("UTStarcom Improvements"); and

    (b) all information of a nature similar to the Technical Information that HFCL devises or develops in connection with or for purposes of manufacturing the Product including improvements in terms of Sections 6.9 and 6.10 below ("HFCL Improvements").

    1.4 "Product" means the [***] as more fully described in Exhibit A and certain upgrades from time to time in the same product hierarchy.

    1.5 "Technical Information" means such designs, drawings, specifications and other information that UTStarcom uses for the purposes of manufacturing the Product, including written documentation and unwritten know-how used by UTStarcom in the assembly, manufacture, testing, sale, use and maintenance of the Product, as more fully described in Exhibit B.

    1.6 "Territory" shall mean [***].

2.  TECHNICAL INFORMATION

    2.1 UTStarcom shall, on a time scale mutually agreed by the Parties and commensurate with the reasonable requirements of HFCL in that behalf supply to HFCL such Technical Information [***] necessary to enable HFCL to assemble the Product at HFCL's plant(s) in the Territory.

    2.2 UTStarcom shall not be obliged to make any alterations to any document, extract or copy which it supplies hereunder as part of the Technical Information or in relation to any UTStarcom Improvement.

    2.3 HFCL shall use the Technical Information, know-how and UTStarcom Improvements only for the manufacture of the Product at the manufacturing plant of HFCL in the Territory and shall not use any Technical Information, know-how or UTStarcom Improvements in any manner or for any other purpose not expressly authorized by this Agreement. HFCL shall not part with or dispose of, whether by sale, transfer, gift or other disposition, any Technical Information, know-how or UTStarcom Improvements except as expressly and previously permitted by UTStarcom in writing.

    2.4 In the event that any deficiency, inaccuracy, error or other defect shall at any time become apparent in any Technical Information so supplied by UTStarcom, UTStarcom shall, upon receiving a written request from HFCL, promptly use all reasonable endeavors to make and supply the appropriate corrections.

    2.5 If, within [***] of executing this Agreement, HFCL does not commence manufacturing the Product; then UTStarcom shall have the right to deem this Agreement terminated, effective upon UTStarcom's giving written notice to HFCL. Upon receiving such notice, HFCL shall, in addition to its obligations and liabilities under Sections 12.3, 12.4 and 12.6 of this Agreement and its obligation to pay the technology license fee in accordance with the terms of this Agreement,

2

cease using and shall have no right to use any of the Technical Information, know-how and UTStarcom Improvements.

    2.6 Notwithstanding Section 2.5, UTStarcom may in its absolute discretion allow HFCL a reasonable extension to commence manufacturing the Product of up to [***] term if the failure to start manufacturing the Product arises from a force majeure or is substantially caused by UTStarcom's failure to provide the Technical Information in a timely manner, unless such failure on the part of UTStarcom is attributable to an act or omission of HFCL or is directly caused by any reason substantially attributable to the acts of a third party reasonably within the control of HFCL.

    2.7 The Parties acknowledge that except as specifically licensed to HFCL under this Agreement, UTStarcom owns or has licenses to, to the exclusion of HFCL, all rights, title and interest in the Technical Information, know-how, UTStarcom Improvements and the Product, as they exist now and as they may exist in the future, and in all related know-how and all software that may be provided by UTStarcom as part of or in connection with the Technical Information, know how or UTStarcom Improvements for the manufacture of the Product. HFCL warrants that its use of any of the Technical Information, know-how or UTStarcom Improvements for manufacture of the Product shall not directly or indirectly create in or for HFCL any right, title or interest in such Technical Information, know-how or UTStarcom Improvements, except as expressly specified in this Agreement.

3.  IMPROVEMENTS.

    3.1 For [***] after the Effective Date, subject to grant of appropriate export licenses in the United Stated of America, UTStarcom shall supply HFCL with Technical Information relating to UTStarcom Improvements including software upgrades that are actually incorporated by UTStarcom into the Product. Upon request [***] of HFCL, UTStarcom shall furnish engineering personnel to provide the know-how to allow HFCL to obtain the benefits of the UTStarcom Improvements, upon terms and conditions related to royalty payments for Improvements to be mutually agreed to in writing. All information contained in UTStarcom Improvements, including the related know-how, when provided pursuant to such mutual agreement, shall become a part of the Technical Information.

    3.2 Section 3.1. does not apply to new products. The manufacturing information on certain upgrades—[***] shall be supplied [***] by UTStarcom. UTStarcom expects these designs to be mature by the [***].

4.  TECHNICAL ASSISTANCE; QUALITY CONTROL; VISITS

    4.1 UTStarcom shall, at HFCL's request and prepayment of [***] applicable charges and expenses, including but not limited to [***] and such other [***] expenses, and subject to the availability of UTStarcom personnel, take all reasonable steps to arrange for UTStarcom engineers and technicians, as appropriate to work at the plant in India where HFCL will manufacture the Product, to establish and bring into operation the manufacturing processes of the Product and to train HFCL personnel, as may be required by HFCL. UTStarcom shall determine in its sole discretion the number, identity and level of expertise of the personnel required to provide technical assistance to HFCL, and HFCL shall obtain all necessary prior approvals, including all immigration permits and authorizations, from the Government of India for UTStarcom engineers and technicians to visit the plant and shall pay UTStarcom in accordance with UTStarcom's standard charges then in effect for such services.

    4.2 For the purpose of familiarizing HFCL's staff with the methods used by UTStarcom in relation to the manufacture of the Product, HFCL shall be entitled during the term of this Agreement, on request, but in each case at a time reasonably convenient to UTStarcom, to send

3

suitably qualified employees of HFCL, not exceeding [***] in number, to UTStarcom's facilities for visits not exceeding in the aggregate [***] per [***]. UTStarcom will also host visits by employees of HFCL's customers on terms and conditions subject to mutual agreement. HFCL shall be responsible for [***] such employees' [***] expenses in connection therewith. HFCL shall [***] UTStarcom from all damages, losses, claims and expenses of any nature whatsoever arising from any deliberate act or omission of HFCL's personnel while with UTStarcom for the purpose of such training. Additionally, HFCL shall cause all such personnel to execute and abide by any and all confidentiality agreements and other requirements that UTStarcom may reasonably request.

    4.3 All information communicated by UTStarcom to HFCL pursuant to Sections 4.1 and 4.2 shall constitute Technical Information of UTStarcom and HFCL shall keep all such information confidential as is required by Article 5, whether or not elsewhere described and whether or not summarized in writing and given by UTStarcom to HFCL.

    4.4 HFCL shall procure all necessary approvals, licenses, no-objection certificates, sanctions, permits, permissions, waivers, certificates, consents, and other such items from the concerned governmental authorities as are required under law or reasonably recommended by UTStarcom's counsel, including as may be required under the Environmental Protection Act, Factories Act and other such laws, to enable HFCL to manufacture the Product in accordance with this Agreement. In manufacturing the Product, HFCL shall observe all applicable laws in the Territory with respect to manufacturing, labeling and installation of the Product.

    4.5 UTStarcom shall have the right, [***] and on reasonable prior notice to HFCL, to inspect HFCL's premises and the premises of any of HFCL's permitted sub-contractors from time to time engaged in assembling or testing of the Product or any parts or components of the Product, for purposes of reviewing the quality of HFCL's manufacturing process and of the end product. If at any time UTStarcom determines that HFCL's process or the end product does not conform to UTStarcom's requirements, it shall so inform HFCL. Upon receiving notice of such non-conformance, HFCL shall take all steps required to cause its processes and the end products to conform to UTStarcom's requirements and provide a written undertaking to UTStarcom of such compliance.

    4.6 HFCL undertakes to conform to UTStarcom's quality standards. In order to ensure HFCL's compliance with UTStarcom's quality standards, qualitative specifications, descriptions and directions specified by UTStarcom from time to time, in relation to the manufacture of the Product, HFCL undertakes to manufacture the Product in accordance with the Technical Information provided, the applicable laws of the Territory and as per standards and procedures that are equivalent to that maintained by UTStarcom in its own manufacture of the Product. HFCL shall make no change or alteration in the Product manufactured without the prior written consent of UTStarcom. UTStarcom reserves the right to access into and inspect the premises of HFCL and of any subcontractors in order to ascertain that the quality of the Product meets UTStarcom's quality standards. Upon request of UTStarcom or UTStarcom's designated agents, HFCL shall furnish UTStarcom with information and copies of documents necessary for UTStarcom to obtain assurance that the Product is manufactured using the Technical Information and know-how in accordance with this Agreement and in compliance with applicable laws.

    4.7 HFCL shall implement such procedures or regulations as UTStarcom may consider necessary to ensure conformity to UTStarcom's quality standards and to impose corrective actions as deemed necessary.

5.  CONFIDENTIALITY

    5.1 UTStarcom discloses the Technical Information, know-how and UTStarcom Improvements (in this Article collectively referred to as "Confidential Information") to HFCL pursuant to this

4

Agreement solely on a confidential basis, conditioned upon HFCL not disclosing any portion of any Confidential Information to any third party, except to the extent such Confidential Information is needed by customers of HFCL for use, maintenance or repair of the Product. Disclosure of any Confidential Information to any officer, director, consultant or employee of HFCL for the manufacture of the Product will be on "as needed basis" and all such Confidential Information shall be subject to the confidentiality requirements of section 5 of this agreement. HFCL shall use the Confidential Information only for the assembly, manufacture, testing, repair, marketing, sale and use of the Product strictly in accordance with the terms of this Agreement and for no other purpose.

    5.2 HFCL undertakes that it will keep the Confidential Information communicated to it by UTStarcom confidential.

    5.3 The obligations of HFCL with respect to the Confidential Information shall not apply to any information which,

    (a) is already in HFCL's possession at the date of first communication by UTStarcom and HFCL can reasonably demonstrate that it was in its rightful possession at the date of first communication by UTStarcom;

    (b) is now or, in the future becomes public knowledge otherwise than by reason of any breach of this Agreement by HFCL; or

    (c) is received by HFCL from any other person in good faith, and who has no restriction with respect to disclosing such Confidential Information.

    5.4 All documents and extracts comprising or containing Technical Information and Improvements, including the copyright therein, shall be and remain the property of UTStarcom, and HFCL shall not in any way reproduce such material.

    5.5 The provision of confidentiality shall remain into force for a period of five years after expiration or termination of this Agreement.

    5.6 HFCL understands that disclosure of Confidential Information may irreparably harm UTStarcom. In the event of breach or threatened breach of obligations pertaining to Confidential Information, UTStarcom shall be entitled to seek injunctive relief and any other remedy available at law or equity.

6.  LICENSES

    In consideration of the performance of the Parties' respective obligations herein:

    6.1 UTStarcom hereby grants to HFCL [***] license to use the Technical Information to assemble, manufacture, and test the Product in the Territory.

    6.2 UTStarcom hereby grants to HFCL [***] license to use, sell, lease, install, maintain and repair the Product in the Territory.

    6.3 UTStarcom hereby grants to HFCL the license to assemble, manufacture, test, use, sell, lease, install, maintain and repair, in accordance with Sections 6.1 and 6.2, the Product under the Patents owned or controlled by UTStarcom and under which UTStarcom has the right to grant such a license.

    6.4 UTStarcom hereby grants to HFCL the license to print, copy and distribute Product related user documentation in paper, electronic or CDROM media in the Territory in conjunction with the sale of Product.

5

    6.5 To the extent any of the licenses described in Sections 6.1, 6.2 or 6.3 include software of any nature, the right granted with respect to such software shall be a [***] license solely with respect to the object code of such software:

    (a) to [***] such software only to customers of HFCL for use with the Product in the Territory; and

    (b) to use such software for HFCL's own purposes in operating the Product to the extent provided in this Agreement.

    6.6 In granting these licenses to HFCL, UTStarcom does not in any way grant any ownership interest in any of the software referred to in Section 6.4 and does not grant any interest to utilize, discover or in any way obtain the source code or any human perceivable version of any such software. UTStarcom reserves all rights not expressly granted under this Agreement by UTStarcom to HFCL.

    6.7 The license and rights granted as above in Sections 6.1, 6.2 and 6.3 shall at all times be subject to the terms and conditions of this Agreement, shall be limited to the sole extent required for the purpose for which they are granted and shall remain in effect only as long as HFCL fully complies with the terms and conditions of this Agreement.

    6.8 HFCL shall not, and shall require and ensure that all of its customers and users do not, reverse compile, reverse engineer, reverse assemble or otherwise attempt in any way to obtain or create any source code or other humanly perceivable version of the software. HFCL shall require its customers to enter into such sublicenses with its customers which shall include, among other things, provisions to safeguard and keep secret UTStarcom's Improvements, know-how, Technical Information and all software and which shall contain such of the terms and conditions as may be agreed from time to time by UTStarcom and HFCL. In addition, HFCL shall supply or include UTStarcom's intellectual property notices in all copies made of all of UTStarcom supplied software.

    6.9 HFCL shall inform UTStarcom immediately upon the creation of any perceived or actual modification, improvement or other change to the Product or to the Technical Information conceived, developed, modeled or in any way worked on by HFCL or any agent, representative, contractor or employee of HFCL (an "HFCL Improvement").

    6.10 HFCL hereby assigns, transfers and coveys to UTStarcom all rights, title and interest in every HFCL Improvement, and UTStarcom hereby grants to HFCL a license, identical in terms to the license that UTStarcom grants to HFCL pursuant to this Agreement with respect to the Technical Information, to all HFCL Improvements. HFCL shall take all such further acts and execute and deliver to UTStarcom all such instruments as may be required, or reasonably recommended by counsel, to perfect, register or enforce UTStarcom's ownership of the rights conveyed under this Section 6.10 or to carry out the intent and purpose of this Agreement.

    6.11 Except as specifically permitted by this Agreement or in writing signed by UTStarcom, HFCL shall not, and shall not have the right to, utilize sub-contractors for the purposes of assembling or testing the Product.

    6.12 This Agreement does not grant any right to HFCL, and HFCL shall have no right, interest or title to use the trademark "UTStarcom" or any other trademark, trade name, design or logo of UTStarcom, except that HFCL may use the printed and unstylized name, "UTStarcom, Inc." for the limited use required by Section 6.13. Furthermore, HFCL shall not use any trademark, trade name, design or logo that may be confusingly similar to any of the trademarks, trade names, designs or logos of UTStarcom, nor shall HFCL take any action that

6

would in any way be detrimental to UTStarcom's rights and ownership in such trademarks, trade names, designs and logos.

    6.13 HFCL shall include written notices in all advertising literature, sales brochures and the like, as well as on the Product, to the affect that the Product "is manufactured under license from UTStarcom, Inc."

    6.14 UTStarcom shall decide, in consultation with HFCL, what logo(s) are to be displayed on Product. HFCL shall comply with such a requirement.

    6.15 HFCL expects that following will be minimum sale of lines of the product year wise:

Year 2001  [***]
Year 2002  [***]
Year 2003  [***]
Year 2004  [***]
Year 2005  [***]

    UTStarcom reserves the right to review HFCL's sales performance [***] and make this agreement [***] if failure to achieve the sales targets is primarily due to lack of proper effort on HFCL's part.

7.  CONSIDERATION.

    7.1 HFCL shall pay UTStarcom a technology license fee in upto [***] instalments, not exceeding [***], to be calculated in terms of para 7.2. The first [***] payment will be due immediately on completion of following activities:

    [***]

    The first payment shall be due on the last day of first [***] and subsequent payments shall be done in the same manner. The calendar year is to be divided into the following [***]. Subsequent installments will be due on the last day of each of the [***] following the due date of the first payment. The payment shall be made within [***] from the invoice date.

    7.2 The amount of each installment payable would be calculated based upon the quantity of Product manufactured and shipped by HFCL in the [***] immediately preceding the date of the payment. The rate at which the technology license fee adjustment is calculated varies with the different types of Product components manufactured and is detailed in Exhibit A.

    7.3 This Agreement will automatically terminate upon the occurrence of the earlier of the two events:

    (a) The cumulative amount of the license fee payment under this Agreement equaling or exceeding [***]

    (b) The completion of [***] installments of [***] payments of license fee.

    This agreement may be renewed immediately upon termination with mutual agreement of HFCL and UTStarcom.

    7.4 Additionally, HFCL shall

    (a) pay UTStarcom a [***] software license fee of [***], payable within [***] of signing of this agreement and

    (b) purchase from UTStarcom or a UTStarcom authorized agent, all application specific integrated circuits, (ASIC) or field programmable gate arrays (FPGAs) that HFCL incorporates into a Product, in accordance with the pricing in Exhibit "A" and terms of Exhibit "C."

7

    (c) not attempt to manufacture, purchase, or acquire in any other way the components referred to in 7.4(b) from any source other than UTStarcom without the prior written approval of UTStarcom.

    7.5 HFCL shall be responsible for applying for and obtaining all approvals required for remitting payments to UTStarcom required under this Agreement, including Secretariat for Industrial Assistance/Reserve Bank of India approval. HFCL shall use all reasonable diligence and expediency to obtain all required approvals for remitting payments to UTStarcom required under this Agreement. If HFCL is unable to obtain any required approval for remitting payments to UTStarcom required under this Agreement within [***] of signing this Agreement, then this Agreement shall terminate in accordance with Section 12.2(f), and the provisions of Sections 12.3, 12.4 and 12.7 shall apply.

    7.6 HFCL shall make all payments under this Agreement [***], without recourse to UTStarcom for any reimbursement, contribution or indemnity. Notwithstanding its obligations pursuant to the prior sentence HFCL shall deduct [***] on the amount to be remitted to UTStarcom on account of:

    (a) any fee or other amount to be paid by HFCL to UTStarcom; or

    (b) UTStarcom with respect to any such fee or

    (c) if such tax is required by the Government of India to be paid by UTStarcom or withheld by anyone paying to UTStarcom.

    7.7 Whether as a result of any payment under this Agreement or any characterization by the Government of India or any payment due under this Agreement, HFCL shall ensure that the tax is withheld and paid on behalf of UTStarcom and all other parties liable for such tax and shall also provide to UTStarcom, immediately after each such tax payment, an official tax receipt or other evidence of payment issued by the tax authority with respect to such tax. HFCL shall indemnify and hold UTStarcom harmless from any liability with respect to any tax, including all taxes levied on this Agreement, duties, levies or other fees of any kind whatsoever, which become payable as a consequence of this Agreement, inside the Territory other than the withholding tax as proposed in para 7.6.

    7.8 [***] shall be responsible for taxes on its net income arising in the United States as a result of its providing the Technical Information and assistance in connection with this Agreement.

    7.9 The Parties acknowledge that all payments set forth in this Agreement are not based entirely upon the trade secret nature of the Technical Information or the anticipation of patent protection, but also reflect the value of certain information that is not generally known to the public being available to HFCL for its use to manufacture, test, market and sell the Product.

    7.10 All payments from HFCL to UTStarcom shall be in [***].

    7.11 HFCL shall keep and maintain all appropriate records including records of every Product manufactured in such form and manner that all payments payable under this Agreement to UTStarcom may be readily and accurately determined. Such records shall include, without limitation, all information necessary for HFCL's auditors to prepare the reports provided for in this section. Beginning with the signing of this Agreement and for up to [***] after either the termination of this Agreement UTStarcom shall have the right, [***] to retain independent auditors to review HFCL's records with respect to every Product manufactured to verify the accuracy of the statements provided and amounts paid pursuant to this Article. If the auditors find an overpayment or an underpayment, the difference shall be accounted for in the subsequent statement of accounting and payment. If the auditor's review verifies an underpayment in excess of [***] of the royalties payable for any [***] period under review, or if the auditors determine that

8

HFCL has not maintained sufficiently appropriate records, HFCL shall pay all costs associated with the auditor's review.

    7.12 The Application Specific Integrated Circuit (ASIC) chips listed in Exhibit A may only be procured by HFCL as per procedures approved by UTStarcom. Initially the following procedures are approved:

    (a) HFCL may purchase the listed ASICS from UTStarcom. UTStarcom agrees to charge not more than a [***] surcharge on the cost of procurement and programming of these items.

    (b) HFCL may purchase the listed ASICS directly from third party vendors and send them to UTStarcom's facility in China for programming. HFCL agrees to pay a [***] programming fee per ASIC chip thus programmed.

    In addition, UTStarcom will explore the feasibility of establishing a programming facility in India, either at a third party's premises or in HFCL's premises. Under such a scenario, UTStarcom will invoice HFCL the actual cost of such programming incurred by UTStarcom. UTStarcom reserves the right to modify the list of controlled ASICS in Exhibit A at any time by informing HFCL of the change in writing. UTStarcom will make a good faith effort to reduce the size of the list to the minimum in order to contain administrative and overhead costs.

8.  COLLATERAL SUPPLIES.

    To the extent necessary to support HFCL in its manufacturing activity, UTStarcom undertakes, subject to UTStarcom's availability and the parties' agreement on terms, reasonably to supply HFCL with assembly, and testing tools, equipment and parts, as the parties determine separately in writing. Except as may be expressly provided in such other written agreement, UTStarcom shall have no obligation of any nature to supply any part or component to HFCL.

9.  NOVATION; ASSIGNMENT.

    This Agreement is personal to HFCL and HFCL shall not have any right to dispose in any way, by lease, transfer, novation or assignment, partially or totally, any license granted to it under this Agreement, to any third person, in form of a sub-license or any other form, unless previously authorized in writing by UTStarcom. Any attempted assignment or delegation in violation of this Article 9 shall be void.

10. PATENTS, MARKING.

    10.1 UTStarcom shall not be liable to indemnify HFCL against any loss sustained by it as the result of any claim made, or any action brought by, any third party for infringement of any letters, patent, registered design, or like instrument of privilege by reason of the manufacture, assembly, use or sale by HFCL of the Product using the Technical Information, the Improvements or any other information supplied or to be supplied to HFCL pursuant to this Agreement. If any such claim is brought against HFCL, UTStarcom shall take all reasonable steps to provide HFCL with copies of UTStarcom's documentation to assist HFCL in defending itself under such claim. UTStarcom confirms that all intellectual property rights for proprietary software developed by UTStarcom is held by UTStarcom, except to the extent licensed such as pursuant to this Agreement.

    10.2 UTStarcom shall not be bound to take legal proceedings against any third party in respect of any infringement of letters, patent, registered design or like instrument of privilege which may now or at any future time be owned by it.

    10.3 HFCL shall indemnify and hold UTStarcom, [***] harmless from and against all losses, costs, expenses and damages, including reasonable attorneys' fees, resulting from or in connection

9

with any breach by HFCL of this Agreement or any claim by third persons resulting from or in connection with HFCL's assembly, manufacture, marketing, sale or use of Product, to the extent such third party claim does not arise from any design, act or omission directly attributable to UTStarcom, subject to UTStarcom having notified HFCL promptly in writing of any such claim, tendered to HFCL the defense or settlement of any such claim at HFCL's expense, and cooperated with HFCL, at HFCL's expense, in defending or settling such claim.

    10.4 HFCL shall defend, indemnify and hold UTStarcom harmless from and against all claims, causes of action, lawsuits, loss, expenses, obligations, damages, and liability, including costs of defense and reasonable attorney's fees, whether in contract or tort, including negligence and strict liability, as a result of property damage, personal injuries or death of any persons arising out of, or proximately caused by, in whole or in part, any action or inaction by HFCL or any defect, including any design defect, attributable, to or involving the manufacture, use, lease or sale of any Product.

    10.5 HFCL shall reproduce in all copies that it makes or causes to be made of any aspect of the Product all patent, copyright and proprietary notices included by UTStarcom on any publication, software and firmware provided in connection with this Agreement so as to continue to maintain UTStarcom's rights therein. If instructed in writing by UTStarcom, HFCL shall modify such notices in order to comply with all applicable laws.

11. GOVERNING LAW AND ARBITRATION.

    11.1 This Agreement shall be governed by and interpreted and construed in accordance with the laws of India. Each Party consents to the -exclusive personal jurisdiction of the courts of India. The Parties specifically [***] the application of the United Nations Convention on the International Sale of Goods.

    11.2 The Parties shall seek to resolve all disputes arising out of or in connection with this Agreement, including the construction, validity, performance or breach of this Agreement, without resorting to litigation or arbitration. Prior to either Party utilizing the remedies detailed in Section 11.4, it shall first notify the other Party that the notifying Party wishes to resolve a dispute, controversy or claim that it has with the other Party arising out of or connected to this Agreement (a "Dispute"). As soon as practical and no later than [***] after the other Party receives a notice of Dispute, each Party shall appoint a dispute representative ("Dispute Representative") who shall contact the other Party toward seeking a resolution to the Dispute.

    11.3 All discussions, correspondence and negotiations between the Parties pursuant to their seeking a resolution in accordance with Section 11. 1 shall be exempt from discovery and production, and shall not be admissible in any litigation or arbitration with respect to the Dispute, without the written consent of both Parties. Documents identified in or provided with such communication, which are not prepared for purposes of the Dispute resolution in accordance with Section 11.2 shall not be so exempted and may, if otherwise admissible, be admitted in evidence in any such arbitration or litigation.

    11.4 If the negotiations taken place pursuant to Section 11.2 do not resolve the Dispute within [***] of the other Party's receipt of the notice of Dispute, either Party may submit the Dispute to binding arbitration to be held in London, England pursuant to the Rules of Conciliation and Arbitration of the International Chamber of Commerce (the "ICC") in accordance with the laws of England, modified as follows:

    (a) All proceedings, filings and submissions shall be made solely in English, the matter shall be heard before a single arbitrator who must be selected by the mutual consent of both Parties, failing which by the ICC within [***] of submission of the respondent's answer to the

10

demand for arbitration, and the arbitrator shall be an attorney experienced in international commercial transactions and trained in the common law system.

    (b) Each Party shall be entitled to pre-hearing depositions of not more than three percipient witnesses.

    (c) Each Party shall identify all witnesses, including experts, and produce copies of all documents to be used at the hearing at least 90 days prior to the hearing.

    (d) All experts identified under Section 11.4(c) shall be subject to deposition by the opposing party at any time prior to the discovery cut-off in Section 11.4(e).

    (e) All discovery must be completed at least 30 days prior to the hearing.

    (f)  The hearing on the matter shall occur within 180 days after selection of the arbitrator.

    (g) The arbitrator's decision shall be in accordance with the law of England, except that exemplary damages shall not be awarded.

    (h) The arbitrator shall be deemed instructed by this Agreement and the Parties to issue a written decision within 60 days after completion of the hearing.

    (i)  The arbitrator may award costs and expenses, including reasonable legal fees, to the prevailing Party.

    (j)  Notwithstanding the foregoing procedures in this Section 11.4, the Parties may modify these procedures by written agreement.

    11.5 Notwithstanding the provisions set forth above in this Article 11, UTStarcom may initiate litigation for the purpose of seeking an injunction or other relief, or other equitable relief in order to seek enforcement of any equitable remedy referred to in Section 5.6.

    11.6 The Parties shall continue to perform the Agreement during the arbitration proceedings, and neither Party shall withhold any payment due or otherwise payable under this Agreement unless any such payment is, or forms a part of, the subject matter of the arbitration proceeding.

    11.7 The Parties shall consent to such extension of time as may be necessary for the arbitrators to make their award.

12. TERM AND TERMINATION.

    12.1 Subject to the following provisions of this Article, this Agreement and the rights and licenses hereby granted or agreed to, shall continue in force for [***] or until the termination of the Agreement according to the provisions of article 7.3, whichever is earlier.

    12.2 Without affecting UTStarcom's rights pursuant to Section 2.5, in the event that HFCL shall at any time during the term of this Agreement:

    (a) be in breach of any of its obligations under this Agreement, including the obligations to purchase the ASICS pursuant to Article 7, where such breach is irremediable or, if capable of remedy, is not remedied within [***] of notice from UTStarcom requiring its remedy;

    (b) be or become bankrupt or insolvent, unable to pay its debts as they fall due;

    (c) admit in writing that it is unable to pay its debts, make any composition with its creditors, have a receiver or manager appointed for the whole or any part of its undertaking or assets or, otherwise than as a solvent company for the purpose of and followed by an amalgamation or reconstruction where-under its successor shall be bound by its obligations

11

hereunder, commence to be wound up or undergo any analogous act or proceeding under the laws of the state in which it is registered;

    (d) be acquired or otherwise come under the direct or indirect control of a person or persons other than those controlling it as of the Effective Date;

    (e) fail to receive required approvals for remitting payments to UTStarcom as required under this Agreement or failure to make any payment to UTStarcom as and when due pursuant to this Agreement including payments under Article 7; or

    (f)  terminate this Agreement for any reason other than the expiration of [***] after the Effective Date if the term of this Agreement has not been previously extended by mutual written agreement, subject to any required regulatory approvals, then, and in any such event, UTStarcom may forthwith by notice in writing terminate this Agreement, and thereupon all rights and licenses hereby granted or agreed to be granted by UTStarcom pursuant to this Agreement shall immediately terminate.

    12.3 Upon termination, HFCL shall immediately cease manufacturing the Product using the Technical Information, know-how and any Improvement and shall immediately desist from using the Technical Information, know-how and all Improvements for any purpose whatsoever. HFCL shall promptly, on UTStarcom's request, and return to UTStarcom at HFCL's cost or destroy all copies of all documents and extracts comprising or in any way containing any Technical Information, know-how or Improvements. HFCL shall procure a declaration from its board of directors as well as its legal counsel to be delivered to UTStarcom confirming that all Technical Information, know-how and Improvements, including all designs, drawings, models, samples, plans, documents, specifications and other information supplied to it by UTStarcom and all copies of such information in HFCL's possession have been destroyed or returned. The Parties expressly agree that UTStarcom shall not be liable or responsible to HFCL or to any third party claiming under or through HFCL for any claims, damages, or costs in any way whatsoever, arising in connection with any termination of this Agreement.

    12.4 Upon termination of this Agreement, all rights and obligations granted under or imposed by this Agreement shall immediately cease and terminate except for the rights, duties and obligations which by their nature one would reasonably expect to survive, including the rights and obligations covered in such provisions in this Agreement with respect to payments, the sublicensed use of technology, Confidential Information, trademarks, indemnities, warranties, remedies and limitations of liability, independent contractors, export controls, governing law, arbitration and jurisdiction, assignment, severability, publicity, legal expenses, notices, subject headings, waiver and this Agreement being the entire agreement of the Parties.

    12.5 UTStarcom shall not be in breach of this Agreement or liable for any damages, losses or expenses whatsoever which occur as the direct or indirect result of any delay or inability to export the Technical Information, any know-how or any UTStarcom Improvement, or any item hereunder, due to the action or inaction of any United States Government Agency.

    12.6 If UTStarcom reasonably determines that HFCL has breached in any way any obligation with respect to the disclosure and use of Confidential Information of UTStarcom, including the Technical Information, know-how and UTStarcom Improvements, UTStarcom shall be immediately entitled to exercise all of its rights under this Agreement and under the law without regard to any notice or waiting period or any other provision of this Agreement. Notwithstanding the prior sentence, UTStarcom shall not terminate this Agreement or any of HFCL's rights to the Technical Information under it unless UTStarcom has first made inquiry upon HFCL with respect to such breach and allowed HFCL [***] to respond to such inquiry. Any failure by HFCL to respond to

12

UTStarcom's inquiry within [***] shall constitute sufficient basis for UTStarcom to terminate this Agreement.

    12.7 No termination of this Agreement shall prejudice the accrued rights of either Party, and the foregoing remedies are in addition to and shall not affect other remedies available under the governing law of this Agreement.

    12.8 The terms of this agreement will apply to all manufacture and sale of the Product, to any customer whatsoever by HFCL, except the sale undertaken to DOT under the terms of the [***]. The sale of the Product to DOT by HFCL as required by the [***] will continue to be governed by the terms of the agreement signed by UTStarcom and HFCL on 6^th Day of April 2000.

13. FORCE MAJEURE.

    In the event that either party shall be delayed or impeded in the performance of any of its obligations hereunder by industrial disputes, or by any cause beyond its reasonable control, including but not limited to war, hostilities, disorder, embargoes or export restrictions, acts of God, fire, earthquakes, storm, proclamations, regulation, ordinance or any other analogous events, it shall not be liable to other for any failure to carry out or to observe any of the terms, provisions or conditions of this Agreement and be entitled to such extension of time as may be reasonable in all the circumstances.

14. WAIVER.

    Failure by either Party to enforce at any time any of the provisions of this Agreement or any delay in exercising any right, power or remedy under this Agreement shall not be construed as a waiver by such Party of any such provisions nor in any way affect the validity of the Agreement or any part thereof.

15. PUBLICITY.

    15.1 Publicity or advertising relating to this Agreement may be released by either of the Parties hereto only with the prior written approval of the other Party.

    15.2 HFCL shall state in advertisements and publicity relating to the Product that it is manufactured under license from UTStarcom.

16. NOTICES; SERVICE.

    All notices, requests, reports and communications of any type given or transferred by a Party to the other in connection with this Agreement shall be given in writing and shall be deemed effective when delivered to the other Party addressed as provided below:

If to HFCL:	If to UTStarcom:
Managing Director HFCL, 8 Commercial Complex, Masjid Moth, Greater Kailash — II New Delhi-110048 India	Director, India Operations, 33 Wood Avenue, South Iselin, NJ 08852
Fax +91-11-6217784 Attention:	Fax: +1 732 767 5274 Attention: Ruchir Godura

    Either Party may change the address at which it wishes to receive notices under this article by giving notice to the other Party of the new address.

13

17. EFFORTS AND QUALITY.

    HFCL shall maintain manufacturing standards for the Product to assure that their quality is at least equal to the Product produced by UTStarcom. In order to verify quality of the Product HFCL shall permit UTStarcom's representative to inspect and test any assembled Product at HFCL's facilities prior to shipment.

18. WARRANTY; EXCLUSIONS.

    18.1 UTStarcom warrants that:

    (a) it has the right to license the Technical Information, the know-how and the UTStarcom Improvements to HFCL as contemplated by this Agreement; and

    (b) the Technical Information, know-how and UTStarcom Improvements furnished to HFCL under this Agreement are substantially equivalent to what UTStarcom uses, as of the Effective Date, to manufacture the Product.

    18.2 Except as specifically provided in this Article 18, the Technical Information, know-how and UTStarcom Improvements, including such provided software, are provided to HFCL and licensed on an "AS IS" basis WITHOUT ANY WARRANTY WHATSOEVER, AND THE PARTIES EXPRESSLY EXCLUDE ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE TECHNICAL INFORMATION, KNOW-HOW AND UTSTARCOM IMPROVEMENTS, AS WELL AS ANY PRODUCT, AND THE PARTIES EXCLUDE ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE PARTIES ALSO SPECIFICALLY EXCLUDE ALL WARRANTIES OF NON-INFRINGEMENT WITH RESPECT TO THIRD PARTY RIGHTS.

    18.3 Except as otherwise specifically provided for in this Agreement, each Party shall be responsible for any and all liability to all third persons based on claims arising out of such Party's own manufacture, use or sale of any Product or any other product, whether or not in conformity with the Technical Information, know-how or UTStarcom Improvements.

    18.4 HFCL warrants that:

    (a) it shall be fully responsible for providing all support, maintenance and repair for all end users of every Product that it manufactures, distributes or sells and shall take all commercially reasonable efforts to ensure that no such end user contacts UTStarcom for any support or other issue with respect to any Product;

    (b) it shall manufacture the Product using only high quality materials and top class workmanship and that the end product will be free from any defect in manufacture, misbranding, merchantable and fit for the intended use. HFCL shall take all reasonable care and skill in manufacturing the Product;

    (c) it has the necessary expertise and staffing capabilities to manufacture the Product and to perform its obligations under this Agreement and that the Product manufactured will conform in all respect with the specifications provided by UTStarcom; and

    (d) it shall give proper consideration and weight to the interests of UTStarcom in all dealings and abide by all rules, regulations, standards methods, procedures and instructions provided to it by UTStarcom.

19. GOVERNMENT APPROVALS.

    19.1 This Agreement is subject to the United States export laws and regulations, and HFCL acknowledges that no technical data or other information to be provided pursuant to this Agreement may be exported until UTStarcom has first obtained all necessary and recommended

14

approvals and licenses, including from the United States Government and any other entity or person that may have regulatory or other authority over this Agreement or any activity contemplated pursuant to this Agreement.

    19.2 HFCL shall be responsible for obtaining all approvals of the Government of India and every other regulatory body that may be needed or recommended for entering into this Agreement and performing all of the obligations provided for under this Agreement. Specifically HFCL shall be responsible for obtaining all type approvals and all other authorizations, licenses and permits connected in any way to interconnecting or otherwise utilizing the Product in India and with any existing or future telecommunications system. HFCL shall obtain all such authorizations, licenses and permits on behalf of and for the benefit of UTStarcom and shall in no way utilize any such authorization, license or permit or its rights connected to any of them to block or in any way restrict UTStarcom from enjoying, directly or indirectly, the rights and privileges obtained pursuant to any such authorization, license or permit.

20. RELATIONSHIP OF THE PARTIES.

    HFCL and UTStarcom are independent contractors. Neither Party nor its employees, consultants, contractors or agents are agents, employees or joint venturers of the other Party, nor do they have any authority to bind the other Party by contract or otherwise to any obligation. Neither Party shall expressly, implicitly, by appearance or otherwise make any representation contrary to the relationship described in this Article 20. The Parties do not intend for this Agreement or any relationship between them to create any aspect of a franchise in any way or manner.

21. LIMITATION OF LIABILITY.

    21.1 EXCEPT FOR LIABILITY ARISING IN CONNECTION WITH A BREACH OF THE OBLIGATIONS PROVIDED IN ARTICLE 5 OF THIS AGREEMENT, NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, IN NO CASE SHALL EITHER PARTY, ITS AFFILIATES OR THEIR EMPLOYEES AND AGENTS, BE LIABLE TO THE OTHER PARTY FOR INDIRECT, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR LOSS OF PROFITS OR CAPITAL REVENUE IN CONNECTION WITH THIS AGREEMENT EVEN IF IT HAS BEEN ADVISED AS TO THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS APPLY TO ALL CAUSES OF ACTION AND CLAIMS, INCLUDING WITHOUT LIMITATION, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION AND OTHER TORTS. BOTH PARTIES UNDERSTAND AND AGREE THAT THE REMEDIES, EXCLUSIONS AND LIMITATIONS IN THIS AGREEMENT ALLOCATE RISKS BETWEEN THE PARTIES AS ALLOWED BY LAW. THE TERMS AND CONDITIONS IN THIS AGREEMENT REFLECT, AND ARE SET IN RELIANCE UPON, THIS ALLOCATION OF RISKS AND THE EXCLUSION OF CONSEQUENTIAL DAMAGES AND LIMITATIONS OF LIABILITY SET FORTH IN THIS PARAGRAPH.

    21.2 IN NO EVENT SHALL UT STARCOM'S LIABILITY TO HFCL OR ANY OTHER PARTY ARISING UNDER THIS AGREEMENT OR IN CONNECTION WITH ANY PRODUCT EXCEED THE [***] OR [***] WHICHEVER IS LESS.

22. SEVERABILITY.

    In the event that any one or more provisions of this Agreement shall be declared to be illegal or unenforceable under any law, rule, or regulations of any government having jurisdiction over the Parties hereto, such illegibility or unenforceability shall not affect the validity and enforceability of the other provisions of this Agreement, and the parties shall agree upon a modification to this Agreement with respect to such illegal or unenforceable provisions to eliminate such invalidity or unenforceability.

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23. NO RIGHTS IN THIRD PARTIES.

    This Agreement is made for the benefit of HFCL and UTStarcom and not for the benefit of any third party individual or entity.

24. HEADINGS AND REFERENCES.

    The subject headings of the articles of this Agreement are included for the purpose of convenience only and shall not affect the construction or interpretation of any of its provisions.

25. ENTIRE AGREEMENT.

    No modification or addition to this Agreement or its enclosures shall be binding on the two Parties unless specifically agreed upon, in writing, by the Parties themselves. This Agreement contains the entire agreement between the Parties and supersedes all agreements, expressions of interest, communications and other representations, understandings, and agreements, oral or written, between the Parties with respect to the subject matter of this Agreement. For purposes of interpretation and performance hereof, the English language version of this Agreement shall be controlling and binding on the Parties.

26. CONSTRUCTION.

    This Agreement has been negotiated by the Parties and their respective counsel and shall be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either Party.

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AS WITNESS the hands of the duly authorized representatives of the Parties hereto, effective as of the day and year first written above.

Signed for and on behalf of	Signed for and on behalf of
HIMACHAL FUTURISTIC COMMUNICATION Ltd.	UTStarcom, Inc.
By:	By:
Name:	Name:
Title:	Title:

Exhibit "A" Product Elements, controlled ASICS, (Page 1)

    This Exhibit A lists the defining plug-in modules for the Product. The Product may also consist of associated mechanical, cabling and power subsystems and components that are reasonably required to support the operation of the items in the below list.

Item	Module Description	Technology License Fee($US)
1	[***]	[***]
2.1	[***]	[***]
2.2	[***]	[***]
3	[***]	[***]

Exhibit "A" Product Elements, controlled ASICS, (Page 2)

Item	Module Description	Technology License Fee($US)
4	[***]	[***]
5	[***]	[***]
6	[***]	[***]
7	[***]	[***]
8	[***]	[***]
9	[***]	[***]

Exhibit "A" Product Elements, Controlled, ASICS (Page 3)

Item	Module Description	Technology License Fee($US)
10	[***]	[***]
11	[***]	[***]
12	[***]	[***]
13	[***]	[***]
14	[***]	[***]
15	[***]	[***]
16	[***]	[***]

Exhibit "A" Product Elements, controlled ASICS (Page 4)

Item	Module Description	Technology License Fee($US)
17	[***]	[***]
18	[***]	[***]
19	[***]	[***]
20	[***]	[***]
21	[***]	[***]
22	[***]	[***]
23	[***]	[***]
24	[***]	[***]
25	[***]	[***]

Notes:

1)

The Technical Information for the [***] will be provided by HFCL

2)

The license fee for [***], when used in one to one correspondence with a [***] is [***]

3)

The license fee for a [***] when used to deliver [***] as a subscriber service is [***]. License fee for [***] line card will be determined later by UTStarcom

Exhibit "A" Product Elements, controlled ASICS, (Page 5)

    The following is the list of controlled ASICS:

S/N	ASIC code	UTS Part (top)	UTS P/N	Base Code
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

EXHIBIT "B" Technical Information

    For each part of the Product to be manufactured by HFCL, UTStarcom will supply the following information:

1)

Parts List for each Printed Circuit Board including Procurement specifications, vendor details and order code of vendors



2)

Gerber files for each Printed Circuit Board



3)

Firmware details and files in object code (excluding FPGA [ASIC] object code).



4)

Circuit Diagram



5)

Assembly Diagram



6)

Mechanical Drawings including manufacturing drawings for each Printed Circuit Board



7)

For each Sub-system and for the total system the following Technical Literature in English



•

System Description



•

Installation and Operation Manual



•

Testing Manual which contains test plans and procedure



•

Maintenance and Repair Manual which also contains Trouble shooting procedures



8)

List of any special jigs for manufacturing and testing



9)

List of Test instruments required for testing

    The above information shall be provided for the Product Elements as in Exhibit "A"

EXHIBIT "C" Terms of Payment ASICS and FPGAs

    HFCL shall make payments to UTStarcom for ASICs and FPGAs against an [***] to be established by HFCL in favour of UTStarcom with a bank authorized by the Reserve Bank of India to deal in foreign exchange and acceptable to UTStarcom in its sole discretion. HFCL shall open a [***]for each ASIC and/or FPGA at the time it orders them from UTStarcom. UTStarcom may also indicate in writing to HFCL, alternative means of payment and HFCL may choose to use such means.

QuickLinks

Exhibit 10.63

MANUFACTURING LICENSE AGREEMENT
AND
Exhibit "A" Product Elements, controlled ASICS, (Page 1)
Exhibit "A" Product Elements, controlled ASICS, (Page 2)
Exhibit "A" Product Elements, Controlled, ASICS (Page 3)
Exhibit "A" Product Elements, controlled ASICS (Page 4)
Exhibit "A" Product Elements, controlled ASICS, (Page 5)
EXHIBIT "B" Technical Information
EXHIBIT "C" Terms of Payment ASICS and FPGAs