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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000912057-01-006930.txt : 20010307
<SEC-HEADER>0000912057-01-006930.hdr.sgml : 20010307
ACCESSION NUMBER:		0000912057-01-006930
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		11
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010228

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			UTSTARCOM INC
		CENTRAL INDEX KEY:			0001030471
		STANDARD INDUSTRIAL CLASSIFICATION:	RADIO TELEPHONE COMMUNICATIONS [4812]
		IRS NUMBER:				521782500
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		
		SEC FILE NUMBER:	000-29661
		FILM NUMBER:		1557881

	BUSINESS ADDRESS:	
		STREET 1:		1275 HARBOR BAY PARKWAY
		STREET 2:		STE 100
		CITY:			ALAMEDA
		STATE:			CA
		ZIP:			94502
		BUSINESS PHONE:		5108648800

	MAIL ADDRESS:	
		STREET 1:		1275 HARBOR BAY PARKWAY
		STREET 2:		STE 100
		CITY:			ALAMEDA
		STATE:			CA
		ZIP:			94502
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a2040014z10-k.txt
<DESCRIPTION>10-K
<TEXT>

<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

(MARK ONE)

<TABLE>
<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000.
                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

       FOR THE TRANSITION PERIOD FROM ______________ TO ______________ .

                        COMMISSION FILE NUMBER 000-29661
                            ------------------------

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

<TABLE>
<S>                                            <C>
               DELAWARE                                     52-1782500
    (State or other jurisdiction of              (I.R.S. Employer Identification
    incorporation or organization)                           Number)

   1275 HARBOR BAY PARKWAY, ALAMEDA,                          94502
              CALIFORNIA                                    (Zip Code)
    (Address of principal executive
               offices)
</TABLE>

       Registrant's telephone number, including area code: (510) 864-8800
        Securities registered pursuant to Section 12(b) of the Act: NONE
   Securities registered pursuant to Section 12(g) of the Act: Common Stock,
                               $0.00125 par value
                            ------------------------

    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 / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

    The aggregate market value of voting stock held by non-affiliates of the
registrant as of January 31, 2001, was approximately $846,164,868 based upon the
closing price of $25.625 reported for such date on The Nasdaq National Market.
For purposes of this disclosure, shares of Common Stock held by persons who hold
more than 5% of the outstanding shares of Common Stock and shares held by
officers and directors of the registrant, have been excluded in that such
persons may be deemed to be affiliates. This determination is not necessarily
conclusive.

    As of January 31, 2001, registrant had outstanding 95,810,101 shares of
Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held on May 11, 2001 are incorporated herein by reference in Part III.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                                UTSTARCOM, INC.
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                          --------
<S>         <C>                                                           <C>
PART I.

  Item 1.   Business....................................................      3
  Item 2.   Facilities..................................................     22
  Item 3.   Legal Proceedings...........................................     23
  Item 4.   Submission of Matters to a Vote of Security Holders.........     23
            Executive Officers..........................................     23

PART II.

  Item 5.   Market for Registrant's Common Equity and Related
              Stockholder Matters.......................................     25
  Item 6.   Selected Financial Data.....................................     26
  Item 7.   Management's Discussion and Analysis of Financial Condition
              and Results of Operations.................................     27
  Item 7A.  Quantitative and Qualitative Disclosures About Market
              Risks.....................................................     52
  Item 8.   Financial Statements and Supplementary Data.................     53
  Item 9.   Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure..................................     83

PART III.

  Item 10.  Directors and Executive Officers of the Registrant..........     84
  Item 11.  Executive Compensation......................................     84
  Item 12.  Security Ownership of Certain Beneficial Owners and
              Management................................................     84
  Item 13.  Certain Relationships and Related Transactions..............     84

PART IV.

  Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
              8-K.......................................................     84

            Exhibit Index...............................................     85

            Signatures..................................................     89
</TABLE>
<PAGE>
                                     PART I
                           FORWARD LOOKING STATEMENTS

    This Annual Report on Form 10-K contains forward-looking statements within
the meaning of the federal securities laws. These statements include those
concerning the following: our expectation of growth in demand for voice and data
communications services and products in China and developing nations; our
expectation of growth in the Chinese economy; our expectation that China will
enter the World Trade Organization; our plan to expand our presence and increase
investments in mainland China; our plan to leverage our installed base of
systems and service provider relationships in China to deliver capabilities such
as broadband and high-speed wireless data services; our expectation that our PAS
network access system will continue to be allowed in China's county-level cities
and counties and on a limited basis in certain large and medium-sized cities;
our plans for penetration in other high-growth communications markets; our
expectation that we will have permanent staff assigned to a UTStarcom office in
New Delhi by mid-year 2001; our expectation of growth in voice and data
communication technologies, including in IP-based switching; our expectation of
continued significant investments in research and development; our plan to
develop and introduce future products and technologies, including additional
functionality for our WACOS IP-based switching platform; our intention to expand
our manufacturing capabilities; our intention to develop the capacity to
manufacture our own wireless handsets; our expectation that we will fill the
majority of our current backlog orders during the 2001 fiscal year; our
expectations regarding our future investment activities; and our belief that
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. These statements are subject to risks and uncertainties that
could 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-K. UTStarcom
undertakes no obligation to update forward-looking statements to reflect events
or circumstances occurring after the date of this Form 10-K.

ITEM 1--BUSINESS

OVERVIEW

    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 allow 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.

    Our integrated suite of products consists of PAS, AN-2000, OMUX and WACOS.
Our PAS network access system allows service providers to offer voice and data
services over fixed wireless and city-wide wireless mobile networks. With
approximately 3.0 million lines installed in 90 cities, and based on our
knowledge of China's communications market, we believe that PAS is the most
widely deployed wireless local access system in China. For wireline networks, we
provide a broadband-ready access system called AN-2000. Nearly 2.3 million lines
of our wireline AN-2000 access system have been deployed in China, including
deployments in the six largest regional communications markets. Our optical
multiplexing, or OMUX, products provide optical transmission and are often
bundled with our AN-2000 and PAS systems. The OMUX, either as a stand-alone or
bundled product, is currently installed at over 5,000 locations for over 200
communications service providers. Our newest product, WACOS, is an IP-based
switch designed to deliver multiple voice and data services using a highly
distributed architecture. We began initial shipments of WACOS in 2000. Our
access and switching

                                       3
<PAGE>
systems are currently designed to address the unique performance requirements of
rapidly expanding communications infrastructure markets such as China.

INDUSTRY BACKGROUND

    COMMUNICATIONS NEEDS OF DEVELOPING COUNTRIES.  Demand for voice and data
communications services in developing nations continues to grow rapidly and is
driven by both public sector infrastructure investment and private sector
business growth. The governments of many developing countries have identified
the development of a communications infrastructure as a key driver of
modernization and economic growth. According to a 1998 report by the
International Telecommunication Union, developing countries are investing in
communications infrastructure at a rate of $53.1 billion annually, representing
31.9% of all communications infrastructure spending worldwide. Governments are
increasingly implementing and funding infrastructure development through
privatization of state-owned telecommunications service providers. These service
providers, in turn, are deploying advanced networks for voice and data services.
In addition, increasingly affluent businesses and residential consumers in the
highest growth regions of these countries are demanding state-of-the-art voice
and data communications solutions to interact and compete on a global basis.

    GROWTH IN CHINA'S COMMUNICATIONS MARKET.  China has one of the fastest
growing communications markets in the world. Growth in China's communications
equipment and services markets is being driven by the government's commitment to
developing a communications infrastructure, pent-up demand for communication
services and robust economic growth. Dataquest estimates that the market for
communications equipment and services in China will grow from $44.2 billion in
1998 to $89.9 billion in 2002, representing a compound annual growth rate of
19.4%. Dataquest forecasts that the market for access equipment in China will
grow at a compound annual rate of 32.8% from 1998 to 2002. According to these
Dataquest forecasts, this market represents the fastest growing segment of the
communications market in China and the fastest growing access equipment market
in the world. China's demand for communications services is highlighted by its
relatively low teledensity rate, which is a measure of the number of lines per
hundred people. According to 1999 statistics from the International
Telecommunication Union, China, with a population of 1.3 billion, has a
teledensity rate of only 8.6% compared to teledensity rates in Brazil of 14.9%,
in the United Kingdom of 57.5%, in France of 57.9%, in Hong Kong of 57.6% and in
the United States of 68.2%. While growth in the China communications market is
currently driven predominantly by voice services, the increasing demand for data
services presents a growing opportunity. The Strategis Group and BDA China
Limited estimate that Internet subscribers in China will grow from 2.1 million
in 1998 to 40.4 million in 2003, representing a compound annual growth rate of
80.6%. China's ability to invest heavily in its communications infrastructure is
fueled by the country's strong economic activity. The Economist Intelligence
Unit estimates that China's GDP will grow at a compound annual rate of 7.9%
through 2002.

    STRUCTURE OF CHINA'S TELECOMMUNICATIONS INDUSTRY.  Historically, the China
Telecom system was the sole provider of public telecommunications services in
China. In 1993, the State Council, in an effort to promote competition, began
issuing licenses to new telecommunications operators including China United
Telecommunications Corporation, or Unicom, a provider of mobile communication
services, and Jitong Communications Co., Ltd., a provider of data communications
and Internet access services. In February 1999, the State Council approved a
restructuring plan for the China Telecom system. The plan separated the
telecommunications operations of the China Telecom system along four business
lines: fixed line, mobile, paging and satellite communications services. Under
the new structure, a new state-owned company, China Mobile, holds and operates
the nationwide mobile communications assets. China Mobile also controls China
Mobile (Hong Kong) Limited, a public company, that operates cellular services in
thirteen of China's provinces. A new state-owned company, China Satellite, holds
and operates the satellite assets. The paging operations have been merged into
Unicom. China Telecom

                                       4
<PAGE>
holds and operates the fixed line telephone and data communications assets.
China Telecom operates through a network of approximately 2,400 local level
telephone companies called Telecommunications Bureaus. Telecommunications
Bureaus are responsible for purchasing, installing and operating the voice and
data communications services in their local markets.

    GOVERNMENT REGULATION OF THE TELECOMMUNICATIONS INDUSTRY.  The China
telecommunications industry is regulated at the national, provincial and local
levels. At the national level, the Ministry of Information Industry, or MII,
regulates the industry. The Ministry of Information Industry was established in
March 1998 to assume the regulatory, administrative and other governmental
duties of the former Ministry of Posts and Telecommunications. The Ministry of
Information Industry has broad authority to regulate all aspects of the
telecommunications and information technology industries in China including
managing spectrum bandwidths, setting network equipment specifications and
standards, regulating the Internet and drafting laws and regulations related to
the electronics and telecommunications industries. Based on our industry
experience, we believe that the Ministry of Information Industry's general
telecommunications equipment strategy is to ensure that China's infrastructure
is based on advanced open architectures that are expandable, cost efficient and
quickly deployed. The Ministry of Information Industry also oversees the 33
Telecommunications Administrations that have regulatory responsibility over the
telecommunications industry in their respective provinces. In China today, each
Telecommunications Administration oversees all local Telecommunications Bureaus
in its region and approves a subset of telecommunications products that meet
Ministry of Information Industry standards from which Telecommunications Bureaus
can then select the specific products they purchase, install and operate.
Although historically the Ministry of Information Industry has shared regulation
and operation of China's telecommunications industry with the China Telecom
system, as part of the Chinese government's industry restructuring, the
regulatory functions of the Ministry of Information Industry and the
Telecommunications Administrations have been separated from the operational
functions of the state-owned Telecommunications Bureaus under their control.
Following this separation, the Ministry of Information Industry will act
exclusively as the industry regulator and the local Telecommunications Bureaus
will act exclusively as operators. Given the multi-level regulatory environment,
equipment providers in China must generally market intensively to all three
levels of the communications industry.

    COMMUNICATIONS NETWORK ARCHITECTURE IN CHINA.  The development of China's
communications infrastructure involves not only installing a nationwide network
of high-bandwidth fiber-optic backbones, but also locally connecting each
business and residential subscriber to these backbones. The systems of wireline
or wireless connections that link local subscribers to these backbone networks
are often referred to as the "last mile" or the local access network. Because of
the high growth rate, geographic dispersion and diverse communications needs of
residences and businesses in China, the direct wiring of subscribers to the
backbone network using traditional copper connections is a lengthy, costly and
inefficient process. Direct wiring of subscribers to traditional telephone
switches often locks those subscribers into a limited set of communications
services and limits expandability and migration to other services. In contrast,
service providers in China require communications equipment that allows them to
roll out different services quickly, efficiently and cost-effectively. Given the
relative absence of a legacy communications infrastructure, these service
providers are less constrained and thus often deploy the latest, "best-of-breed"
systems with the flexibility to handle future services such as data. This is
true in both the local access networks and the backbone networks.

    A new trend in access network design is the use of remote nodes that push
network intelligence closer to a group of subscribers, thus making it easier and
more efficient to deliver multiple services from the backbone network to
subscribers at the local level. These nodes use a standard digital protocol
known as V5.2 to communicate with backbone networks. This open protocol allows
equipment from various vendors to be interconnected seamlessly and allows
service providers to deliver a variety of services from multiple backbones over
the same access network thus reducing costs. By deploying

                                       5
<PAGE>
small, intelligent nodes close to subscribers, service providers can deploy
fewer central office switches, each covering larger areas, optimizing
manageability and lowering per-subscriber cost. Because of these benefits,
service providers in China are deploying open architecture switches capable of
interacting with access networks at most new installations.

    Another new trend can be seen in the backbone network, where an increasing
portion of traffic travels across IP-based systems instead of traditional voice
systems using circuit switches. IP-based architectures differ fundamentally from
circuit-switched architectures in the way information travels from point to
point through networks. IP-based technology does not require a dedicated
connection or circuit between the callers. Instead, the caller's voice is
divided into numerous small packages of information called packets. These
packets are sent over the network intermixed with other packets of data, such as
fax, email or Internet content, to be reassembled at the destination of the
call. In contrast, traditional telephone technology requires that a circuit
between the callers be established and maintained during the length of the call,
and voice and data cannot easily be transmitted simultaneously over this
circuit. This is inefficient because much of a phone call is silence which
effectively wastes capacity on the circuit. This inefficiency has caused service
providers to seek new switches based on IP-based technology.

    NEEDS OF CHINA'S COMMUNICATIONS SERVICE PROVIDERS.  Service providers in
China often require network solutions with a suite of integrated products that
address all of their access needs, including wireline and wireless, voice and
data. These comprehensive product offerings enable service providers to quickly,
and with minimal incremental investment, address the changing demands of their
subscribers for expanded or more advanced services over time. Service providers
also require solutions that are based on widely-adopted international
communications standards to ease installation and avoid duplicate buildout of
separate networks. In addition, given the rapid growth in China's emerging
communications market, network solutions must be efficient and expandable so
that the same architecture can provide an affordable entry level solution for as
few as hundreds of subscribers yet economically extend to hundreds of thousands
of subscribers over time. Additionally, service providers in China will often
require the vendors to continually develop products to meet evolving market
needs and to have a local service and support presence.

    Although markets such as China represent substantial opportunities for
communications equipment vendors, to date, few companies have delivered the
combination of leading technology, market specific products and a local presence
that service providers require.

THE UTSTARCOM SOLUTION

    Our wireless and wireline access and switching systems are designed to
deliver the following key benefits to service providers:

    INTEGRATED, COMPREHENSIVE PRODUCT OFFERING.  By offering communications
systems that link the backbone network, the access network and subscribers'
premises, we supply service providers with solutions that enable them to quickly
deploy services to subscribers. For the implementation of completely new
networks, which is typical in China, service providers can choose to deploy our
complete suite of product offerings. By contrast, for locations where some
network infrastructure is already in place, service providers can deploy a
subset of our products and integrate them into their existing networks.
Furthermore, as subscriber needs evolve from voice to data, we offer solutions
to meet these needs. Our AN-2000, OMUX and PAS products can be managed from a
single integrated management station through the use of our Netman software.
WACOS has an advanced web-based management system which in the future will be
adapted to support all of our product offerings.

    FLEXIBILITY FOR VOICE AND DATA SERVICES.  We have designed our systems to
offer a high degree of flexibility in terms of the number of subscribers and
types of traffic delivered to those subscribers. Our

                                       6
<PAGE>
equipment can be flexibly configured to offer a variety of services in response
to subscriber demand. This flexibility is particularly important in China, as
the communications services market is undergoing rapid change and growth. As
Internet usage achieves greater penetration in China, we believe service
providers will desire systems which are designed to deliver high-speed data
capability. Our access systems allow service providers to quickly and
cost-effectively implement upgrades for new services, including high-speed data
capability, compared to alternative solutions which may require the purchase of
an entirely new system to provide these services.

    LEADING PRICE AND PERFORMANCE SOLUTION.  All of our products are based on a
modular design, using cost effective off-the-shelf components wherever possible
and realizing most of the products' added value through our software. By
delivering a modular system, we allow service providers to purchase only the
functionality and capacity needed and to purchase additional functionality and
capacity over time as subscriber demand warrants. In response to large pent-up
demand, most service providers in China are currently delivering voice services.
However, we expect demand for data services to increase dramatically in China.
To meet this growing demand, service providers will be able to deliver data
traffic with modular upgrades to our systems rather than through large-scale
purchases of replacement equipment. Furthermore, as demand for communications
services in China grows, our expandable systems will allow service providers to
grow from a small initial subscriber base to hundreds of thousands of
subscribers in a cost-effective and efficient manner.

    ARCHITECTURE BASED ON WIDELY ADOPTED COMMUNICATION STANDARDS.  Our products
are designed to comply with widely adopted international open communication
standards for multi-vendor interoperability, which are consistent with standards
established by the Ministry of Information Industry. For example, we were one of
the first companies to deliver an access system to the China market that
incorporated an open interface, known as the V5.2 protocol, to central office
switches. The open interface is a technology that allows service providers to
connect our products to equipment from multiple vendors and thus integrate
multiple voice and data traffic types within one system. In this manner an
operator can deploy our system for voice services first, but offer mobile or
Internet services at a later time as the market for these services develops.
Furthermore, our compliance with open standards lowers costs by permitting
service providers to shorten evaluation times and ease integration of our
products with other systems in the service providers' networks.

    LOCAL PRESENCE.  We have established a strong local presence in China that
allows us to be responsive to the needs of service providers and their
subscribers. We manufacture our products primarily at two facilities located in
the cities of Huizhou in Guangdong province and Hangzhou in Zhejiang province
that are owned by joint ventures between us and affiliates of the corresponding
Telecommunications Administrations. By using local facilities in China, we have
helped create new jobs within the provinces and have strengthened our
relationships with the Telecommunications Administrations in some of China's
most modernized and rapidly growing provinces. We also maintain twelve sales and
customer support sites in China that allow us to deploy a customer support
representative onsite anywhere in China within 24 hours. Our sales force
develops direct relationships with decision makers at both the provincial and
the local levels through pre-sales design and consulting services, as well as
performing more traditional product sales functions. Additionally, through our
relationships at the national, provincial and local levels we receive a
continuous flow of information on market changes and insight into unique service
provider needs and related opportunities.

STRATEGY

    Our objective is to be a leading provider of broadband, IP and wireless
network equipment to high growth communications markets. The principal elements
of our strategy are as follows:

    LEVERAGE OUR INSTALLED BASE AND CUSTOMER RELATIONSHIPS AS DEMAND FOR
BROADBAND AND HIGH-SPEED DATA GROWS IN CHINA.  We believe we are a leading
supplier of both wireline and wireless access

                                       7
<PAGE>
systems in China. Communications service providers currently face a large
subscriber demand for voice services. Accordingly, our systems are being used
primarily for voice services. However, given the increasing demand for Internet
and data access in China, we believe we are well positioned to leverage our
installed base of systems and service provider relationships to deliver
additional data capabilities. We intend to capitalize on this opportunity by
supplying systems that enable service providers to offer broadband services over
copper connections through digital subscriber line, or xDSL, technologies and
over fiber optic connections. We also intend to enable high-speed data services
over 64 Kilobits per second, or Kbps, wireless links. Moreover, we will supply
products that complement our own products through original equipment
manufacturer (OEM) relationships to market and sell leading-edge products
utilizing our extensive sales and marketing organization in China.

    DEVELOP PRODUCTS AND TECHNOLOGIES FOR MARKET-DRIVEN SOLUTIONS; PENETRATE
EMERGING IP-BASED SWITCHING MARKET.  By working closely with multiple service
providers over the last six years, we have gained unique insight into future
service provider requirements. For example, we developed our PAS wireless access
system in response to a market need for a low-cost, community-based mobile
service. We believe increases in Internet usage, particularly voice over IP
traffic, have resulted in a market need for a next-generation switching platform
optimized for IP traffic. Accordingly, we have made a substantial investment in
developing our WACOS IP-based switching system, which began initial shipments in
2000. WACOS is designed to integrate with our existing products and to scale
over time in response to increased demand. We believe that WACOS can deliver
value to service providers, both as a stand-alone system and in connection with
expansions to our PAS system installations. We intend to deliver additional
functionality on the WACOS platform in the future which we believe will enable
us to enter new markets in China and around the world. We have a history of
developing unique systems, such as PAS and WACOS, and we intend to continue to
provide market-driven solutions to our customers.

    EXPAND PRESENCE IN MAINLAND CHINA.  We intend to further capitalize on
China's large population, low teledensity and increasing demand for
communications services. Since our inception, we have focused our engineering,
product development and sales and marketing efforts primarily on communications
equipment for China. This focus has enabled us to be a leader in this market by
quickly identifying the needs of service providers in China and rapidly
developing market-specific products to address those needs. We intend to expand
our presence in this market by:

    - increasing the number of sales and support staff and offices within China;

    - developing new products to address the demands of our existing and
      emerging customer base;

    - migrating our installed base from voice to data as market demand warrants;
      and

    - increasing our local research and development and manufacturing
      capabilities.

    LEVERAGE SUCCESS IN MAINLAND CHINA TO ADDRESS OTHER HIGH-GROWTH
COMMUNICATIONS MARKETS.  Since our products comply with many international
standard protocols and are attractive and readily adaptable to the requirements
of service providers in many markets outside of Mainland China, we intend to
leverage our success in Mainland China to penetrate other high-growth
communications markets. We anticipate supplying these markets through direct
sales offices located in key market regions, by licensing our technology to
local manufacturers where import taxation favors this approach, through the
development of local sales agency and distributor relationships within specific
market regions, and through original equipment manufacturer (OEM) sales
relationships. Our International Sales Division is currently targeting expansion
into Latin America, Europe, Africa, India, the Philippines, Taiwan and other
Pacific Rim markets. We intend to have permanent staff assigned to a UTStarcom
office in New Delhi by mid-year 2001 to further develop sales in India and
nearby markets. We plan to continue to develop local direct sales representative
offices in key regions around the world.

                                       8
<PAGE>
    Recent examples of the success of these strategies include:

    - Worldwide OEM sales agreements for our AN-2000 system with the NEC
      Corporation, with Kyocera Corporation and with Airspan Networks Limited;

    - A licensing contract that will allow Himachal Futuristic
      Communications Ltd. (HFCL) of New Delhi, India to manufacture, sell and
      support our AN-2000 product in India. Together with HFCL, we have begun to
      supply AN-2000 to Infotel, a private operator in the Punjab state;

    - Installations of our AN-2000 system for telephone network operator EPM in
      Bogata, Colombia;

    - Sales agreement to provide our AN-2000 system to Mauritius Telecom Corp.
      to provide access to their national Data Services backbone network;

    - Deployment of our PAS network product for First International
      Telecommunications Corporation (FITEL) of Taipei, Taiwan in the first
      phase of a metropolitan wireless mobile telephone system for the greater
      Taipei area and other Taiwan cities;

    - Type approval to market our AN-2000 system in Russia, Brazil and
      Indonesia; and

    - Sales agreements to provide our AN-2000 system to Telmex, Mexico and to
      Sovintel, Peterstar and Combellga, all of Russia.

PRODUCTS

    Our integrated suite of network access, optical multiplexing, subscriber
terminal and IP-based switching products gives service providers in high-growth
markets an efficient means to offer voice and data services. Our product lines
include PAS, AN-2000, OMUX, Netman and WACOS.

                                       9
<PAGE>
PAS (PERSONAL ACCESS SYSTEM)

    PAS is a wireless access system that enables voice and data access over
fixed and city-wide wireless links. The following diagram shows how our PAS
system is deployed:

                                     [LOGO]

    A typical PAS installation consists of several remote terminals based on our
AN-2000 architecture, each coupled through one or more digital radio port
controllers to many small indoor and outdoor radio ports, and various subscriber
terminals. The wireless access network formed by PAS components connects to the
central office switch to provide local and long distance telephone service over
a standard V5.2 interface or an analog 2-wire interface for switches without
V5.2 capability. This provides for an open interface to the central office
switch which benefits service providers by shifting network intelligence to the
access network, thus reducing reliance on costly and proprietary distributed
central office switch architectures. The remote terminals pass traffic through
the radio port controllers to the radio ports, which each serves multiple
subscribers. From the radio port, the signal is passed to a remote subscriber
terminal or handset. The air traffic controller provides wireless
traffic-channel and mobility management throughout the system.

    In 2000 we introduced a version of PAS using the WACOS platform instead of
the AN-2000 platform. This eliminates the dependence on an existing local
exchange switch, and uses a Signaling System 7 (SS7) interface to the Local or
Long distance telephone network instead of V5.2 which the remote terminal uses.
This deployment method has the advantage that it can be installed in a
"greenfield" environment where existing switching capacity is not available, and
can be scaled to larger sizes more easily.

    PAS enables rapid and reliable deployment of communications services to
subscriber communities where the installation of a wireline alternative may be
uneconomical. PAS can also be used in large indoor spaces such as office
buildings, airports and shopping malls. PAS is optimized for high-capacity urban
or suburban traffic densities and can deliver wireline equivalent voice quality,
including voice-band modem and fax support, with the advantages of simple
planning for radio siting, immunity to inter-radio interference, low power
consumption and expandability. Our PAS system operates in China in the 1900-1915
MHz band allocated by the Radio Regulatory Bureau of the Ministry of Information
Industry.

    PAS provides city-wide wireless mobile phone service for a community of up
to several hundred thousand subscribers at traffic densities of upwards of
15,000 subscribers per square kilometer. PAS

                                       10
<PAGE>
targets first-time subscribers, second line subscribers and small businesses.
PAS provides distinct benefits to both service providers and subscribers.
Service providers can quickly illuminate entire communities with strategically
located low-power radios, creating the potential for new revenue streams from
city-wide mobile service. Additionally, compared to traditional cellular
systems, PAS mobility functions are completely integrated into the access
network architecture and thus require no central office switch modification or
incremental mobile switching hardware. By integrating PAS into the existing
access network, service providers can take advantage of unused central office
switching capacity to carry incremental wireless traffic loads. This integration
also allows a service provider to offer existing switch-based services, such as
caller ID, call forwarding, and voice mail, to its wireless subscribers.
Subscribers benefit from rapid service activation and enjoy the mobility of
small handsets weighing less than three ounces. We purchase a variety of
handsets manufactured by multiple Japanese vendors under the UTStarcom label. We
also perform local assembly of the wireless infrastructure components and
handsets in China, have entered into arrangements with third parties to
manufacture handsets in China, and intend to develop the capacity to manufacture
our own handsets.

    With the PAS system, a service provider does not need to modify its existing
billing system. However, PAS does provide separate call detail records that the
service provider can use for specific mobility-related billing policies such as
premium billing for roaming calls or wireless data calls, or for pre-paid PAS
services.

    An additional benefit of PAS is its support of wireless data transmission of
up to 64Kbps. This enables wireless Internet access at speeds faster than those
possible with many wireline dial-up modems. Based on our knowledge of China's
communications market, we believe PAS allows faster Internet access than other
wireless technologies currently commercially deployed in China.

    PAS also offers an advanced set of information-mode features including short
message and email text messaging, browsing of Internet content and access to
location-dependent information that, for example, allows subscribers to search
for restaurants or hospitals near their current location. The information
services can be delivered in English and Chinese character sets.

    As of December 31, 2000, service providers have installed our PAS system in
90 locations in Mainland China representing a total installed base of
approximately 3.0 million lines.

AN-2000

    Our AN-2000 is a digital wireline network access system that delivers a
variety of services to subscribers over copper, fiber or microwave radio links.
These services include:

    - traditional analog voice;

    - dialed voice and data in digital format over integrated services digital
      network, or ISDN, lines;

    - analog and digital leased lines;

    - business data services over integrated digital subscriber line, or IDSL,
      and high-data-rate digital subscriber line, or HDSL;

    - fully integrated TDM and ATM broadband capability; and

    - high-performance, always-on Internet access for residential and business
      subscribers using advanced asymmetric digital subscriber line (ADSL)
      technology.

                                       11
<PAGE>
    Service providers have deployed nearly 2.3 million AN-2000 subscriber lines.
The following diagram depicts a typical AN-2000 deployment:

                                     [LOGO]

    The AN-2000 system consists of both central office terminals and remote
terminals which are linked together to form a digital access network using
copper, fiber or microwave radio. The AN-2000 connects to the access ring
through a fully integrated synchronous digital hierarchy (SDH) optical
interface. A central office AN-2000, or CT, connects the access ring to Internet
access, local and long distance and dedicated data services. A remote AN-2000,
or RT, connects to the access ring and offers voice and data services to the
subscribers. A regional access network has the potential to contain hundreds of
AN-2000s servicing hundreds of thousands of subscribers.

    The AN-2000 provides several important features that together form a
cost-effective access platform for the delivery of voice and data services. We
were among the earliest to offer a V5.2 switch interface to the China market.
This capability benefits service providers by shifting network intelligence out
into the access network, reducing reliance on costly and proprietary distributed
central office switch architectures. In addition, we designed the AN-2000 to
provide high capacity, expandability and redundancy, offering reliable operation
and economical service management. For service providers whose switches are not
yet V5.2 compliant, we provide a migration capability whereby the AN-2000
terminates analog and ISDN ports in the central office, effectively creating a
V5.2 interface to the remote AN-2000s. Based on our industry knowledge, we
believe that the AN-2000 is currently the leading system available that can
convert existing analog central office interfaces to V5.2.

    Our OMUX product, which converts data transmission between electrical and
optical formats, is often bundled with our PAS and AN-2000 systems. Together,
these products can comprise a complete access system. In addition to bundled
sales, the OMUX is used by cellular service providers to connect base station
controllers to base stations and by other enterprises for private data networks
and data collection applications.

    The primary advantage of the OMUX is its ability to offer highly competitive
price and performance characteristics to service providers, particularly in low
capacity implementations. The OMUX employs our SPDH technology, which provides
the reliability of higher priced synchronous digital hierarchy, or SDH, networks
for lower capacity access networks and enables highly reliable operations. The
OMUX is available in varying capacities depending on network configuration and

                                       12
<PAGE>
service provider requirements. As of December 31, 2000, service providers have
deployed the OMUX at over 5,000 locations, both as a stand-alone product and
bundled with PAS and AN-2000.

NETMAN

    Our Netman network management system, which is integrated with our network
access products, provides for centralized management of our PAS, AN-2000 and
OMUX products. Netman provides the ability to manage individual network
components and to report the status of the network as a whole. With Netman, a
service provider can add and drop subscribers and continuously monitor all
access network elements, providing for real-time reporting and alarms in
addition to performance management and optimization and distribution of software
updates. Netman uses a scalable client/ server architecture in a Windows NT
environment. Server hardware may be scaled to handle several thousand nodes.
Netman can also be installed on a portable personal computer and may be used as
the local on-site maintenance terminal wherever remote nodes are installed.

WACOS

    Our WACOS system is an IP-based switching system designed to perform many of
the functions performed today by traditional central office switches, including
local wireline services and mobile switching services. The initial application
serves as the mobility service switch for our PAS system. Future applications
will support third-generation wideband W-CDMA and TD-SCDMA mobile services, a
full suite of local exchange services, Voice over IP gateway functions and
narrowband and broadband remote access services. The WACOS system supports
communication between legacy telephone equipment and next-generation IP devices.
In addition, operational support system software provided with WACOS enables
management of WACOS equipment, billing for WACOS services and customer care for
WACOS subscribers. WACOS has an advanced web-based management system which in
the future will be adapted to support all our product offerings. The use of IP
technology to transmit voice and data over a single network enables the use of
lower cost equipment and improves bandwidth efficiency for service providers.
This results in a wider variety of communications applications at lower per
subscriber cost. The WACOS family includes:

    - PSTN Gateway devices which support connection to the public switched
      telephone network, or PSTN, through standard interfaces;

    - Voice-over-IP Gateway, which will support standard interfaces such as
      H.323 and MGCP;

    - Remote Access Server which will support analog modem, ISDN and wireless
      data applications;

    - Wireless Gateways which support expansion of PAS networks and future 3G
      networks; and

    - OSS Server Cluster which supports management, billing and customer care
      functions.

                                       13
<PAGE>
    The following diagram depicts our WACOS system:

                                     [LOGO]

MARKETS AND CUSTOMERS

    Market opportunities within China's 31 provinces vary greatly by region,
with the more densely populated coastal provinces experiencing the strongest
economic development. We provide our communications equipment to
Telecommunications Bureaus in a wide variety of provinces. Historically we have
focused on marketing and selling our products to Telecommunications Bureaus in
Guangdong, Zhejiang, Fujian, Shandong and Jiangsu provinces and the municipality
of Shanghai. The PRC State Statistical Bureau estimates that in 1997, these six
regions represented 26.3% of China's population and 41.1% of China's gross
domestic product. These regions also represent a disproportionately high
percentage of China's wireline and wireless subscribers and influence adoption
of technology among other regions. More recently we have expanded our marketing
focus to the inland provinces as well. While each of the Telecommunications
Bureaus is part of the China Telecom system and subject to its ultimate control,
equipment purchasing decisions are generally made at the individual
Telecommunications Bureau level.

                                       14
<PAGE>
    The following table is a list of our customers in Mainland China who have
each purchased more than $500,000 of our products during 2000.

BEIJING MUNICIPALITY
Beijing Telecommunications
  Administration
JT Telecom

FUJIAN PROVINCE
Putian Telecommunications Bureau
Quanzhou Telecommunications Bureau

GUANGDONG PROVINCE
Dongguan Telecommunications Bureau
Foshan Telecommunications Bureau
Jiangmen Telecommunications Bureau
Meizhou Telecommunications Bureau
Qingyuan Telecommunications Bureau
Sanshui Telecommunications Bureau
Shanwei Telecommunications Bureau
Shaoguan Telecommunications Bureau
Yunfu Telecommunications Bureau
Zhangzhou Telecommunications Bureau
Zhanjiang Telecommunications Bureau
Zhaoqing Telecommunications Bureau
Zhuhai Telecommunications Bureau

GUANGXI PROVINCE
Laibin Telecommunications Bureau
Liuzhou Telecommunications Bureau
Wuzhou Telecommunications Bureau

GUIZHOU PROVINCE
Luoding Telecommunications Bureau

HEBEI PROVINCE
Baoding Telecommunications Bureau
Chengde Telecommunications Bureau
Handan Telecommunications Bureau
Qinhuangdao Telecommunications
  Bureau
Xingtai Telecommunications Bureau
Xuanhua Telecommunications Bureau

HEILONGJIANG PROVINCE
Haerbin Telecommunications Bureau

HENAN PROVINCE
Jiaozuo Telecommunications Bureau
Luohe Telecommunications Bureau

HUBEI PROVINCE
Fengjie Telecommunications Bureau
Yibing Telecommunications Bureau

HUNAN PROVINCE
Binzhou Telecommunications Bureau

JIANGSU PROVINCE
Changzhou Telecommunications Bureau
Taizhou Telecommunications Bureau
Xuzhou Telecommunications Bureau
Yancheng Telecommunications Bureau

JILIN PROVINCE
Siping Telecommunications Bureau

LIAONING PROVINCE
Benxi Telecommunications Bureau
Heshan Telecommunications Bureau
Liaoyang Telecommunications Bureau
Liaoyang Tel. Instrument Co.
Panjin Telecommunications Bureau

NINGXIA PROVINCE
Shizhuishan Telecommunications Bureau
Yinchuan Telecommunications Bureau

SHAANXI PROVINCE
Wuzhong Telecommunications Bureau
Xian Telecommunications Bureau

SHANDONG PROVINCE
Dongying Telecommunications Bureau
Jinan Telecommunications Bureau
Jining Telecommunications Bureau
Linyi Telecommunications Bureau
Pingdu Telecommunications Bureau

SHANGHAI MUNICIPALITY
Cenxi Telecommunications Bureau

SICHUAN PROVINCE
Chongqing Telecommunications Bureau
Neijiang Telecommunications Bureau
Suining Telecommunications Bureau
Xinhui Telecommunications Bureau

YUNNAN PROVINCE
Kunming Telecommunications Bureau

ZHEJIANG PROVINCE
Fuyang Telecommunications Bureau
Hangzhou Telecommunications Bureau
Quzhou Telecommunications Bureau
Ruian Telecommunications Bureau
Shaoxing Telecommunications Bureau
Shengzhou Telecommunications Bureau
Tonglu Telecommunications Bureau
Wencheng Telecommunications Bureau
Wenling Telecommunications Bureau
Wenzhou Zongheng Corp.
Xiaoshan Telecommunications Bureau
Xinchang Telecommunications Bureau
Yuhang Telecommunications Bureau
Zhuji Telecommunications Bureau

    In 2000, sales to Hangzhou Telecommunications Bureau accounted for 12.1% of
our revenues. No other individual customer accounted for 10% or more of our
revenues in 2000.

    We also sell our network access equipment to service providers in high
growth communications markets outside of China. Markets outside of China
accounted for about 1.0% of our total sales in 2000.

    As of December 31, 2000, our backlog totaled approximately $192 million,
compared to approximately $72 million as of December 31, 1999. We expect to fill
the majority of our current backlog orders during the 2001 fiscal year.

SALES, MARKETING AND CUSTOMER SUPPORT

    We pursue a direct sales and marketing strategy in China, targeting sales to
individual Telecommunications Bureaus and to manufacturers or equipment
distributors with closely associated customers. We maintain sales and customer
support sites in Beijing, Shanghai, Guangzhou, Shenyang, Wuhan, Xian, Hangzhou,
Jinan, Chengdu, Fuzhou, Kunming and Zhengzhou. We also sell through
relationships with regional government-owned telecommunications manufacturing
companies, which act as agents in the sale of our products to Telecommunications
Bureaus.

    We believe our customer support services in Mainland China allow us to
distinguish ourselves from competing equipment providers and build customer
loyalty. The customer service operation in

                                       15
<PAGE>
Hangzhou is co-located with the manufacturing joint venture and serves as both a
technical resource and liaison to our product development organization. In
China, customer service technicians are distributed in the regional sales and
customer support sites to provide a local presence. We provide additional
support on a 24-hour, 365-day basis from the customer support center in Hangzhou
in the form of field dispatch personnel, who also provide training on
installation, operation and maintenance of equipment. As of December 31, 2000,
we employed 550 people in sales, marketing and customer support in Mainland
China.

    Our sales efforts in markets outside of Mainland China combine direct sales,
original equipment manufacturer (OEM) sales, and manufacturing licensing. We
maintain sales and customer support sites in Miami, Florida to address Latin
American markets; in Tel Aviv, Israel to address European and African markets;
in Manila, the Philippines to address the Philippine market; in Taipei, Taiwan
to address the Taiwan market; and in Hong Kong to address other Pacific Rim
markets. We intend to have permanent staff assigned to a UTStarcom office in New
Delhi, India by mid-year 2001 to further develop sales in India and nearby
markets.

    Our customer service operations in the U.S. and Hangzhou, China support our
customers outside of Mainland China with training, project supervision and
problem escalation. We maintain and will continue to expand our staff of local
personnel near customers who require support on a 24-hour, 365-day basis. These
facilities currently are deployed in Taipei, Manila and New Delhi. In many
cases, such as in Mexico, Russia and UAE, our local in-country sales partners
also provide customer support.

TECHNOLOGY

    Our research and development efforts have led to the creation of key
technologies that have contributed to the success of our products in the
marketplace.

    V5.2 PROTOCOL AND DYNAMIC SWITCHING.  The AN-2000 and PAS intelligent call
processor and 2,048 timeslot interchange allow these systems to fully exploit
the power of the V5.2 interface protocol between the central office switch and
access node, which requests voice channel allocation from the switch on a
call-by-call basis. Since most subscriber telephones are idle most of the time,
a small number of channels can be shared by many subscribers, saving money and
increasing reliability. The AN-2000 and PAS can economically split a large
bundle of V5.2 voice channels from the central office switch into many smaller,
more economical bundles to be transmitted to the remote access nodes that may
contain fewer subscribers than the switch is optimized for. This capability
increases switch utilization, reduces the number and expense of V5.2 interfaces
provided by the central office switch and economically allows the deployment of
many small remote access nodes. Our V5.2 interface product is extensively
deployed throughout China and is interoperable with the products of major switch
vendors.

    SDH OPTICAL TRANSMISSION.  Service providers have widely chosen to adopt and
deploy fiber optic transmission systems conforming to the synchronous digital
hierarchy, or SDH, standard promulgated by the International Telecommunications
Union. The SDH standard is the international equivalent of the North American
SONET standard. The SDH standards for first tier capacity allow up to 1,953
information channels to be transmitted over optical fiber between nodes that can
be structured in a redundant ring configuration. If the fiber in the ring is cut
accidentally, the SDH system can recover its operation immediately and maintain
service while the cut is repaired. The AN-2000 fully integrates the SDH fiber
with self-healing ring capability into a single plug-in module in contrast to
earlier generation equipment that required a separate external SDH multiplexer.
This configuration saves expense and provides a simple unified management
structure for the SDH and access node functions.

    PAS MOBILITY MANAGEMENT.  We have developed a specially configured AN-2000
node, called the air traffic controller, or ATC, in the PAS product to provide
the function of wireless traffic-channel and mobility management. PAS
subscribers are assigned wireless traffic channels at the time they become

                                       16
<PAGE>
active on a call and the precise channel may be different from call to call or,
in the case of PAS users, may change during a call, because of variable channel
availability and also movement of the subscriber. The ATC collects all of these
dynamically assigned channels and re-maps them to fixed channels on the access
network interface, providing wireless benefits without alteration of the access
network. Service providers can mix and match wireline and wireless service
delivery in a seamless manner without regard for access network compatibility or
special provisioning. PAS can manage hundreds of thousands of air traffic
channels by arranging a network of ATCs into a two-stage configuration with
regional nodes handling local traffic and a network of central nodes handling
traffic between regional nodes.

    WACOS IP-BASED SWITCHING AND SERVICE DELIVERY PLATFORM.  The WACOS system is
deployed as a layered network architecture designed to support end-to-end
communications and data services. This type of architecture is rapidly gaining
worldwide acceptance with a large number of vendors and service providers
cooperating in the creation of new standards for IP-based networks. In the WACOS
implementation, unlike current telephone networks, service providers and
subscribers are able to quickly and easily deploy new services and features
based on these emerging standard protocols. WACOS is a complete
telecommunications system that offers technology at several levels:

    - TRADITIONAL PHONES AND IP APPLIANCES. Innovative protocols used by WACOS
      provide support for traditional telephone service and provide the
      foundation for next-generation IP-based appliances such as IP-enabled cell
      phones and personal digital assistants.

    - IP ACCESS NETWORK. The WACOS gateway converts between legacy telephony
      protocols such as SS7 and V5.2 and modern IP-based services. The gateway
      provides an open platform for the development of enhanced services, such
      as unified messaging, by us or third party developers.

    - BACKBONE NETWORK. WACOS relies on industry standard IP-based network
      architecture. Initially based on widely deployed IP over asynchronous
      transfer mode, or ATM, technology, WACOS is capable of economical upgrade
      to emerging packet over SONET and gigabit ethernet standards.

    - OPERATIONAL SUPPORT SYSTEM. The operational support system, or OSS, is
      implemented using industry-standard computing platforms based on Windows
      NT or Unix, depending on customer preference. The OSS allows service
      providers to flexibly tailor billing policies and allows subscriber
      self-provisioning through on-line account access. Web-based graphic user
      interfaces provide precise management information to support staff with
      minimal training requirements, reducing operational costs.

RESEARCH AND DEVELOPMENT

    We believe that continued and timely development and introduction of new and
enhanced products are essential if we are to maintain our competitive position.
While we use competitive analyses and technology trends as factors in our
product development plans, the primary input for new products and product
enhancements comes from soliciting and analyzing information about service
providers' needs. Our Ministry of Information Industry, Telecommunications
Administration and Telecommunications Bureau relationships and full-service
post-sale customer support provide our research and development organization
with insight into trends and developments in the marketplace. The insights
provided from these relationships allowed us to develop unique, market-driven
products such as PAS and WACOS.

    We maintain a strong relationship between our U.S. and China research
centers. Projects are typically designed and developed in the United States by
one team and tested in China by another, allowing us to conduct research and
development activities 24 hours a day. We rotate engineers between the U.S. and
China research centers to further integrate our research and development
operations. We have been able to cost-effectively hire highly skilled technical
employees from a large pool of qualified candidates in China.

                                       17
<PAGE>
    In the past we have made, and expect to continue to make, significant
investments in research and development. Our research and development
expenditures totaled $41.5 million in 2000, $18.6 million in 1999 and
$14.7 million in 1998.

MANUFACTURING, ASSEMBLY AND TESTING

    We manufacture or engage in the final assembly and testing of our PAS
systems, AN-2000, OMUX and WACOS products at the facilities of our two
manufacturing joint ventures in China and under license to HFCL in India. In
Zhejiang province, we have a joint venture with Zhejiang Telecommunication
Equipment Factory. In Guangdong province, we have a joint venture with Guangdong
Nanfang Communications Group Corporation. These manufacturing operations consist
of circuit board assembly, final system assembly, software installation and
testing. We assemble circuit boards primarily using surface mount technology.
Assembled boards are individually tested prior to final assembly and tested
again at the system level prior to system shipment. We use internally developed
functional and parametric tests for quality management and process control and
have developed an internal system to track quality statistics at a serial number
level.

    Both the Guangdong and the Zhejiang manufacturing facilities are ISO 9002
certified. ISO 9002 certification requires that the certified entity establish,
maintain and follow an auditable quality process including documentation,
requirements, development, training, testing and continuous improvement and
which is periodically audited by an independent outside auditor.

    We have contracted with Matsushita Electric Industrial Co., Ltd., which
distributes products under the Panasonic brand, to manufacture the PAS wireless
infrastructure components and handsets for distribution under the UTStarcom
label. Other suppliers include Kyocera Corporation, Sanyo and JRC, which provide
handsets under the UTStarcom label, and Sharp Corporation, which provides
handsets and repeaters under the UTStarcom label. Our AN-2000 product line
integrates some third party products for subscriber premises equipment and
testing. In order to gain more control over the quality of the products, further
reduce the cost and ease restrictions on China's import license quotas, we have
started and will continue local assembly of the wireless infrastructure
components and handsets in China, and have entered into arrangements with third
parties to manufacture handsets in China. We also intend to develop the capacity
to manufacture our own handsets.

                                       18
<PAGE>
STRATEGIC RELATIONSHIPS

    We benefit from strategic relationships with other major companies that act
as our suppliers, investors and customers. SOFTBANK CORP. is a major investor in
our company and holds a seat on our Board of Directors. We have invested in an
investment fund established by SOFTBANK focused on investments in Internet
companies in China. Matsushita Communication Industrial Co., Ltd. is a major
supplier of radio and terminal equipment for the PAS system, and is also an
investor and has funded custom developments related to the WACOS system.
Mitsubishi Electric Corporation has also invested in our company. Affiliates of
the Guangdong and Zhejiang Telecommunications Administrations are our
manufacturing joint venture partners in China. NEC Corporation is marketing our
AN-2000 system under a private label worldwide. HFCL is our partner in
manufacturing and sales in India. We have strategic technology partnership
agreements with Zaffire, Inc. which provides a DWDM optical networking platform,
and with Foundry Networks, Inc. which provides Gigabit Ethernet and Fast
Ethernet switching technology as well as Layer 2 & 3 switching.

COMPETITION

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

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

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

    - 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 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.

                                       19
<PAGE>
    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:

    - total initial cost of solution;

    - short delivery and installation intervals;

    - design and installation support;

    - ease of integration with the backbone network;

    - flexibility in supporting multiple interfaces and services;

    - 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.

INTELLECTUAL PROPERTY

    Our success and ability to compete is dependent in part on our proprietary
technology. We rely on a combination of patent, copyright, trademark and trade
secret laws, as well as confidentiality agreements and licensing arrangements,
to establish and protect our proprietary rights. To date, we have relied
primarily on proprietary processes and know-how to protect our intellectual
property. We presently hold one U.S. patent for existing products. The term of
the patent will expire as late as the year 2016, depending on whether we
maintain the patent for the whole term. We have submitted fifteen U.S. patent
applications and eight foreign patent applications. We cannot assure you that
any of our patent applications will be granted or that any patents issued will
cover the scope of the claims sought in the applications. Our U.S. patents do
not afford any intellectual property protection in China or other international
jurisdictions. Moreover, we have applied for but 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 joint ventures in China rely upon our trademarks, technology and know-how to
manufacture and sell our products. Under the terms of our joint venture
agreements, any modifications or enhancements to or derivatives of our
intellectual property developed by the joint ventures will be owned by the joint
ventures. Any infringement of our proprietary rights could result in significant
litigation costs, and any failure to adequately protect our proprietary rights
could result in our competitors offering similar products, potentially resulting
in loss of a competitive advantage and decreased revenues. Despite our efforts
to protect our proprietary rights, existing patent, copyright, trademark and
trade secret laws afford only limited protection. In addition, the legal systems
of some foreign countries, including China, do not protect our proprietary
rights to the same extent as does the legal system of the United States.
Attempts may be made to copy or reverse engineer aspects of our products or to
obtain and use information that we regard as proprietary. Accordingly, we may
not be able to prevent misappropriation of our technology or deter others from
developing similar technology. Furthermore, policing the unauthorized use of our
products is difficult. Litigation may be necessary in the future to enforce our
intellectual property rights or to

                                       20
<PAGE>
determine the validity and scope of the proprietary rights of others. This
litigation could result in substantial costs and diversion of resources and
could significantly harm our business.

    The communications industry is characterized by the existence of a large
number of patents and frequent litigation based on allegations of patent
infringement. From time to time, third parties may assert patent, copyright,
trademark and other intellectual property rights to technologies and in various
jurisdictions that are important to our business. Any claims asserting that our
products infringe or may infringe proprietary rights of third parties, if
determined adversely to us, could significantly harm our business. Any claims,
with or without merit, could be time-consuming, result in costly litigation,
divert the efforts of our technical and management personnel, cause product
shipment delays or require us to enter into royalty or licensing agreements, any
of which could significantly harm our business. Royalty or licensing agreements,
if required, may not be available on terms acceptable to us, if at all. In the
event a claim against us was successful and we could not obtain a license to the
relevant technology on acceptable terms or license a substitute technology or
redesign our products to avoid infringement, our business would be significantly
harmed.

EMPLOYEES

    As of December 31, 2000, we employed a total of 1,573 full-time employees.
We also from time to time employ part-time employees and hire contractors. Of
the total number of full-time employees, 653 are in research and development,
204 in manufacturing, 573 in marketing, sales and support, and 143 in
administration. We have 1,354 employees located in China, 211 employees located
in the United States, and 8 employees in other countries. In addition to our
total full-time employees, the Guangdong manufacturing joint venture has 110
employees. Our employees are not represented by any collective bargaining
agreement, and we have never experienced a work stoppage. We believe that our
employee relations are good.

                                       21
<PAGE>
ITEM 2--FACILITIES

<TABLE>
<CAPTION>
LOCATION                                    FUNCTIONS              SQUARE FOOTAGE   DATE OF LEASE EXPIRATION
- --------                         --------------------------------  --------------   ------------------------
<S>                              <C>                               <C>              <C>
HEADQUARTERS Alameda, CA          Administration, Sales/Customer
                                      Support, Research and
                                           Development                 25,576           January, 2003

Iselin, NJ                       Sales/Customer Support, Research
                                         and Development               27,238            July, 2002

Shenzhen, China                      Research and Development          16,060            June, 2002

Hefei, China                         Research and Development           2,153            July, 2001

Hangzhou, China                   Administration, Sales/Customer
                                     Support, Engineering and
                                          Manufacturing                83,926            March, 2002

Hangzhou, China                   Administration, Sales/Customer
                                      Support, Research and
                                  Development, and Manufacturing       89,340          February, 2002

Huizhou, China                            Manufacturing                44,250          December, 2001

Beijing, China                          UTSC Headquarters
                                  Administration, Sales/Customer
                                             Support                   15,995             May, 2001

Shanghai, China                       Sales/Customer Support            5,070          December, 2002

Wuhan, China                          Sales/Customer Support              753            March, 2002

Guangzhou, China                      Sales/Customer Support            5,856            April, 2001

Chengdu, China                        Sales/Customer Support            1,851          December, 2001

Jinan, China                          Sales/Customer Support              750            March, 2001

Kunming, China                        Sales/Customer Support            2,676          February, 2003

Xian, China                           Sales/Customer Support            3,604          December, 2002

Shenyang, China                       Sales/Customer Support            3,122             May, 2003

Fuzhou, China                         Sales/Customer Support            6,030            June, 2002

Zhengzhou, China                      Sales/Customer Support            2,420           October, 2001

Taipei, Taiwan                        Sales/Customer Support            1,300             May, 2001

Hong Kong, China                      Sales/Customer Support              800            June, 2002
</TABLE>

    We have entered a 50-year lease for approximately 49 acres of land located
in Zhejiang Science and Technology Industry Garden of Hangzhou Hi-tech Industry
Development Zone. We are currently in the planning process of completing a
design layout and preparing a construction cost estimate for a manufacturing
facility. Once the planning is completed, our Board of Directors will then
decide on the actual building of the manufacturing facility. In addition, as we
expand into markets outside of Mainland China, our facility needs may increase
according to business needs.

                                       22
<PAGE>
ITEM 3--LEGAL PROCEEDINGS

    We may become involved in legal proceedings from time to time in the
ordinary course of business. As of the date of this report, we are not involved
in any material legal proceedings.

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

    Not applicable.

EXECUTIVE OFFICERS

    The following table sets forth certain information regarding our executive
officers as of December 31, 2000:

<TABLE>
<CAPTION>
NAME                                     AGE                              POSITION
- ----                                   --------   --------------------------------------------------------
<S>                                    <C>        <C>
Hong Liang Lu                             46      President, Chief Executive Officer and Director

Ying Wu                                   41      Vice Chairman of the Board of Directors, Executive Vice
                                                    President and Chief Executive Officer, China
                                                    Operations

Michael Sophie                            43      Vice President of Finance, Chief Financial Officer and
                                                    Assistant Secretary

Bill Huang                                38      Vice President, Chief Technology Officer

Shao-Ning J. Chou                         38      Executive Vice President and Chief Operating Officer,
                                                    China Operations

Paul Berkowitz                            48      Vice President, International Sales

Gerald Soloway                            52      Vice President, Engineering
</TABLE>

    HONG LIANG LU has been our President and Chief Executive Officer and a
director since June 1991. Mr. Lu co-founded UTStarcom under its prior name,
Unitech Telecom, Inc., in June 1991, which subsequently acquired StarCom Network
Systems, Inc. in September 1995. From 1986 through December 1990, Mr. Lu was
President and Chief Executive Officer of Kyocera Unison, a majority-owned
subsidiary of Kyocera International, Inc. From 1983 until its merger with
Kyocera in 1986, he was President and Chief Executive Officer of Unison
World, Inc., a software development company. From 1979 to 1983 he was Vice
President and Chief Operating Officer of Unison World, Inc. Mr. Lu holds a B.S.
in Civil Engineering from the University of California at Berkeley.

    YING WU has been our Executive Vice President and Vice Chairman of the Board
of Directors since October 1995. Mr. Wu has also been the President and Chief
Executive Officer of one of our subsidiaries, UTStarcom China, since
October 1995. From February 1991 to September 1995, Mr. Wu was a co-founder and
Senior Vice President of StarCom Network Systems, Inc., a company that marketed
and distributed third party telecommunications equipment. From 1988 to 1991,
Mr. Wu was a member of the staff of Bellcore Laboratories. From 1987 through
1988, Mr. Wu was a consultant at AT&T Bell Labs. He holds a B.S. in Electrical
Engineering from Beijing Industrial University and an M.S. in Electrical
Engineering from the New Jersey Institute of Technology.

    MICHAEL SOPHIE has been our Vice President of Finance and Chief Financial
Officer since August 1999. Prior to joining our company, Mr. Sophie held
executive positions at P-Com, Inc. from August 1993 to August 1999 as Vice
President Finance, Chief Financial Officer and Group President. From 1989
through 1993, Mr. Sophie was Vice President of Finance at Loral Fairchild
Corporation. He holds a B.S. degree from California State University, Chico and
an M.B.A. from the University of Santa Clara.

                                       23
<PAGE>
    BILL HUANG has been our Chief Technology Officer since September 1999. From
December 1996 to September 1999, he was our Vice President of Strategic Product
Planning. From June 1995 to December 1996, Mr. Huang served as our Vice
President, China Operations. From 1994 to June 1995, Mr. Huang was our Director,
Engineering. From 1992 to 1994, he was a Member of the Technical Staff and
Project Leader at AT&T Systems. Mr. Huang serves on the board of Shenzhen Gin De
(Group) Ltd., a real estate investment company in China. Mr. Huang holds a B.S.
in Electrical Engineering from Huazhong University of Science & Technology, and
an M.S. in Electrical Engineering and Computer Sciences from the University of
Illinois.

    SHAO-NING J. CHOU has been our Executive Vice President and Chief Operating
Officer of China Operations since January 1999. From March 1997 to
December 1998, he was Vice President of China Operations and from July 1996 to
March 1997, he served as Vice President of Engineering. From March 1995 to
June 1996, he was Director of Engineering for wireless systems and software with
Lucent Technologies Microelectronics IC group. From April 1993 to March 1995, he
was a Technical Manager for the Global Wireless product group with AT&T consumer
products where he led multiple development teams for handset and wireless
personal base station products. From July 1985 to April 1993, Mr. Chou was team
leader and a member of the technical staff for advanced digital communication
research in AT&T Bell Laboratories where he led and engaged in data
communication equipment and multimedia product development. Mr. Chou holds a
B.S. in Electrical Engineering from City College of New York, an M.S. in
Engineering from Princeton University and an M.B.A. from the State University of
New Jersey, Rutgers.

    PAUL BERKOWITZ has been our Vice President of International Sales since
November 1998. From July 1996 to November 1998, he was our Vice President of
Product Management & Planning, and from December 1995 to June 1996, he served as
our Vice President of Engineering. From 1994 to 1995, Mr. Berkowitz was Director
of Application Software of AT&T Network Systems where he managed, among other
things, an international team in marketing, architecture, and development of
software involving a portfolio of advanced GUI and client-server products for
telecommunications services. Between 1992 and 1994, he led the planning and
development effort for a 1 Gigabit/sec Asynchronous Transfer Mode switch support
Wide Area Network services including TDM and Frame Relay in the AT&T Paradyne
Unit. Mr. Berkowitz has been granted four patents and holds a B.S. and an M.S.
in Electrical Engineering from Columbia University.

    GERALD SOLOWAY has been our Vice President of Engineering since
January 1999. From April 1998 to January 1999, he served as our Director of
Strategic Marketing. Prior to this, Dr. Soloway worked for Lucent Technologies,
formerly Bell Labs, for 29 years. At Lucent, Dr. Soloway held executive
positions in Consumer Products, Business Terminal Development, PBX Systems
Engineering, Key System Development and Access Systems Development. He holds a
Ph.D. from Polytechnic Institute of New York, an M.S. from New York University,
and a B.S. from Cooper Union, all in Electrical Engineering. Dr. Soloway also
holds seven patents in communications and computer graphics technology.

                                       24
<PAGE>
                                    PART II

ITEM 5-- MARKET FOR UTSTARCOM, INC.'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

<TABLE>
<CAPTION>
FISCAL 2000                                                    HIGH       LOW
- -----------                                                  --------   --------
<S>                                                          <C>        <C>
First Quarter from March 3, 2000...........................  $ 93.50     $41.00
Second Quarter.............................................  $79.625     $16.75
Third Quarter..............................................  $ 32.88     $18.00
Fourth Quarter.............................................  $ 23.00     $12.31
</TABLE>

    Our common stock has been traded in The Nasdaq Stock Market under the symbol
UTSI since our initial public offering on March 3, 2000. The preceding table
sets forth the high and low closing sales prices per share of our common stock
as reported on The Nasdaq National Market for the periods indicated. As of
December 31, 2000 we had approximately 250 stockholders of record.

    To date, we have not paid any cash dividends on our common stock. We
currently anticipate that we will retain any available funds to finance the
growth and operation of our business and we do not anticipate paying any cash
dividends in the foreseeable future. Certain present or future agreements may
limit or prevent the payment of dividends on our common stock.

    We raised net proceeds of $189.4 million from our initial public offering on
March 3, 2000. As of December 31, 2000, we had 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. 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. At December 31, 2000, there are
no material agreements or commitments with respect to any acquisition or
investment activities.

                                       25
<PAGE>
ITEM 6--SELECTED FINANCIAL DATA

    You should read the selected financial data set forth below in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Financial Statements and the Notes thereto included
elsewhere in this report. Historical results are not necessarily indicative of
results that may be expected for any future period.

<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31,
                                                              ----------------------------------------------------
                                                                2000       1999       1998       1997       1996
                                                              --------   --------   --------   --------   --------
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>        <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales...................................................  $368,646   $187,516   $105,167   $75,597    $35,542
Cost of sales (includes deferred stock compensation expense
  of $90, $12, $0, $0 and $0)...............................   240,465    112,703     64,142    48,795     22,322
                                                              --------   --------   --------   -------    -------
Gross profit................................................   128,181     74,813     41,025    26,802     13,220
Operating expenses:
  Selling, general and administrative (includes deferred
    stock compensation expense of $4,676, $4,256, $390, $0
    and $0).................................................    48,055     35,122     23,211    21,211      8,042
  Research and development (includes deferred stock
    compensation expense of $6,795, $1,285, $22, $0 and
    $0).....................................................    41,452     18,648     14,681     8,941      3,899
  Amortization of intangible assets.........................     4,894        332        120        40         42
  In-process research and development.......................        --      3,992         --        --         --
                                                              --------   --------   --------   -------    -------
    Total operating expenses................................    94,401     58,094     38,012    30,192     11,983
Operating income (loss).....................................    33,780     16,719      3,013    (3,390)     1,237
Interest and other income (expenses)........................    10,829     (2,212)    (1,138)    2,033        858
Equity in net income (loss) of affiliated companies.........      (288)     1,348       (773)       73       (291)
                                                              --------   --------   --------   -------    -------
Income (loss) before income taxes and minority interest.....    44,321     15,855      1,102    (1,284)     1,804
Income tax expense..........................................    14,021        626      1,423       400        575
Minority interest in (earnings) loss of consolidated
  subsidiaries..............................................    (2,307)    (2,110)       914       301       (743)
                                                              --------   --------   --------   -------    -------
Income (loss) from continuing operations....................    27,993     13,119        593    (1,383)       486
Income (loss) from discontinued operations..................        --     (1,656)      (893)    1,413        301
                                                              --------   --------   --------   -------    -------
Net income (loss)...........................................    27,993     11,463       (300)       30        787
Preferred stock dividend....................................        --         --         --        --     (1,097)
Beneficial conversion feature of Series F preferred stock...        --    (29,977)        --        --         --
Cumulative effect on prior years of the application of SAB
  101 "Revenue Recognition in Financial Statements".........      (980)        --         --        --         --
                                                              --------   --------   --------   -------    -------
Net income (loss) applicable to common stockholders.........  $ 27,013   $(18,514)  $   (300)  $    30    $  (310)
Earnings (loss) per share:
Basic.......................................................  $   0.34   $  (2.13)  $  (0.04)  $    --    $ (0.04)
                                                              ========   ========   ========   =======    =======
Diluted.....................................................  $   0.27   $  (2.13)  $     --   $    --    $ (0.04)
                                                              ========   ========   ========   =======    =======
Proforma amounts assuming application of SAB101 "Revenue
  Rocognition in Financial Statements" is applied
  retroactively:
Net income (loss) applicable to common stockholders.........  $ 27,993   $(19,494)  $   (300)  $    30    $  (310)
Earnings (loss) per share:
Basic.......................................................  $   0.35   $  (2.25)  $  (0.04)  $    --    $ (0.04)
                                                              ========   ========   ========   =======    =======
Diluted.....................................................  $   0.27   $  (2.25)  $     --   $    --    $ (0.04)
                                                              ========   ========   ========   =======    =======
Shares used in per share calculations:
Basic.......................................................    79,696      8,678      7,582     7,320      8,344
                                                              ========   ========   ========   =======    =======
Diluted.....................................................   101,867      8,678     77,050     7,320      8,344
                                                              ========   ========   ========   =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                                               AS OF DECEMBER 31,
                                                              ----------------------------------------------------
                                                                2000       1999       1998       1997       1996
                                                              --------   --------   --------   --------   --------
                                                                                 (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>        <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................  $149,112   $87,364    $17,626    $35,049    $18,246
Working capital.............................................   369,861   126,637     57,416     59,076     34,382
Total assets................................................   591,837   271,788    142,121    101,097     49,610
Total short-term debt.......................................    43,381    43,338     38,426      1,579      1,127
Long-term debt..............................................    12,048        --         --         --         --
Convertible preferred stock.................................        --        --         --         --     39,912
Total stockholders' equity..................................   412,319   165,720     72,336     72,513     39,519
</TABLE>

                                       26
<PAGE>
ITEM 7-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

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

    We incorporated in Delaware as Unitech Industries Inc. in 1991. Since our
incorporation, we have focused our resources on developing products for China's
communications market. We shipped our first network access products in 1993. In
1994, we changed our name to Unitech Telecom, Inc. In 1995, we acquired StarCom
Network Systems, Inc. and changed our name to UTStarcom, Inc. During 1996, we
introduced our advanced, V5.1 and V5.2 compliant, multi-service network access
product, the AN-2000. Late in 1996, we introduced our PAS wireless access
system. In December 1999, we completed the acquisition of Wacos, Inc., a
research and development subsidiary that develops IP-based switching systems. As
part of our business operations in China, we have established a wholly owned
subsidiary and three joint ventures in that country.

    To date, we have derived substantially all of our revenues from sales of
communications equipment to service providers in China. Each of the
Telecommunications Bureaus to whom we sell our equipment in China is part of the
China Telecom system and subject to its ultimate control. However, equipment
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 99% of our sales for the twelve months ended December 31, 2000 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

                                       27
<PAGE>
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 and development is
critical to our long-term success. Accordingly, we expect that our research and
development expenses will increase in future periods.

    In connection with the grant of stock options to some of our employees, we
recorded net deferred compensation of $2.4 million during 2000 and
$15.9 million during 1999, 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. In connection with grants to non-employees
during 1999, we recorded deferred compensation of $7.4 million. 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
$11.6 million during 2000 and $5.6 million during 1999. At December 31, 2000,
approximately $6.5 million remained to be amortized.

    Amortization of intangible assets consists primarily of the amortization of
intangible assets associated with acquisitions in China and our acquisition of
the minority interest in our Wacos, Inc. subsidiary.

    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 the Company does not have voting
control over all significant matters.

    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.

                                       28
<PAGE>
RESULTS OF OPERATIONS

    The following table sets forth the percentage of net sales represented by
certain items reflected in our consolidated statements of operations:

<TABLE>
<CAPTION>
                                                                       YEARS ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
PERCENTAGE OF NET SALES:
Net sales...................................................   100.0%     100.0%     100.0%
Cost of sales...............................................    65.2       60.1       61.0
                                                               -----      -----      -----
Gross profit................................................    34.8       39.9       39.0
Operating expenses:
  Selling, general and administrative.......................    13.1       18.7       22.1
  Research and development..................................    11.2       10.0       13.9
  Amortization of intangible assets.........................     1.3        0.2        0.1
  In-process research and development.......................      --        2.1         --
                                                               -----      -----      -----
    Total operating expenses................................    25.6       31.0       36.1
Operating income............................................     9.2        8.9        2.9
Interest and other income (expenses)........................     2.9       (1.2)      (1.1)
Equity in net income (loss) of affiliated companies.........    (0.1)       0.7       (0.7)
                                                               -----      -----      -----
Income before income taxes and minority interest............    12.0        8.4        1.1
Income tax expense..........................................     3.8        0.3        1.4
Minority interest in (earnings) loss of consolidated
  subsidiaries..............................................    (0.6)      (1.1)       0.9
                                                               -----      -----      -----
Income from continuing operations...........................     7.6        7.0        0.6
Loss from discontinued operations...........................      --       (0.9)      (0.8)
                                                               -----      -----      -----
Net income (loss) before cumulative effect..................     7.6        6.1       (0.2)
Beneficial conversion feature of Series F preferred stock...              (16.0)
Cumulative effect on prior years of the application of SAB
  101 "Revenue Recognition in Financial Statements".........    (0.3)        --         --
                                                               -----      -----      -----
Net income (loss) applicable to common stockholders.........     7.3%      (9.9)%     (0.2)%
</TABLE>

COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999

NET SALES. Our net sales increased 96.6% to $368.6 million in 2000 from
$187.5 million in 1999. This increase was primarily due to an increase in sales
volume of our PAS system. In 2000, sales to Hangzhou Telecommunications Bureau
accounted for 12.1% of our net sales. In 1999, sales to Xian Telecommunications
Bureau and Kunming Telecommunications Bureau accounted for 30.2% and 10.7% of
our net sales, respectively.

GROSS PROFIT. Gross profit increased 71.3% to $128.2 million in 2000 from
$74.8 million in 1999. Gross profit, as a percentage of net sales, decreased to
34.8% in 2000 from 39.9% in 1999. The decrease in gross profit, as a percentage
of net sales, was primarily due to increases in sales of lower margin handsets,
which comprised 28.9% of sales in 2000 compared to 9.6% in 1999.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 36.8% to $48.1 million in 2000 from $35.1 million in 1999.
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 percentage of net sales decreased to 13.1% in 2000 from 18.7% in
1999. The decrease in selling, general and

                                       29
<PAGE>
administrative expenses as a percentage of net sales was 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 122.3% to
$41.5 million in 2000 from $18.6 million in 1999. 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, and non-cash stock compensation expense which
increased to $6.8 million in 2000 from $1.3 million in 1999. Stock compensation
expense is related to certain stock option grants to employees and non-employees
that we are amortizing over the periods of the applicable options. As a
percentage of net sales, research and development expenses increased to 11.2% in
2000 from 10.0% in 1999. 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 increased
to $4.9 million in 2000 from $0.3 million in 1999. The increase in amortization
of intangible assets was due to the increase in amortization associated with our
December 1999 acquisition of the portion of our Wacos, Inc. subsidiary owned by
the minority shareholders.

IN-PROCESS RESEARCH AND DEVELOPMENT COSTS. In-process research and development
costs resulted from our acquisition of the non-affiliated minority interest in
our Wacos, Inc., subsidiary in December 1999. The aggregate purchase price of
Wacos, Inc. was approximately $28.0 million which, based upon an independent
appraisal by Willamette Management Associates of all the assets acquired and
liabilities assumed, was allocated to the specifically identifiable tangible and
intangible assets acquired. Intangible assets included approximately
$4.0 million of in-process research and development which was charged to
operations in December 1999, $0.2 million of assembled workforce and
approximately $23.6 million of excess purchase price over the fair market values
of the tangible and identified intangible assets, which is being amortized over
periods of three to five years.

INTEREST INCOME (EXPENSES), NET. Net interest income was $8.9 million in 2000
and net interest expenses were $1.0 million in 1999. The increase in interest
income 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 and sale of our preferred stock in November and December 1999.

OTHER INCOME (EXPENSES), NET. Net other income was $1.9 million in 2000 and net
other expenses were $1.2 million in 1999. The increase in other income was
primarily due to a one-time gain on non-trade receivables which related to
receipts of balances previously considered uncollectible.

EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANIES. Consolidated equity in net loss
of affiliated companies was $0.3 million in 2000 and consolidated equity in net
income of affiliated companies was $1.3 million in 1999. The change between the
two periods was primarily due to the decrease of net income at our Guangdong
manufacturing subsidiary.

INCOME TAX EXPENSES. Income tax expenses were $14.0 million in 2000 and
$0.6 million in 1999. The increase in the income tax expenses was due to our
increasing income.

MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES. Minority interest in
earnings of consolidated subsidiaries was $2.3 million in 2000 and $2.1 million
in 1999. The change between the two periods was primarily due to the increased
profitability at our Zhejiang manufacturing subsidiary.

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BENEFICIAL CONVERSION FEATURE. The issuance of Series F preferred stock in 1999
included a beneficial conversion feature pursuant to which the preferred shares
converted into common shares on a one-for-one basis at a price below the
expected offering price upon the completion of our initial public offering. This
resulted in a charge to net income in 1999 of approximately $30.0 million,
reducing diluted earnings per share available to common stockholders by $3.45.

CUMULATIVE EFFECT. 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. In light of the guidance issued
in SAB 101, we changed our method of revenue recognition to the point of
contractual final acceptance. 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. Due to these changes, we recorded a cumulative adjustment in first
quarter 2000 of $1.0 million (net of income taxes of $0) or $0.01 per share,
basic and diluted. The impact in 2000 of adopting SAB 101 was to reduce net
income before the cumulative effect of the accounting change by $0.3 million
with no effect on basic or diluted net income per share.

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998

NET SALES. Our net sales increased 78.2% to $187.5 million in 1999 from
$105.2 million in 1998. This increase was primarily due to an increase in sales
volume of our PAS system. In 1999, sales to Xian Telecommunications Bureau and
Kunming Telecommunications Bureau accounted for 30.2% and 10.7% of our net
sales, respectively. In 1998, no customers accounted for over 10% of our net
sales.

GROSS PROFIT. Gross profit increased 82.4% to $74.8 million in 1999 from
$41.0 million in 1998. Gross profit, as a percentage of net sales, increased to
39.9% in 1999 from 39.0% in 1998. The increase in gross profit, as a percentage
of net sales, was primarily due to manufacturing economies of scale and
significant increases in sales of higher margin network access products and a
shift in product mix toward higher margin network access products.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 51.3% to $35.1 million in 1999 from $23.2 million in 1998.
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, and non-cash stock compensation
expense which increased to $4.3 million in 1999 from $0.4 million in 1998.
Selling, general and administrative expenses as a percentage of net sales
decreased to 18.7% in 1999 from 22.1% in 1998. The decrease in selling, general
and administrative expenses as a percentage of net sales was 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 26.5% to
$18.6 million in 1999 from $14.7 million in 1998. 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, and non-cash stock compensation expense which
increased to $1.3 million in 1999 from $22,000 in 1998. As a percentage of net
sales, research and development expenses decreased to 10.0% in 1999 from 13.9%
in 1998. 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.

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AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets increased
to $0.3 million in 1999 from $0.1 million in 1998. The increase in amortization
of intangible assets was due to the increase in amortization associated with our
December 1999 acquisition of the portion of our Wacos, Inc. subsidiary owned by
the minority shareholders.

IN-PROCESS RESEARCH AND DEVELOPMENT COSTS. In-process research and development
costs resulted from our acquisition of the non-affiliated minority interest in
our Wacos, Inc., subsidiary in December 1999. The aggregate purchase price of
Wacos, Inc. was approximately $28.0 million which, based upon an independent
appraisal by Willamette Management Associates of all the assets acquired and
liabilities assumed, was allocated to the specifically identifiable tangible and
intangible assets acquired. Intangible assets included approximately
$4.0 million of in-process research and development which was charged to
operations in December 1999, $0.2 million of assembled workforce and
approximately $23.6 million of excess purchase price over the fair market values
of the tangible and identified intangible assets, which is being amortized over
periods of three to five years.

INTEREST INCOME (EXPENSES), NET. Net interest expenses were $1.0 million in 1999
and $0.1 million in 1998. The increase in interest expense was primarily due to
increased interest charges on higher average debt balances combined with
decreased interest income from lower average cash balances.

OTHER INCOME (EXPENSES), NET. Net other expenses were $1.2 million in 1999 and
$1.0 million in 1998. The 1999 other expense was primarily due to a loss on
asset sales. The 1998 other expense was primarily due to a loss on one
investment.

EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANIES. Consolidated equity in net
income of affiliated companies was $1.3 million in 1999 and consolidated equity
in net loss of affiliated companies was $0.8 million in 1998. The change between
the two periods was primarily due to the increase of net income at our Guangdong
manufacturing subsidiary.

INCOME TAX EXPENSES. Income tax expenses were $0.6 million in 1999 and
$1.4 million in 1998. The decrease in income tax expenses was due to required
adjustments to our deferred tax asset valuation allowance, and also reflected
tax incentives and a one-time tax refund of $0.4 million in China in 1999.

MINORITY INTEREST IN (EARNINGS) LOSS OF CONSOLIDATED SUBSIDIARIES. Minority
interest in earnings of consolidated subsidiaries was $2.1 million in 1999 and
minority interest in loss of consolidated subsidiaries was $0.9 million in 1998.
The change between the two periods was primarily due to the increased
profitability at our Zhejiang manufacturing subsidiary.

LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was
$1.7 million in 1999 compared to $0.9 million in 1998.

BENEFICIAL CONVERSION FEATURE. The issuance of Series F preferred stock in 1999
included a beneficial conversion feature pursuant to which the preferred shares
converted into common shares on a one-for-one basis at a price below the
expected offering price upon the completion of our initial public offering. This
resulted in a charge to net income in 1999 of approximately $30.0 million,
reducing diluted earnings per share available to common stockholders by $3.45.

LIQUIDITY AND CAPITAL RESOURCES

    We have financed our operations through the sales of preferred stock, bank
lines of credit and our initial public offering in March 2000. 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. In April 2000, we made a payment of $8.7 million to SOFTBANK to repay
a stockholder loan. In July 2000, we established a line of credit with
Commercial Bank of Hangzhou to

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borrow up to $24.1 million. As of December 31, 2000, we have borrowed
$12.0 million under this line of credit and classified this $12.0 million
borrowings as long-term debt. As of December 31, 2000, we had working capital of
$369.9 million, including $149.1 million in cash and cash equivalents,
$83.9 million of short-term investments and $43.4 million of
Renminbi-denominated bank borrowings.

    We have invested $8.0 million and may invest up to an additional
$7.0 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 Holdings Pte., Ltd. ("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 the early stages and may
never materialize. As a result, we may experience losses in connection with this
investment in Softbank China.

    Net cash used in operations in 2000 of $46.2 million was primarily due to an
increase in inventories, accounts receivable and other current and non-current
assets of $60.7 million, $81.1 million and $4.9 million, respectively. The uses
of cash were partially offset by depreciation and amortization expense of
$9.5 million, amortization of deferred stock compensation expense of
$11.6 million, and an increase in accounts payable, income taxes payable and
other current liabilities and deferred revenue of $14.1 million, $5.9 million
and $28.0 million, respectively.

    Net cash used in investing activities in 2000 of $111.4 million was
primarily due to acquisition of property, plant and equipment of $19.5 million,
our $8.0 million investment in Softbank China, and the purchase of short-term
investments of $83.8 million.

    Net cash provided by financing activities in 2000 of $219.3 million was
primarily due to net proceeds of $198.2 million from the issuance of common
stock through our initial public offering and exercise of stock options, and net
proceeds of $20.8 million from borrowing under our lines of credit.

    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, 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 December 31, 2000 is approximately $10.6 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.

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<PAGE>
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. We adopted SFAS
No. 133 on January 1, 2001, and the adoption is not expected to materially
impact the financial statements.

    In September 2000, the FASB issued SFAS No. 140 (SFAS 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. We adopted SFAS No. 140 on
January 1, 2001, and the adoption is not expected to materially impact the
financial statements.

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:

    - 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;

    - 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;

    - aggressive price reductions by our competitors;

    - currency fluctuations;

    - market acceptance of our products and product enhancements;

    - 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

    - 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

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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 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 AND AN ACCUMULATED DEFICIT

    As of December 31, 2000, we had an accumulated deficit of approximately
$7.8 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 sustain profitability.
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:

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

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

    - 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,

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<PAGE>
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
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:

    - total initial cost of solution;

    - short delivery and installation intervals;

    - design and installation support;

    - ease of integration with the backbone network;

    - flexibility in supporting multiple interfaces and services;

    - 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 2000, one customer, Hangzhou
Telecommunications Bureau, accounted for 12.1% 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

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<PAGE>
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
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
systems 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.

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<PAGE>
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 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, we or our competitors 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

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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.

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 a 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

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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.

    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. Additionally, to comply with
manufacturing regulations in China we will need to obtain components for our
handsets from local sources. These sources may not be able to produce adequate
quantities of components that meet our quality standards.

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.

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<PAGE>
    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 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.

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    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:

    - amendment of the Articles of Association of the joint venture;

    - liquidation or dissolution of the joint venture;

    - 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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<PAGE>
    - 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.

    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 December 31, 2000, this Japanese
Yen bank account is valued at $10.6 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;

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<PAGE>
    - 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 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 continually 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

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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. 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.

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
$364.0 million, or 98.8%, of our sales in 2000, $186.1 million, or 99.3%, of our
sales in 1999, and $102.9 million, or 97.9%, of our sales in 1998 occurred in
China. Additionally, a substantial portion of our fixed assets are located in
China. Of our total fixed assets, approximately 69.4% as of December 31, 2000,
53.7% as of

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December 31, 1999 and 46.4% as of December 31, 1998 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.

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

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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 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.

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    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 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

                                       48
<PAGE>
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 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 Industryannounced 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 wireless
access services, such as those delivered over our PAS system, were increased,
from approximately $0.01 per minute to approximately $0.02 per minute. The
increase in rates for wireless access services 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

                                       49
<PAGE>
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 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 WTO as early as 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

                                       50
<PAGE>
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 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.

                                       51
<PAGE>
ITEM 7A--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    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.

    The table below represents carrying amounts and related weighted-average
interest rates of maturity of our investment portfolio at December 31, 2000:

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT INTEREST RATES)
- -------------------------------------
<S>                                                           <C>
Cash and cash equivalents...................................  $149,112
Average interest rate.......................................       4.1%
Short-term investments......................................  $ 83,858
Average interest rate.......................................       6.7%
Total investment securities.................................  $232,970
  Average interest rate.....................................       5.0%
</TABLE>

    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
December 31, 2000 is approximately $10.6 million.

                                       52
<PAGE>
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Financial Statements:
  Independent Accountants' Report...........................     54
  Consolidated Balance Sheets at December 31, 2000 and
    December 31, 1999.......................................     55
  Consolidated Statements of Operations for the years ended
    December 31, 2000, 1999, and 1998.......................     56
  Consolidated Statements of Stockholders' Equity for the
    years ended December 31, 2000, 1999, and 1998...........     57
  Consolidated Statements of Cash Flows for the years ended
    December 31, 2000, 1999, and 1998.......................     58
  Notes to Consolidated Financial Statements................     59
  Pro Forma Combined Financial Information (Unaudited)......     81
  Unaudited Pro Forma Combined Statements of
    Operations--Year Ended December 31, 1999................     82
  Notes to Unaudited Pro Forma Combined Financial
    Information.............................................     83
</TABLE>

                                       53
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS:

    To the Board of Directors and Stockholders of UTStarcom, Inc.:

    In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and stockholders' equity and cash flows
present fairly, in all material respects, the financial position of
UTStarcom, Inc. and its subsidiaries (the Company) at December 31, 2000 and
1999, and the results of their operations and of their cash flows for each of
the three years ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

<TABLE>
<S>                                            <C>
                                               /s/ PRICEWATERHOUSECOOPERS LLP
</TABLE>

San Francisco, California
January 24, 2001

                                       54
<PAGE>
                                UTSTARCOM, INC.
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents.................................  $149,112   $ 87,364
  Short-term investment.....................................    83,858         --
  Accounts receivable, net of allowances for doubtful
    accounts of $12,835 and $6,789 at December 31, 2000 and
    1999, respectively......................................   161,330     77,823
  Receivable from related parties...........................       406        892
  Inventories, net..........................................   118,995     55,204
  Other current assets......................................    17,674     10,109
                                                              --------   --------
Total current assets........................................   531,375    231,392
Property, plant and equipment, net..........................    21,999      8,168
Long-term investments.......................................    12,397      4,460
Goodwill and intangible assets, net.........................    20,238     25,132
Other long term assets......................................     5,828      2,636
                                                              --------   --------
  Total assets..............................................  $591,837   $271,788
                                                              ========   ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 44,564   $ 21,745
  Debt......................................................    43,381     34,593
  Debt to shareholder.......................................        --      8,745
  Income taxes payable......................................     7,170      2,985
  Deferred revenue..........................................    31,678      5,249
  Other current liabilities.................................    34,721     29,102
                                                              --------   --------
Total current liabilities...................................   161,514    102,419
                                                              --------   --------
Long-term debt..............................................    12,048         --

Minority interest in consolidated subsidiaries..............     5,956      3,649

Stockholders' equity:
Convertible preferred stock: $.00125 par value; authorized:
  99,200,000 shares; issued and outstanding 70,377,322 at
  December 31, 1999.........................................        --         88
Common stock: $.00125 par value; authorized: 250,000,000
  shares; issued and outstanding: 95,032,657 at December 31,
  2000 and 8,929,837 at December 31, 1999...................       120         13
Additional paid-in capital..................................   426,665    218,692
Deferred stock compensation.................................    (6,491)   (17,792)
Accumulated deficit.........................................    (7,808)   (34,821)
Notes receivable from shareholders..........................      (314)      (555)
Other comprehensive income..................................       147         95
                                                              --------   --------
Total stockholders' equity..................................   412,319    165,720
                                                              --------   --------
  Total liabilities and stockholders' equity................  $591,837   $271,788
                                                              ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       55
<PAGE>
                                UTSTARCOM, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net sales...................................................  $368,646   $187,516   $105,167
Cost of sales (includes stock compensation expense of $90,
  $12, and $0)..............................................   240,465    112,703     64,142
                                                              --------   --------   --------
Gross profit................................................   128,181     74,813     41,025
                                                              --------   --------   --------
Operating expenses:
  Selling, general and administrative expenses (includes
    stock compensation expense of $4,676, $4,256, $390).....    48,055     35,122     23,211
  Research and development expenses (includes stock
    compensation expense of $6,795, $1,285, and $22)........    41,452     18,648     14,681
  Amortization of intangible assets.........................     4,894        332        120
  In-process research and development costs.................        --      3,992         --
                                                              --------   --------   --------
Total operating expenses....................................    94,401     58,094     38,012
                                                              --------   --------   --------
Operating income............................................    33,780     16,719      3,013
Interest income.............................................    12,195      2,010      1,817
Interest expenses...........................................    (3,311)    (3,057)    (1,924)
Other income (expenses).....................................     1,945     (1,165)    (1,031)
Equity in net income (loss) of affiliated companies.........      (288)     1,348       (773)
                                                              --------   --------   --------
Income before income taxes, minority interest and cumulative
  effect of a change of accounting principle................    44,321     15,855      1,102
Income tax expense..........................................    14,021        626      1,423
                                                              --------   --------   --------
Income (loss) before minority interest......................    30,300     15,229       (321)
Minority interest in (earnings) loss of consolidated
  subsidiaries..............................................    (2,307)    (2,110)       914
                                                              --------   --------   --------
Income from continuing operations...........................    27,993     13,119        593
Loss from discontinued operations...........................        --     (1,656)      (893)
                                                              --------   --------   --------
Net income (loss) before cumulative effect of a change of
  accounting principle......................................    27,993     11,463       (300)
Cumulative effect of change in accounting principle, net of
  income taxes (note 3).....................................      (980)        --         --
                                                              --------   --------   --------
Net income (loss)...........................................    27,013     11,463       (300)
Beneficial conversion feature of Series F convertible
  preferred stock...........................................        --    (29,977)        --
                                                              --------   --------   --------
Net income (loss) applicable to common stockholders.........  $ 27,013   $(18,514)  $   (300)
                                                              ========   ========   ========
Basic earnings (loss) per share:
  Income (loss) from continuing operations before cumulative
    effect of accounting change.............................  $   0.35   $  (1.94)  $   0.08
  Loss from discontinued operations.........................        --      (0.19)     (0.12)
  Cumulative effect of change in accounting principle.......     (0.01)        --         --
                                                              --------   --------   --------
  Net income (loss).........................................  $   0.34   $  (2.13)  $  (0.04)
                                                              ========   ========   ========
Diluted earnings (loss) per share:
  Income (loss) from continuing operations before cumulative
    effect of accounting change.............................  $   0.28   $  (1.94)  $   0.01
  Loss from discontinued operations.........................        --      (0.19)     (0.01)
  Cumulative effect of change in accounting principle.......     (0.01)        --         --
                                                              --------   --------   --------
  Net income (loss).........................................  $   0.27   $  (2.13)  $  (0.00)
                                                              ========   ========   ========
Weighted average shares used in per-share calculation:
  --Basic...................................................    79,696      8,678      7,582
                                                              ========   ========   ========
  --Diluted.................................................   101,867      8,678     77,050
                                                              ========   ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       56
<PAGE>
                                UTSTARCOM, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                          CONVERTIBLE
                                                        PREFERRED STOCK            COMMON STOCK
                                                     ----------------------   ----------------------     ADDITIONAL
                                                       ISSUED       AMOUNT      SHARES       AMOUNT    PAID-IN-CAPITAL
                                                     -----------   --------   -----------   --------   ---------------
<S>                                                  <C>           <C>        <C>           <C>        <C>
Balances, December 31, 1997........................   57,518,068     $ 72       9,807,006     $ 12        $ 88,393
Common stock issued upon exercise of options.......                               483,544        1             479
Stock dividend.....................................      945,850        1          54,150
Exchange of common for preferred stock.............    1,171,836        1      (1,171,836)      (1)
Deferred compensation related to grant of stock
  options to non-employees.........................                                                          1,041
Cancellation of non-employee stock options.........                                                           (612)
Amortization of deferred stock compensation related
  to grant of stock options to non-employees.......
Reacquired common stock............................                                                           (453)
Notes receivable from stockholders.................
Net loss...........................................
Other comprehensive income:
  Translation adjustment...........................
  Total comprehensive income.......................
                                                     -----------     ----     -----------     ----        --------
Balances, December 31, 1998........................   59,635,754       74       9,172,864       12          88,848
Common stock issued upon exercise of options.......                               548,219                      530
Reacquired common stock............................                                 7,692                       (7)
Stock reclassification.............................     (549,448)      (1)        549,448        1
Notes receivable from stockholders.................
Deferred stock compensation related to grant of
  stock options to employees.......................                                                         15,937
Amortization of deferred stock compensation........
Deferred stock compensation related to grant of
  stock options to non-employees...................                                                          7,391
Distribution to stockholders.......................                                                         (6,550)
Issuance of preferred stock, net of issuance costs
  of $41...........................................    6,152,106        8                                   49,951
Issuance of preferred stock for Wacos
  acquisition......................................    4,523,700        6                                   27,616
Preferred stock issued upon exercise of options....      615,210        1                                    4,999
Dividend related to beneficial conversion feature
  to issuance of Series F preferred stock in
  December 1999....................................                                                         29,977
Retirement of Treasury Stock.......................                            (1,348,386)
Net income.........................................
                                                     -----------     ----     -----------     ----        --------
Balances, December 31, 1999........................   70,377,322       88       8,929,837       13         218,692
Common stock issued upon Initial Public Offering
  net of expenses..................................                            11,500,000       14         189,391
Conversion of preferred stock to common stock upon
  Initial Public Offering..........................  (70,377,322)     (88)     70,377,322       88
Exercise of common stock warrant...................                               500,000        1           3,124
Common stock issued upon exercise of options.......                             3,651,687        4           4,551
Common stock issued from ESPP......................                                73,811                    1,130
Distribution to stockholders.......................                                                          1,889
Deferred stock compensation related to grant of
  stock options....................................                                                            260
Amortization of deferred stock compensation........
Tax benefits for non-qualified stock option
  exercises........................................                                                          7,628
Repayment of notes receivable from stockholders....
Net income.........................................
Other comprehensive income:
  Unrealized holding gain..........................
  Total comprehensive income.......................
                                                     -----------     ----     -----------     ----        --------
Balances, December 31, 2000........................           --     $ --      95,032,657     $120        $426,665
                                                     ===========     ====     ===========     ====        ========

<CAPTION>

                                                                                     NOTES RECEIVABLE   ACCUMULATED OTHER
                                                     ACCUMULATED    DEFERRED STOCK         FROM           COMPREHENSIVE
                                                       DEFICIT       COMPENSATION      STOCKHOLDERS           INCOME
                                                     ------------   --------------   ----------------   ------------------
<S>                                                  <C>            <C>              <C>                <C>
Balances, December 31, 1997........................    $(16,007)       $     --           $(129)               $172
Common stock issued upon exercise of options.......
Stock dividend.....................................
Exchange of common for preferred stock.............
Deferred compensation related to grant of stock
  options to non-employees.........................                      (1,041)
Cancellation of non-employee stock options.........                         612
Amortization of deferred stock compensation related
  to grant of stock options to non-employees.......                         412
Reacquired common stock............................
Notes receivable from stockholders.................                                        (240)
Net loss...........................................        (300)
Other comprehensive income:
  Translation adjustment...........................                                                             (77)
  Total comprehensive income.......................
                                                       --------        --------           -----                ----
Balances, December 31, 1998........................     (16,307)            (17)           (369)                 95
Common stock issued upon exercise of options.......
Reacquired common stock............................
Stock reclassification.............................
Notes receivable from stockholders.................                                        (186)
Deferred stock compensation related to grant of
  stock options to employees.......................                     (15,937)
Amortization of deferred stock compensation........                       5,553
Deferred stock compensation related to grant of
  stock options to non-employees...................                      (7,391)
Distribution to stockholders.......................
Issuance of preferred stock, net of issuance costs
  of $41...........................................
Issuance of preferred stock for Wacos
  acquisition......................................
Preferred stock issued upon exercise of options....
Dividend related to beneficial conversion feature
  to issuance of Series F preferred stock in
  December 1999....................................     (29,977)
Retirement of Treasury Stock.......................
Net income.........................................      11,463
                                                       --------        --------           -----                ----
Balances, December 31, 1999........................     (34,821)        (17,792)           (555)                 95
Common stock issued upon Initial Public Offering
  net of expenses..................................
Conversion of preferred stock to common stock upon
  Initial Public Offering..........................
Exercise of common stock warrant...................
Common stock issued upon exercise of options.......
Common stock issued from ESPP......................
Distribution to stockholders.......................
Deferred stock compensation related to grant of
  stock options....................................                        (260)
Amortization of deferred stock compensation........                      11,561
Tax benefits for non-qualified stock option
  exercises........................................
Repayment of notes receivable from stockholders....                                         241
Net income.........................................      27,013
Other comprehensive income:
  Unrealized holding gain..........................                                                              52
  Total comprehensive income.......................
                                                       --------        --------           -----                ----
Balances, December 31, 2000........................    $ (7,808)       $ (6,491)          $(314)               $147
                                                       ========        ========           =====                ====

<CAPTION>

                                                         TOTAL
                                                     STOCKHOLDERS'
                                                        EQUITY
                                                     -------------
<S>                                                  <C>
Balances, December 31, 1997........................    $ 72,513
Common stock issued upon exercise of options.......         480
Stock dividend.....................................           1
Exchange of common for preferred stock.............          --
Deferred compensation related to grant of stock
  options to non-employees.........................          --
Cancellation of non-employee stock options.........          --
Amortization of deferred stock compensation related
  to grant of stock options to non-employees.......         412
Reacquired common stock............................        (453)
Notes receivable from stockholders.................        (240)
Net loss...........................................        (300)
Other comprehensive income:
  Translation adjustment...........................         (77)
  Total comprehensive income.......................        (377)
                                                       --------
Balances, December 31, 1998........................      72,336
Common stock issued upon exercise of options.......         530
Reacquired common stock............................          (7)
Stock reclassification.............................          --
Notes receivable from stockholders.................        (186)
Deferred stock compensation related to grant of
  stock options to employees.......................          --
Amortization of deferred stock compensation........       5,553
Deferred stock compensation related to grant of
  stock options to non-employees...................          --
Distribution to stockholders.......................      (6,550)
Issuance of preferred stock, net of issuance costs
  of $41...........................................      49,959
Issuance of preferred stock for Wacos
  acquisition......................................      27,622
Preferred stock issued upon exercise of options....       5,000
Dividend related to beneficial conversion feature
  to issuance of Series F preferred stock in
  December 1999....................................          --
Retirement of Treasury Stock.......................          --
Net income.........................................      11,463
                                                       --------
Balances, December 31, 1999........................     165,720
Common stock issued upon Initial Public Offering
  net of expenses..................................     189,405
Conversion of preferred stock to common stock upon
  Initial Public Offering..........................          --
Exercise of common stock warrant...................       3,125
Common stock issued upon exercise of options.......       4,555
Common stock issued from ESPP......................       1,130
Distribution to stockholders.......................       1,889
Deferred stock compensation related to grant of
  stock options....................................          --
Amortization of deferred stock compensation........      11,561
Tax benefits for non-qualified stock option
  exercises........................................       7,628
Repayment of notes receivable from stockholders....         241
Net income.........................................      27,013
Other comprehensive income:
  Unrealized holding gain..........................          52
  Total comprehensive income.......................      27,065
                                                       --------
Balances, December 31, 2000........................    $412,319
                                                       ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       57
<PAGE>
                                UTSTARCOM, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              ---------   --------   --------
<S>                                                           <C>         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $  27,013   $ 11,463   $   (300)
Adjustments to reconcile net income (loss) to net cash used
  in operating activities:
  Loss from discontinued operations.........................         --      1,656        893
  Depreciation and amortization.............................      9,494      3,013      2,486
  Write-off of in-process research and development costs....         --      3,992         --
  Net loss on sale of assets................................        807        611         73
  Cumulative effect of change in accounting principle.......        980         --         --
  Stock compensation expense................................     11,561      5,553        412
  Equity in net (income) loss of affiliated companies.......        288     (1,348)     1,700
  Minority interest in consolidated subsidiary..............      2,307      2,110     (2,084)
  Changes in operating assets and liabilities:
    Accounts receivable and receivable from related
      parties...............................................    (81,132)    (1,591)   (51,782)
    Inventories.............................................    (60,693)   (34,560)    (5,518)
    Other current and non-current assets....................     (4,850)    (8,317)    (1,668)
    Accounts payable and payable to related parties.........     14,143      6,644       (917)
    Income taxes payable....................................      5,907      1,127        930
    Other current liabilities...............................      5,659     21,024      8,561
    Deferred revenue........................................     22,351        (13)        --
                                                              ---------   --------   --------
Net cash (used in) provided by continuing operations........    (46,165)    11,364    (47,214)
Net cash (used in) provided by discontinued operations......         --       (530)       207
                                                              ---------   --------   --------
Net cash (used in) provided by operating activities.........    (46,165)    10,834    (47,007)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment..................    (19,513)    (3,607)    (2,250)
Investment in affiliates, net of cash acquired..............     (8,226)      (720)    (1,093)
Proceeds from disposal of property..........................        164        997         --
Purchase of short-term investments..........................    (83,806)        --         --
                                                              ---------   --------   --------
Net cash used in continuing operations......................   (111,381)    (3,330)    (3,343)
Net cash (used in) provided by discontinued operations......         --        179        (36)
                                                              ---------   --------   --------
Net cash used in investing activities.......................   (111,381)    (3,151)    (3,379)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock, net of expenses..........................    198,213     55,480        480
Reacquired common stock.....................................         --         --       (453)
Proceeds from borrowing, net................................     20,836     23,729      8,245
Proceeds (payments) from shareholder notes..................        245    (17,505)    24,939
                                                              ---------   --------   --------
Net cash provided by financing activities of continuing
  operations................................................    219,294     61,704     33,211
Effects of exchange rates on cash...........................         --         --        (77)
                                                              ---------   --------   --------
Net increase (decrease) in cash and cash equivalents........     61,748     69,387    (17,252)
Investments and (advances to) from discontinued
  operations................................................         --       (351)       171
                                                              ---------   --------   --------
Net increase (decrease) in cash and cash equivalents........     61,748     69,738    (17,423)
Cash and cash equivalents at beginning of period............     87,364     17,626     35,049
                                                              ---------   --------   --------
Cash and cash equivalents at end of period..................  $ 149,112   $ 87,364   $ 17,626
                                                              =========   ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       58
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--DESCRIPTION OF BUSINESS

    UTStarcom, Inc. (the Company), a Delaware corporation, provides
communications equipment including network access systems, optical transmission
products and subscriber terminal products for service providers that operate
wireless and wireline networks. The Company's operations are conducted primarily
by its foreign subsidiaries that manufacture, distribute, and support the
Company's products in international markets, principally the People's Republic
of China (China).

    The following lists the Company's active subsidiaries, its percentage
ownership, and the business each subsidiary operates as of December 31, 2000:

<TABLE>
<CAPTION>
                                         PERCENTAGE
NAME                                       OWNED                      TYPE OF OPERATIONS
- ----                                     ----------   ---------------------------------------------------
<S>                                      <C>          <C>
UTStarcom-China (UTSC)                       100%     Marketing and sales of telecom equipment
Hangzhou UTStarcom, Ltd. (HUTS)               88%     Manufacturing of telecom equipment
Guangdong UTStarcom, Ltd. (GUTS)              51%     Manufacturing of telecom equipment
</TABLE>

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION:

    The accompanying consolidated financial statements include the accounts of
the Company and its wholly and majority (over 50 percent) owned subsidiaries,
except for 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.

RESTATEMENT AND RECLASSIFICATION:

    The consolidated financial statements of the Company have been restated to
reflect the disposition of Nanjing UTStarcom, Ltd. (NUTS) in September 1999.
(See Note 5). Accordingly, the revenues, costs and expenses, assets and
liabilities and cash flows of these discontinued operations have been excluded
from the respective captions in the Consolidated Balance Sheets, Consolidated
Statements of Operations and Consolidated Statements of Cash Flows, and have
been reported through the date of disposition as "Net assets of discontinued
operations", "Income (loss) from discontinued operations" and "Net cash (used
in) provided by discontinued operations" for all periods presented.

    The Company has retroactively accounted for its December 1999 acquisition of
Wacos as if the original investment in Wacos by SOFTBANK Corporation (SOFTBANK)
in December 1997 had been made by the Company (See Note 7).

    Certain reclassifications have been made in the prior years financial
statements to conform with the 2000 presentation.

USE OF ESTIMATES:

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements

                                       59
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS:

    Cash and cash equivalents consist primarily of highly liquid monetary
instruments with a maturity of three months or less at the date of purchase.
Restricted cash consisted of the following at December 31:

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                  2000       1999
- --------------                                                --------   --------
<S>                                                           <C>        <C>
Collateral for letters of credit............................   $3,103     $  640
Cash in escrow..............................................       --      2,410
Cash collateral.............................................    1,500      1,500
                                                               ------     ------
                                                               $4,603     $4,550
                                                               ======     ======
</TABLE>

    Restricted cash balances are expected to be released within three months of
being recorded and are treated as part of cash and cash equivalents.

SHORT-TERM INVESTMENTS:

    Short-term investments, consisting primarily of investments with original
maturities of less than twelve months, are accounted for in accordance with
Statement of Financial Accounting Standards No. 115 ("SFAS No. 115"),
"Accounting for Certain Investments in Debt and Equity Securities". This
statement requires that securities are classified as "held to maturities",
"available for sale" or "trading". Debt securities that the Company does not
have the positive intent and ability to hold to maturity and all marketable
equity securities are classified as available-for-sale and are carried at fair
value. Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of stockholders' equity.
Realized holdings gains and losses on securities classified as
available-for-sale are reported as earnings. The fair value of investments is
determined based on quoted market prices. The cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization, interest income, realized gains and losses and declines in
value judged to be other than temporary are included in interest and other
income. The cost of securities is based on specific identification.

<TABLE>
<CAPTION>
                                                                      DECEMBER 31, 2000
                                                       -----------------------------------------------
                                                                     GROSS        GROSS      ESTIMATED
                                                       AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                                         COST        GAINS        LOSSES       VALUE
                                                       ---------   ----------   ----------   ---------
<S>                                                    <C>         <C>          <C>          <C>
Government and agency obligations....................   $ 4,000      $   20     $     --        4,020
Other debt securities................................    78,827       1,011           --       79,838
                                                        -------      ------     ----------    -------
Total current available-for-sale securities..........   $82,827      $1,031     $     --      $83,858
</TABLE>

INVENTORIES:

    Inventories are stated at the lower of cost or market, net of allowance for
obsolescence. Cost is computed using standard cost, which approximates actual
cost on a first-in, first-out basis.

                                       60
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 where installations are performed,
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.

WARRANTY COSTS:

    A warranty is provided under the terms of the Company's contract for a
period not greater than one year. The Company provides for these costs at the
time of revenue recognition based upon prior experience.

PROPERTY, PLANT AND EQUIPMENT:

    Property, plant and equipment are recorded at cost and are stated net of
accumulated depreciation. Depreciation is provided for on a straight-line basis
over the estimated useful lives of the related assets, generally ranging from
two to five years. Leasehold improvements are amortized on a straight-line basis
over the shorter of the useful life of the improvements or the term of the
lease. When assets are disposed of, the cost and related accumulated
depreciation are removed from the accounts and the resulting gains or losses are
included in the results of operations. The Company generally depreciates its
assets over the following periods:

<TABLE>
<CAPTION>
                                                                YEARS
                                                      -------------------------
<S>                                                   <C>
Furniture, test or manufacturing equipment..........  5
Research and development equipment..................  2
Computers and software..............................  3
Leasehold improvements..............................  5 or remaining lease life
</TABLE>

GOODWILL AND INTANGIBLE ASSETS:

    Goodwill and intangible assets include the excess of costs of acquired
companies over the fair value of net assets acquired and acquired workforce,
which are amortized on a straight-line basis generally over 3 to 5 years.
Valuation of goodwill and intangible assets is based on forecasted discounted
cash flows and is reassessed when circumstances warrant.

IMPAIRMENT OF LONG-LIVED ASSETS:

    Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"), requires that long-lived assets and certain intangible assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If undiscounted expected future
cash flows are less than the carrying value of the assets, an impairment loss is
to be recognized

                                       61
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
based on the fair value of the assets. The Company considers the requirements of
SFAS 121 on an ongoing basis.

STOCK-BASED COMPENSATION:

    The Company accounts for employee stock option grants in accordance with
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees" ("APB 25") and has adopted the disclosure-only alternative of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123").

    The value of warrants, options or stock exchanged for services from
non-employees is generally expensed over the period benefited. The warrants and
options are valued using Black-Scholes option pricing model. To calculate the
expense, the Company uses either the fair value of the consideration received or
the fair value of the equity instruments issued, whichever is more reliably
measurable.

COMPREHENSIVE INCOME:

    Comprehensive income, as defined, includes all changes in equity (net
assets) during a period from nonowner sources. Accumulated other comprehensive
income or loss is shown in the consolidated statement of shareholders equity in
December 31, 2000, 1999 and 1998.

INCOME TAXES:

    Deferred income taxes are recognized for the differences between the tax
bases of assets and liabilities and their financial reporting amounts based on
enacted tax rates. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.

    The Company does not provide for U.S. Federal taxes on undistributed
earnings of its foreign subsidiaries or affiliates as they are considered to be
reinvested for an indefinite period.

SEGMENT REPORTING:

    The Company has determined that they operate in a single segment, providing
communications equipment through an integrated suite of network access systems,
optical transmission products and subscriber terminal products.

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:

    Financial instruments consist of cash and cash equivalents, short-term
investments, accounts receivable and payable, and debt. The carrying amounts of
cash and cash equivalents, short-term investments, accounts receivable and
payable approximate their fair values because of the short term nature of those
instruments. The carrying amounts of debt approximate their fair values because
of either the short maturity, the variable interest rates of those instruments,
or that the difference between the fixed interest rate payable and the current
prevailing rate is not significant.

FOREIGN CURRENCY TRANSLATIONS:

    Operations of the Company's subsidiaries are conducted primarily in China
and the financial statements of those subsidiaries are translated from China's
Renminbi, as functional currency, into U.S. Dollars in accordance with the
Statement of Financial Accounting Standards No. 52, "Foreign Currency

                                       62
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Translation" ("SFAS 52"). Accordingly, all foreign currency assets and
liabilities are translated at the average exchange rate for the period. The
effects of translating the financial statements of foreign subsidiaries into
U.S. dollars are reported as a cumulative translation adjustment, a separate
component of comprehensive income in stockholders' equity. Foreign currency
translation gains and losses have not been material for any of the years
presented.

EARNINGS (LOSS) PER SHARE:

    Basic earnings (loss) per share is computed by dividing 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.

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 is not expected to materially
impact the financial statements.

    In September 2000, the FASB issued SFAS No. 140 (SFAS 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 is not expected to materially impact the
financial statements.

NOTE 3--ACCOUNTING CHANGES

    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. In light of the guidance issued in
SAB 101, the Company changed its method of revenue recognition to the point of
contractual final acceptance. 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. Due to these changes, the Company recorded a cumulative adjustment in
first quarter 2000 of $1.0 million (net of income taxes of $0) or $0.01 per
share, basic and diluted. The impact in 2000 of adopting SAB 101 was to reduce
net income before the cumulative effect of the accounting change by
$0.3 million with no effect on basic or diluted net income per share.

                                       63
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--ACCOUNTING CHANGES (CONTINUED)
    Adopting this new method of accounting as of January 1, 1998 would have
produced the following pro forma results (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
AS REPORTED,                                                  1999       1998
- ------------                                                --------   --------
<S>                                                         <C>        <C>
Net loss..................................................  $(18,514)   $ (300)
Net loss per share, basic.................................  $  (2.13)   $(0.04)
Net income (loss) per share, diluted......................  $  (2.13)   $ 0.00
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA,                                                    1999       1998
- ----------                                                  --------   --------
<S>                                                         <C>        <C>
Net loss..................................................  $(19,494)   $ (300)
Net loss per share, basic.................................  $  (2.25)   $(0.04)
Net income (loss) per share, diluted......................  $  (2.25)   $ 0.00
</TABLE>

NOTE 4--COMPLETION OF INITIAL PUBLIC OFFERING

    On March 3, 2000, the Company completed its initial public offering ("IPO").
In the IPO, the Company 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 sale of the shares of common stock generated net proceeds of approximately
$189.4 million, after deducting underwriting discounts and commissions and
expenses of the offering of approximately $17.6 million. As of the effective
date of the offering, all of the convertible preferred stock outstanding was
converted into 70,377,322 shares of common stock.

NOTE 5--DISCONTINUED OPERATIONS

    During September 1999, the Company closed UTStarcom Nanjing, Inc. (NUTS),
its wholly owned subsidiary. NUTS was engaged in telephone network and internet
network services unrelated to the remaining Company operations. NUTS sold
substantially all of its assets prior to closure. The close of NUTS was
accounted for as a discontinued operation.

    The Company's previous interests in the net revenues and expenses of NUTS'
operations prior to September 30, 1999 are classified separately as income
(loss) from discontinued operations in the income statements. The components of
the income or loss are summarized as follows:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED
                                                                DECEMBER 31,
                                                             -------------------
(IN THOUSANDS)                                                 1999       1998
- --------------                                               --------   --------
<S>                                                          <C>        <C>
Net sales..................................................  $   298     $4,457
Operating expenses and cost of sales.......................    1,369      5,345
                                                             -------     ------
Operating loss.............................................   (1,071)      (888)
Other expenses.............................................     (585)        (5)
                                                             -------     ------
Loss from discontinued operations..........................  $(1,656)    $ (893)
                                                             =======     ======
</TABLE>

    The Company's cash flow statements include separately the cash flows from
discontinued operations.

                                       64
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
(IN THOUSANDS)                                                  2000       1999       1998
- --------------                                                --------   --------   --------
<S>                                                           <C>        <C>        <C>
Cash paid during the period for:
Interest....................................................   $3,289     $3,723     $  564
Income taxes................................................   $8,038     $1,386     $1,076
</TABLE>

    Noncash investing and financing activities were as follows:

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
(IN THOUSANDS)                                                  2000       1999       1998
- --------------                                                --------   --------   --------
<S>                                                           <C>        <C>        <C>
Share in additional paid in capital of minority shareholder
  in Wacos..................................................   $   --    $    --     $2,867
Distribution of net assets to shareholders..................   $   --    $ 4,956     $1,983
Issuance of shares upon the Wacos acquisition...............   $   --    $27,953     $   --
Payment of shareholders' loan...............................   $   --    $ 1,640     $   --
Retirement of treasury stock................................   $   --    $ 3,060     $   --
Non-qualified stock option exercise tax benefits............   $7,628    $    --     $   --
</TABLE>

NOTE 7--ACQUISITION OF COMPANIES

    In September 1996, the Company purchased a 49% interest in GUTS for
approximately $1.2 million. In February 1998, the Company acquired an additional
2% interest in GUTS for $80,000, increasing its ownership interest to 51%.
However, because the Company does not have voting control over all significant
matters of GUTS, the investment in and results of operations of GUTS are
included in the consolidated financial statements using the equity method of
accounting. The purchase of the additional interest has been accounted for as a
purchase resulting in an intangible asset for the insignificant excess of the
purchase price over the fair value of the net assets.

    In February and October 1997, the Company purchased a total of 49% of the
voting stock of Wacos for approximately $0.3 million. In October and
December 1997, SOFTBANK, the then major stockholder of the Company, acquired a
40% voting interest in Wacos for $5.1 million. In December 1999, the Company
issued 3,691,534 shares of Series G preferred stock in exchange for SOFTBANK's
4,103,465 shares in Wacos. As a result of the common control that existed
between the Company, SOFTBANK and Wacos during this period of ownership this
exchange of shares was made at historic cost. The Company has retroactively
accounted for its acquisition of Wacos as if the original investment by SOFTBANK
had been made by the Company.

    In December 1999, the Company completed the purchase of the non-affiliated
minority interests in its Wacos subsidiary with the issuance of 832,166 shares
of Series G preferred stock and $9.7 million of common stock options valued
using a Black-Scholes model. The aggregate purchase price of Wacos was
approximately $28.0 million which, based upon an independent appraisal by
Willamette Management Associates of all assets acquired and liabilities assumed,
was allocated to the specifically identifiable tangible and intangible assets
acquired. Intangible assets included approximately $4.0 million of in-process
research and development which was charged to operations in December 1999,
$0.2 million of assembled workforce and approximately $23.6 million of excess
purchase price over the fair market values of the tangible and identified
intangible assets, being amortized over periods of three to five years.

                                       65
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--ACQUISITION OF COMPANIES (CONTINUED)
    The values of Wacos' in-process research and development projects were
estimated by an excess income approach. Management revenue and operating expense
projections were reduced by appropriate amounts to reflect a fair return on the
net tangible and collateral intangible assets to be employed in realizing the
forecasted net incomes. The resulting forecasted "excess" income figures were
discounted to present value using a 40% rate of return, reflecting the
technological, market and other risks associated with the subject technologies
and future products. The discounted excess incomes were summed and then, in
accordance with methodology approved by the Securities and Exchange Commission,
reduced by an appropriate percentage completion factor for each project to
account for the anticipated remaining research and development factors. At the
time of the Wacos acquisition, Wacos was engaged in three distinct in-process
research and development projects in relation to its Internet Protocol based
switching system. These projects were in various stages of development but none
had reached the point where technological feasibility had been established.

    The following presents the allocation of the purchase price for Wacos:

<TABLE>
<CAPTION>
(IN THOUSANDS)
- --------------
<S>                                                           <C>
Purchased in-process research and development...............  $ 3,992
Fair value of net assets acquired...........................       83
Fair value of identified intangible assets..................      240
Excess of costs of acquiring Wacos over fair value of net
  assets....................................................   23,638
                                                              -------
                                                              $27,953
                                                              =======
</TABLE>

NOTE 8--DISTRIBUTION TO SHAREHOLDERS

    In August 1999 the Company distributed to its shareholders the net assets of
a previously consolidated yet unrelated business which had been acquired in
1997. This business, which operated in a dissimilar market segment, had been
managed and financed, in all significant respects, as if it were autonomous from
the Company. These financial statements have been prepared as if the acquired
business was distributed on the original date of purchase in 1997.

NOTE 9--INVENTORIES

    As of December 31, 2000 and 1999 inventories consist of the following:

<TABLE>
<CAPTION>
(IN THOUSANDS)                                               2000       1999
- --------------                                             --------   --------
<S>                                                        <C>        <C>
Raw materials............................................  $ 41,876   $31,461
Work-in-process..........................................    23,432     4,356
Finished goods...........................................    62,888    25,802
                                                           --------   -------
                                                           $128,196   $61,619
Less allowance for obsolete inventory....................    (9,201)   (6,415)
                                                           --------   -------
                                                           $118,995   $55,204
                                                           ========   =======
</TABLE>

                                       66
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--PROPERTY, PLANT AND EQUIPMENT

    As of December 31, 2000, and 1999 property, plant and equipment consists of
the following:

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                2000       1999
- --------------                                              --------   --------
<S>                                                         <C>        <C>
Buildings.................................................  $   224    $   145
Land......................................................    7,319         --
Leasehold improvements....................................    2,237      1,640
Automobiles...............................................    3,035      1,173
Equipment and furniture...................................   18,698     11,720
                                                            -------    -------
                                                            $31,513    $14,678
Less accumulated depreciation and amortization............   (9,514)    (6,510)
                                                            -------    -------
                                                            $21,999    $ 8,168
                                                            =======    =======
</TABLE>

    Depreciation and amortization expense was $4.6 million, $2.7 million and
$2.4 million for the years ended December 31, 2000, 1999 and 1998 respectively.

NOTE 11--LONG-TERM INVESTMENTS

    The Company's long term investments were as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                 2000       1999
- --------------                                               --------   --------
<S>                                                          <C>        <C>
Investment in GUTS.........................................  $ 2,026     $2,314
Investment in Softbank China...............................    8,002         --
Investment in others.......................................    2,369      2,146
                                                             -------     ------
Total......................................................  $12,397     $4,460
                                                             =======     ======
</TABLE>

    In September 1996, the Company purchased a 49% interest in GUTS. In
February 1998, the Company acquired an additional 2% interest in GUTS,
increasing its ownership interest to 51%. However, because the Company does not
have voting control over all significant matters of GUTS, the investment in and
results of operations of GUTS are accounted for using the equity method.

                                       67
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11--LONG-TERM INVESTMENTS (CONTINUED)
    Condensed financial information for the unconsolidated investments in GUTS
is as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                2000       1999
- --------------                                              --------   --------
<S>                                                         <C>        <C>
Current assets............................................  $ 9,885    $13,738
Noncurrent assets.........................................      516        866
Current liabilities.......................................   (5,503)    (9,071)
                                                            -------    -------
Total shareholders' equity................................    4,898      5,533
Other shareholders' shares of equity......................    2,400      2,711
                                                            -------    -------
UTStarcom's share of equity...............................    2,498      2,822
Elimination of intercompany profit........................     (472)      (508)
                                                            -------    -------
Investment in unconsolidated subsidiary...................  $ 2,026    $ 2,314
                                                            =======    =======
</TABLE>

<TABLE>
<CAPTION>
(IN THOUSANDS)                                       2000       1999       1998
- --------------                                     --------   --------   --------
<S>                                                <C>        <C>        <C>
Net sales........................................  $16,523    $16,004    $10,995
Gross profit.....................................      931      2,366      2,123
Operating income.................................     (638)     1,067      1,040
Net income (loss)................................     (441)       820        734
                                                   -------    -------    -------
UTStarcom's share of net income (loss)...........     (225)       418        374
Elimination of intercompany profit...............      (63)       930     (1,147)
                                                   -------    -------    -------
Equity in net income (loss) of subsidiary........  $  (288)   $ 1,348    $  (773)
                                                   =======    =======    =======
</TABLE>

    Product sales to GUTS for the years ended December 31, 2000, 1999 and 1998
were $13.1 million, $8.4 million and $5.6 million, respectively. Product
purchases from GUTS for the years ended December 31, 2000, 1999 and 1998 were
$6.8 million, $7.9 million and $8.9 million, respectively.

    In May 2000, the Company purchased a 10% interest in Softbank China Holdings
Pte., Ltd. ("Softbank China"). The investment in Softbank China and other
investments less than 20% owned are accounted for using the cost method. See
Note 13 for discussion of Related Party Transactions.

NOTE 12--GOODWILL AND INTANGIBLE ASSETS

    As of December 31, 2000 and 1999 goodwill and intangible assets resulting
from the Company's acquisition of Wacos consist of the following:

<TABLE>
<CAPTION>
                                                              2000       1999
                                                            --------   --------
                                                              (IN THOUSANDS)
<S>                                                         <C>        <C>
Excess of purchase price over net assets acquired.........  $25,695    $25,695
Less accumulated amortization.............................   (5,457)      (563)
                                                            -------    -------
                                                            $20,238    $25,132
                                                            =======    =======
</TABLE>

    Amortization expense was $4.9 million, $0.3 million and $0.1 million for the
years ended December 31, 2000, 1999 and 1998, respectively.

                                       68
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13--RELATED PARTY TRANSACTIONS

    Debt to shareholder at December 31, 2000 and 1999 consist of the following:

<TABLE>
<CAPTION>
                                                                2000        1999
                                                              ---------   --------
                                                                 (IN THOUSANDS)
<S>                                                           <C>         <C>
Debt to shareholder--SOFTBANK...............................  $     --     $8,745
                                                              =========    ======
</TABLE>

    Jitong, a company in China with which the Company had a management
consulting agreement, paid UTSC $8.7 million for the repayment of a loan made by
to Jitong. SOFTBANK is the Company's principal stockholder. In April, 2000, the
Company made a repayment in full to Softbank Corporation. The payable was a
non-interest bearing balance.

    In May 2000, the Company purchased a 10% interest in Softbank China, which
is 90% owned by SOFTBANK, for $8.0 million.

    In June 1998, the Company entered into a loan agreement with SOFTBANK for a
total of $25.0 million. As of December 31, 1999, the entire loan was paid off
and the loan agreement was terminated.

NOTE 14--THIRD PARTY DEBT

    The following represents the outstanding borrowings at December 31, 2000 and
1999:

<TABLE>
<CAPTION>
NOTE                                      RATE                MATURITY           2000       1999
- ----                              --------------------   -------------------   --------   --------
                                                                                 (IN THOUSANDS)
<S>                               <C>                    <C>                   <C>        <C>
Bank of China(1)................  From 5.56% to 5.85%    From 01/01 to 12/01   $28,917    $27,108
China Merchants Bank(2).........         6.44%                  03/01            3,614         --
Commercial Bank of Hangzhou(3)..         6.44%                  10/00               --      6,024
Commercial Bank of Hangzhou(4)..         6.21%                  06/10           12,048         --
Industrial & Commercial Bank of
  China(5)......................         5.85%                  05/01            6,024      1,446
China Construction Bank(6)......         6.44%                  06/01            4,819         --
Other...........................        Various                Various               7         15
                                  --------------------   -------------------   -------    -------
Total debt......................                                               $55,429    $34,593
Long-term debt..................                                                12,048         --
                                                                               -------    -------
Short-term debt.................                                               $43,381    $34,593
                                                                               =======    =======
</TABLE>

- ------------------------

(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 $108,434.

(2) Collateralized by $1,500 deposited with the bank and guaranteed by HUTS.
    This line allows for borrowings of up to $3,614 and matures on March 1,
    2001.

(3) Guaranteed by HUTS. This line allows for borrowings of up to $6,024 and
    matured in October 2000.

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

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

                                       69
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14--THIRD PARTY DEBT (CONTINUED)
(6) Guaranteed by HUTS. This line allows for borrowings of up to $4,819 and
    matures in June 2001.

NOTE 15--OTHER CURRENT LIABILITIES

    Other current liabilities at December 31, 2000 and 1999 consist of the
following:

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                2000       1999
- --------------                                              --------   --------
<S>                                                         <C>        <C>
Accrued contract costs....................................  $22,858    $19,373
Accrued payroll and compensation..........................    4,500      3,493
Accrued other taxes.......................................       --        618
Warranty costs............................................    3,133      1,236
Other.....................................................    4,230      4,382
                                                            -------    -------
                                                            $34,721    $29,102
                                                            =======    =======
</TABLE>

NOTE 16--PROVISION FOR INCOME TAXES

    United States and foreign income (loss) before income taxes, minority
interest, loss on discontinued operations, and cumulative effect of a change in
accounting principles were as follows:

<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31,
                                                   ------------------------------
                                                     2000       1999       1998
                                                   --------   --------   --------
                                                           (IN THOUSANDS)
<S>                                                <C>        <C>        <C>
United States....................................  $(9,973)   $(15,664)  $(4,928)
Foreign..........................................   54,294      31,519     6,030
                                                   -------    --------   -------
                                                   $44,321    $ 15,855   $ 1,102
                                                   =======    ========   =======
</TABLE>

    Undistributed foreign earnings at December 31, 2000 amounted to
$91.3 million.

    The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                    ------------------------------
                                                      2000       1999       1998
                                                    --------   --------   --------
                                                            (IN THOUSANDS)
<S>                                                 <C>        <C>        <C>
CURRENT:
  Federal.........................................  $13,369    $ 1,100     $    9
  State...........................................      782        533          1
  Foreign.........................................    6,046      1,700        934
DEFERRED:
  Federal.........................................   (4,433)    (2,453)       632
  State...........................................        2        (10)      (239)
  Foreign.........................................   (1,745)      (244)        86
                                                    -------    -------     ------
                                                    $14,021    $   626     $1,423
                                                    =======    =======     ======
</TABLE>

                                       70
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16--PROVISION FOR INCOME TAXES (CONTINUED)
    Deferred income taxes arise from temporary differences between the tax basis
of assets and liabilities and their reported amounts in the financial
statements. A summary of the components of net deferred tax assets is as
follows:

<TABLE>
<CAPTION>
                                                      U.S.      CHINA      TOTAL
                                                    --------   --------   --------
<S>                                                 <C>        <C>        <C>
DECEMBER 31, 2000:
Deferred tax assets:
Current assets
Allowances and reserves...........................  $ 1,749     $2,438    $ 4,187
Valuation allowance...............................    2,311         --      2,311
                                                    -------     ------    -------
  Net current deferred tax assets.................  $ 4,060     $2,438    $ 6,498
                                                    =======     ======    =======
Non current assets
Net operating loss carryforward...................  $ 2,231     $   --    $ 2,231
Future period compensation deductions.............    1,395         --      1,395
Tax credit carryforwards..........................    3,574         --      3,574
Fixed assets......................................      205                   205
Other.............................................      508                   508
                                                    -------     ------    -------
  Total non-current deferred tax assets...........    7,913         --      7,913
Valuation allowances..............................   (4,153)        --     (4,153)
                                                    -------     ------    -------
  Net non-current deferred tax assets.............  $ 3,760     $   --    $ 3,760
                                                    =======     ======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                      U.S.      CHINA      TOTAL
                                                    --------   --------   --------
<S>                                                 <C>        <C>        <C>
DECEMBER 31, 1999:
Deferred tax assets:
Current assets
Allowances and reserves...........................  $ 1,638     $1,222    $ 2,860
Valuation allowance...............................       --       (524)      (524)
                                                    -------     ------    -------
  Net current deferred tax assets.................  $ 1,638     $  698    $ 2,336
                                                    =======     ======    =======
Non current assets
Future period compensation deductions.............  $ 1,205     $   --    $ 1,205
Net operating loss carryforward...................    2,231         --      2,231
Tax credit carryforwards..........................    2,513         --      2,513
                                                    -------     ------    -------
  Total deferred tax assets.......................    5,949         --      5,949
Deferred tax liabilities:
Accelerated depreciation..........................     (277)        --       (277)
                                                    -------     ------    -------
                                                      5,672         --      5,672
Valuation allowances..............................   (3,656)        --     (3,656)
                                                    -------     ------    -------
  Net non-current deferred tax assets.............  $ 2,016     $   --    $ 2,016
                                                    =======     ======    =======
</TABLE>

    As of December 31, 2000, the Company had research and development credit
carryforwards of approximately $2.1 million for federal tax purposes expiring in
varying amounts between 2017 and 2019. As of December 31, 2000 the Company had
federal and state net operating loss carryovers of

                                       71
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16--PROVISION FOR INCOME TAXES (CONTINUED)
$5.4 million and $11.2 million, respectively which were acquired from Wacos in a
merger on December 14, 1999. The federal net operating loss carryovers will
expire in 2019. The state net operating loss carryovers will expire in varying
amounts between 2002 and 2004. Management believes that the Company's ability to
use their deferred tax assets is limited based on the expectation that they will
not be able to fully utilize either the tax net operating losses or the research
and development credits generated by Company's other research and development
center in the U.S. The Company has created a full valuation allowance against
these deferred tax assets.

    UTSC and HUTS were granted tax holidays which started to phase out in 1999.
The net impact of these tax holidays was to increase net income by approximately
$4.5 million, $4.5 million, and $0.3 million for the years ended December 31,
2000, December 31, 1999, and December 31, 1998, respectively.

    The difference between the Company's effective income tax rate and the
United States of America Federal statutory rate is reconciled below:

<TABLE>
<CAPTION>
                                                                      YEARS ENDED
                                                                      DECEMBER 31,
                                                             ------------------------------
                                                               2000       1999       1998
                                                             --------   --------   --------
<S>                                                          <C>        <C>        <C>
Federal statutory rate.....................................     34%        34%        34%
State taxes, net of federal income tax benefit.............     (1)        (3)       (11)
Permanent differences......................................      7         15         17
Amortization of deferred compensation......................      8         --         --
Effect of difference in foreign taxes rates................    (18)       (31)       (19)
Change in valuation allowance..............................     --         11        110
Other......................................................      2        (22)        (3)
                                                               ---        ---        ---
Effective rate.............................................     32%         4%       128%
                                                               ===        ===        ===
</TABLE>

    The high effective tax rate in 1998 reflects valuation allowances on net
operating losses generated by Wacos for which management expects to receive no
future benefit. The effect of the valuation allowances on the Company's
consolidated effective tax rates in 1998 is pronounced because the Company's
income (loss) before taxes and minority interest was relatively small in
comparison to the Wacos net operating losses in those years.

NOTE 17--COMMON STOCK AND STOCK INCENTIVE PLANS

STOCK OPTION PLANS.

    1992 OMNIBUS EQUITY INCENTIVE PLAN.  On April 12, 1992, the Board of
Directors adopted the Company's 1992 Omnibus Equity Incentive Plan, which the
Company's stockholders ratified on December 9, 1994. Under the 1992 plan,
directors, employees and consultants were eligible to acquire shares of common
stock pursuant to options, stock purchase rights and stock appreciation rights.
At the time of adoption, 2,400,000 shares of common stock were reserved for
issuance under the 1992 plan. As of December 31, 2000, there were 1,620,328
shares authorized for issuance under the 1992 plan, and no options outstanding
to purchase any shares of common stock. On July 31, 1995, the Board of Directors
elected not to grant any further options under the 1992 plan.

    THE 1995 STOCK PLAN.  On July 31, 1995, the Board of Directors adopted, and
in October 1995, the Company's stockholders approved, the Company's 1995 Stock
Plan. Under the 1995 plan, officers,

                                       72
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17--COMMON STOCK AND STOCK INCENTIVE PLANS (CONTINUED)
employees and consultants were eligible to acquire shares of common stock
pursuant to options or stock purchase rights. At the time of adoption, 3,705,232
shares of common stock were reserved for issuance under the 1995 plan. In 1995
and 1996, the Company's Board and stockholders added an additional 5,400,000
shares to the 1995 plan, raising the total number of authorized shares reserved
under the 1995 plan to 9,105,232. As of December 31, 2000, there were 6,711,744
shares authorized for issuance under the 1995 plan and options to purchase
3,185,650 shares of common stock were outstanding under the 1995 plan. On
January 31, 1997, the Board of Directors elected not to grant any further
options under the 1995 plan. Upon the adoption of the 1997 plan, all remaining
unissued shares under the 1995 plan not already subject to options or other
awards ceased to be reserved for issuance under the 1995 plan.

    THE 1997 STOCK PLAN.  On January 31, 1997, the Board of Directors adopted,
and the Company's stockholders approved, the Company's 1997 Stock Plan. Under
the 1997 plan, officers, employees and consultants are eligible to receive
options to purchase shares of common stock and stock purchase rights. In
December 1999, the Board of Directors amended the 1997 plan, which the Company's
stockholders approved in February 2000. As of December 31, 2000 the Company is
authorized to issue up to 12,903,841 shares subject to options. During the term
of the 1997 plan, the number of shares issuable under the plan will be increased
annually on the first day of each fiscal year beginning in 2001 by an amount
equal to the lesser of 6,000,000 shares or 4% of the outstanding shares of our
common stock on that date, or a lesser amount determined by the Board. The plan
terminates in January 2007, but may be terminated earlier by the Board of
Directors. As of December 31, 2000, there were options to purchase 11,989,074
shares of common stock outstanding under the 1997 plan. The Compensation
Committee administers the 1997 plan.

    Options granted under the 1997 plan may be incentive stock options, or ISOs,
which are intended to qualify for favorable federal income tax treatment under
the provisions of Section 422 of the Internal Revenue Code of 1986, as amended,
or non-qualified stock options, or NSOs, which do not so qualify. The
Compensation Committee selects the eligible persons to whom options will be
granted and determines the grant date, amounts, exercise prices, vesting periods
and other relevant terms of the options, including whether the options will be
ISOs or NSOs. The exercise price of ISOs granted under the 1997 plan may not be
less than 100% of the fair market value of our common stock on the grant date,
while the exercise price of NSOs can be determined by the Compensation Committee
in its discretion. Options are generally not transferable during the life of the
optionee.

    Options vest and become exercisable as determined by the Compensation
Committee. Options may generally be exercised at any time after they vest and
before their expiration date as determined by the Compensation Committee.
However, no option may be exercised more than 10 years after the grant date.
Options will generally terminate (i) 12 months after the death or permanent
disability of an optionee and (ii) 90 days after termination of employment for
any other reason. The aggregate fair market value of the shares of common stock
represented by ISOs that become exercisable in any calendar year may not exceed
$100,000. Options in excess of this limit are treated as NSOs.

    In the event the Company is merged with or into another corporation, or all
or substantially all of the Company's assets are sold, each outstanding option
will be assumed or an equivalent option or right will be substituted by the
successor corporation or its parent or subsidiary. If the successor corporation
refuses to assume or substitute for the option or right, the options or rights
will automatically vest and become exercisable in full for a period of at least
fifteen days, after which time the option will terminate.

                                       73
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17--COMMON STOCK AND STOCK INCENTIVE PLANS (CONTINUED)
    Under the 1997 plan, the Company may grant stock purchase rights to eligible
participants. Any shares purchased pursuant to stock purchase rights will be
subject to a restricted stock purchase agreement. Unless the Compensation
Committee determines otherwise, this agreement will grant the Company a right to
repurchase the stock upon the voluntary or involuntary termination of the
employee for any reason, including death or disability. The purchase price for
repurchased shares will be the original price paid and may be paid by
cancellation of any indebtedness owed to the Company. The shares of stock
subject to the right of repurchase lapse over time.

    As of December 31, 2000, an aggregate of 21,235,913 shares of common stock
were authorized for issuance under the Company's stock plans, 15,174,724 of
which were subject to outstanding options and 155,035 of which were available
for grant.

    A summary of activity under the Plans follows:

<TABLE>
<CAPTION>
                                                      SHARES AVAILABLE   NUMBER OF    WEIGHTED AVERAGE
                                                         FOR GRANT         SHARES      EXERCISE PRICE
                                                      ----------------   ----------   ----------------
<S>                                                   <C>                <C>          <C>
Options Outstanding, December 31, 1997..............      3,788,284       8,951,348        $ 1.31

Options Granted.....................................     (2,611,198)      2,611,198        $ 3.53
Options Exercised...................................             --        (483,544)       $ 1.00
Options Forfeited or Expired........................      1,120,010      (1,424,380)       $ 2.71
                                                         ----------      ----------        ------
Options Outstanding, December 31, 1998..............      2,297,096       9,654,622        $ 1.72

Options Authorized in 1999..........................      3,209,556              --            --
Options Granted.....................................     (6,055,310)      6,055,310        $ 5.65
Options Exercised...................................             --        (555,911)       $ 0.95
Options Forfeited or Expired........................        720,901        (748,307)       $ 3.54
                                                         ----------      ----------        ------
Options Outstanding, December 31, 1999..............        172,243      14,405,714        $ 3.25

Options Authorized in 2000..........................      4,404,823              --            --
Options Granted.....................................     (4,848,697)      4,848,697        $15.74
Options Exercised...................................             --      (3,651,687)       $ 1.25
Options Forfeited or Expired........................        426,666        (428,000)       $12.52
                                                         ----------      ----------        ------
Options Outstanding, December 31, 2000..............        155,035      15,174,724        $ 7.54
                                                         ==========      ==========        ======
</TABLE>

    Options to purchase 6,937,475 shares were exercisable as of December 31,
2000.

                                       74
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17--COMMON STOCK AND STOCK INCENTIVE PLANS (CONTINUED)
    The following table summarizes information with respect to stock options
outstanding as of December 31, 2000:

<TABLE>
<CAPTION>
                           OUTSTANDING OPTIONS AS OF DECEMBER 31, 2000
                        -------------------------------------------------   EXERCISABLE AT DECEMBER 31, 2000
                                                         WEIGHTED AVERAGE   ---------------------------------
      RANGE OF            NUMBER      WEIGHTED AVERAGE      REMAINING          NUMBER       WEIGHTED AVERAGE
   EXERCISE PRICES       OF SHARES     EXERCISE PRICE    CONTRACTUAL LIFE     OF SHARES      EXERCISE PRICE
- ---------------------   -----------   ----------------   ----------------   -------------   -----------------
                                                             (IN YEARS)
<S>                     <C>           <C>                <C>                <C>             <C>
 $ 0.06 - $ 0.06           277,188         $ 0.06               7.6             182,028           $ 0.06
   0.25 -   0.25           185,672           0.25               8.2              83,005           $ 0.25
   0.85 -   0.94         2,528,342           0.86               2.7           2,528,342           $ 0.86
   1.71 -   2.50         1,886,201           2.16               3.7           1,789,285           $ 2.14
   3.54 -   4.50         3,633,858           4.27               8.3           1,570,675           $ 4.23
   9.38 -  13.00         3,998,405          11.10               9.4             574,200           $ 9.45
  15.00 -  21.31         2,076,266          15.80               9.4             147,248           $17.97
  22.75 -  30.13           563,792          25.33               9.5              62,692           $24.18
  36.50 -  47.50            25,000          43.10               9.3                  --               --
- ------------------      ----------         ------               ---           ---------           ------
 $ 0.06 - $47.50        15,174,724         $ 7.54               7.2           6,937,475           $ 3.21
</TABLE>

    The Company has elected to account for employee stock-based compensation
under APB 25 and has provided the following information as required by
SFAS 123, "Accounting for Stock-Based Compensation."

    The following assumptions were used to calculate the fair value of the
options granted:

<TABLE>
<CAPTION>
                                                           2000          1999          1998
                                                         --------      --------      --------
<S>                                                      <C>           <C>           <C>
Expected remaining term in years.......................     3.00         2.41          3.51
Weight average risk-free interest rate.................     5.86%        6.10%         4.91%
Expected dividend rate.................................     0.00%        0.00%         0.00%
Volatility.............................................   100.00%        0.00%         0.00%
</TABLE>

    The weighted average fair value per share of those options granted in 2000,
1999 and 1998 was $7.54, $3.25, and $0.82, respectively. The Company was not
public in 1999 and 1998, as such a zero volatility rate was used.

                                       75
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17--COMMON STOCK AND STOCK INCENTIVE PLANS (CONTINUED)
    Using the above method and assumptions, the Company's net income (loss)
applicable to common stock and earnings (loss) per share, on a pro forma basis,
would have been:

<TABLE>
<CAPTION>
                                                      EARNINGS (LOSS)   EARNINGS (LOSS)
                                         NET INCOME      PER SHARE         PER SHARE
                                           (LOSS)          BASIC            DILUTED
                                         ----------   ---------------   ---------------
                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                      <C>          <C>               <C>
Year ended:
December 31, 1998:
  Actual...............................   $   (300)        $(0.04)           $   --
                                          ========         ======            ======
  Pro forma............................   $   (775)        $(0.10)           $(0.01)
                                          ========         ======            ======
December 31, 1999:
  Actual...............................   $(18,514)        $(2.13)           $(2.13)
                                          ========         ======            ======
  Pro forma............................   $(21,395)        $(2.47)           $(2.47)
                                          ========         ======            ======
December 31, 2000:
  Actual...............................   $ 27,013         $ 0.34            $ 0.27
                                          ========         ======            ======
  Pro forma............................   $ 22,976         $ 0.29            $ 0.23
                                          ========         ======            ======
</TABLE>

    These pro forma results are not necessarily indicative of results which may
be expected in the future as additional grants are made each year and options
vest over several years.

2000 EMPLOYEE STOCK PURCHASE PLAN.

    In February 2000, the Company's stockholders approved the 2000 Employee
Stock Purchase Plan. The Purchase Plan is intended to qualify as an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code.

    The Company has reserved 2,000,000 shares of common stock for sale under the
stock purchase plan. The number of shares reserved for sale under the plan will
be increased annually on the first day of each fiscal year beginning in 2001 by
an amount equal to the lesser of 4,000,000 shares or 2% of the outstanding
shares of the Company's common stock on that date, or a lesser amount determined
by the Board of Directors. The stock purchase plan will be administered by the
Board or a committee appointed by the Board.

    The stock purchase plan is implemented by offering periods, the duration of
which may not exceed 24 months. Offering periods may contain interim purchase
periods. Shares purchased under the stock purchase plan will be held in separate
accounts for each participant. The first offering period began in March 2000 and
shall end on the last trading day on or before April 30, 2002.

    Employees will be eligible to participate in the stock purchase plan if they
are employed by the Company for more than 20 hours per week and more than five
months in a calendar year. The stock purchase plan permits eligible employees to
purchase the Company's common stock through payroll deductions, which may not
exceed 15% of the employee's total compensation. Stock may be purchased under
the plan at a price equal to 85% of the fair market value of the Company's stock
on either the date of purchase or the first day of the offering period,
whichever is lower. However, the Board of Directors may in its discretion
provide that the price at which shares of common stock are purchased under the
plan shall be 85% of the fair market value of the Company's shares on the date
of purchase.

                                       76
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17--COMMON STOCK AND STOCK INCENTIVE PLANS (CONTINUED)
Participants may not purchase shares of common stock having a value greater than
$25,000 during any calendar year.

    Participants may increase or decrease their payroll deductions at any time
during an offering period, subject to limits imposed by the Board of Directors.
If a participant withdraws from the stock purchase plan, any contributions that
have not been used to purchase shares shall be refunded. A participant who has
withdrawn may not participate in the stock purchase plan again until the next
offering period. In the event of retirement or cessation of employment for any
reason, any contributions that have not yet been used to purchase shares will be
refunded to the participant, or to the participant's designated beneficiary in
the case of death, and a certificate will be issued for the full shares in the
participant's account.

    The Board of Directors may terminate or amend the stock purchase plan,
subject to stockholder approval in some circumstances. Unless terminated earlier
by the Board, the stock purchase plan will have a term of 10 years.

    At December 31, 2000 there were rights to purchase approximately 73,811
shares outstanding under the Purchase Plan and there were 1,926,189 shares
available for purchase under the plan.

DEFERRED STOCK COMPENSATION

    In connection with the grant of certain stock options to employees,
non-employees and members of the Board of Directors, the Company recorded
deferred stock compensation of $0.3 million in 2000 representing the difference
between the deemed fair value of common stock for accounting purposes and the
option exercise price of these options at the date of grant. Deferred
compensation is presented as a reduction of stockholders' equity, with
amortization recorded over the four-year vesting period. At December 31, 2000
approximately $6.5 million remained to be amortized over the corresponding
vesting period of each respective option, generally four years. The deferred
stock compensation amortization expense for 2001, 2002, and 2003 is expected to
be $4.1 million, $1.9 million, and $0.5 million, respectively.

NOTE 18--401(K) PLAN

    On January 1, 2000, the Company adopted the UTStarcom Inc. 401(k) Savings
Plan (the "401(k) Plan") a cash-or-deferred arrangement which covers the
Company's eligible employees. The 401(k) Plan permits, but does not require,
that the Company may make matching contributions on behalf of all eligible
employees who make salary reduction contributions to the 401(k) Plan. Commencing
with the plan year beginning January 1, 2001, the Company has elected to begin
making matching contributions on behalf of qualified employees who participate
in the 401(k) Plan. The Company will contribute $0.50 for each dollar
contributed by qualified employees to the 401(k) Plan, to a maximum of $3,000
per employee per plan year. The Company's matching contributions are subject to
a vesting schedule based upon longevity of employee service with the Company.
The Company made no contribution to the plan for any of the year presented.

NOTE 19--COMMITMENTS AND CONTINGENCIES

    On July 24, 2000, the Company entered into an agreement totaling
approximately $10.7 million. The Company agreed to purchase software
intellectual property from Hua You Starcom Communication Co., Ltd. and Stable
Gain International Ltd., and to purchase certain related fixed

                                       77
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19--COMMITMENTS AND CONTINGENCIES (CONTINUED)
assets from Hainan Xinhuangpu Investment Co., Ltd. Also development employees
were transferred from Hainan Xinhuangpu Investment Co., Ltd. to the Company. The
transfer of the software intellectual property will be recorded upon the
completion of government approvals. Upon completion of the transaction, the
Company expects to use purchase accounting.

LEASES:

    The Company leases certain facilities under non-cancelable operating leases,
which expire at various dates through 2003. The minimum future lease payments
under the leases at December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                              OPERATING LEASES
                                                              ----------------
<S>                                                           <C>
Years ending:
  2001......................................................       $1,926
  2002......................................................        1,104
  2003......................................................           34
  2004......................................................           --
                                                                   ------
  Total minimum lease payments..............................       $3,064
</TABLE>

    Rent expense for the years ended December 31, 2000, 1999, and 1998 was
$2.2 million, $1.8 million, and $1.8 million, respectively.

LITIGATION:

    The Company and its subsidiaries may become involved in legal proceedings,
claims and litigation from time to time arising in the ordinary course of
business. In the opinion of management, the outcome of such current legal
proceedings, claims and litigation will not have a material effect on the
Company's consolidated operating results, cash flows, or financial position.

GUARANTEE:

    In conjunction with a sale of equipment, HUTS has guaranteed a bank loan
incurred by a UTSC customer. As of December 31, 2000, the total amount of debt
guaranteed by the Company was $1.0 million. The debt carries an interest rate of
6.993% per annum and is payable in three installments with the final installment
due December 30, 2001.

NOTE 20--OPERATING RISKS

Financial Risks:

    Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash, cash equivalents,
short-term investments and accounts receivable. The Company places its temporary
cash and short-term investments with several financial institutions.
Approximately $44.3 million and $43.6 million of the Company's cash was on
deposit in foreign accounts at December 31, 2000 and 1999, respectively. The
Company invests excess cash in highly liquid investments with original maturity
of twelve months or less, such as certificates of deposit, government sponsored
entities notes, commercial paper, floating rate corporate bonds, fixed income
corporate bonds, and money market funds, which the Company believes have limited
exposure to risk.

                                       78
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20--OPERATING RISKS (CONTINUED)
Concentration of Credit Risk and Major Customers:

    The Company's first and second largest customers accounted for 12.1% and
6.0% of the Company's sales as of December 31, 2000 and 7.0% and 0.2% of the
accounts receivable respectively, as of December 31, 2000. The Company's first
and second largest customers accounted for 30.0% and 11.0% of the Company's
sales and 39.0% and 6.0% of the accounts receivable respectively, as of
December 31, 1999. No customer in the continuing operations accounted for more
than 10% of the Company's sales during 1998. Over 90% of the Company's sales
during 2000 were to entities affiliated with the government of China or state
owned enterprises. Accounts receivable balances from these China government
affiliated entities or state owned enterprises were $153.8 million as of
December 31, 2000 and $83.8 million as of December 31, 1999. The Company extends
credit to its customers generally without requiring collateral. The Company
monitors its exposure for credit losses and maintains allowances for
uncollectible accounts.

    One vendor, a related party, accounted for 28.4% of the Company's cost of
sales and there was no amount outstanding as of December 31, 2000.

Country Risks:

    Almost 99% of the Company's sales for the year ended December 31, 2000 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 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 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 the Company's PAS
system. However, the Company does not yet have this network access license and
the Company cannot provide any assurance

                                       79
<PAGE>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20--OPERATING RISKS (CONTINUED)
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 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.

NOTE 21--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

    The table below has been revised to account for the application of SAB 101
"Revenue Recognition in Financial Statements" (SAB 101).

<TABLE>
<CAPTION>
                                                                       FOR THE THREE MONTHS ENDED:
                                        -----------------------------------------------------------------------------------------
                                        DEC. 31,   SEPT. 30,   JUNE 30,   MARCH 31,   DEC. 31,   SEPT. 30,   JUNE 30,   MARCH 31,
                                          2000       2000        2000       2000        1999       1999        1999       1999
                                        --------   ---------   --------   ---------   --------   ---------   --------   ---------
                                                    REVISED    REVISED     REVISED
                                                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                     <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
Revenues..............................  $126,997   $107,386    $75,676     $58,587    $ 62,815    $55,019    $42,131     $27,551
Gross profit..........................  $ 43,014   $ 37,292    $27,262     $20,613    $ 23,902    $23,060    $18,254     $ 9,597
Net income/(loss).....................  $ 13,887   $ 12,355    $ 5,020     $(3,269)   $(27,359)   $ 6,646    $ 3,625     $(1,426)
Net income/(loss) per share:*
  Basic...............................  $   0.15   $   0.13    $  0.05     $ (0.09)   $  (3.11)   $  0.76    $  0.42     $ (0.17)
  Diluted.............................  $   0.13   $   0.12    $  0.05     $ (0.09)   $  (3.11)   $  0.09    $  0.05     $ (0.17)
</TABLE>

- ------------------------------

*   Net income/(loss) per share is computed independently for each of the
    quarters presented, therefore, the sum of the quarterly net income/(loss)
    per share may not equal the annual net income/(loss) per share.

Revised quarterly results (unaudited)

    The results of operations and statements of financial position as previously
reported in the Company's interim 2000 financial statements filed on Form 10-Q
have been revised to reflect the application of SAB 101 "Revenue Recognition in
Financial Statements" effective January 1, 2000. The proforma results of
operations for the three months ended December 31, 1999 is presented for
comparison purposes as if the application of SAB 101 were adopted October 1,
1999.

    The net effect of the revision was:
<TABLE>
<CAPTION>
                                                      FOR THE THREE MONTHS ENDED
                            ------------------------------------------------------------------------------
                               SEPTEMBER 30, 2000           JUNE 30, 2000              MARCH 31, 2000
                            ------------------------   ------------------------   ------------------------
                            AS REPORTED   AS REVISED   AS REPORTED   AS REVISED   AS REPORTED   AS REVISED
                            -----------   ----------   -----------   ----------   -----------   ----------
                                                  (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                         <C>           <C>          <C>           <C>          <C>           <C>
Revenues..................   $103,812      $107,386      $80,008      $75,676       $58,759      $58,587
Gross profit..............   $ 35,940      $ 37,292      $28,356      $27,262       $20,860      $20,613
Net income/(loss).........   $ 10,870      $ 12,355      $ 6,208      $ 5,020       $(2,983)     $(3,269)
Net income/(loss) per
  share:*
  Basic...................   $   0.12      $   0.13      $  0.07      $  0.05       $ (0.08)     $ (0.09)
  Diluted.................   $   0.11      $   0.12      $  0.06      $  0.05       $ (0.08)     $ (0.09)

<CAPTION>

                                DECEMBER 31, 1999
                            --------------------------
                            AS REPORTED   AS PROFORMA
                            -----------   ------------
                            (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                         <C>           <C>
Revenues..................   $ 62,815       $ 61,218
Gross profit..............   $ 23,902       $ 23,607
Net income/(loss).........   $(27,359)      $(27,654)
Net income/(loss) per
  share:*
  Basic...................   $  (3.11)      $  (3.15)
  Diluted.................   $  (3.11)      $  (3.15)
</TABLE>

                                       80
<PAGE>
              PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)

    The following unaudited pro forma information presents the combined results
of operations as if the acquisition of the minority interest in Wacos had
occurred at the beginning of 1999. The pro forma information is not necessarily
indicative of what would have occurred had the acquisition taken place as of
January 1, 1999, nor is it indicative of future results of operations.

    See notes to unaudited pro forma combined financial information for further
detail on the accounting treatment.

                                       81
<PAGE>
                        UTSTARCOM, INC. AND SUBSIDIARIES
             UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                   FOR THE YEAR ENDED DECEMBER 31, 1999
                                                        -----------------------------------------------------------
                                                                                              PRO FORMA
                                                        UTSTARCOM    WACOS(A)    COMBINED    ADJUSTMENTS    TOTAL
                                                        ----------   ---------   ---------   -----------   --------
<S>                                                     <C>          <C>         <C>         <C>           <C>
Net sales.............................................   $187,516                $187,516                  $187,516
Cost of sales (includes amortization of deferred stock
  compensation of $12)................................    112,703                 112,703                   112,703
                                                         --------    --------    --------      -------     --------
Gross profit..........................................     74,813                  74,813                    74,813
Operating expenses:
  Selling, general and administrative expenses
    (includes amortization of deferred stock
    compensation of $4,256)...........................     35,122                  35,122                    35,122
  Research and development expenses (includes
    amortization of deferred stock compensation of
    $1,285)...........................................     18,648                  18,648                    18,648
  Amortization of intangible assets...................        332                     332      $ 4,608(1)     4,940
  In-process research and development costs...........      3,992                   3,992       (3,992)(2)       --
                                                         --------    --------    --------      -------     --------
Total operating expenses..............................     58,094                  58,094          616       58,710
                                                         --------    --------    --------      -------     --------
Operating income (loss)...............................     16,719                  16,719         (616)      16,103
Interest income (expenses)............................     (1,047)                 (1,047)                   (1,047)
Other income (expenses)...............................     (1,165)                 (1,165)                   (1,165)
Equity in net income of affiliated companies..........      1,348                   1,348                     1,348
                                                         --------    --------    --------      -------     --------
Income (loss) before income taxes and minority
  interest............................................     15,855                  15,855         (616)      15,239
Income tax expense (benefit)..........................        626                     626                       626
                                                         --------    --------    --------      -------     --------
Income (loss) before minority interest................     15,229                  15,229         (616)      14,613
Minority interest in (earnings) loss of consolidated
  subsidiaries........................................     (2,110)                 (2,110)                   (2,110)
                                                         --------    --------    --------      -------     --------
Income (loss) from continuing operations..............     13,119                  13,119         (616)      12,503
Beneficial conversion feature of Series F convertible
  preferred stock.....................................    (29,977)                (29,977)                  (29,977)
                                                         --------    --------    --------      -------     --------
Income (loss) from continuing operations applicable to
  common stockholders.................................   $(16,858)               $(16,858)     $  (616)    $(17,474)
                                                         ========    ========    ========      =======     ========

Earnings per common share--basic......................                                                     $  (0.24)
                                                                                                           ========
Earnings per common share--diluted....................                                                     $  (0.24)
                                                                                                           ========
  Shares used in pro forma per-share
    calculation--basic................................                                                       72,947
                                                                                                           ========
  Shares used in pro forma per-share
    calculation--diluted..............................                                                       72,947
                                                                                                           ========
</TABLE>

(A) Wacos statement of operations are consolidated within UTStarcom's statement
    of operations and no further adjustment is required.

 See accompanying notes to unaudited pro forma combined financial information.

                                       82
<PAGE>
                        UTSTARCOM, INC. AND SUBSIDIARIES

          NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

    Pro forma adjustments for the unaudited pro forma statement of operations
for the year ended 1999 are as follows:

    (1) Represents the allocation of purchase price for Wacos to assembled
       workforce and the excess of costs of acquiring Wacos over the fair value
       of net assets acquired, which will be amortized over a period of three to
       five years; and

    (2) Represents the in-process research and development charge resulting from
       the acquisition of the minority interest in Wacos, removed from the pro
       forma statement of operations as a non-recurring charge.

    The pro forma combined statement of operations data presents the Company's
consolidated results of operations as if the Company's acquisition of Wacos had
occurred as of January 1, 1999 and the assumed conversion of all the Company's
outstanding preferred stock into shares of the Company's common stock that will
be effective upon the closing of the Company's initial public offering as if
such conversion had occurred on January 1, 1999 or at the date of issuance. The
pro forma information is not necessarily indicative of what would have occurred
had the acquisition been made as of such period, nor is it indicative of future
results of operations.

ITEM 9-- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

    Not applicable.

                                       83
<PAGE>
                                    PART III

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF UTSTARCOM, INC.

    The information required by this section is incorporated by reference from
the information in the section entitled "Election of Directors" in the Proxy
Statement. The required information concerning our executive officers is
contained in the section entitled "Executive Officers" in Part I of this
Form 10-K.

    Item 405 of Regulation S-K calls for disclosure of any known late filing or
failure by an insider to file a report required by Section 16 of the Exchange
Act. This disclosure is contained in the section entitled "Section 16
(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement and is
incorporated herein by reference.

ITEM 11--EXECUTIVE COMPENSATION

    The information required by this section is incorporated by reference from
the information in the sections entitled "Election of Directors--Directors'
Compensation", "Executive Compensation" and "Stock Price Performance Graph" in
the Proxy Statement.

ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this section is incorporated by reference from
the information in the section entitled "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement.

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this section is incorporated by reference from
the information in the section entitled "Certain Relationships and Related
Transactions" in the Proxy Statement.

                                    PART IV

ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a)  (1)  FINANCIAL STATEMENTS--See Index to Consolidated Financial
              Statements and Financial Statement Schedules at page 53 of this
              Form 10-K.

         (2)  FINANCIAL STATEMENT SCHEDULE(S)--See Index to Consolidated
              Financial Statements and Financial Statement Schedules at page 53
              of this Form 10-K.

         (3)  EXHIBITS--See Exhibit Index at page 85 of this Form 10-K.

                                       84
<PAGE>
                                 EXHIBITS INDEX

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
- ---------------------   ------------------------------------------------------------
<C>                     <S>
     3.1(1)             Thirteenth Amended and Restated Certificate of Incorporation
                        of UTStarcom, Inc.

     3.2(1)             Amended and Restated Bylaws of UTStarcom, Inc.

     4.1                See exhibits 3.1 and 3.2 for provisions of the Certificate
                        of Incorporation and Bylaws defining the rights of holders
                        of Common Stock.

     4.2(1)             Specimen Common Stock Certificate.

     4.3(1)             Third Amended and Restated Registration Rights Agreement
                        dated December 14, 1999.

    10.1(1)             Form of Indemnification Agreement.

    10.2(1)             1992 Omnibus Equity Incentive Plan and form of related
                        agreement.

    10.3(1)             1995 Stock Plan and forms of related agreements.

    10.4(1)             1997 Stock Plan, as amended, and forms of related
                        agreements.

    10.5(1)             2000 Employee Stock Purchase Plan and forms of related
                        agreements.

    10.6(1)             Common Stock Purchase Warrant dated February 5, 1998 between
                        UTStarcom, Inc. and Lintech Limited.

    10.7(1)             Common Stock Purchase Warrant dated September 20, 1999
                        between UTStarcom, Inc. and Talent Group International, Ltd.

    10.8(1)             Employment and Non-Competition Agreement dated October 6,
                        1995 between UTStarcom, Inc. and Hong Lu.

    10.9(1)             Employment and Non-Competition Agreement dated October 6,
                        1995 between UTStarcom, Inc. and Ying Wu.

    10.10(1)*           Product Manufacture & License Agreement dated May 13, 1997
                        between UTStarcom, Inc. and Tollgrade Communications, Inc.

    10.11(1)*           Sales Agreement dated February 12, 1999 between UTStarcom
                        (China) Ltd. and BaoDing Telecommunication Bureau, Hebei
                        Province.

    10.12(1)*           Sales Contract dated August 23, 1999 between UTStarcom
                        (China) Ltd. and Xian Telecommunication Bureau.

    10.13(1)*           Technical License and Assistance Agreement dated November 2,
                        1999 between UTStarcom, Inc. and Mitsubishi Electric
                        Corporation.

    10.13(a)(1)*        Amendment No. 1 to Technical License and Assistance
                        Agreement dated February 21, 2000 between UTStarcom, Inc.
                        and Mitsubishi Electric Corporation.

    10.14(1)*           Technical Assistance Agreement dated October 1, 1999 between
                        Matsushita Communication Industrial Co. Ltd. and UTStarcom,
                        Inc.

    10.14(a)(1)         Addendum dated February 18, 2000 to the Technical Assistance
                        Agreement dated October 1, 1999 between Matsushita
                        Communication Industrial Co. Ltd. and UTStarcom, Inc.

    10.15(1)*           Joint Product Development and Marketing Memorandum and
                        Understanding dated September 2, 1999 between UTStarcom,
                        Inc. and Matsushita Communication Industrial Co., Ltd.

    10.16(1)*           Joint Patent Filing Agreement dated December 1, 1998 between
                        UTStarcom, Inc. and Matsushita Communication Industrial Co.,
                        Ltd.

    10.17(1)*           Loan Agreement dated June 15, 1998 between UTStarcom, Inc.
                        and SOFTBANK Corp.
</TABLE>

                                       85
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
- ---------------------   ------------------------------------------------------------
<C>                     <S>
    10.18(a)(1)*+       Loan Agreement dated March 9, 1999 between Bank of China and
                        UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(b)(1)*        Loan Agreement dated June 7, 1999 between Bank of China and
                        UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(c)(1)*        Loan Agreement dated June 29, 1999 between Bank of China and
                        UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(d)(1)*        Loan Agreement dated July 7, 1999 between Bank of China and
                        UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(e)(1)*        Loan Agreement dated July 14, 1999 between Bank of China and
                        UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(f)(1)*        Loan Agreement dated July 21, 1999 between Bank of China and
                        UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(g)(1)*        Loan Agreement dated August 5, 1999 between Bank of China
                        and UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(h)(1)*        Loan Agreement dated August 17, 1999 between Bank of China
                        and UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(i)(1)*        Loan Agreement dated September 2, 1999 between Bank of China
                        and UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.18(j)(1)*        Loan Agreement dated September 17, 1999 between Bank of
                        China and UTStarcom Hangzhou Telecommunications Co., Ltd.

    10.19(1)*           Joint Venture Agreement dated July 31, 1997 between
                        UTStarcom, Inc. and Zhejiang Telecommunication Equipment
                        Factory.

    10.20(1)*           Joint Venture Agreement dated December 8, 1995 between
                        UTStarcom, Inc. and Chinese Guangdong Nanfeng
                        Telecommunication Group Co. Ltd.

    10.20(a)(1)*        Amendment Agreement to the Contract and Articles of
                        Association of Guangdong UTStarcom Communications Co. Ltd.
                        dated December 11, 1997.

    10.21(1)*           Joint Venture Agreement dated September 12, 1997 between
                        UTStarcom, Inc. and Zhejiang Nantian Post and
                        Telecommunication Development Group Co. Ltd.

    10.22(1)            Lease dated December 23, 1997 between UTStarcom, Inc. and
                        Tech Center Partners.

    10.23(1)            Lease Agreement dated April 1995, as amended, between
                        UTStarcom, Inc. and Metro Park Associates.

    10.24(1)            Lease Agreements dated December 31, 1997 and May 14, 1998
                        between Guangdong UTStarcom Telecom Co., Ltd. and Guangdong
                        Southern Telecom Group Huizhou Company.

    10.25(1)            Lease Contract dated December 15, 1996 between UTStarcom
                        (Hangzhou) Telecommunications Co., Ltd. and Yile Village,
                        Gudang Township.

    10.26(1)*           Purchase Agreement for P.R. China Market dated April 1, 1999
                        between UTStarcom Inc., Matsushita Electric Industrial Co.,
                        Ltd. and Matsushita Communication Industrial Co., Ltd.

    10.27(1)            Information Service Project Contract dated June 1, 1998
                        between UTStarcom (China) Ltd. and China Jitong
                        Communication Co. Ltd.

    10.28(1)            Payment Agent Contract dated June 11, 1998 among UTStarcom,
                        UTStarcom (China) Ltd, Softbank Corporation and Jitong
                        Communication Co., Ltd.
</TABLE>

                                       86
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
- ---------------------   ------------------------------------------------------------
<C>                     <S>
    10.29(1)            Agreement on Termination of Contract dated August 30, 1999
                        among UTStarcom, Inc., UTStarcom (China) Ltd., Softbank
                        Corporation and Jitong Communication Co., Ltd.

    10.30(1)            Exchange Agreement dated October 15, 1997 between UTStarcom,
                        Inc. and certain investors.

    10.31(1)            Exchange Agreement dated October 15, 1997 between UTStarcom,
                        Inc. and certain investors.

    10.32(1)            Employment and Non-Competition Agreement dated October 6,
                        1995 between UTStarcom, Inc. and Bill Huang.

    10.33(1)            Lease contract on Housing and Vacant Land at Yunshan Post
                        and Telecommunication Industrial Village dated January 3,
                        2000 between Guangdong UTStarcom Telecom Co., Ltd. and
                        Guangdong Nanfang Communication Group, Huizhou Co.

    10.34(1)            Loan Agreement dated October 8, 1996 between UTStarcom
                        (China) Co., Inc. and Bill X. Huang.

    10.35(1)            Promissory Note Secured by Deed of Trust dated February 13,
                        1999 issued to UTStarcom, Inc. by Bill X. Huang and Minnie
                        Huang.

    10.36(1)*           Supply Agreement dated February 18, 2000 between UTStarcom,
                        Inc. and Matsushita Electric Industrial Co., Ltd.

    10.37(2)*           Manufacturing License Agreement between Himachal Futuristic
                        Communications Ltd. and UTStarcom, Inc., undated.

    10.38(2)*           Sales Agreement between Japan Radio Company and UTStarcom,
                        dated March 16, 2000.

    10.39(2)*           Technical Collaboration Agreement between Sharp Corporation
                        and UTStarcom, Inc., dated March 31, 2000.

    10.40(2)*           Parts Supply Agreement between Sharp Corporation and
                        UTStarcom, Inc., undated.

    10.41(3)*           Joint Venture Agreement between SOFTBANK Corporation and
                        UTStarcom, Inc., dated May 29, 2000.

    10.42(3)*           Land Use Right Assignment Agreement between the
                        Administration Committee of Hangzhou Hi-Tech Industry
                        Development Zone of Zhejiang Province of the People's
                        Republic of China and UTStarcom, Inc., dated May 18, 2000.

    10.43(3)*           Supply Agreement between Matsushita Electric Industrial Co.,
                        Ltd., Matsushita Communications Industrial Co., Ltd., and
                        UTStarcom, Inc., dated April 1, 2000.

    10.44(4)*           OEM Agreement between UTStarcom, Inc. and Zaffire, Inc.,
                        dated August 10, 2000.

    10.45(4)*           Development Agreement between UTStarcom, Inc. and Matsushita
                        Communication Industrial Co., Ltd., dated September 26,
                        2000.

    10.46(4)*           OEM Agreement between UTStarcom, Inc. and Interwave
                        Communications International, Ltd., dated July 14, 2000.

    10.47(4)*           OEM Agreement between UTStarcom, Inc. and Foundry Networks,
                        Inc., dated August 24, 2000.

    10.48(4)*           Loan Contract between UTSC Co., Ltd. and Bank of China
                        Beijing Branch, dated August 29, 2000.

    10.49*              Sales Contract between UTStarcom (China), Ltd. and Zhejiang
                        Telecom Company (Shaoxing Branch), dated November 18, 2000.
</TABLE>

                                       87
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
- ---------------------   ------------------------------------------------------------
<C>                     <S>
    10.50*              Sales Contract between UTStarcom (China), Ltd. and He Nan
                        Telecom Company, dated October 28, 2000.

    10.51*              Sales Contract between UTStarcom (China), Ltd., Xian
                        Equipment Import/Export Company, Ltd., and Shaanxi China
                        Telecom Group, Ltd., dated September 29, 2000. (received by
                        UTStarcom, Inc. on October 9, 2000).

    10.52*              Technical Assistance Agreement between UTStarcom, Inc. and
                        Matsushita Communication Industrial Co. Ltd., dated December
                        1, 2000.

    10.53*              Definitive Agreement for Collaboration between UTStarcom,
                        Inc. and Mitsubishi Electric Corporation, dated October 22,
                        2000.

    10.54*              Software License Agreement between UTStarcom, Inc. and DDI
                        Corporation, Inc. dated October 4, 2000.

    10.55*              Strategic Alliance, Purchase and License Agreement between
                        UTStarcom, Inc. and Telecommunication D'Haiti S.A.M., dated
                        December 5, 2000.

    21.1                Subsidiaries of UTStarcom, Inc.

    23.1                Consent of PricewaterhouseCoopers LLP.

    23.2                Consent of Willamette Management Associates

    24.1                Power of Attorney (included on signature page).
</TABLE>

- ------------------------

*   Portions of the exhibit have been omitted pursuant to an order granted by
    the Securities and Exchange Commission for confidential treatment.

(1) Incorporated by reference to the Registrant's Registration Statement on
    Form S-1 (No. 333-93069), which became effective March 2, 2000.

(2) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2000.

(3) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarter ended June 30, 2000.

(4) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2000.

    (b) Reports on Form 8-K:
       No reports on Form 8-K were filed during the year.

    (c) Exhibits
       See Item 14(a) (3) above.

    (d) Financial Statement Schedules

    See Index to Consolidated Financial Statements and Financial Statement
       Schedules at page 53 of this Form 10-K.

                                       88
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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, on the 28th day of
February, 2001.

<TABLE>
<S>                                                    <C>  <C>
                                                                      UTSTARCOM, INC.
                                                                        (REGISTRANT)

                                                       By               /s/ HONG LIANG LU
                                                            -----------------------------------------
                                                                          Hong Liang Lu
                                                              PRESIDENT, CHIEF EXECUTIVE OFFICER AND
                                                                             DIRECTOR
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 28th day of February, 2001.

<TABLE>
<CAPTION>
                 SIGNATURE                                            TITLE
                 ---------                                            -----
<S>                                                <C>
             /s/ HONG LIANG LU                        President, Chief Executive Officer and
   --------------------------------------             Director (Principal Executive Officer)
               Hong Liang Lu

           /s/ MICHAEL J. SOPHIE                    Vice President of Finance, Chief Financial
   --------------------------------------           Officer and Assistant Secretary (Principal
             Michael J. Sophie                          Financial and Accounting Officer)

             /s/ MASAYOSHI SON                          Chairman of the Board of Directors
   --------------------------------------
               Masayoshi Son

                /s/ YING WU                          Vice Chairman of the Board of Directors
   --------------------------------------
                  Ying Wu

               /s/ THOMAS TOY                                        Director
   --------------------------------------
                 Thomas Toy

             /s/ CHAUNCEY SHEY                                       Director
   --------------------------------------
               Chauncey Shey

            /s/ LARRY D. HORNER                                      Director
   --------------------------------------
              Larry D. Horner
</TABLE>

                                       89
<PAGE>
    Condensed Financial Information at December 31, 1999 and 2000 and for each
of the three years ended December 31, 2000.

    INDEPENDENT ACCOUNTANTS REPORT ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Stockholders of UTStarcom, Inc.:

    Our audits of the consolidated financial statements referred to in our
report dated January 24, 2001, included an audit of the financial statement
schedules of this Form 10-K. In our opinion, these financial statement schedules
present fairly, in all material respects the information set forth therein when
read in conjunction with the related consolidated financial statements.

/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
San Francisco, California
January 24, 2001

                                       90
<PAGE>
                                                                      SCHEDULE I

                        UTSTARCOM, INC. (UNCONSOLIDATED)
                           REGISTRANT BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents.................................  $104,805   $ 43,729
  Short-term investment.....................................    83,858         --
  Accounts receivable.......................................   105,571     42,107
  Receivable from related parties...........................       406        892
  Inventories, net..........................................    18,223     11,479
  Other current assets......................................     4,889      4,764
                                                              --------   --------
Total current assets........................................   317,752    102,971
Property, plant and equipment, net..........................     6,604      3,867
Long-term investments.......................................   110,332     54,971
Goodwill and intangible assets, net.........................    18,888     23,696
Other long term assets......................................     5,768      2,155
                                                              --------   --------
  Total assets..............................................  $459,344   $187,660
                                                              ========   ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable..........................................  $ 18,794   $  4,501
  Third party debt..........................................         7         15
  Income taxes payable......................................     3,999      2,127
  Deferred revenue..........................................    11,457        500
  Other current liabilities.................................    12,768     14,797
                                                              --------   --------
Total current liabilities...................................    47,025     21,940
                                                              --------   --------
Stockholders' equity:
Convertible preferred stock: $.00125 par value; authorized:
  99,200,000
shares; issued and outstanding 70,377,322 at December 31,
  1999......................................................        --         88
Common stock: $.00125 par value; authorized: 250,000,000
shares; issued and outstanding: 95,032,657 at December 31,
  2000 and 8,929,837 at December 31, 1999...................       120         13
Additional paid-in capital..................................   426,665    218,692
Deferred stock compensation.................................    (6,491)   (17,792)
Accumulated deficit.........................................    (7,808)   (34,821)
Notes receivable from shareholders..........................      (314)      (555)
Other comprehensive income..................................       147         95
                                                              --------   --------
Total stockholders' equity..................................   412,319    165,720
                                                              --------   --------
Total liabilities, minority interest, and stockholders'
  equity....................................................  $459,344   $187,660
                                                              ========   ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       91
<PAGE>
                                                                      SCHEDULE I

                        UTSTARCOM, INC. (UNCONSOLIDATED)
                        CONDENSED INFORMATION AS TO THE
                             RESULTS OF OPERATIONS
                               OF THE REGISTRANT
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net sales...................................................  $267,384   $109,091   $48,458
Cost of sales (includes stock compensation expense of $90,
  $12, and $0)..............................................   228,624     95,866    36,293
                                                              --------   --------   -------
Gross profit................................................    38,760     13,225    12,165
Operating expenses:
  Selling, general and administrative expenses (includes
    stock compensation expense of $4,676, $4,256, $390).....    14,814      8,249     5,892
  Research and development expenses (includes stock
    compensation expense of $6,795, $1,285, and $22)........    40,957     12,966     9,319
  Amortization of intangible assets.........................     4,808        188        --
  In-process research and development costs.................        --      3,992        --
                                                              --------   --------   -------
Total operating expenses....................................    60,579     25,395    15,211
                                                              --------   --------   -------
Operating loss..............................................   (21,819)   (12,170)   (3,046)
Interest income.............................................    12,426      3,839     3,754
Interest expenses...........................................      (154)    (1,693)   (1,016)
Other income (expenses).....................................      (139)       360      (925)
Equity in net income of affiliated companies................    47,399     21,954     2,220
                                                              --------   --------   -------
Income before income taxes and cumulative effect of a change
  of accounting principle...................................    37,713     12,290       987
Income tax expense (benefit)................................     9,720       (829)      394
                                                              --------   --------   -------
Income from continuing operations...........................    27,993     13,119       593
Loss from discontinued operations...........................        --     (1,656)     (893)
                                                              --------   --------   -------
Net income (loss) before cumulative effect of a change of
  accounting principle......................................    27,993     11,463      (300)
Cumulative effect of change in accounting principle, net of
  income taxes..............................................      (980)        --        --
                                                              --------   --------   -------
Net income (loss)...........................................    27,013     11,463      (300)
Beneficial conversion feature of Series F convertible
  preferred stock...........................................        --    (29,977)       --
                                                              --------   --------   -------
Net income (loss) applicable to common stockholders.........  $ 27,013   $(18,514)  $  (300)
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       92
<PAGE>
                                                                      SCHEDULE I

                        UTSTARCOM, INC. (UNCONSOLIDATED)
          CONDENSED INFORMATION AS TO THE CASH FLOWS OF THE REGISTRANT
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       YEARS ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $ 27,013   $11,463    $  (300)
Adjustments to reconcile net income (loss) to net cash used
  in operating activities:
  Loss from discontinued operations.........................        --     1,656        893
  Depreciation and amortization.............................     7,308     1,258        841
  Write-off of in-process research and development costs....        --     3,992         --
  Net loss on sale of assets................................       698        --        107
  Cumulative effect of change in accounting principle.......       980        --         --
  Stock compensation expense................................    11,560     5,553        412
  Equity in net loss of affiliated companies................   (47,399)  (21,954)    (2,220)
  Minority interest.........................................        --        --         --
  Changes in operating assets and liabilities:
    Accounts receivable and receivable from related
      parties...............................................   (61,089)    3,647    (35,238)
    Inventories.............................................    (6,744)  (10,062)      (380)
    Other current and non-current assets....................     2,497    (1,578)      (739)
    Accounts payable and payable to related parties.........    14,363   (24,359)    16,000
    Income taxes payable....................................     3,264     1,079        884
    Other current liabilities...............................    (1,987)   11,275      2,585
    Deferred revenue........................................    10,957       500         --
                                                              --------   -------    -------
Net cash used in operating activities.......................   (38,579)  (17,530)   (17,155)
                                                              --------   -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment..................    (6,119)   (1,422)    (2,122)
Investment in affiliates, net of cash acquired..............    (8,945)      108       (803)
Proceeds from disposal of property..........................        75       652         --
Purchase of short-term investment...........................   (83,805)       --         --
                                                              --------   -------    -------
Net cash used in investing activities.......................   (98,794)     (662)    (2,925)
                                                              --------   -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock, net of expenses..........................   198,213    55,481        480
Reacquired common stock.....................................        --        --       (453)
Distribution of cash to shareholders........................        --        --         --
Proceeds (payments) from borrowing, net.....................        (8)       (7)        13
Proceeds from shareholder notes.............................       245        --         --
                                                              --------   -------    -------
Net cash provided by financing activities...................   198,450    55,474         40
                                                              --------   -------    -------
Net increase (decrease) in cash and cash equivalents........    61,077    37,282    (20,040)
Cash and cash equivalents at beginning of period............    43,729     6,447     26,487
                                                              --------   -------    -------
Cash and cash equivalents at end of period..................  $104,806   $43,729    $ 6,447
                                                              ========   =======    =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       93
<PAGE>
                                                                      SCHEDULE I

                                UTSTARCOM, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 1.  BASIS OF PRESENTATION

    UTStarcom, Inc., a Delaware corporation, is the parent company of all
UTStarcom, Inc. subsidiaries. The accompanying condensed financial statements
reflect the financial position, results of operations and cash flows of
UTStarcom, Inc. on a separate basis. All subsidiaries of UTStarcom, Inc. are
reflected as investments accounted for using the equity method. Accordingly,
intercompany transactions have not been eliminated. No cash dividends were paid
to UTStarcom, Inc. by its subsidiaries during the three years ended
December 31, 2000. For accounting policies and other information, see the Notes
to Consolidated Financial Statements included elsewhere herein.

                                       94
<PAGE>
                                                                     SCHEDULE II

                                UTSTARCOM, INC.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                    ADDITIONS
                                                      BALANCE AT    CHARGED TO                BALANCE AT
                                                     BEGINNING OF   COSTS AND                   END OF
DESCRIPTION                                           THE PERIOD     EXPENSES    DEDUCTIONS   THE PERIOD
- -----------                                          ------------   ----------   ----------   ----------
<S>                                                  <C>            <C>          <C>          <C>
YEAR ENDED DECEMBER 31, 2000
Allowance for doubtful accounts....................     $6,789        $6,448       $  402       $12,835
Provision for obsolete inventory...................     $6,415        $2,786       $   --       $ 9,201
Accrued product warranty costs.....................     $1,236        $4,279       $2,382       $ 3,133

YEAR ENDED DECEMBER 31, 1999
Allowance for doubtful accounts....................     $3,957        $6,006       $3,174       $ 6,789
Provision for obsolete inventory...................     $2,445        $5,695       $1,725       $ 6,415
Accrued product warranty costs.....................     $  997        $  481       $  242       $ 1,236

YEAR ENDED DECEMBER 31, 1998
Allowance for doubtful accounts....................     $3,312        $  875       $  230       $ 3,957
Provision for obsolete inventory...................     $1,779        $1,048       $  382       $ 2,445
Accrued product warranty costs.....................     $  548        $  879       $  430       $   997
</TABLE>

                                       95
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.49
<SEQUENCE>2
<FILENAME>a2040014zex-10_49.txt
<DESCRIPTION>EXHIBIT 10.49
<TEXT>

<PAGE>
                                                                 Exhibit 10.49


[*] 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.


                                  CONTRACT


Contract No.: UTPAS-H22Kii1206                                   Project No.

The Buyer:                                The Seller:

Zhejiang Telecommunications Corporation,  UTStarcom (China) Ltd.
Shaoxing Branch                           11th Floor, CNT Manhattan Building,
                                          No. 6 Chao Yang Men Bei Da Jie Street,
                                          Beijing, 100027

Tel:  0575-5134567                        Tel: (010)-65542030
Fax:  0575-5124855                        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 according to the terms and conditions as stipulated hereinafter:

     1.   Total Contract Price: [*]

     2.   Name of Commodities: PAS Wireless Access System

               (Please refer to the attached list for quantity, specifications
               and unit price.)

     3.   Date of Shipment: [*].

     4.   Place of Destination: Shaoxing Telecommunications Corporation (He He
          Qiao), Zhuji Telecommunications Bureau, Xinchang County
          Telecommunications Bureau, Bianzhou Telecommunications Bureau and
          Shangyu Telecommunications Bureau.

     5.   Packing:

               The goods shall be packed in new strong cases suitable for long
          distance transportation and well protected against dampness, moisture,
          shook and rust. The Seller shall be liable for any damage to the goods
          on account of improper packing.

     6.   Shipping Marks:

               The Seller is required to mark clearly on the surface of each
          package the package number, measurements and such cautions as "This
          Side Up", "Handle with Care" and "Keep Away from Moisture" in unfading
          ink and put on shipping marks.

     7.   Transportation:


<PAGE>

          7.1  [*] shall bear all the expenses and risks involved in the
               handling of the goods until the moment when the goods have
               officially been handed over to the relevant transportation unit
               designated by the Buyer.

          7.2  The transportation and insurance costs from Hangzhou or Huizhou
               Railway Stations (or from the Sellers' warehouse, if shipped by
               highway) to the place of destination designated by the Buyer
               shall be borne by [*].

     8.   Acceptance of Goods:

          8.1  Upon arrival of the goods, the Buyer shall check the goods
               immediately in the presence of the Seller's representative and
               sign on the shipping list as a certificate of acceptance of the
               goods. If shipped by air, railway or postal service, the
               carrier's shipping list shall serve as a certificate of
               acceptance of the goods.

          8.2  In case of missing parts or damages due to the Seller's improper
               packing, the Buyer shall make a detail record, or commission the
               China Commodity Inspection Bureau for a reexamination and
               issuance of a certificate, or require the representatives of the
               Buyer and the Seller to sign a memorandum to serve as a
               certificate for the replacement of missed or damaged parts. If
               the Buyer opens the cases by itself or fails to make a written
               claim on missing or damaged parts within [*] upon arrival of the
               goods, the Buyer shall be deemed to have accepted the goods.

     9.   Terms of Payment:

               General Provisions:

               If the payment by the Buyer to the Seller is made in [*], the
          exchange rate shall be based on the average price of a given foreign
          currency published by the People's Bank of China on the same day when
          the Seller receives such payment.

               The payment shall be made by T/T to Beijing Industry and Commerce
          Bank of China, Chao Yang Branch, Ri Tan Lu Office, for the account
          number [*].

          9.1  Terms of Payment for the Equipment as Follows:

               9.1.1 Amount Paid on Arrival of the Goods

                     [*] of the total contract price, or [*] shall be paid by
                     the Buyer within [*] upon arrival of the goods.


                                      -2-
<PAGE>


               9.1.2 [*] of the total contract price, or [*] shall be paid by
                     the Buyer within [*] upon connection and a test run of the
                     equipment.

               9.1.3 [*] of the total contract price, or [*] shall be paid by
                     the Buyer within [*] upon certification of quality of final
                     test (The final test is set for [*] upon connection of the
                     equipment).

          9.2  In the event that a payment required by Section 9.1 is not made
               by the Buyer within the stipulated time, the Buyer shall pay to
               the Seller, in addition to the amount owned, a late payment
               penalty equal to [*] of the amount owned per week. Any fractional
               part of a week is to be considered as a full week. The total
               amount of late payment penalty shall not, however, exceed [*] of
               the total amount owned.

     10.  Warranty:

          10.1 The Seller warrants the equipment supplied hereunder to be free
               from defects in workmanship and materials. The Seller's warranty
               for equipment and materials will commence upon delivery of the
               goods and will continue for a period of [*]. During the warranty
               period, the Seller will, [*], either repair or replace those
               equipment and materials not in conformity with the aforementioned
               warranty. If the Buyer determines that certain parts be returned
               to the Seller, the [*] shall bear the transportation cost for the
               return of such parts inside China and for the return of the
               repaired or replaced parts to the Buyer's site.

          10.2 The Seller warrants to eliminating errors from the software it
               provides.

          10.3 The foregoing warranty does not extend to any equipment or part
               that has been:

               10.3.1 Damaged due to improper use or accidents;

               10.3.2 Wired, repaired or altered by anyone other than the Seller
                      or its representatives;

               10.3.3 Damaged due to improper installation, storage, handling or
                      maintenance by anyone other than the Seller or its
                      representatives; and

               10.3.3 Removed from its original site of installation, or due to
                      expendable components such as fuses, light bulbs, motor
                      brushes and the like.

               10.2.5 All equipment supplied under this Contract is brand-new.

     11.  Force Majeure


                                      -3-
<PAGE>

               The Seller shall not be liable for any loss, damage, delay of the
          goods or failure of their performance resulting directly or indirectly
          from any cause which is beyond its reasonable control, which includes
          but is not limited to the laws, regulations, acts of any government
          authorities.

     12.  Late Delivery and Penalty:

               In case of delayed shipment, except for force majeure, the Seller
          shall pay to the Buyer for every week of delay a penalty amounting to
          [*] of the total value of the goods whose shipment has been delayed.
          Any fractional part of a week is to be considered as a full week. 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.

     13.  Arbitration

               The parties shall strictly execute this Contract in accordance
          with the relevant laws and regulations of the PRC. All disputes
          arising out of the execution of the Contract shall be settled through
          mutual understanding and friendly negotiations. In case no settlement
          can be reached through negotiations, either party can apply to the
          appropriate organization for arbitration or medication. The
          arbitration fees shall be borne by the losing party.

     14.  Limitation of Liability

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

          a.   The actual value of the damages or losses caused to the Buyer.

          b.   The Seller shall not be liable for any consequential or
               incidental losses or damages resulting from this Contract.

     15.  Validity and Termination of the Contract and Miscellaneous Matters:

          15.1 This Contract will come into force upon affixation of the seals
               by the parties and execution by the representatives of the
               parties.

          15.2 This Contract will be terminated upon fulfillment of the
               respective duties and obligations by the parties.

          15.3 This Contract can only be amended by an instrument in writing
               signed and sealed by the duly authorized representatives of the
               parties.


                                      -4-
<PAGE>


          15.4 During the course of performance of this Contract, all notices
               between the parties shall be delivered by telex, facsimile or
               certified mail.

          15.5 This Contract is made in both Chinese and English, and the
               versions in two languages shall be equally authentic. In case of
               discrepancy between the two versions, the Chinese version will
               prevail.

     16.  Remarks:

               The Contract is made in two originals, of which each party holds
          one.




         The Buyer:

         Zhejiang Telecommunication Corporation,
         Shaoxing Branch



         Representative: (Signature)
         Date:   November 18, 2000


         The Seller:

         UTStarcom (China) Ltd.


         Representative: (Signature)
         Date:   November 18, 2000







                                      -5-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.50
<SEQUENCE>3
<FILENAME>a2040014zex-10_50.txt
<DESCRIPTION>EXHIBIT 10.50
<TEXT>

<PAGE>
                                                               Exhibit 10.50


[*] 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.


                                   CONTRACT


Contract No.: UTA-BJ-0011-004                                  Project No.: PAS

The Buyer:                                The Seller:

Henan Telecommunications Corporation,     UTStarcom (China) Ltd.
Luoyang Branch

No. 216 Zhong Zhou Zhong Street,          11th Floor, CNT Manhattan Building,
Luoyang, 471000                           No. 6 Chao Yang Men Bei Da Jie Street,
                                          Beijing, 100027

Tel: (0379) - 9937662                     Tel: (010)-65542030
Fax: (0379) - 3942706                     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 according to the terms and conditions as stipulated hereinafter: PAS
Wireless Citywide Telephone System.

     1.   Total Contract Price: [*]

     2.   Name of Commodities or Services: PAS Citywide Telephone System for
          Henan telecommunications Corporation, Luoyang Branch.

               (Please refer to the attached list for quantity, specifications
               and unit price.)

     3.   Date of Shipment: [*].

     4.   Place of Destination: Henan telecommunications Corporation, Luoyang
          Branch (No. 216 Zhong Zhou Zhong Street Luoyang) and Yanshi
          Telecommunication Bureau.

     5.   Packing:

               The goods shall be packed in new strong cases suitable for long
          distance transportation and well protected against dampness, moisture,
          shook and rust. The Seller shall be liable for any damage to the goods
          on account of improper packing.

<PAGE>

     6.   Shipping Marks:

               The Seller is required to mark clearly on the surface of each
          package the package number, measurements and such cautions as "This
          Side Up", "Handle with Care" and "Keep Away from Moisture" in unfading
          ink and put on shipping marks.

     7.   Transportation:

          7.1  The Seller shall bear all the expenses and risks involved in the
               handling of the goods until the moment when the goods have
               officially been handed over to the relevant transportation unit
               designated by the Buyer.

          7.2  The transportation and insurance costs from Hangzhou or Huizhou
               Railway Stations (or from the Sellers' warehouse, if shipped by
               highway) to the place of destination designated by the Buyer
               shall be borne by the Buyer.

     8.   Acceptance of Goods:

          8.1  Upon arrival of the goods, the Buyer shall check the goods
               immediately in the presence of the Seller's representative and
               sign on the shipping list as a certificate of acceptance of the
               goods. If shipped by air, railway or postal service, the
               carrier's shipping list shall serve as a certificate of
               acceptance of the goods.

          8.2  In case of missing parts or damages due to the Seller's improper
               packing, the Buyer shall make a detail record, or commission the
               China Commodity Inspection Bureau for a reexamination and
               issuance of a certificate, or require the representatives of the
               Buyer and the Seller to sign a memorandum to serve as a
               certificate for the replacement of missed or damaged parts. If
               the Buyer opens the cases by itself or fails to make a written
               claim on missing or damaged parts within [*] upon arrival of the
               goods, the Buyer shall be deemed to have accepted the goods.

     9.   Terms of Payment:

               General Provisions:

               If the payment by the Buyer to the Seller is made in [*], the
          exchange rate shall be based on the average price of a given foreign
          currency published by the People's Bank of China on the same day when
          the Seller receives such payment.

               The payment shall be made by T/T to Beijing Industry and Commerce
          Bank of China, Chao Yang Branch, Ri Tan Lu Office, for the account
          number [*].

          9.1  Terms of Payment for the Equipment as Follows:


                                      -2-
<PAGE>

               9.1.1 Down Payment

                         [*] of the total contract price, or [*] shall be paid
                     as down payment by the Buyer to the Seller within [*] upon
                     execution of the Contract.

                         If the down payment is delayed, the date of shipment
                     for the goods will be delayed accordingly.

               9.1.2 Payment upon Arrival of the Goods

                         [*] of the total contract price, or [*] shall be paid
                     by the Buyer within [*] upon arrival of all the equipment.

               9.1.3 The remaining [*] of the total contract price, or [*] shall
                     be paid by the Buyer within [*] upon certification of
                     quality of final test or within [*] upon arrival of the
                     goods, whichever is earlier.

          9.2  In the event that a payment required by Section 9.1 is not made
               by the Buyer within the stipulated time, the Buyer shall pay to
               the Seller, in addition to the amount owned, a late payment
               penalty equal to [*] of the amount owned per week. Any fractional
               part of a week is to be considered as a full week. The total
               amount of late payment penalty shall not, however, exceed [*] of
               the total amount owned.

     10.  Equipment Installation:

          10.1 The Buyer is responsible for the installation of the equipment.

          10.2 The Seller is responsible for the technical support during the
               installation of the equipment.

     11.  Warranty:

          11.1 The Seller warrants the equipment supplied hereunder to be free
               from defects in workmanship and materials. The Seller's warranty
               for equipment and materials will commence upon delivery of the
               goods and will continue for a period of [*]. During the warranty
               period, the Seller will, at its option, either repair or replace
               those equipment and materials not in conformity with the
               aforementioned warranty. If the Buyer determines that certain
               parts be returned to the Seller, the [*] shall bear the
               transportation cost for the return of such parts inside China and
               for the return of the repaired or replaced parts to the Buyer's
               site.


                                      -3-
<PAGE>

          11.2 The Seller warrants to eliminating errors from the software it
               provides.

          11.3 The foregoing warranty does not extend to any equipment or part
               that has been:

               11.3.1 Damaged due to improper use or accidents;

               11.3.2 Wired, repaired or altered by anyone other than the Seller
                      or its representatives;

               11.3.3 Damaged due to improper installation, storage, handling or
                      maintenance by anyone other than the Seller or its
                      representatives; and

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

     12.  Force Majeure

               The Seller shall not be liable for any loss, damage, delay of the
          goods or failure of their performance resulting directly or indirectly
          from any cause which is beyond its reasonable control, which includes
          but is not limited to the laws, regulations, acts of any government
          authorities.

     13.  Late Delivery and Penalty:

               In case of delayed shipment, except for force majeure, the Seller
          shall pay to the Buyer for every week of delay a penalty amounting to
          [*] of the total value of the goods whose shipment has been delayed.
          Any fractional part of a week is to be considered as a full week. 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.

     14.  Arbitration

               The parties shall strictly execute this Contract in accordance
          with the relevant laws and regulations of the PRC. All disputes
          arising out of the execution of the Contract shall be settled through
          mutual understanding and friendly negotiations. In case no settlement
          can be reached through negotiations, either party can apply to the
          appropriate organization for arbitration or medication. The
          arbitration fees shall be borne by the losing party.


                                      -4-
<PAGE>

     15.  Limitation of Liability

          15.1 In the event of any breach of this Contract by the Seller, or of
               any losses or injuries to the Buyer arising out of this Contract
               for which the Seller is liable, the Seller's total cumulative
               liability for such breaches, losses and injuries shall be the
               lesser of:

               a.   The actual value of the damages or losses caused to the
                    Buyer.

               b.   The total payment made to the Seller.

          15.2 The Seller shall not be liable for any consequential or
               incidental losses or damages resulting from this Contract.

     16.  Validity and Termination of the Contract and Miscellaneous Matters:

          16.1 This Contract will come into force upon affixation of the seals
               by the parties and execution by the representatives of the
               parties.

          16.2 This Contract will be terminated upon fulfillment of the
               respective duties and obligations by the parties.

          16.3 The Seller hereby grants the Buyer the license to use the
               software contained within the equipment purchased. The Buyer or
               its representatives shall not de-compile, disassemble or reverse
               the software unless consented in writing by the Seller.

          16.4 This Contract can only be amended by an instrument in writing
               signed and sealed by the duly authorized representatives of the
               parties.

          16.5 During the course of performance of this Contract, all notices
               between the parties shall be delivered by telex, facsimile or
               certified mail.

          16.6 This Contract is made in both Chinese and English, and the
               versions in two languages shall be equally authentic. In case of
               discrepancy between the two versions, the Chinese version will
               prevail.

     17.  Remarks:

               The Contract is made in two originals, of which each party holds
          one.


                                      -5-
<PAGE>

         The Buyer:

         Henan Telecommunications Corporation, Luoyang Branch
                       (Corporate Seal)


         Representative: (Signature)
         Date:   October 28, 2000


         The Seller:

         UTStarcom (China) Ltd.



         Representative: (Signature)
         Date:   October 28, 2000








                                      -6-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.51
<SEQUENCE>4
<FILENAME>a2040014zex-10_51.txt
<DESCRIPTION>EXHIBIT 10.51
<TEXT>

<PAGE>

                                                                   Exhibit 10.51


[*] 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.


                                CONTRACT NUMBER:
                                 20MKK-0320022US


                                       ON

                   XIAN BROADBAND MULTI-MEDIA BUSINESS SYSTEM

                                      AMONG

                CHINA XIAN MACHINERY IMPORT & EXPORT CORPORATION

                                       AND

           CHINA TELECOM GROUP, SHANXI TELECOMMUNICATIONS CORPORATION

                                       AND

                              U.S. UTSTARCOM, INC.


<PAGE>


                     TABLE OF CONTENTS OF PURCHASE CONTRACT

1.       Definition
2.       Subject Matter of Contract
3.       Price
4.       Payment and Terms of Payment
5.       Terms of Transportation
6.       Packing and Shipping Marks
7.       Shipment
8.       Installation, Testing, Test Run and Final Test
9.       Warranty
10.      Spare Parts
11.      Claims
12.      Force Majeure
13.      Arbitration
14.      Notice
15.      Amendment of Contract
16.      Customs Duties, Taxes and Other Expenses
17.      Miscellaneous
18.      Validity of Contract

                  Signature Page

         Appendices

         Appendix 1        List of Quotation for Equipment
         Appendix 2        Technology Proposal
         Appendix 3        Training Plan
         Appendix 4        Manual of Products
         Appendix 5        Reply to Questions re Quotation


<PAGE>


                                PURCHASE CONTRACT

1.       Purchase Contract

         (a) This purchase contract of Xian broadband multi-media business
system equipment and other related service contracts (hereinafter referred to as
the "Contract") are made among China Xian Machinery Import & Export Corporation
(hereinafter referred to as the "Buyer"), registered under the laws of the
People's Republic of China and having its legal address at Building No. 4
(East), Jian Hua Hotel, No. 6 East Section, Huan Cheng Road (South), Xian, China
Telecom Group, Shanxi Telecommunications Corporation (hereinafter referred to as
the "End User"), registered under the laws of the People's Republic of China and
having its legal address at No. 1 Gao Xin Road, Xian and U.S. UTStarcom, Inc.
(hereinafter referred to as the "Seller"), having its address at 1275 Harbour
Bay Parkway, Suite 100, Alameda CA 94502 by adhering to the principle of mutual
benefits and friendly cooperation, through discussions and pursuant to the
following terms and conditions:

         Chapter 1         Definition

         1.1      "Authorized representatives" shall mean people who exercise
                  the rights on behalf of the parties to this Contract.

         1.2      "Contract Equipment" shall mean system equipment, spare parts
                  and related software listed in Appendix 1 attached to this
                  Contract.

         1.3      "Technical Services" shall mean services provided within the
                  boundaries of [*] by the Seller to the Buyer and the End User.

         1.4      "Site" shall mean the spot where contract equipment is
                  installed.

         1.5      "Readiness for Preparation of the Site" shall mean that prior
                  to the arrival of the contract equipment at the Site, the Site
                  provided by the Buyer and the End User is equipped with the
                  conditions required by the Seller for the installation of the
                  contract equipment; thus, the work for such installation may
                  start.

         1.6      "Amended Application Forms" shall mean forms on the amendment
                  of the scope, plan or price of the Contract.

         Chapter 2         Subject Matter of Contract

         2.1      The Buyer agrees to buy from the Seller the equipment and
                  technical services provided in accordance with Appendix Nos. 1
                  and 2 attached to this Contract, and the Seller agrees to sell
                  such equipment and services. Please refer to Appendix 2
                  attached to this Contract for detailed explanation of the
                  equipment and the related technical services pursuant to this
                  Contract.
<PAGE>

         Chapter 3         Price

         3.1      The Buyer shall pay the Seller a total contract price of [*].

                           The contract price is [*].

         3.2      The contract price listed in 3.1 is based on the provisions of
                  [*], and the expenses for shipping and insurance are paid up
                  till to [*].

         3.3      The prices listed in 3.1 are fixed. Any amendment of the
                  relevant contracts shall be unanimously made in writing by the
                  parties to the Contract.

         Chapter 4         Payment and Terms of Payment

         4.1      The computation and display of prices listed in the Contract
                  and the preparation and payment of all the invoices shall be
                  carried out in [*].

         4.2      The total contract price set forth in 3.1 shall be paid by the
                  Buyer by the following means and ratio:

                  4.2.1    Within [*] upon the official validity of this
                           Contract, the Buyer shall pay [*] of the total
                           contract price or [*]. The Buyer shall wire transfer
                           such payment through the Buyer's bank within [*] upon
                           receipt of the following documents:

                           a.  Export license issued by the government
                               authorities of the Seller's country or a
                               certificate indicating no need of such export
                               license;

                           b.  Five (5) copies of [*] pro forma invoices;

                           c.  Five (5) copies of [*] commercial invoices;

                           d.  Two (2) copies of [*] sight draft;

                           e.  Original copy of air waybill indication "freight
                               paid", and notification to China Xian Machinery
                               Import & Export Corporation;

                           f.  Three (3) copies of a detailed packing list;

                           g.  An original and a copy of the insurance policy
                               covering all risks for [*] of the contract price;
                               and

                           h.  Two (2) copies of inspection certificates of
                               quality and quantity or weight.

                  4.2.2    2nd Payment: [*] of the Contract Price

                                      -2-
<PAGE>

                                  Upon arrival of the goods and after confirming
                           without error the following documents submitted by
                           the Seller, the Buyer shall wire transfer [*] of the
                           total contract price or [*] to the bank designated by
                           the Seller in accordance with the provisions of the
                           contractual clauses:

                           a.  Three (3) originals and three (3) copies of
                               commercial invoices for [*] of the total contract
                               price indicating the contract number and the
                               names of the goods.

                  4.2.3    Final Payment: [*] of the Total Contract Price

                                  The final payment, i.e. [*] of the total
                           contract price or [*], shall be paid via T/T by the
                           Buyer to the Seller's designated bank upon arrival of
                           the goods and against the following documents
                           presented by the Seller:

                           a.  Three (3) originals and three (3) copies of
                               commercial invoices for [*] of the total contract
                               price indicating the contract number and the
                               names of the goods.

         4.3      Any bank expenses in connection with the aforementioned
                  procedures for such payment occurred inside the People's
                  Republic of China shall be borne by [*]; and any bank expenses
                  occurred outside the People's Republic of China shall be borne
                  by the [*].

         Chapter 5         Terms of Transportation

         5.1      All the equipment under this Contract shall be shipped to Xian
                  pursuant to the provisions of [*].

         5.2      With [*] upon shipment of the contract equipment, the Seller
                  shall notify the Buyer and the End User by fax of the contract
                  number, date, commodities, quantities, value of invoices,
                  gross weight, flight number and other information.

         5.3      The port of destination for the goods is Xianyang
                  International Airport in Xian, and the [*] shall be
                  responsible for the domestic transportation and insurance.

         Chapter 6         Packing and Shipping Marks

         6.1      All the equipment and materials supplied under this Contract
                  shall be carefully packed in strong cases suitable for
                  long-distance transportation by air, sea or land and well
                  protected against changes of weather, dampness, rain, rust,
                  shook on loading and unloading and erosions. If necessary,
                  they should be shipped in well-sealed containers.

                                      -3-
<PAGE>

         6.2      The Seller shall mark packing cases for loose spare parts,
                  indicating in English the contract number, names of the
                  equipment and spare parts. In addition, spare parts and tools
                  shall be marked with letters of "parts" or "tools".

         6.3      The Seller shall mark, in conspicuous English, the following
                  contents on both sides of each packing case:

                  1)   Contract number;

                  2)   Shipping Mark: 20MKK-0320022US;

                  3)   Recipient;

                  4)   Port of Destination: Xian;

                  5)   Case number;

                  6)   Gross weight; and

                  7)   Measurement (length x width x height).

                       Based on the characteristics and different requirements
         of each packing case during the course of transportation, the Seller
         shall mark in English such cautions as "Handle with Care", "This Side
         Up", "Keep Dry" and any other conspicuous signs customarily used in the
         trade.

         6.4      The Seller shall enclose a set of packing list inside each
                  packing case.

         Chapter 7         Shipment

         7.1      The Seller shall make one-time delivery of all the goods at
                  the delivery date stipulated in the performance schedule
                  (within [*] upon execution of the Contract).

         7.2      The Seller shall be liable for any delay of the delivery of
                  the contract goods caused by its own fault.

         Chapter 8         Installation, Testing, Test Run and Final Test

         8.1      The [*] shall be responsible for the installation of the
                  contract equipment under the supervision of the [*]
                  technicians, and the [*] shall be responsible for the
                  supervisory work of installation and system debugging, whereby
                  the [*] technicians shall render assistance. The Seller's
                  technical support shall comply with the integrated technology
                  standards of engineering system for Xian broadband multi-media
                  business system.

                                      -4-
<PAGE>

         8.2      Installation, testing and acceptance of the contract equipment
                  shall be carried out in accordance with the performance
                  schedule listed in Appendix 4 to this Contract.

         8.3      Upon completion of the contract equipment installation by the
                  End User and of debugging by the Seller, the Seller should
                  guarantee the requirements of stability performance for the
                  contract equipment be met and that preparation be made for a
                  test run. The Seller shall provide the End User with any
                  written and related information [*] prior to the test run, and
                  confirm the date for such test run. Thereafter, the test run
                  will begin immediately.

         8.4      If, due to the Seller's reasons, the equipment does not comply
                  with the allocation requirements, the Seller will solve the
                  problem of such contract equipment at its own cost until they
                  are up to the standards. The corresponding extension of the
                  period of time for the test run shall be equal to the time
                  spent by the Seller to solve the problem of such contract
                  equipment.

         Chapter 9         Warranty

         9.1      The Seller warrants the equipment supplied hereunder to be
                  free from defects in workmanship. The Seller's warranty for
                  the quality of the equipment will commence upon execution of
                  the certificate of qualification at the final test and
                  continue for a period of [*]. During the warranty period, the
                  Seller will, at its option, either repair or replace any parts
                  not conforming to the above warranty. The Seller shall bear
                  all the expenses for the return of such parts as well as the
                  transportation charges for the return of such repaired or
                  replaced parts to the installation site.

         9.2      If any part is determined to be returned by the parties, the
                  End User shall complete a repair & maintenance form provided
                  by the Seller and return the part, and the [*] shall bear the
                  cost of transportation, insurance, loading and unloading of
                  the faulty party to be returned to the Seller, and also be
                  responsible for the return of the repaired or replaced part to
                  the End User.

         9.3      The Seller shall make its best efforts to ship a replaced part
                  within [*] upon identification by the End User of the faulty
                  essential part affecting the system performance. The End User
                  shall do its best to return the faulty part within [*] upon
                  delivery of a replaced part by the Seller to the End User.

         9.4      If the Seller determines the need to dispatch its technicians
                  to assist the End User in inspecting or repairing a faulty
                  part at the site, any cost occurred during the warranty period
                  shall be [*]. After the end warranty period, the Seller shall
                  provide the Buyer with maintenance services, but the fees
                  shall not exceed [*] of the discount price of the repaired
                  unit.

         Chapter 10        Spare Parts

                                      -5-
<PAGE>

         10.1     The Seller agrees that it will exert its best efforts to
                  provide spare parts for [*] upon delivery of the goods. The
                  Seller warrants that it will notify the Buyer [*] ahead of
                  time of any decision to suspend the production of certain
                  parts in order to enable the Buyer to purchase enough parts
                  for its inventory.

         10.2     The Seller agrees not to price any of the spare parts higher
                  than [*].

         Chapter 11        Claims

         11.1     Within [*] upon arrival of the goods at the End User's site,
                  the cases shall be opened by the End User in the presence of
                  the Seller's representatives, and checked jointly by the
                  representatives of both the End User and the Seller.

         11.2     In case of missing parts or damages due to the inadequate
                  packing on the part of the Seller, the Buyer and the End User
                  shall make a detailed record at the site or they may
                  commission the China Commodity Inspection Bureau for a
                  re-inspection. The representatives of the Buyer and the Seller
                  shall draft and sign a proposal with a detailed list of the
                  goods attached. Such proposal may serve proper evidence for
                  the replacement or repair of missed or damaged parts. The
                  replacement of missed parts and the repair of damaged parts
                  shall be carried out in accordance with the provisions of
                  Chapter 9, the warranty clause.

         11.3     In case of delayed shipment due to the Seller's fault, the
                  Buyer may seek compensation from the Seller according to the
                  following ratio: a penalty amounting to [*] of the total value
                  of the goods plus interest shall be imposed per weak. Any
                  fractional part of a week is to be considered as a full weak.
                  The total amount of compensation shall not, however, exceed
                  [*] of the total value of the goods involved in delayed
                  shipment. The payment of compensation will not exclude the
                  Seller from its obligations to execute the Contract. If the
                  delayed shipment exceeds [*], the Buyer and the End User have
                  the right to rescind part or whole of the Contract.

         11.4     The total amount of the aforementioned penalty shall not
                  exceed [*] of the total contract price, which will be deducted
                  at the time of payment due by the Buyer.

         Chapter 12        Force Majeure

         12.1     The Seller, the End User or the Buyer shall not be liable for
                  any lass, damage, delay or failure of performance resulting
                  directly or indirectly from any cause which is beyond their
                  reasonable control including, but not limited to, the laws,
                  regulations, acts or failure to act of any governmental
                  authorities. Under such circumstances, the party affected by
                  the force majeure event shall notify the other party within
                  [*] after the occurrence of such event. If the performance of
                  this Contract is prevented for the aforementioned reasons for
                  a consecutive period of [*] or a longer time, any party has
                  the right to terminate this Contract by way of a written
                  notice.

                                      -6-
<PAGE>

         Chapter 13        Arbitration

         13.1     Any dispute arising out of the performance of this Contract
                  shall be settled by the parties through friendly
                  consultations. In case of no settlement through consultations,
                  the said dispute shall be submitted for an arbitration.

         13.2     The place for the arbitration is Xian, China, and the said
                  arbitration should be carried by Xian Arbitration Commission
                  in accordance with its rules. This Contract is governed by the
                  laws of the People's Republic of China.

         13.3     The arbitration award issued by the Arbitration Commission
                  shall be final and binding on the parties. No party shall try
                  to seek legal or any other channels to amend the arbitration
                  award.

         13.4     The arbitration fees shall be covered by the losing party
                  unless otherwise stipulated by the Arbitration Commission.

         13.5     During the arbitration, the parties shall continue to perform
                  this Contract except for the part under arbitration.

         Chapter 14        Notice

         14.1     Any notice hereunder by the parties shall be in writing, and
                  delivered by fax or similar communication means confirmed by
                  the parties or registered mail to the following addresses:

                       The Seller:               U.S. UTStarcom, Inc.
                                Telephone:       001-510-8648800
                                Fax:             001-510-8648802

                       The Buyer:                China Xian Machinery Import
                                                 & Export Corporation
                                Telephone:       0086-29-2239614
                                Fax:             0086-29-2230418

                       The End User:             China Telecom Group, Shanxi
                                                 Telecommunications Corporation
                                Telephone:       86-29-8258899
                                Fax:             86-29-8258809

         14.2     Notices sent by fax or similar communications means shall be
                  deemed as being effectively served on the sending day; notices
                  sent by guaranteed or registered mail shall be deemed as being
                  effectively served on the sending day when the prepaid postage
                  is delivered.

         Chapter 15        Amendment of Contract

                                      -7-
<PAGE>

         15.1     Any amendment or memorandum made by the parties in relation to
                  this Contract shall be executed by the authorized
                  representatives of the parties.

         15.2     During the performance of this Contract, any increase,
                  cancellation or amendment relating to the contract price,
                  schedule and progress of the project may be submitted by the
                  parties, and shall come into force only after the confirmation
                  of the parties' approval and signatures.

         15.3     If any party fails to carry out its duties during the
                  performance of this Contract, it shall bear the corresponding
                  cost associated with such failure.

         Chapter 16        Customs Duties, Taxes and Other Expenses

         16.1     The [*] shall be responsible for the payment of any taxes or
                  other financial obligations arising out of this Contract and
                  levied at abroad.

         16.2     The [*] shall be responsible for the payment of any taxes or
                  other financial obligations levied in China in relation to
                  this Contract or import of equipment from abroad.

         16.3     The Seller shall be responsible for the payment of any taxes
                  or other financial obligations levied in China in relation to
                  this Contract or import of equipment from abroad.

         Chapter 17        Miscellaneous

         17.1     This Contract shall be kept confidential, and can only be
                  disclosed or submitted to the government authorities pursuant
                  to the laws.

         17.2     This contract from its main body of Chapter 1 to 18 and
                  appendices 1 to 6 represents the unanimous agreement of the
                  parties and their common understanding on the relevant
                  negotiations and agreements, whether in oral or written form,
                  prior to the execution of this Contract. Unless otherwise
                  specified in this Contract, no other representations,
                  understanding or agreements are contained in this Contract.
                  Any party shall not be liable for anything beyond the terms,
                  conditions, definitions, warranties, understanding or
                  representations provided for in this Contract.

         17.3     This Contract shall be terminated upon completion of each
                  party's duties and obligations.

         17.4     Technical Services

                  17.4.1   The Seller is obliged to provide the following
                           services within [*] after the delivery of the goods:

                                      -8-
<PAGE>

                           a.  To provide 24-hour [ILLEGIBLE] online technical
                               consultations, and warrants timely response to
                               eliminate or reduce the occurrence of any
                               breakdown.

                           b.  To send a maintenance team to solve the problem
                               at the site within [*] upon receipt of a notice.

         Chapter 18        Validity of Contract

         This Contract is made in three (3) copies, and shall be jointly entered
into and executed by the representatives of the parties.

         Buyer:       China Xian Machinery Import & Export Corporation



         Authorized Representative: (Signature)
         Date of Signature:         9/29/00


         Seller:      U.S. UTStarcom, Inc.


         Authorized Representative: (Signature)
         Date of Signature:         9/29/00




         End User:    China Telecom Group, Shanxi Telecommunications Corporation


         Authorized Representative: (Signature)
         Date of Signature:         9/29/00



                                      -9-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.52
<SEQUENCE>5
<FILENAME>a2040014zex-10_52.txt
<DESCRIPTION>EXHIBIT 10.52
<TEXT>


<PAGE>


                                                                   Exhibit 10.52


[*] 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.


                         TECHNICAL ASSISTANCE AGREEMENT

AGREEMENT made and entered into, by and between

Matsushita Communication Industrial Co., Ltd., Communication Systems Division, a
Japanese corporation, having its principal offices at 3-1 Tsunashima-Higashi
4-chome, Kohoku-ku, Yokohama 223-8639, Japan (hereinafter called "Licensor"),
and UTStarcom Inc., a Delaware corporation, having its principal offices at 1275
Harbor Bay Parkway, Suit 100, Alameda, California 94502, U.S.A. (hereinafter
called "Licensee").

                                   WITNESSETH:


RECITALS:


Licensor and Licensee have been the parties to the technical assistance
agreement effective on October 1, 1999 which is subsequently modified, under
which Licensee is receiving from Licensor, technical assistance and information
for, and know-how in connection with, the manufacture and assembly in [*] of a
certain radio port and radio port controller.

Licensee is desirous of receiving such a technical assistance in further details
and to a higher level.

Licensor is willing and ready to render such technical assistance, information
and know-how to Licensee, all upon and subject to the terms and conditions
hereinafter set forth,

NOW, THEREFORE, in consideration of the recitals and the mutual promises herein
contained, the parties hereto agree as follows:

ARTICLE 1. DEFINITIONS

1.01  The term "Item(s)" means,
1)[*], and
2)[*],
Any other items may be added to the aforesaid items or any of the aforesaid
items may be excluded from the scope of Items by mutual written agreement or the
parties hereto and subject to the approval of the Japanese Government, if then
required.

1.02  The term "Products" means the product models and the subassemblies
therefor within the scope of Items, that are designed and/or manufactured by
Licensor during the term of this Agreement and are selected by a written
agreement of the parties hereto. The initial Products are set forth in
Exhibit A attached hereto and made a part hereof. Exhibit A may be amended by
a written agreement of the parties from time to time during the term of this
Agreement and subject to the approval of the Japanese Government, if then
required.

1.03  The term "Effective Date" means the date on which both parties signed this
Agreement (if different, the later date of signature), subject to the approval
of the Japanese Government, if necessary.

1.04  The term "Components" means parts, components, materials, subassemblies,
printed circuit boards, control cards, interface cards, accessories, packing
materials, and printed materials used in the Products.

1.05  The term "Production Equipment" means machine, tools, jigs, molds, dies,
and instruments, required by Licensee for manufacture (including assembly,
adjustment, programming, and tests) and inspection of the Products.


<PAGE>


1.06  The term "Production" means procurement of Production Equipment,
Components, assembly, adjustment, in-process test, quality control inspection
and repair.

1.07  The term "Calculation Period" means the periods from [*] to [*], from [*]
to [*], from [*] to [*], and from [*] to [*] of each year, and the period from
the later coming [*] to the date of termination or expiration of this Agreement.

1.08  The term "Affiliates" means companies or other entities controlling,
controlled by, or under the common control with, either party, and the term
"Subsidiaries" means, among the Affiliates, companies or other entities
controlled by either party. As used in this Article, the term "control" means
the direct or indirect ownership or control of the majority of the outstanding
shares or the ownership representing the power to direct the business of the
companies or entities, as long as such ownership or control exists.

ARTICLE 2. TECHNICAL ASSISTANCE

2.01  Technical Information and Advice:
2.01A  During the term of this Agreement, Licensor shall furnish Licensee with a
set of tangible technical information for use by Licensee in the manufacture
and/or assembly of the Products to the extent freely disposable by Licensor
without any obligation to any third party, necessary for the Production of the
Products by Licensee. Such information (hereinafter called "Technical
Information") shall be as set forth in Exhibit B attached hereto and made a part
of this Agreement.

2.01B  From time to time during the term of this Agreement, whenever a new
Product is selected pursuant to Article 1.02. hereof, Licensor will furnish
Licensee with the technical information therefor, to the extent provided for in
Article 2.01A hereof and required in addition to what has been previously
supplied. Such technical information shall also be the Technical Information.

2.01C  From time to time during the term of this Agreement, at the reasonable
request of Licensee in writing, Licensor may furnish Licensee with advice and
information which is incidental or supplemental to the Technical Information
furnished pursuant to Articles 2.01A and 2.01B hereof and which may be properly
disclosed by Licensor.

2.01D  All Technical Information furnished hereunder shall be in the English
language except for software and hardware design document in the Japanese
language, and the measurements and specifications used therein shall be in the
metric system.

2.02  Technical Service:
2.02A  From time to time during the term of this Agreement, at the reasonable
request of Licensee in writing, Licensor may permit officers and/or employees of
Licensee to visit Licensor's facilities at which it manufactures or assembles
the Products, for such periods of time as mutually agreed, to train such
personnel of Licensee in the process of manufacturing and assembling the
Products.

2.02B  From time to time during the term of this Agreement, at the reasonable
request of Licensee in writing, Licensor may send one or more of its engineers
and/or technicians to Licensee's or Sub-Licensee's facilities at which it
manufactures and/or assembles the Products, for such periods of time as mutually
agreed, to provide advisory and instructive technical service to Licensee
regarding the manufacture and/or assembly of the Products hereunder.

2.02C  Details of the terms and conditions applicable to the technical services
to be provided to Licensee as set forth in Articles 2.02A and 2.02B that are to
be rendered by Licensor's engineers or technicians visiting Licensee's factory
as herein provided shall be confirmed in writing between both parties hereto to
the extent practicable prior to any such visit.

2.02D  From time to time during the term of this Agreement, at the reasonable
request of Licensee, Licensor may inspect or test samples of the Products
produced by Licensee or the Components obtained by Licensee pursuant to the
provisions of Article 4.02 hereof, and Licensor may inform Licensee of the
results of such inspection or the test with any pertinent comments, if any, that
Licensor may have to make. Such samples shall be given to Licensor [*] and at
the [*].


                                      -2-


<PAGE>


Licensee shall also reimburse Licensor, [*], for the expenses of [*] involved
after receipt by Licensee of Licensor's invoice therefor.

2.03A  All costs and expenses for the technical information, advice and services
to be provided to Licensee as set forth in Articles 2.01 and 2.02 hereof
(hereinafter called "Technical Services"), including those for technical
information, advice, technical service, accommodation, transportation to and
from Japan by air coach, meals and allowances, in respect of Licensor's
engineers and/or technicians and Licensee's officers and/or employees as the
case may be, shall be paid, or if paid by [*], shall be reimbursed, by [*] to
[*] in [*] by means of telegraphic transfer within [*] after [*] presentation to
[*] of bills or invoices for any such costs or expenses.

2.03B  The schedule of the Technical Services at the initial stage and the
payment therefor shall be set forth in Exhibit C.

2.03C  Anything to the contrary herein notwithstanding, all such personnel of
Licensor shall be deemed at all times to be employees of Licensor, subject to
Licensor's ultimate direction and control, and shall not be deemed to be
employees of Licensee.

2.03D  Governmental Approval: Any of the Technical Assistance (as defined in
Article 3.01A hereof) herein contemplated shall be made available to Licensee
subject to a required approval by the competent authority of the Japanese
Government under the Foreign Exchange and Foreign Trade Law of Japan, and/or the
Japanese governmental administration guidance if and to the extent from time to
time so required. It is further agreed by the parties hereto that any addition
or selection of Item or Product pursuant hereto and any renewal of this
Agreement shall also be subject to a required approval of the Japanese
Government under the aforesaid law and/or governmental guidance, if and to the
extent then required.

ARTICLE 3. LICENSES

3.01A  During the term of this Agreement, Licensor hereby grants to Licensee [*]
license, [*], to use the Technical Information and advice and information
related thereto and the Technical Services and such other technical assistance
as may be furnished by Licensor hereunder (all of which are hereinafter
collectively called "Technical Assistance") in order to manufacture and/or
assemble the Products in [*] for sale, use, lease or other disposition of the
same in [*].

3.01B  To the extent any patent owned by Licensor is embodied within the
Technical Assistance and is applicable to manufacturing or selling the Products,
Licensor agrees and hereby grants to Licensee during the term hereof, a [*]
license under such patent, [*], to the extent necessary to exercise the license
granted under Article 3.01A.

3.01C  [*], Licensee [*] grant a sub-license of the license granted to it under
Articles 3.01A and 3.01B to UTStarcom (Hangzhou) Telecom Co., Ltd. at Yile
Industrial Park, Building 3, 129 WenYi Road, Hangzhou 310012, P.R. China
(hereinafter called "Sub-Licensee"), as long as the Sub-Licensee remains a
Subsidiary of the Licensee and provided that Licensee obtains at its risk and
responsibility any permits and licenses necessary for such sub-license
including, but not limited to, those by the governments of U.S.A. and P.R.
China, that the Licensee shall have Sub-Licensee observe and comply with the
terms and conditions hereof, and that Licensee shall be responsible for the
performance of the Sub-Licensee. In the event there is a major change in the
management or ownership of the Sub-Licensee, the Licensee shall inform the
Licensor thereof without delay.

3.01D  In the event the Licensee or the Sub-Licensee invents, creates or
perceives any improvement, enhancement, addition or other modification on the
Products and/or Technical Assistance during the term of this Agreement, the
Licensee and the Sub-Licensee hereby grants to Licensor and its Subsidiaries a
[*] license, [*], to use such improvement, enhancement and modification in order
to manufacture/assemble the Item or sale, use, lease or other disposition of the
same.

3.01E  In the event any improvement, enhancement, addition or other modification
on the Products and/or Technical Assistance is invented, created or perceived
jointly by (i) the Licensor and (ii) the Licensee and/or Sub-Licensee during the
term of this Agreement, such improvement, enhancement, addition or other
modification shall be [*] owned by [*].


                                      -3-


<PAGE>


The application for protection and its costs for such [*] owned improvement,
enhancement, addition or other modification ("[*] Property") shall be discussed
separately by the parties. Each party and its Affiliates may use such [*]
Property for any purpose without the consent of the other party and without any
compensation or accounting to the other party, provided that granting a license,
sale, transfer or other disposition of the [*] Property to any third party
(excluding respective Affiliates) requires a prior written consent of the other
party and the income resulting from such license, sale, transfer or other
disposition shall be shared [*] between the parties hereto.

ARTICLE 4. PRODUCTION EQUIPMENT & COMPONENTS

4.01  Production Equipment:
In the event that Licensee purchases any of the Production Equipment
excluding the molds and dies from any third party, Licensee agrees that in
order for Licensor to properly provide Technical Assistance to Licensee
pursuant to this Agreement, Licensee shall purchase such Production Equipment
only in accordance with the specifications therefor that are given to
Licensee by Licensor. As for the molds and dies, the Licensor provides the
specification of the Components to be manufactured with such molds and dies,
and the Licensee shall purchase the molds and dies at its sole discretion and
responsibility.

4.02  Components:
In the event Licensee purchases any Components from any third party, Licensee
agrees that in order for Licensor to properly provide Technical Assistance to
Licensee pursuant to this Agreement, any such Components that Licensee
purchases from any third party shall meet and maintain the specifications and
quality standards set therefor by Licensor.

ARTICLE 5. REMUNERATION

5.01  The parties hereto agree to establish the annual contracted minimum
quantities as to the each of the Products which Licensee shall manufactures in
[*] and sells in [*] during each annual term of this Agreement. Such contracted
minimum quantities shall be separately confirmed in writing.

5.02  In consideration of the Technical Assistance to be provided by Licensor to
Licensee and the licenses granted to Licensee pursuant to this Agreement,
Licensee agrees to pay to Licensor a technical assistance fee set forth in
Exhibit D.

5.03  Licensee agrees to provide Licensor with written reports, in such a
form as may be reasonably indicated and requested by Licensor, within [*]
after the end of each Calculation Period beginning with the Calculation
Period commencing on the Effective Date, setting forth the number of Products
shipped from Licensee and Sub-Licensee during the immediately preceding
Calculation Period, and also showing computation of the technical assistance
fee payable pursuant to the provisions of this Article and compensation of
the tax described in Article 5.05 hereof. The report following expiration or
termination of this Agreement shall include all of the Products shipped from
Licensee and Sub-Licensee prior to the expiration or termination hereof and
not previously reported to Licensor. Within [*] after the end of each
Calculation Period, Licensee shall pay to Licensor the technical assistance
fee for the Products included in such report in [*], by telegraphic transfer
to Licensor's account at such bank as shall be designated by Licensor. The
conversion to [*] from [*] shall be made based on the TTB rate quoted by the
Citibank in California, U.S.A. on the date of relative payment.

5.04  Licensee agrees to keep records showing the total number of the Products
shipped from Licensee and Sub-Licensee, and showing other related information in
sufficient detail to enable the technical assistance fee payable hereunder by
Licensee to be determined. Licensee further agrees, if Licensor so requests, to
permit its books and records to be examined by Licensor from time to time during
the term hereof and for [*] after termination or expiration hereof and to take
extracts therefrom, to verify the technical assistance fee due and payable
hereunder. Such examination shall be made at the expense of [*] its duly
authorized representative(s) or agent(s) appointed by Licensor.

5.05  The technical assistance fee payable to Licensor by Licensee hereunder is
net of the withholding tax or the tax at the source, and, if there is any such
tax, the amount of the technical assistance fee is adjusted to compensate for
such tax. Licensee shall promptly after payment of such tax furnish Licensor
with a copy or the pertinent receipt of such tax issued by the tax agency or
proof of payment thereof.


                                      -4-


<PAGE>


5.06  If, as of the expiration or termination of this Agreement, there are any:
(1) Products then completed by Licensee but not yet sold or otherwise disposed
of; or (2) Products then in the process or manufacture or assembly; the
technical assistance fee shall be paid thereon, as set forth above, by Licensee
to Licensor by telegraphic transfer for all of such products within [*] after
such expiration or termination hereof. Licensee agrees to provide Licensor with
written reports in respect of any Products provided for in this Article 5.06 in
like form and manner set forth in Article 5.03 hereof, within [*], after the
expiration or termination hereof, setting forth the number of each such Product
then completed or then in process as of the date of expiration or termination
hereof.

ARTICLE 6. MAINTENANCE OF QUALITY

6.01A  Licensee agrees that in order for Licensor to properly provide the
Technical Assistance to Licensee pursuant to this Agreement, Licensee shall
strictly comply, in the Production of the Products hereunder, with all
specifications and quality standards that are reasonably established by Licensor
for Production of the Products. Licensee agrees to submit to Licensor, as
Licensor reasonably requests, Licensee's quality control and inspection data in
such form as may be reasonably established by Licensor for its inspection.
Licensee shall keep, during and for [*] after the terms of this Agreement,
copies of such quality control and inspection data so furnished to Licensor.
Licensee agrees, upon reasonable request of Licensor, to send to Licensor
samples of Products or the Components obtained by Licensee or its Sub-Licensee
in reasonable quantities. Licensor may give Licensee, as promptly as possible,
such Technical Assistance and such pertinent advice and/or instructions in
written form in English with respect to the Products and/or Components, as shall
be necessary in the reasonable opinion of Licensor after inspecting and/or
testing such samples and/or after reviewing the reports of quality control,
inspection and/or manufacturing data.

6.01B  If, at any time during the term of this Agreement, Licensee and Licensor
deem it necessary, Licensor may send to Licensee, Licensor's engineer(s) and/or
technician(s) for the purpose of checking and/or inspecting the quality and/or
performance of the Products and/or Components manufactured or assembled by,
and/or the performance of the Production Equipment and/or the quality of the
Components purchased by, Licensee or the Sub-Licensee, and in any such event,
the provisions of Article 2.03 hereof shall be applicable to such sending of
Licensor's engineer(s) and/or technician(s).

6.01C  Licensee hereby agrees to inform Licensor forthwith in writing of any
current or future standards, legal or otherwise, applicable to the Products, if
any, in [*]. Licensor agrees to provide Licensee with such information and
assistance as may be reasonably required by Licensee in obtaining any approvals,
ratings or listings for the Products.

6.02  Manufacture and assembly of the Products and the sale or other disposition
thereof by Licensee or the Sub-Licensee, as well as any guarantee thereon to
Licensee's customers of the Products including, without limitation,
responsibility for product liability, obtaining approval for the Products
pursuant to any standard, legal or otherwise, applicable to the Products, shall
be at Licensee's sole cost and expense and at Licensee's sole risk and
responsibility, and Licensor shall not be responsible therefor to Licensee, the
Sub-Licensee or any third party. Licensee shall indemnify Licensor for and hold
Licensor harmless from any losses, liabilities, damages, claims, actions, suits,
proceedings, costs and expenses (including fees and expenses of counsel) arising
out of or in connection with the use by Licensee of any Technical Assistance,
Production Equipment, Components, Technical Information, advice or service
furnished by Licensor hereunder and the manufacture or assembly and sale or
other disposition of the Products or Components hereunder, including, without
limitation, claims for product liability (excepting those claims relating to
defects in design of the Products as delivered Licensor) and obtaining approval
for the Products pursuant to any standards, legal or otherwise, applicable to
the Products or for infringement of any patents, trademarks or other proprietary
rights or any third party.

6.03  The sole obligation of Licensor with respect to the Technical Assistance,
advice or service to be provided to Licensee under this Agreement shall be to
furnish the same to Licensee as provided for in this Agreement. Licensor shall
have no responsibility for the ability of Licensee or the Sub-Licensee to use
such Technical Assistance, Technical Information, advice or service or for the
Products manufactured or assembled by Licensee or the Sub-Licensee thereunder.


                                      -5-

<PAGE>

ARTICLE 7. TRADEMARK

7.01  Licensee shall affix Licensee's brand name and/or its trade name
designated by Licensee on the Products. Licensee shall not use any trademark,
model numbers or tradename used by the Licensor or any mark which shall be,
in the Licensor's opinion, similar to or shall resemble such Licensor's
trademarks, model numbers or tradename, on the Products or with respect to
the sale, use, lease or other disposition thereof (including relevant
printings and advertising materials).

ARTICLE 8. GENERAL PROVISIONS

8.01  Secrecy and Unauthorized Use of Technical Information:
8.01A  Except as specifically set forth in Article 8.01 hereof or otherwise
approved by Licensor in a separate writing, Licensee agrees to treat and keep
secret and confidential and not to disclose, except as herein provided pursuant
to Article 8.01B below, to any person, Licensor's technical know-how which may
be disclosed by Licensor's engineers or technicians and/or acquired by
Licensee's officers or employees and agents, as well as all Technical
Information, advice and service furnished or disclosed by Licensor to Licensee
hereunder, except to the extent Licensee may be required to disclose the same to
obtain any approvals for the Products as provided for in Article 6 above or as
may otherwise be required by law. Licensee further shall not use any Technical
Information, advice or service furnished hereunder for any purpose other than
that of this Agreement and shall not file or cause to be filed application for
any patent or similar right in any countries based on or with respect to the
Technical Information, advice or service furnished hereunder.

8.01B  In the event Licensee shall disclose any of the Technical Information to
the Sub-Licensee, except as provided in Article 8.01A hereof, Licensee shall
obtain from the Sub-Licensee a confidential information agreement or arrangement
as shall be mutually satisfactory to Licensor and Licensee.

8.01C  Licensee shall take all necessary actions to comply and to compel
compliance with the provisions of Article 8.01A hereof and with the provisions
of any confidential information agreement or arrangement entered into pursuant
to the provisions of Article 8.01B hereof.

8.01D  The provisions of Article 8.01 hereof shall survive the expiration or
termination of this Agreement, unless and until any Technical Information and
advice or service furnished in connection therewith, as referred to in Article
8.01A above, shall have become part of the public domain or until [*] after the
expiration or termination of this Agreement.

8.02  No Warranty:
8.02A  Nothing herein contained shall be construed as the making or giving by
Licensor of any warranty or representation that any Products manufactured or
assembled by Licensee or the Sub-Licensee hereunder or that any process or
method for manufacturing or assembling the Products by Licensee or the
Sub-Licensee or that any Components or Production Equipment purchased by
Licensee or the Sub-Licensee according to the specifications supplied from
Licensor shall not infringe upon any proprietary property rights, including but
not limited to, patent rights and trademark rights owned or otherwise controlled
by a third party. Any license or permission, if any, that is required by
Licensee or the Sub-Licensee from any third party, to manufacture or assemble or
sell or otherwise dispose of the Products hereunder, shall be acquired by
Licensee [*].

8.02B  During and after the term hereof, nothing herein contained shall be
construed as the making or giving by Licensor of any warranty or representation
that any Products meet the current or future standards, legal or otherwise,
applicable to the Products, if any, in the [*].

8.03  Force Majeure:
Neither party shall be liable for delay or failure in performance arising from
any of the following: (a) acts of God, or public enemy, or war (declared or
undeclared); (b) acts of governmental or quasi-governmental authorities or any
political subdivision thereof, or of any department or agency thereof, or
regulations or restrictions imposed by law or by court action; (c) acts of
persons engaged in subversive activities or sabotage; (d) fires, floods,
explosions, or other catastrophes; (e) epidemics or quarantine restrictions; (f)
strikes, slowdowns, lockouts, or labor stoppages, or disputes of


                                      -6-


<PAGE>


any kind; (g) freight embargoes or interruption of transportation; (h) any other
causes, similar or dissimilar, beyond the control of the affected party, and the
time for performance by such party shall be extended by a period of any such
delay.

8.04  Breach or Default and Waiver:
Either party hereto has the right to terminate this Agreement by giving a
written notice to the other party to that effect in the event such other
party shall have been in a material breach and/or default of this Agreement
and such material breach and/or default shall not have been corrected within
[*] after receipt of notice specifying the nature of such breach and/or
default. The termination of this Agreement shall be without any prejudice to
the rights which such terminating party may have under this Agreement. No
failure or delay on the part of any party to exercise its right of
termination of this Agreement for any one or more breaches and/or defaults
shall be construed to prejudice its rights of termination for any other or
subsequent breaches and/or defaults.

8.05  Disputes:
Any disagreement in connection herewith shall be finally settled by
arbitration. If Licensor initiates the arbitration, the arbitration shall be
held in San Francisco, California, the U.S.A. in accordance with the
International Arbitration Rules of American Arbitration Association. If
Licensee initiates the arbitration, the arbitration shall be held in Tokyo,
Japan in accordance with the Commercial Arbitration Rules of Japan Commercial
Arbitration Association.

8.06  Applicable Law:
This Agreement shall be interpreted and governed in accordance with the laws
of Japan, without reference to its conflicts of laws principles.

8.07  Assignment:
Neither this Agreement or any rights and obligations hereunder shall be
assignable or otherwise transferable by either party, voluntarily or by
operation or law or otherwise, without the prior written consent of the other
party hereto, and any assignment or transfer without such consent of the
other party shall be null and void; provided, however, that all of the terms
of this Agreement shall inure to the benefit of and shall be binding upon
each of the parties hereto and their respective successors and assigns as may
be expressly consented to in writing by the other party.

8.08  Entire Agreement and Amendment:
This Agreement and the exhibits thereto, contains the entire and only
agreement between the parties hereto with respect to the subject matter
herein contained and, this Agreement supersedes and cancels all previous
agreements, negotiations, commitments and writings with respect to the
subject matter hereof. This Agreement may not be amended, modified,
superseded or canceled, nor may any of the terms, provisions or conditions
hereof be waived, except by a written instrument duly executed by an
authorized officer of each of the parties hereto. No waiver by either party
of any condition of this Agreement, in any one instance, shall be deemed to
be or construed as a further or continuing waiver of any such condition.

8.09  Obligations After Expiration or Termination:
Except as to Products completed and/or in process as referred to in Article
5.06 hereof, upon and after the expiration or termination of this Agreement,
Licensee shall not engage, nor contract with third parties to engage, in the
manufacture or assembly or sale or other disposition of the Products, and
Licensee shall, upon and after the expiration or termination of this
Agreement, neither use nor contract with third parties to use any Technical
Information or technical know-how embodied in the Technical Information,
advice, service or other technical assistance furnished by Licensor
hereunder, and Licensee shall return to Licensor [*], within [*] after notice
to that effect sent by Licensor to Licensee, all or such Technical
Information, advice, service or other technical assistance theretofore
delivered or furnished by Licensor hereunder in tangible form relating to the
Products and the manufacture and assembly thereof, including all copies or
reproductions thereof.

8.10  Article Headings:
The article headings contained in this Agreement are for the convenience of
reference only and do not form a part of this Agreement, and shall not in any
way affect the interpretation of this Agreement.

                                      -7-


<PAGE>


8.11  Notice:
For the purpose of this Agreement, any notice hereunder shall be sufficiently
given if:

8.11A  Delivered personally, in which case it shall be deemed to have been
received at the time of delivery; or

8.11B  Sent by prepaid registered or certified air mail, addressed as follows:

                To Licensee at:
                UTStarcom Inc.
                1275 Harbor Bay Parkway, Suite 100, Alameda, California 94502,
                the U.S.A.
                Attention: Russell L. Boltwood
                To Licensor at:
                Matsushita Communication Industrial Co., Ltd.
                Communication Systems Division
                4-3-1, Tsunashima-higashi, Kohoku-ku, Yokohama 223-8639, Japan
                Attention: General Manager,
                International Business Department

or to such other addresses as may hereafter be furnished in writing by either
party hereto to the other, and such mail shall be deemed conclusively to have
been received on the tenth (10th) business day of the recipient following the
date on which it is so mailed; or

8.11C  Sent by a overseas commercial courier to the address set forth in Article
8.11B, in which case it shall be deemed to have been received on the second
(2nd) business day of the recipient following the date on which it is deposited
to such courier.

8.12  Scope of Technical Assistance and Licenses:
The Technical Assistance to be provided and licenses granted pursuant to this
Agreement are solely for manufacturing, assembling and selling the Products
and not for manufacturing, assembling and selling any individual Components
or Production Equipment.

8.13  Change of Specifications:
8.13A  Licensee or the Sub-Licensee may make any change(s) in the specifications
or to the physical appearance of the Products, provided that such change(s)
shall be at the risk and responsibility of Licensee and that Licensee shall
defend, indemnify and hold Licensor harmless from any losses, liabilities,
damages, claims, actions, suits, proceedings, costs and expenses (including fees
and expenses of counsel) arising out of or in connection with such change(s).
Such changed Products shall be also deemed to be Products for the purpose of
this Agreement.

8.13B  Upon written notice to Licensee, Licensor may from time to time alter the
specifications of or substitute any Components Licensor may supply in any manner
which, in the judgment of Licensor, does not degrade the performance or quality
of such Components, without incurring any liability to Licensee.

ARTICLE 9. TERM & TERMINATION

9.01  This Agreement shall be effective for the period of [*] commencing on the
Effective Date unless earlier terminated pursuant to the provisions of this
Agreement, and after expiration of the original term, this Agreement may be
renewed by the mutual written consent of the parties hereto under the terms and
conditions to be then mutually agreed upon and subject to the approval of the
Japanese Government, if then required. Notwithstanding the foregoing in this
Article 9.01, in the event Licensee continues the manufacture of the Products
after expiration of the original term, this Agreement shall be deemed
automatically renewed year to year under the otherwise same terms and
conditions, unless Licensor gives a notice of termination at least [*] prior to
the expiration of any renewal term.

9.02  If at any time during the term of this Agreement, Licensee makes any
unauthorized use of any Technical Information, advice or service furnished by
Licensor to Licensee, Licensor shall have the right to terminate this Agreement
upon notice without prejudice to any rights which Licensor may have under or in
connection with this Agreement.


                                      -8-


<PAGE>


9.03  Should Licensee at any time default in making payment of any technical
assistance fee or in providing any report as herein provided for and fail to
remedy such default within [*] written notice to that effect given by Licensor,
Licensor may, at its option, terminate this Agreement by written notice in
writing to Licensee. No failure or delay on the part of Licensor to exercise its
right of termination of this Agreement for any one or more defaults of Licensee
in the payment of any technical assistance fee or in providing any report
pursuant hereto shall be construed to prejudice Licensor's rights of termination
hereof for any other or subsequent default.

9.04  Licensor may terminate this Agreement immediately by giving a written
notice to Licensee upon any of the following events:
(a) any arrangement with direction or any application for bankruptcy,
receivership, winding-up or other similar proceeding against Licensee and/or
Sub-Licensee shall be made by Licensee, Sub-Licensee or any person;
(b) all of or, in the opinion of Licensor, substantial part of the assets of
Licensee and/or Sub-Licensee shall be seized or attached in conjunction with any
action against Licensee and/or Sub-Licensee by any third party;
(c) a sale of all of or in the opinion of Licensor, substantially all of the
assets of Licensee and/or Sub-Licensee is made, or this Agreement is assigned by
Licensee without the prior written consent of Licensor;
(d) there occurs any such change in the capital ownership and/or management
control of Licensee and/or Sub-Licensee as, in the opinion of Licensor, may
adversely affect the performance of this Agreement and/or the benefits or rights
of Licensor in this Agreement;
(e) there occurs any difficulties, in Licensor's opinion, to perform the
obligation under this Agreement due to any of significant changes of the
political, economic or taxation policy by the governmental or quasi-governmental
organization or agencies in the [*];
(f) Licensor judges that the quality of the Products assembled by Licensee or
Sub-Licensee hereunder is found to be insufficient and such insufficiency seems
not to be corrected within a reasonable period of time;
(g) an import license of the Components and/or Production Equipment into the [*]
and/or an import license of the Components and/or Production Equipment from
Licensee to Sub-Licensee is not obtained from the competent authority of the
government of the [*], (to the extent that such license is required by law),
within [*] from the Effective Date hereof; or
(h) the sub-licensing arrangement between Licensee and Sub-Licensee is not
completed or is terminated.

9.05  Expiration or termination of this Agreement for any reason whatsoever
shall not affect the rights of Licensor or Licensee which shall have been
accrued hereunder.

9.06  The following articles shall survive any termination or expiration of this
Agreement; Articles 1, 3.01D, 3.01E, 5.02-5.06, 6.01A, 6.02, 6.03, 8, 9.05,
9.06, 10, and 11.

ARTICLE 10.

10.01  No Joint Venture:
This Agreement is not a joint venture or a partnership, and nothing herein shall
be deemed, construed or in any way interpreted to constitute the parties as
joint venturers or as partners.

10.02  Export Control:
A.  In connection with the performance of this Agreement and the transactions
contemplated hereunder, Licensor, Licensee and Sub-Licensee each hereby agree to
fully comply with all applicable provisions of the export control laws and
regulations of [*].

B.  Licensee agrees to treat all data communicated to it by Licensor as required
by the appropriate export control laws of [*]. If such data are subject to the
export control laws of Japan, Licensor shall so notify Licensee together with
the applicable Classification Numbers. Should Licensee transmit any non-public
technical data to Licensor in the course of the performance of this Agreement,
Licensor shall comply with applicable [*] regulations governing the use and
communication of such technical data. If such data are subject to the export
control regulations of the [*] Licensee shall also notify Licensor together with
the applicable Classification Numbers.


                                      -9-


<PAGE>


C.  Licensee agrees that it shall not export the Products manufactured hereunder
to any country to which export is restricted by the Export Administration
Regulations without the required approval of the [*] Government to the extent
required.

D.  Licensee and Sub-Licensee shall not knowingly sell, lease or otherwise
dispose of either any data transmitted hereunder, or the Products, directly or
indirectly, to any customer who makes use of, or is likely to or intends to make
use of, the same for "Military Purposes". For the purpose of this section,
"Military Purposes" means the design, development, manufacture or use of any
weapon, including without limitation nuclear weapon, biological weapon, chemical
weapon and missiles.

E.  In order to assure the observance and/or implementation by Licensee and
Sub-Licensee of the foregoing provisions, Licensee and Sub-Licensee shall submit
necessary documents (including without limitation, sales contract, sales notes
and invoices) in accordance with request of Licensor.

F.  In the event that Licensee and Sub-Licensee violates the provisions of this
Article 10.02, Licensee and Sub-Licensee shall jointly and severally bear
responsibility for any and all damages incurred by Licensor because of such
violation, and further, notwithstanding the provisions of Article 8.04 hereof,
Licensor shall have the right to terminate this Agreement forthwith by giving a
written notice to Licensee, without any prejudice to the rights and remedies
which Licensor may have under this Agreement.

G.  In the course of operation under this Agreement, Licensor may wish to obtain
from Licensee, technical data, whether by direct communication between Licensee
and Licensor, or by communication between Licensee and employees of Licensor who
are not U.S. citizens, but who are assigned to Licensee by Licensor. To the
extent that any such technical data is subject to U.S. export controls and may
not be exported except with prior receipt of a Letter of Assurances, this
Agreement is intended to serve as such Assurances. Licensor assures that it will
not re-export, re-transfer or otherwise release any such data or the direct
product thereof except in conformity with the then applicable U.S. export
control laws and regulations. As used in this Article 10.02, the terms
"technical data" and "direct product" shall have the meaning specified in the
U.S. Export Control Regulations.

ARTICLE 11. SEVERABILITY

11.01  If any provision(s) of this Agreement shall contravene any laws or
regulations, it is agreed that the invalidity or illegality of such provision(s)
shall not invalidate the whole of this Agreement but this Agreement shall be
construed as if it did not contain the provision(s) claimed or held to be
invalid or illegal in the particular jurisdiction concerned insofar as such
construction does not effect the substance of this Agreement, and the rights and
obligations of the parties hereto shall be construed and enforced accordingly.
In the event, however, that such claim of invalidity or illegality shall
substantially and adversely effect the interest of either party hereto, the
parties hereto shall negotiate a mutually acceptable provision(s) not
conflicting with such laws, and, if the parties hereto cannot agree upon a
substitute provision(s) within a reasonable period, Licensor or Licensee may
terminate this Agreement forthwith.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement in two (2)
original counterpart instruments, to be executed and delivered in English, as of
the date written below, by their duly authorized officers.

<TABLE>
<CAPTION>


Matsushita Communication Industrial                           UTStarcom Inc.
Co., Ltd., Communication Systems Division
<S>                                                          <C>
By:                                                           By:
    -------------------------------------------------              ---------------------------------------------------
Name:   Yasuo Katsura                                         Name:   Hong Liang Lu
       ----------------------------------------------                -------------------------------------------------
Title:  Senior Managing Director                              Title:  President & CEO
        ---------------------------------------------                 ------------------------------------------------
Date:   December 1, 2000                                      Date:   December 1, 2000
       ----------------------------------------------                -------------------------------------------------
</TABLE>


                                      -10-


<PAGE>


Exhibit A
- ---------

                                List of Products
                                ----------------

[*]











                                      -11-



<PAGE>


Exhibit B (1/2)
- ---------------


                          List of Technical Information
                          -----------------------------


         Design Related Materials
         ------------------------
         [*]

         1.2  Hardware and Mechanical materials

         [*]

         1.3  Software Related materials

         [*]







                                      -12-


<PAGE>


Exhibit B (2/2)
- ---------------

         2  Production Related materials

         [*]

         3  Quality control & Assurance materials

         [*]





                                      -13-



<PAGE>


Exhibit D
- ---------


                            Technical Assistance Fee
                            ------------------------

1.   The technical assistance fee for each unit of the Products shall be
     calculated in accordance with the following formula ("Formula");

          [*]

2.   The following products shall be categories for technical assistance fee;

          [*]





                                      -14-


<PAGE>


       Schedule of Technical Services at the initial stage and the payment
       -------------------------------------------------------------------

                                       [*]






                                      -15-





<PAGE>


                       Technical Service Costs and Expense
                       -----------------------------------

                                       [*]












                                      -16-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.53
<SEQUENCE>6
<FILENAME>a2040014zex-10_53.txt
<DESCRIPTION>EXHIBIT 10.53
<TEXT>

<PAGE>

                                                                   Exhibit 10.53


[*] 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.


                     DEFINITIVE AGREEMENT FOR COLLABORATION

                                   (3G W-CDMA)

THIS DEFINITIVE AGREEMENT (hereinafter referred to as "DA") is made and entered
into this 22nd of October, 2000 by and between UTStarcom Inc., having its
principal place of business at 1275 Harbor Bay Parkway, Suite 100, Alameda,
California 94502, U.S.A. (hereinafter referred to as "UTStarcom") and Mitsubishi
Electric Corporation, acting through its Communication Systems Business
Division, having its principal place of business at 8-1-1, Tsukaguchi-Honmachi,
Amagasaki, Hyogo 661-8661, Japan (hereinafter referred to as "MELCO")



                                WITNESSETH THAT;

WHEREAS, UTStarcom and MELCO (hereinafter referred to individually as a "Party"
and collectively as "Parties") have a strong intention to establish a mutually
beneficial business relationship, bringing the expertise and experiences of each
Party in China and other Asian market (hereinafter referred to as "Territory");
and

WHEREAS, UTStarcom and MELCO have concluded MEMORANDUM OF UNDERSTANDING (MoU)
(3G W-CDMA) on March 31, 2000; and

WHEREAS, UTStarcom and MELCO have concluded Joint Development Plan on June
21, 2000:

WHEREAS, The Parties have studied the business and technical feasibility of
development of 3G W-CDMA in [*] based on UTStarcom WACOS platform (hereinafter
referred to "WACOS 3G Network") in accordance with MOU:

NOW, THEREFORE, in the light of the above recitals, the Parties hereto set forth
the DA, as follows:

1.   SCOPE OF WORK FOR THE DEVELOPMENT, TIME FRAME OF MAJOR MILESTONE AND ROLE &
     RESPONSIBILITY OF PRODUCT DEVELOPMENT AND SYSTEM INTEGRATION & TESTING

     The Parties confirm to jointly develop and market a complete suite of
     infrastructure product for the 3rd generation cellular network (hereinafter
     referred to as "3G W-CDMA") with a spirit of creating and developing a new
     business based on Parties' own initiated architecture and specification in
     [*]. MELCO will develop 3G BTS and UTStarcom will develop the rest of the
     network infrastructures (RNC, MSC/GSN, NMS, etc.) of a 3G W-CDMA based on
     WACOS platform (hereinafter referred to as "the Products").

     Scope of work for development, Time frame of major milestone and Role &
     Responsibility of product development and system integration & Testing are
     described in Annex-1 (UTStarcom & Mitsubishi 3G Joint Development Plan).
<PAGE>

     The Parties shall jointly perform system integration effort in accordance
     with Addendum-1.

2.   TASK FORCE TEAM AND STEERING COMMITTEE

     During the term of this DA, the Parties internally promote their
     cooperation with all reasonable means with the aim to secure a satisfactory
     result of this DA. The Parties shall carry out and complete the development
     of the respective products with the Parties' due diligence for a joint
     business development. The Parties organize the following:

     (1) Task Force

         a.   A task force composed of two teams, one business and one
              technical, from each Party is hereby created. Each Party shall
              assign a task force leader to be in charge of ensuring the proper
              implementation of the DA and, in particular, the coordination of
              each Party's task. The names of these individuals are listed in
              Annex 2.

              The technical task force will be responsible for the execution of
              the engineering development. The business task force will be
              responsible for the execution of business development.

         b.   Task force shall meet on a regular basis, in principle once a
              month.

         c.   Important agreed decisions shall be recorded in writing and signed
              by the task force. Such signed writing shall serve as the records
              of the DA implementation.

         d.   In the event of disagreement, the task force will escalate the
              issue to the Steering Committee.

     (2) Steering Committee

         a.   The Parties create a Steering Committee including the management
              of each Party and other staff member directly involved in the
              Project as per Annex-3.

         b.   The Steering Committee shall meet regularly on quarterly basis
              unless either Party call for an extraordinary meeting for a
              purpose of management review and important decision making,
              including schedule and role & responsibility, as well as an
              effectual business development.

         c.   Decision of the Steering Committee shall be made by the Parties'
              mutual agreement. At the conclusion of each meeting, the
              representatives shall prepare minutes and sign the same.

         d.   The Steering Committee shall examine and make decisions on all
              important matters relating to this DA, including, but not limited
              to:

                  i.       Winning strategy for proactively obtaining 3G W-CDMA
                           business.

                                      -2-
<PAGE>

                  ii.      Review of implementation and execution of D/A.

                  iii.     Review of analysis of competition and carriers'
                           network planning for 3G, financial back up for 3G
                           implementation and carriers' preference of technology
                           for 3G and set an action plan to be taken.

                  iv.      All important questions raised by the task force and
                           the decisions to be made in respect thereof.

3.   COST [*]

     [*] shall bear [*] cost incurred during the system integration, in
     particular, for integration testing during the [*] phases as shown in
     Annex-4, unless otherwise agreed in this DA or separately.

     If the quantity shown in Annex-4 will be increased in future, the Parties
     shall discuss [*] with regard to extra-cost to be caused by the increase of
     the quantity.

     In the event that either Party requires support from the other party for
     successful development and execution of respective responsible portion, the
     other Party may support the requesting Party on the basis of [*].

4.   3G MOBILE SIMULATOR

     MELCO shall provide 3G mobile simulator during the [*] phases if UTStarcom
     requests for it. The quantity will be further discussed.

5.   [*] TERMS/CONDITIONS

     UTStarcom shall have the right to sell the MELCO BTS on [*] basis to
     UTStarcom's customers [*] under the condition that the BTS is still
     manufactured by MELCO.

     MELCO shall have the right to sell the UTStarcom RNC and WACOS 3G products
     on [*] basis to customers [*] under the condition that the RNC and WACOS 3G
     products are still manufactured by UTStarcom.

     In the event that MELCO or its nominees arrange Official Development Aids
     (ODA) or equivalent financing, and the financing requires MELCO's brand
     name on the MELCO BTS, UTStarcom shall use MELCO's brand name on the BTS
     for commercial proposals and any associated contracts.

     In the event that a joint venture is established between UTStarcom and
     MELCO after completion of a joint-venture feasibility study, MELCO's supply
     of the MELCO BTS to UTStarcom on [*] basis will be re-studied and
     negotiated to mutual agreement between the Parties.

                                      -3-
<PAGE>

6.   COLLABORATION OF SYSTEM INTEGRATION

     UTStarcom and MELCO shall collaborate in the system integration using
     MELCO's BTS together with UTStarcom's RNC and WACOS 3G Core Network
     products as per conditions stipulated in Addendum-1.

7.   RELEASE OF INFORMATION

     (1) UTStarcom will provide MELCO with necessary and sufficient information
         and data to the extent available, subject to Article 13(4), for MELCO's
         timely study upon MELCO's request.

     (2) MELCO will provide UTStarcom with necessary and sufficient information
         and data to the extent available, subject to Article 13(4), for
         UTStarcom's timely study upon UTStarcom's request.

8.   SUBCONTRACTING

     Subject to the stipulation set forth in the DA, each Party shall be
     entitled to subcontract, at its own risk, to a corporation or corporations
     of its choice, any part of the supplies and services allocated to it under
     this DA.

9.   PARTICIPATION OF THIRD PARTY INTO JOINT DEVELOPMENT

     UTStarcom and MELCO agree to consider a participation of an appropriate
     third company in the joint development, in case both Parties mutually judge
     that the participation of the third Party will enhance the Parties strength
     of competitiveness and a probability to win any bid in the Territory in the
     future. In such a case, the items stated in this DA shall still hold valid
     between UTStarcom and MELCO; and a separate agreement will be made among
     all Parties, reflecting this DA.

10.  PURCHASE WARRANTY

     The Parties shall honor Clause 7 of MOU signed on March 31, 2000, as it is
     clearly stipulated as a legal binding Clause in Clause 16(3) of the MOU.
     [*] shall retain the sole discretion of whether MELCO's BTS is equal or
     better than that of another vendor in terms of price, quality,
     functionality and performance, in a reasonable and fair manner with good
     faith.

     If MELCO BTS satisfies the requirements of potential customers in terms of
     technical performance (by the sole discretion of [*] in a reasonable and
     fair manner with good faith), and MELCO's price is equal or better than
     other competing BTS units (by the sole discretion of [*] in a reasonable
     and fair manner with good faith), UTStarcom shall in the best effort
     purchase [*] of UTStarcom BTS product needs from MELCO.

11.   [*]


                                      -4-
<PAGE>

12.  DISPUTES

     All disputes, controversies or differences which may arise between the
     Parties hereto, of or in relation to or in connection with this DA, whether
     during or after its term, which fails to be solved amicably, shall be
     finally resolved by arbitration in accordance with the Rules of
     Conciliation and Arbitration of the International Chamber of Commerce as in
     force on the date of this DA. The arbitration shall be held in (a) Tokyo,
     Japan in case of an arbitration claim filed by UTStarcom; and in (b) New
     York, USA in case of an arbitration claim filed by MELCO. The arbitration
     panel shall consist of three (3) arbitrators appointed in accordance with
     the said Rules. All arbitration proceeding shall be conducted in English
     language.

13.  CONFIDENTIALITY AND INDUSTRIAL AND/OR INTELLECTUAL PROPERTY

     (1) Ownership of Intellectual Property

         The Parties agree that each Party retains full and exclusive rights and
         ownership in any and all letters patent, inventions, software,
         algorithms, know-how, trademarks, copyrights and trade secrets, and any
         other proprietary rights which the Party currently possess, or develop
         independently pursuant to this DA.

     (2) Joint Invention

         It is not anticipated that the Parties shall carry out joint
         development work, but in the event that the personnel of MELCO and
         UTStarcom jointly make an invention or generate intellectual property
         rights in the course of the development, the Parties shall jointly file
         an application and have the right to use such intellectual property
         right without accounting to the other. Expenses incurred in connection
         with the filing and maintenance of the protective rights shall be
         shared equally, unless a Party elects not to file an application, in
         which case the other Party may file at its own expense and enjoy the
         exclusive ownership.

     (3) Against Infringement

         In the event a claim is brought by a third party alleging that the
         Products infringe any patent, copyright or any other intellectual
         property right of that third party, the Party having supplied the
         infringing module shall defend and settle the claim and indemnify and
         hold the other Party harmless from any fees, expenses or damages that
         may be incurred or awarded as consequence of such claim.

     (4) Confidentiality

         "Confidential Information" is all information (i) identified in written
         or oral format by the Disclosing Party as confidential, trade secret or
         proprietary information, and, if disclosed orally, summarized in
         written format within thirty (30) days of disclosure. "Disclosing
         Party" is the Party disclosing Confidential Information. "Receiving
         Party" is the Party receiving Confidential Information.

                                      -5-
<PAGE>

         The Receiving Party may use the Confidential Information solely for the
         purpose of joint development of 3G W-CDMA. The Receiving Party shall
         not disclose the Confidential Information to any third party other than
         persons in the direct employ of the Receiving Party and its
         subsidiaries who have a need to have access to and knowledge of the
         Confidential Information solely for the purpose authorized above. Each
         Party shall take appropriate measures by instruction and agreement
         prior to disclosure to such employees to assure against unauthorized
         use or disclosure.

         The Receiving Party shall have no obligation with respect to
         information which (i) was rightfully in possession of or known to the
         Receiving Party without any obligation of confidentiality prior to
         receiving it from the Disclosing Party; (ii) is, or subsequently
         becomes, legally and publicly available without breach of this
         Agreement; (iii) is rightfully obtained by the Receiving Party from a
         source other than the Disclosing Party without any obligation of
         confidentiality; (iv) is developed by or for the Receiving Party
         without use of the Confidential Information and such independent
         development can be shown by documentary evidence; (v) becomes available
         to the Receiving Party by wholly lawful inspection or analysis of
         products offered for sale; (vi) is transmitted by a Party after
         receiving written notification from the other Party that it does not
         desire to receive any further Confidential Information; (vii) is
         disclosed by the Receiving Party pursuant to a valid order issued by a
         court or government agency, provided that the Receiving Party provides
         (a) prior written notice to the Disclosing Party of such obligation and
         (b) the opportunity to oppose such disclosure.

         Upon written demand by the Disclosing Party, the Receiving Party shall:
         (i) cease using the Confidential Information, (ii) return the
         Confidential Information and all copies, notes or extracts thereof to
         the Disclosing Party within [*] of receipt of demand, and (iii) upon
         request of the Disclosing Party, certify in writing that the Receiving
         Party has complied with the obligations set forth in this paragraph.

         The terms of confidentiality under this Agreement shall not be
         construed to limit either Party's right to independently develop or
         acquire products without use of the other Party's Confidential
         Information. The Disclosing Party acknowledges that the Receiving Party
         may currently or in the future be developing information internally, or
         receiving information from other parties, that is similar to the
         Confidential Information. Accordingly, nothing in this Agreement will
         be construed as a representation or agreement that the Receiving Party
         will not develop or have developed for it products, concepts, systems
         or techniques that are similar to or compete with the products,
         concepts, systems or techniques contemplated by or embodied in the
         Confidential Information provided that the Receiving Party does not
         violate any of its obligations under this Agreement in connection with
         such development.

         Notwithstanding anything herein contained to the contrary, each Party
         shall have the right to refuse to receive any Confidential Information,
         and the right to use Residuals for any purpose, including, but not
         limited to use in development, manufacture, promotion, sale and
         maintenance of its products and services, without paying any charge to
         the Disclosing Party, provided that each Party shall maintain the
         confidentiality as provided herein and that the right to Residuals does
         not represent a license under any patent right, utility model right,

                                      -6-
<PAGE>

         design right or trade mark right of the Disclosing Party. The term
         "Residuals" means information in non-tangible form retained in the
         unaided memories of the Receiving Party's and its subsidiaries'
         employees who have had rightful access to the Disclosing Party's
         Confidential Information pursuant to the term of this Agreement. An
         employee's memory is unaided if the employee has not intentionally
         memorized the Confidential Information for the purpose of retaining and
         subsequently using or disclosing it. Both Parties agree that any
         Confidential Information disclosed hereunder by the other Party in the
         course of performance of the subject matter provided hereunder shall be
         considered as Residuals.

         Each Party shall retain all right, title and interest to such Party's
         Confidential Information. No license under any trademark, patent or
         copyright, or application for same which are now or thereafter may be
         obtained by such Party is either granted or implied by the conveying of
         Confidential Information.

         The Receiving Party shall not reverse-engineer, decompile, or
         disassemble any software disclosed to it and shall not remove,
         overprint or deface any notice of copyright, trademark, logo, legend,
         or other notices of ownership from any originals or copies of
         Confidential Information it obtains from the Disclosing Party.

         CONFIDENTIAL INFORMATION IS PROVIDED "AS IS" WITH ALL FAULTS. IN NO
         EVENT SHALL THE DISCLOSING PARTY BE LIABLE FOR THE ACCURACY OR
         COMPLETENESS OF THE CONFIDENTIAL INFORMATION.

         None of the Confidential Information disclosed by the Parties
         constitutes any representation, warranty, assurance, guarantee or
         inducement by either Party to the other with respect to the
         infringement of trademarks, patents, copyrights; any right of privacy;
         or any rights of third persons.

         Neither Party shall transmit, directly or indirectly, the Confidential
         Information or any technical data received from the other Party, nor
         the direct product thereof, without the Disclosing Party's prior
         written consent and in accordance with all export laws and regulations
         of the United States and Japan. The Parties agree that they do not
         intend nor will they, directly or indirectly, export or re-export any
         Confidential Information to any end-user who either Party knows or has
         reason to know will utilize it in the design, development or production
         of nuclear, chemical or biological weapons or to any end user who has
         been prohibited from participating in U.S. and Japanese export
         transactions by any federal agency of the U.S. and Japanese Government.

         Each Party acknowledges that monetary remedies may be inadequate to
         protect Confidential Information and that injunctive relief may be
         appropriate to protect such Confidential Information.

         Not withstanding the foregoing sentence, each Party may disclose joint
         developed Interface specification between MELCO's 3G BTS and
         UTStarcom's WACOS PNC and Interface specification between MELCO's 3G
         BTS and UTStarcom's WACOS Network Management Center to third party who
         agree in writing to be bound by the provisions hereof, provided that

                                      -7-
<PAGE>

         the third party shall not disclose the specifications to any other
         party. The Parties shall take every reasonable precaution to protect
         the confidentiality of Confidential Information or materials to be
         confidential. In the event of termination of this DA, there shall be no
         use or disclosure by either Party of any Confidential Information of
         the other Party, and neither Party shall manufacture or have
         manufactured any product, devices, components or assemblies utilizing
         any of the other Party's Confidential Information absent a prior
         written agreement between the Parties. Additionally, neither Party
         shall use the name of the other party in any news release, public
         announcement, advertisement or other form of publicity without the
         prior written consent of the other Party.

14.  EFFECTIVE DATE -- TERM

     This DA comes into force as soon as it is signed by the Parties and shall
     remain valid until December 31st, 2002 or the date to be mutually agreed.
     Within [*] before December 31st, 2002 or the date extended by mutual
     agreement, the Steering Committee shall decide on the future course of the
     cooperation or extension of this DA.

15.  ASSIGNMENT

     Both parties [*] the right to assign or transfer any or all of its rights
     and obligations under this DA to any third party without the prior written
     agreement of the other Parties.

16.  TERMINATION OF THE AGREEMENT AND INDEMNIFICATION

     Either Party shall have the right to terminate this DA for default by the
     other in performance of any substantial obligation or material breach of
     this DA where such default or breach continues for a period of [*] after
     written notice thereof to the defaulting Party.

     In case this DA is terminated, as per this clause, the defaulting party
     shall be responsible for the compensation of the direct loss, which the
     other party may suffer because of the termination of this DA. In any case,
     the Parties shall not be responsible for each other for indirect and/or
     consequential loss.

17.  GOVERNING LAW

     This DA shall be construed in accordance with the laws of New York State,
     USA.

18.  COMMUNICATIONS-ADVERTISING

     (1) Both parties shall not make any announcement or communicate any
         information to a third party concerning the purpose of this DA without
         the prior approval of the other Party, except as may be required by
         applicable law.
     (2) Any advertising by one Party shall make reference to the other Party.
     (3) Public announcement and/or press release related to this DA will be
         done at appropriate time subject to the agreement by the Parties.

                                      -8-
<PAGE>

19.  OTHERS

     (1) Headings
         Headings to articles of this DA are to facilitate reference only, do
         not form a part of this DA, and shall in no way affect its
         interpretation.

     (2) Entire Agreement
         This DA represents the entire agreement between the Parties regarding
         its subject matter superseding previous communications or
         understandings. This DA may not be modified except by written approval
         by the Parties.

     (3) Partnership disclaimer
         In principle, the relationship of UTStarcom and MELCO established by
         this DA shall be that of prime contractor and key subcontractor as a
         team member, and nothing contained in this DA shall be construed:
         i.     to give either Party the power to direct or control the day-to-
                day activities of the other or:
         ii.    to constitute the Parties as partners, joint venture, co-owner
                or otherwise as participants in a joint or common undertaking.

20.  EFFECTIVENESS OF AGREEMENT

     This agreement is legally binding, but subject to final legal rewording.


                                      -9-
<PAGE>



IN WITNESS WHEREOF, The Parties hereto have caused their representatives, duly
executed in two (2) original copies by their duly authorized representative.


UTStarcom Inc                              Mitsubishi Electric Corporation





By:                                   By:
   ------------------------------          -------------------------------------

Name: Hong Liang Lu                        Name: Teruhiko Moriyama

Title: President and CEO                   Title: Division President
                                                  Communication Systems Business
                                                  Division

Date: October 22, 2000                     Date:  October 22, 2000
     ----------------------------               --------------------------------




                                      -10-
<PAGE>

ANNEX-1



Refer to the Joint Development Plan signed by MELCO and UTStarcom on Jun-21,
2000.



<PAGE>

ANNEX-2



MELCO TASK FORCE TEAM

- -    Lead:
         M. Todo, Group Manager,
         International Marketing & Business Development Department

- -    Technical:
         K. Mihashi, Project Manager,
         H. Kojima, Manager,
         Mobile Communication Network Systems Department

- -    Business:
         T. Aoki, Senior Manager,
         International Marketing & Business Development Department



UTSTARCOM TASK FORCE TEAM

- -    Lead:            Pat Chan, Director, Mobile Network

- -    Technical:       Phil Lee, System Project Manager,

- -    Business:        Jack Wu, Director, Product Management



<PAGE>

ANNEX-3


MELCO STEERING COMMITTEE MEMBERS:

T. Moriyama:               Division President
                           Communication Systems Business Division

K. Teshima:                Deputy Division President
                           Communication Systems Business Division
                           Carrier Network Systems Business Center

S. Aoyama:                 General Manager
                           Communication System R&D Center

K. Kimura:                 General Manager
                           Mobile Communication Network Systems Department

T. Kanamori:               General Manager
                           International Marketing & Business Development
                           Department

M. Todo:                   Group Manager,
                           International Marketing & Business Development
                           Department


UTSTARCOM STEERING COMMITTEE MEMBERS:

Hong Lu:                   President and CEO

Bill Huang:                Vice President
                           Chief Technology Officer

Pat Chan:                  Director, Mobile Network

Jack Wu:                   Director, Product Management



<PAGE>

ANNEX-4



SYSTEM INTEGRATION CORE NETWORK/RNC & UE/BTS REQUIREMENT




(1) For System Integration [*]

              [*]


(2) For Debug [*]


              [*]



<PAGE>


ADDENDUM-1



1.   SYSTEM INTEGRATION DEVELOPMENT EFFORTS FOR RNC AND BTS UNITS:

a.   The Parties shall jointly develop a complete suite of infrastructure
     products for 3G cellular network based on each Parties' own initiated
     architecture and specifications. MELCO will develop a 3G BTS, and UTStarcom
     will develop a RNC based upon the UTStarcom WACOS product platform.
b.   The Parties shall collaborate as to the development of the Interface
     specifications between the BTS and RNC units ("Iub").
c.   MELCO shall develop the BTS in accordance with Iub. UTStarcom shall develop
     the RNC unit which will function with MELCO BTS in accordance with Iub.
d.   UTStarcom shall be responsible for developing, producing and supplying the
     RNC by itself without MELCO's engineering support; except for Iub interface
     for BTS and RNC which is under joint development with MELCO's initiative.
e.   Upon the request of MELCO, and after payment to UTStarcom as stipulated in
     Item 2 below, UTStarcom shall provide MELCO with necessary assistance as to
     UTStarcom RNC for MELCO proposals to potential customers for implementation
     of the UTStarcom RNC with MELCO's BTS and UTStarcom 3G Core Network.
f.   MELCO will provide BTS for UTStarcom primarily for [*] market where
     UTStarcom can lead marketing of W-CDMA infrastructure, while UTStarcom
     shall provide RNC for MELCO where MELCO can lead marketing of W-CDMA
     infrastructure. Conditions of Agreement shall be mutually agreed upon.



2.   PAYMENT TERMS:

In consideration that
     (1) UTStarcom having a joint integration with MELCO's BTS and providing
         MELCO the binary software of the RNC, together with the associated
         documents to MELCO. The documents shall include: Specification of WACOS
         and Basic Specification of RNC by [*]; Specification and Drawing of RNC
         by [*]; and binary RNC software and Operation Manual of RNC by [*]
         (worth of [*]);
     (2) UTStarcom providing one set of RNC and WACOS 3G products to MELCO as
         test bench after the [*] (worth of [*]);
     (3) Upgrading (2) to General Availability (GA) version (worth of [*])

MELCO will pay the following amounts under the following terms and conditions as
mentioned in Item 3 of the Addendum-1.

     a.  Total Payment Amount: [*]
<PAGE>

     b.  Terms of payment:

              1st payment: [*] within [*] after the signing of this DA, MELCO's
                  receipt of UTStarcom development plan and its official
                  notification of authorized fund amount.

              2nd payment: [*] within [*] after the mutual confirmation of
                  successful [*] demonstration of RNC functionality with BTS on
                  the Iub interface.

              3rd payment: [*] within [*] after MELCO's receipt of a delivery
                  acceptance confirmation of a UTStarcom RNC by a customer in
                  accordance with a UTStarcom contract to be signed with a
                  customer for 3G W-CDMA including MELCO's BTS.

3.   MARKETING TERMS/CONDITIONS:

UTStarcom shall pay to MELCO [*] of RNC selling price [*] under the condition
that the sold 3G system will use a third party BTS.

                                      -2-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.54
<SEQUENCE>7
<FILENAME>a2040014zex-10_54.txt
<DESCRIPTION>EXHIBIT 10.54
<TEXT>

<PAGE>

                                                                 Exhibit 10.54


[*] 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.


SOFTWARE LICENCE AGREEMENT

THIS AGREEMENT is made as of October 4, 2000

BETWEEN

DDI Corporation, a corporation duly organized and existing under the laws of
Japan, whose registered office is at 8, Ichibancho, Chiyoda-ku, Tokyo 102-8401,
Japan (the LICENSOR); and

UTStarcom Inc., a corporation duly organized and existing under the law of
Delaware, whose registered office is at 1275 Harbor Bay Parkway, Alameda, CA
94502, USA (UTS).

WHEREAS

(A)      DDI-Pocket Incorporated, a corporation duly organized and existing
under the laws of Japan, whose registered office at 3-5-1 Toranomon, Minato-ku,
Tokyo 105-8477, Japan (DDI-P) developed P-mail Deluxe Software (PDX), a service
which can be used in conjunction with the Personal Handyphone System (PHS);

(B)      First International Telecom Corp., a corporation duly organized and
existing under the laws of Taiwan, whose registered office is at 3F, No. 80,
Sec. 1. Chien-kuo N. Rd., Taipei, Taiwan, R.O.C. (FITEL) desires to establish
its own PHS business in Taiwan (FITEL TAIWAN PHS BUSINESS) and desires to use
DDI-P's PDX service in conjunction with such FITEL Taiwan PHS Business;

(C)      FITEL desires to have UTS develop the necessary systems and products
and for UTS to licence to FITEL certain software and other intellectual property
relating to the FITEL Taiwan PHS Business;

(D)      The Licensor and DDI-P entered into a distribution agreement documented
in the Minutes of the Meeting dated as of July 4, 2000 whereby, among other
things (DISTRIBUTION AGREEMENT), DDI-P authorized the Licensor to enter into
this Agreement with UTS.

(E)      The Licensor desires to grant UTS and UTS desires to obtain from the
Licensor a [*] licence to use the Software and Software Documentation (as both
terms are defined in Clause 1) to develop Products (as defined in Clause 1) to
be provided to FITEL for the FITEL Taiwan PHS Business and to sublicence such
Software and Software Documentation to FITEL to enable FITEL to use such
Products for the FITEL Taiwan PHS Business upon the terms and conditions
contained in this Agreement.

IT IS HEREBY AGREED as follows:

DEFINITIONS

 .1       In this Agreement, unless otherwise expressly provided for, the
following expressions shall have the following meanings:

<PAGE>

DELIVERY DATE means the scheduled date for delivery of the Software Materials;

LOCATION means UTS building/location where the Software is to be delivered;

MEDIA means the media on which the Software and the Software Documentation, as
provided to UTS by the Licensor, is recorded or printed;

PARTIES shall mean the Licensor and UTS (each, a PARTY);

PRODUCTS means the systems and products developed by UTS which are necessary for
FITEL to operate the FITEL Taiwan PHS Business;

PROPRIETARY INFORMATION means any information contained or embodied in the
Software Materials and the Specifications or otherwise disclosed or made
available to UTS by or on behalf of the Licensor pursuant to or in connection
with this Agreement and the Technical Disclosure Agreements one being between
DDI-P and FITEL and the other being between DDI-P and UTS both dated July 4,
2000 (whether orally or in writing), and whether or not such information is
expressly stated to be confidential or marked as such;

SOFTWARE means the computer programs in machine-readable object code only as
specified in Part A of Schedule 1;

SOFTWARE DOCUMENTATION means the operating manuals, user instructions, technical
literature and all other related materials in eye-readable form written in
Japanese as supplied to UTS by the Licensor for aiding the use and application
of the Software only as specified in Part B of Schedule 1;

SOFTWARE MATERIALS means the Software, the Software Documentation and the Media;

SPECIFICATIONS mean the functional specifications of the Software including
details of the environment in which the Software is designed to operate as set
out in Schedule 1 describing the facilities and functions of the Software, the
environment in which the Software is designed to operate and the language in
which the Software is written, a copy of which is attached hereto and initialled
by the parties for the purposes of identification only as Appendix 1;

[*];

USE THE SOFTWARE means to read all or any part of the Software, from magnetic or
other storage media at the Location;

USE THE SOFTWARE MATERIALS means to use the Software, and to read and possess
the Software Documentation in conjunction with the use of the Software and to
possess the Media; and

BASIS OF THIS AGREEMENT

2.1  The Licensor hereby agrees to:

(a)  deliver the Software to UTS on an "AS IS" basis at the Location;


                                      -2-
<PAGE>

(b)  provide UTS with a copy of the Software Documentation on an "AS IS"
basis without any translation, modification or update;

(c)  grant UTS a [*] licence in accordance with Clause 5 to (i) use the
Software Materials to develop Products to be provided to FITEL which are to
be used in connection with the FITEL Taiwan PHS Business and (ii) sublicence
the use of such Software Materials to FITEL to enable FITEL to use the
Products in connection with the FITEL Taiwan PHS Business;

(d)  disclose to UTS the source code of the Software to enable UTS to use the
Software Materials to develop Products to be used in connection with the
FITEL Taiwan PHS Business; and

(e)  grant UTS a [*] licence to modify the source code of the Software only
for the purpose of developing Products in connection with the FITEL Taiwan
PHS Business;

upon and subject to the terms and conditions of this Agreement.

2.2  An additional agreement shall be required detailing the terms and
conditions for distribution of the Products or disclosure of the Proprietary
Information by UTS to a third party.

2.3  UTS agrees not to use (or to allow FITEL to use) the Software Material
or the Proprietary Information in a manner not permitted by this Agreement
unless the Licensor expressly agrees otherwise in writing. Such prohibited
additional uses include, but are not limited to, the following:

(a)  Where UTS intends to provide the Products to third parties other than to
FITEL for use in connection with the FITEL Taiwan PHS Business;

(b)  Where UTS or FITEL intends to distribute the Products for use outside of
Taiwan in which case the Licensor may grant a further licence to UTS on
identical terms to this Agreement, with any necessary modification to reflect
the changed territory, for an additional total sum of [*];

(c)  Where the Licensor and UTS separately agree to conduct trials or market
promotions without paying the full amount of [*]. Such fees that may be
agreed to for such trials or market promotions shall, upon the granting of
any further license, be deducted from the total amount of [*] stipulated in
section (b) above for a further licence.

PRICE AND PAYMENT

3.1  The fee for the licence to be granted to UTS by the Licensor under this
Agreement (the LICENCE FEE) shall be paid by UTS as follows:

(a)  A [*] payment of [*] upon execution of the minutes of the meeting
between DDI Group-DDI (include the Licensor and DDI-P) and UTS dated July 4,
2000; and

                                      -3-
<PAGE>

(b)  [*] on the [*] after the date on which UTS delivers the finished
Products to FITEL (the HANDLING DATE) or the date on which FITEL commences
operational use of the Software in Taiwan, whichever shall occur earlier.

3.2  The Licence Fee and any other charges payable under this Agreement are,
unless otherwise specified:

(a)  [*] of any packing, delivery or transportation charges incurred in
Japan; and

(b)  [*] of consumption tax or any other duties or taxes which may be
chargeable on any goods or services provided to UTS hereunder and which shall be
paid by [*] at the rate and in the manner for the time being prescribed law.

For the avoidance of doubt, [*] shall pay all taxes, tariffs, and duties,
including any sales or use tax (and any related interest or penalty), however
designated, imposed as a result of the execution or implementation of this
Agreement, except any tax imposed upon the [*] corporate income. If the [*] is
required to collect tax to be paid by [*], [*] shall promptly pay such tax to
the [*] on demand.

3.3  The Licence Fee payable pursuant to Clause 3.1(b) shall be discharged if
UTS notifies the Licensor by giving written notice, at any time before the
Handling Date, that UTS desires to terminate the development of the Products,
and if the Licensor accepts such notice.

3.4  If any sum payable under this Agreement is not paid within [*] after the
due date, then (without prejudice to the Licensor's other rights and
remedies) the Licensor reserves the right to charge interest on such sum on a
day-to-day basis (after, as well as before, any judgment), from the due date
to the date of payment inclusive, at the rate of [*] per annum.

3.5  UTS shall not be entitled to withhold payment of any sum by reason of
any right of set-off or any claim or dispute with the Licensor, whether
relating to the quality or performance of the Software Materials or otherwise.

3.6  The Licensor shall have the right to suspend delivery where it
reasonably believes that UTS will not make payment in accordance with this
Clause 3.

DELIVERY AND INSTALLATION

4.1  The Licensor shall use all reasonable endeavours to deliver to UTS:

     (a)  one copy of the Software in source code; and

     (b)  one copy of the Software Documentation;

on the Media at the Location on the Delivery Date.

4.2  Delivery shall be effected and risk of accidental loss of, or damage to,
the Software Materials shall pass to UTS when delivery is tendered at the
Location during normal working hours. UTS

                                      -4-
<PAGE>

acknowledge that they are responsible for effecting insurance cover for the
Software Materials from the time at which risk in the Software Materials passes
to it.

4.3  The Licensor shall not be liable for any delay caused by events beyond its
reasonable control and in such case shall be entitled to a reasonable extension
of time to perform its obligations pursuant to this Clause 4.

4.4  The Licensor shall not be responsible for complying with statutory
regulations, local by-laws, or the fulfilment of any special regulations
affecting UTS.

LICENCE

5.1  The Licensor hereby grants UTS a [*] licence to:

(a)  use the Software only for the purpose of developing Products to be
provided to FITEL to be used in connection with the FITEL Taiwan PHS Business;

(b)  sublicence the use of the Software Materials to FITEL only to enable
FITEL to use the Products in connection with the FITEL Taiwan PHS Business.

(c)  use the Software Documentation in support of its use of the Software for
the development of Products and sublicence of the Software pursuant to Clause
5.1(a) and (b) above; and

(d)  modify the source code of the Software disclosed by the Licensor to UTS
under Clause 2.1 (a) only for the purpose of, and only the extent necessary
for, developing Products to be used in connection with the FITEL Taiwan PHS
Business.

for the duration of this Agreement.

5.2  UTS shall not permit any third party other than FITEL to use the
Software Materials, nor shall UTS use the Software Materials on behalf of or
for the benefit of any third party other than FITEL in any way whatsoever.

5.3 UTS shall not disclose the source code of the Software to any third party
including FITEL.

5.4  UTS shall ensure that (i) FITEL will only use the Software Materials and
Products to enable it to use the Products in connection with the FITEL Taiwan
PHS Business; (ii) FITEL shall only use the Products in connection with the
FITEL Taiwan PHS Business; (iii) FITEL will observe the same obligations of
confidentiality in respect of the Proprietary Information as set forth in
Clause 11; (iv) its agreement with FITEL will not result in any breach of any
of UTS's obligations under this Agreement; and (v) it uses its best efforts
nominate the Licensor as a third party beneficiary of the agreement between
UTS and FITEL.

5.5  The licence granted under this Agreement to UTS shall not be deemed to
extend to any programs or materials of the Licensor other than the Software
Materials unless expressly agreed to in writing by the Licensor.

                                      -5-
<PAGE>

5.6  UTS may make only so many copies of the Software as is reasonably necessary
for its use of the Software pursuant to Clause 5.1 (a) above, and shall ensure
that all such copies bear the Licensor's proprietary notice. All such copies
shall be subject to the terms and conditions of this Agreement.

5.7  During the continuance of this Agreement, UTS shall:

(a)  effect and maintain adequate security measures to safeguard the Software
Materials and any copies thereof from access or use by any unauthorised body
or person;

(b)  retain the Software Materials and any copies thereof under its exclusive
control; and

(c)  maintain a full and accurate record of its copying and disclosure of the
Software Materials and produce such record to the Licensor on request from
time to time.

WARRANTY

6.1  While the Licensor has endeavoured to use reasonable care in compiling the
systems and information incorporated in the Software Materials, the Licensor can
accept no liability of any kind whatsoever for the accuracy and completeness of
such systems or the Software Materials.

6.2  UTS acknowledges that the Software Materials have not been produced to meet
the individual requirements of UTS and cannot be tested in every possible
combination. The Licensor does not warrant that (i) the facilities and functions
comprised in the Software will meet all of UTS's needs in connection with the
FITEL Taiwan PHS Business, (ii) that the Software will operate in the
combinations which may be selected by UTS, (iii) that the operation of the
Software will be uninterrupted or error free, or (iv) that all Software defects
can or will be corrected.

6.3  The Licensor shall have no obligation to repair or replace the Software
Materials under any circumstances except as expressly provided in this
Agreement.

6.4  The Licensor warrants that it has full authority to licence to UTS on the
terms and conditions of this Agreement, based on its Distribution Agreement with
DDI-P.

SUPPORT SERVICE

7.1  The Licensor shall have no obligation to provide any technical support in
connection with the use of the Software under this Agreement or the FITEL Taiwan
PHS Business.

7.2  At the request of UTS, the Licensor may, [*], provide technical support as
to the use of the Software or the FITEL Taiwan PHS Business on the terms and
conditions provided in Appendix 2.

SOFTWARE MAINTENANCE

8.   Unless UTS enters into a separate software maintenance agreement with the
Licensor on or before the Delivery Date (on terms to be agreed between the
parties), the Licensor will not provide any maintenance in respect of the
Software Materials. If at a later date UTS wishes the Licensor to


                                      -6-
<PAGE>

provide maintenance services in respect of the Software Materials, then the
Licensor may [*] provide the same to UTS subject to UTS paying the Licensor's an
agreed maintenance charge.

MODIFICATIONS

9.1  UTS may themselves modify the Software Materials at their own expense and
responsibility to the extent necessary for the development of the Products and
their use in respect of the FITEL Taiwan PHS Business. UTS shall indemnify the
Licensor against any claims that such modifications infringe the copyrights,
database rights, patents, trade secrets or other proprietary or intellectual
property rights of any third party of whatever nature howsoever or wheresoever
arising.

9.2  The copyrights, database rights, patents, trade secrets and other
proprietary or intellectual property rights of whatever nature howsoever or
wheresoever arising in such modifications shall be jointly owned by DDI-P and
UTS. UTS shall be entitled without further charge to use such modifications in
order to develop the Products and allow FITEL to use the Products for the FITEL
Taiwan PHS Business upon the same terms and conditions as the Software Materials
but shall not otherwise be entitled to use such modifications. DDI-P shall be
entitled to use such modifications in Japan. An additional agreement is required
for the use of such modifications outside of Taiwan or Japan.

9.3  UTS shall promptly notify the Licensor of all such modifications and shall,
without charge, supply to the Licensor copies of all documentation relating to
such modifications, including full functional and performance specifications
thereof and all source code materials.

9.4  In addition to providing UTS with the most current version of the Software
in accordance with Clause 2.1, the Licensor shall also provide UTS with any
future modifications of the Software, including but not limited to any changes,
modifications, improvements or bug fixes to existing features, functionalities,
designs or protocols that may be contained within the Software (FUTURE SOFTWARE
MODIFICATIONs). The Licensor shall provide such Future Software Modifications to
UTS [*] only for a period of only [*] from the execution of this Agreement. The
terms and conditions of the license granted by the Licensor to UTS under this
Agreement shall also apply MUTATIS MUTANDIS to any and all Future Software
Modifications provided by the Licensor to UTS, provided, however, that the
provision of Future Software Modifications by the Licensor after expiration of
the [*] period following the execution of this Agreement shall be subject to
separate pricing terms to be negotiated by the parties hereto.

PROPRIETARY RIGHTS

10.1 The Software Materials and all copyrights, database rights, patents, trade
secrets, trademarks and other proprietary or intellectual property rights
whatsoever, howsoever and wheresoever arising in the Software Materials and in
all other written or oral information provided by the Licensor for the purposes
of this Agreement, are and shall remain the exclusive property of DDI-P. DDI-P
reserves the right to grant licences to use or otherwise exploit the Software
Materials to any other person or body. UTS shall not acquire any intellectual
property rights of whatever nature in the Software Materials and may not copy
them or attempt in any way to decompile, disassemble, imitate or reverse
engineer the Software except as expressly permitted in this Agreement.


                                      -7-
<PAGE>

10.2 UTS shall notify the Licensor immediately if UTS become aware of any
unauthorised use or exploitation of the whole or any part of the Software
Materials by any person or body.

10.3 UTS will permit the Licensor to check the use of the Software Materials
by UTS at all times during normal business hours, and for that purpose UTS
shall grant the Licensor (and its agents, employees and representatives) an
[*] licence to enter UTS's premises at any time during normal business hours,
upon giving 48 hours advance written notice by the Licensor to UTS.

CONFIDENTIALITY OF THE PROPRIETARY INFORMATION

11.1 UTS undertakes to treat as confidential and keep secret the Proprietary
Information, and shall not without the prior written consent of the Licensor:

(a)  exploit the Proprietary Information in whole or part other than as may
be necessary to enable UTS to use the Software Materials in accordance with
the terms and conditions of this Agreement;

(b)  disclose the Proprietary Information in whole or part or make any aspect
of the Proprietary Information available to any person or body, subject
always to Clause 11.2 below, other than to:

     (i)   such of UTS' own employees as need to know or use the same for
           the purpose of performing their duties to UTS, for processing
           UTS' own data for its internal business purposes;

     (ii)  UTS' auditor or any other person or body having the right, duty
           or obligation to know the business of UTS, and then only in
           pursuance of such right, duty or obligation;

     (iii) any person or body who is appointed by UTS to maintain any
           equipment on which the Software is used (in accordance with the
           terms of this Agreement) and then only to the extent necessary
           to enable such person or body to properly maintain such equipment.

11.2 UTS undertakes to ensure that any person or body to whom any part of the
Proprietary Information is disclosed pursuant to Clause 11.1(b) is made aware
prior to the disclosure of any part of the Proprietary Information that (i) the
same is confidential and (ii) they owe an express duty of confidence to the
Licensor. UTS shall indemnify and hold the Licensor harmless against any loss or
damage which the Licensor may suffer or incur as a result of UTS failing to
comply with such undertaking.

11.3 UTS shall promptly notify the Licensor if they become aware of any breach
of confidence by any person or body to whom UTS divulges all or any aspect of
the Proprietary Information and shall give the Licensor all reasonable
assistance in connection with any proceedings which the Licensor may institute
against such person or body in respect of such breach of confidence.

11.4 The foregoing obligations as to confidentiality shall remain in full force
and effect notwithstanding any termination of this Agreement.

INTELLECTUAL PROPERTY INFRINGEMENT


                                      -8-
<PAGE>

12.1 If claims arise out of the infringement of any Japanese patent or
copyright of any third party which is valid and effective at the date of this
Agreement, with respect to the use by UTS and/or FITEL of the Software
pursuant to the terms of this Agreement:

(a)  UTS shall promptly notify the Licensor in writing of any allegations of
infringement of which it has notice or becomes aware;

(b)  the Licensor shall have sole control over the defence of any such suit
or claim and over all negotiations in relation thereto, responsibility for
any and all attorneys' fees and legal costs related to defence of any such
suit or claim, and, in particular, UTS shall not make or attempt to make any
settlement or admit any liability in relation to such suit or claim without
the prior written consent of the Licensor;

(c)  At the Licensor's expense, UTS shall take such actions and provide such
information and enter into all such documents as the Licensor may reasonably
require in relation to the defence of any such suit or claim.

12.2 If UTS is prohibited by a court order from using the Software, then the
Licensor shall have the right at its sole option to:

(a)  procure for UTS the right to continue using the Software;

(b)  modify or amend the Software so that it becomes non-infringing;

(c)  replace all or part of the Software with programs of similar capability;
or

(d)  terminate this Agreement in respect of the Software so affected, if the
Licensor considers that, in its reasonable opinion, the foregoing
alternatives are not available on reasonable terms,

in which event UTS shall cease using such prohibited Software forthwith and, at
the Licensor's direction, shall return, or certify that it has destroyed, the
original copies of such Software so affected and any copies made by UTS thereof.
In such event, the Licensor shall be under no further liability to UTS with
respect to the Software so affected.

12.3 Where any computer program materials, in relation to which rights are owned
by a third party, are to be copied or otherwise used by UTS in association with
any Software Materials, UTS warrants that they have any and all necessary
permissions, express or otherwise, to enable them to copy or otherwise use such
computer program materials without infringing such third parties rights.

12.4 If UTS discloses such computer program materials to the Licensor or
requests or permits the Licensor to copy or otherwise use such computer program
materials, UTS warrants that they are entitled to make such disclosures or
requests or give such permission, and that it has any necessary consent, express
or otherwise, to enable the Licensor to copy or otherwise use such computer
program materials as so requested or permitted without infringing said third
party rights.

12.5 UTS shall indemnify the Licensor against any expense or loss the Licensor
may incur resulting from the infringement of third party patents, copyrights,
database rights, trade secrets, trade


                                      -9-
<PAGE>

marks or other proprietary or intellectual property rights whatsoever, howsoever
or wheresoever arising in consequence of any matter referred to in Clauses 12.3
or 12.4.

UTS'S CONFIDENTIAL INFORMATION

13.1 The Licensor shall treat as confidential all information supplied by UTS
under this Agreement which is designated as confidential by UTS or which is by
its nature clearly confidential (the UTS CONFIDENTIAL INFORMATION). This Clause
shall not extend to any information which:

(a)  was lawfully in the possession of the Licensor prior to the commencement
of the negotiations leading to this Agreement;

(b)  is already public knowledge or becomes so at a future date (other than
as a result of a breach by the Licensor of this Clause 13);

(c)  comes into the Licensor's knowledge from a third party who lawfully
possesses such information, and such disclosure is not in breach of a duty of
confidence owed by the disclosing party to UTS.

13.2 The Licensor shall not divulge any UTS Confidential Information to any
person or body except to:

(a)  such of its own employees, consultants, agents or representatives
including the suppliers of any third party software as need to know the same
for the purpose of performing their duties pursuant to this Agreement. The
Licensor shall ensure that its employees, consultants, agents or
representatives are aware of and comply with the provisions of this Clause 13;

(b)  the Licensor's auditors and any other bodies having the right, duty or
obligation to know the business of the Licensor and then only in pursuance of
such right, duty or obligation.

13.3 The foregoing obligations of this Clause 13 shall survive any termination
of this Agreement.

LIMITATION OF LIABILITY

14.1 The Licensor shall not be liable to UTS for any loss, expense or damage of
any kind (direct, indirect, economic or consequential and whether arising from
negligence or otherwise) resulting from the supply, purported supply, failure to
supply, use or possession of the Software Materials, or Products, or any other
service provided under this Agreement.

14.2 No officer or employee of the Licensor shall be liable to UTS in any
circumstances for any loss, expense or damage of any kind (direct, indirect,
economic or consequential and whether arising from negligence or otherwise)
arising from any act or omission during the performance of his or her employment
or other duties. All officers and employees of the Licensor from time to time
shall be entitled to the benefit of the exemptions, limitations, terms and
conditions in this Agreement.

14.3 UTS acknowledges that they are exclusively responsible for:


                                      -10-
<PAGE>

(a)  supervision, management and control of the use of the Software (including
use by FITEL) pursuant to the terms of this Agreement and ensuring that their
personnel are, at all times, educated and trained in the proper use and
operation of the Software Materials;

(b)  processing their data and ensuring the security and accuracy of all inputs
and outputs; and

(c)  making regular back-up copies of their data to ensure recovery of their
data in the event of malfunction of the Software;

(d)  the selection, use of and results obtained from any other programs,
equipment, materials or services used in conjunction with the Software
Materials; and

(e)  any loss, expense, or damage of any kind (direct, indirect, economic or
consequential) suffered by FITEL resulting from the supply, purported supply,
failure to supply, use or possession of the Software Materials or Products or
any other service provided to FITEL by UTS under UTS's agreement with FITEL.

14.4 UTS shall indemnify the Licensor and shall keep the Licensor fully and
effectively indemnified against any loss, expense, or damage of any kind
(direct, indirect, economic or consequential) arising from the breach of this
Agreement by UTS and against any loss of, or damage to, any properly or injury
or death of any person caused by any negligent act, omission or unlawful
misconduct of UTS and/or FITEL, their employees, agents or sub-contractors.

14.5 UTS further acknowledges that they will obtain insurance cover in respect
of all risks relating to their use of the Software Materials and all other goods
and services provided under this Agreement and that they will ensure that the
Licensor is noted on such insurance cover.

TERMINATION

15.1 Any Party hereto may terminate this Agreement forthwith on giving notice in
writing, to the a breaching Party if:

(a)  the breaching Party commits any material or continuing breach of any
term of this Agreement and fails to remedy such breach within [*] after the
receipt of a request in writing from the aggrieved Party to do so (such
request will contain a warning of the aggrieved Party's intention to
terminate), provided, however, the Licensor may terminate this Agreement
immediately with written notice in the event that UTS fails to pay any part
of the Licence Fee within [*] of the due date for payment;

(b)  a Party learns or believes upon reasonable grounds that the other Party
(being a body corporate) has or is likely to:

     (i)  present a petition or have a petition presented against them by a
          creditor for the appointment of an administrator or for their
          winding up;

     (ii) convene a meeting to pass a resolution for a voluntary winding up
          or the making of an administration order;

                                      -11-
<PAGE>

    (iii) enter into liquidation (other than for the purposes of a bona
          fide reconstruction or amalgamation);

    (iv)  call a meeting of their creditors, or have a receiver,
          administrator, administrative receiver, liquidator or any other
          similar officer or insolvency practitioner appointed in respect
          of all or any of its undertakings or assets;

    (v)   refuse or be unable to meet any sums payable to another Party
          when such sums fall due;

    (vi)  cease to carry on business as a going concern or cease to be in
          a position to fulfil this Agreement;

(c)  a Party learns or believes upon reasonable grounds that the other Party
shall be dissolved or shall commit any act of bankruptcy or have a bankruptcy
order made against them or shall make or negotiate for any composition or
arrangement with, or assignment for, the benefit of their creditors;

(d)  any event occurs in a foreign jurisdiction analogous to, or comparable
with Clause 15.1(b)(i) to (v) or 15.1(c) above.

(e)  UTS notifies the Licensor of UTS's desire to terminate the development
of Products and the Licensor accepts such notice in accordance with Clause
3.3.

15.2 Forthwith upon the termination of this Agreement for whatever reason:

(a)  the Parties shall be discharged from any further liability to perform
under this Agreement, except as otherwise specified in this Agreement;

(b)  UTS shall pay the Licensor on demand for all goods and services provided
to UTS by the Licensor prior to such termination;

(c)  UTS shall either return to the Licensor all Software Materials
(including any modifications thereto made by UTS) and all copies of the whole
or any part thereof or, if requested by the Licensor, shall destroy the same
(in the case of the Software, by erasing it from the magnetic media on which
it is stored) and certify in writing by statutory declaration to the Licensor
that such Software Materials have been so destroyed.

15.3 Any termination of this Agreement (howsoever occasioned) shall not affect
any accrued rights or liabilities of any party nor shall it affect the
enforceability of any provision hereof which is expressly or by implication
intended to come into or continue in force on or after such termination.

ASSIGNMENT

16.1 UTS shall not be entitled to assign or otherwise transfer any part of this
Agreement or assign, sub-licence or otherwise transfer, charge or encumber the
Software Materials (other than the permitted sublicense to FITEL under this
Agreement) or any copies thereof without the prior written consent of the
Licensor. Such consent, if given, may be made subject to the payment of any


                                      -12-
<PAGE>

additional fee and/or any other term or condition. Any purported assignment,
licence or transfer by UTS without such consent shall be void.

16.2 The Licensor may assign the benefit of this Agreement including the right
to receive monies, or sub-contract the performance of any of its obligations to
Licensor's subsidiary without the consent of UTS.

WAIVER OF REMEDIES

17. No waiver of any rights arising under this Agreement shall be effective
unless in writing and signed by a duly authorised signatory of the Party against
whom the waiver is to be enforced. No failure or delay by either party in
exercising any right, power or remedy under this Agreement (except as expressly
provided herein) shall operate as a waiver of any such right, power or remedy.

ENTIRE AGREEMENT

18.1 This Agreement supersedes all prior agreements, arrangements, proposals and
undertakings between the parties in relation to the subject matter hereof
(whether written or oral) and constitutes the entire Agreement between the
parties relating to the subject matter hereof. UTS further warrants that they
have not relied on any oral representation made by the Licensor or any agent,
employee or other representative or upon any description, illustration or
specification contained in any advertisements, catalogues or publicity materials
produced by or on behalf of the Licensor or in any correspondence between the
Licensor and UTS before the date of this Agreement.

18.2 No addition to or modification of any provision of this Agreement shall
be binding upon the Parties unless made by a written instrument signed by a
duly authorised signatory of each of the Parties. Any other terms, conditions
or provisions whether proposed by UTS orally or in writing shall be of no
effect and the supply of the Software Materials or any other goods or
services by the Licensor to UTS shall not constitute acceptance by the
Licensor of such other terms, conditions or provisions.

NOTICES

19.  Any notices or other communications required or permitted hereunder or
otherwise in connection herewith shall be in writing and shall be delivered
personally (including by courier), sent by facsimile transmission or sent by
certified or registered mail, postage prepaid. Any notice shall be deemed given
when so delivered personally, or if sent by facsimile transmission, when so
transmitted provided that the sender's facsimile machine produces printed
confirmation of error free transmission to the correct number, or if mailed,
upon receipt, as follows:

TO THE LICENSOR

At:               3-2, Nishishinjuku 2-chome, Shinjuku-ku, Tokyo 163-8003
                  Japan

                  Attention:        Dr. Tsuneyoshi Narahara



                                      -13-
<PAGE>


                  Facsimile No.:    +813 3347 5300

TO UTS

At:               1275 Harbor Bay Parkway
                  Alameda, CA  94502
                  USA

                  Attention:        Mr. Chang H. Kao

                  Facsimile No.     +1 732 548 1099


SEVERABILITY

20.  Should any provision of this Agreement be void or illegal for any reason,
the validity of the remainder of the Agreement shall not be affected and the
parties shall promptly enter into negotiation in good faith to find a
replacement for the provision which is of similar economic effect to both
parties.

FORCE MAJEURE

21.  The Licensor shall not be liable in any way for any failure to perform its
obligations or for any losses, damages or delays incurred by UTS resulting from
circumstances beyond the reasonable control of the Licensor; provided, however,
that the Licensor shall resume performing such obligations as soon as such
circumstances have ended.

FURTHER ASSURANCE

22.  Each Party agrees to execute such documents and waivers and generally do
everything further that may be necessary to fulfil its obligations under this
Agreement.

JAPAN REGULATIONS

23.1 The Software Materials may be subject to regulations imposed by
governmental authorities (the REGULATIONS) restricting the ultimate
destination of such Software Materials. UTS agrees to indemnify the Licensor
against any liability the Licensor may incur in consequence of UTS'
infringement of the Regulations, where the Licensor has attempted to
substantially comply in good faith with said Regulations.

23.2 This Agreement shall be conditional on the Licensor obtaining any necessary
export license from Japan or any other anticipation required pursuant to the
Regulations. The Licensor shall be excused performance under this Agreement and
shall have no further responsibility or liability to UTS if it is not able to
obtain any export licence or authorisation required from Japan or any other
authorities.

LAW AND DISPUTES


                                      -14-
<PAGE>

24.  This Agreement shall in all respects be governed by and construed in
accordance with the law of Japan, such that;

(a)  Any dispute, controversy or claim arising out of or relating to this
contract, or the breach termination of invalidity thereof, shall be settled
by arbitration in accordance with the International Chamber of Commerce (ICC)
Arbitration Rules as at present in force.

(b)  The Licensor and UTS shall each appoint one arbitrator and the two
arbitrators so nominated shall designate a third arbitrator acceptable to
both appointing parties, failing which the third arbitrator shall be
appointed in accordance with the arbitration rules of the ICC. The appointing
authority shall be the ICC.

(c)  The place of arbitration shall be Tokyo, Japan if the dispute,
controversy or claim is initiated by either of UTS. If the dispute,
controversy or claim is initiated by the Licensor, the place of arbitration
shall be Taipei, Taiwan.

(d)  The language to be used in the arbitral proceedings shall be English.

(e)  By agreeing to arbitration pursuant to this clause, the Parties
irrevocably waive their right to any form of appeal, review or recourse, to
any state court or other judicial authority, insofar as such waiver validly
made.

                                      -15-
<PAGE>


IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be
signed by its duly authorized representatives on the date first above written.


Signed for and on behalf

of the LICENSOR

DDI Corporation

- ------------------------------------

Name:  Dr. Tsuneyoshi Narahara

Title: Senior Managing Director




Signed for and on behalf

of UTS

- ------------------------------------

Name:  Mr. Paul Berkowitz

Title: VP of International Marketing



<PAGE>

                                   SCHEDULE 1

The following schedule is not binding. Amendments and changes to the following
schedule shall be made if and when [*] deems such changes necessary.

                                     PART A

SOFTWARE

[*]











                                      -2-
<PAGE>

                                     PART B

SOFTWARE DOCUMENTATION

[*]












                                      -3-
<PAGE>

                                   APPENDIX 1

SPECIFICATION

[*]

SOFTWARE OPERATING ENVIRONMENT: Operates under [*] Operating System.


         USED PROGRAM LANGUAGE: Software programmed by [*].










                                      -4-
<PAGE>

                                   APPENDIX 2

TRAINING AT DDI'S OFFICES

Upon the prior mutual agreement of the Licensor and UTS, the Lincesor shall
provide technical and engineering support training to UTS personnel at the
Licensor's office location, [*], in regard to the Software. [*] shall be
responsible for any and all costs and expenses related to the sending of UTS
personnel to the Licensor's office location for training , including but not
limited to airfare, lodging and meals.

TRAINING FOR UTS PERSONNEL AS UTS'S OFFICES AND BUSINESS LOCATIONS

Upon the prior mutual agreement of the Licensor and UTS, the Licensor shall send
engineering personnel to UTS at its offices and business locations within Taiwan
[and the People's Republic of China]. UTS shall reimburse the Licensor for
sending such engineering personnel according to the folowing fee schedule: [*].

LIMITATIONS

With respect to the training described above, neither the Licensor nor its
development nor its employees or agents shall make any warranty or
representation as to the successful development by UTS of the PDX Center for the
PHS network now being developed by UTS for FITEL for development in Taiwan.



                                      -5-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.55
<SEQUENCE>8
<FILENAME>a2040014zex-10_55.txt
<DESCRIPTION>EXHIBIT 10.55
<TEXT>

<PAGE>

                                                                   Exhibit 10.55


[*] 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.


                    STRATEGIC ALLIANCE, PURCHASE AND LICENSE
                                    AGREEMENT

                                     between

                             UTStarcom Incorporated
                                    (COMPANY)

                                       and

                        TELECOMMUNICATIONS D'HAITI S.A.M.
                                    (TELECO)






<PAGE>


STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION

TABLE OF CONTENTS

<TABLE>
<S>     <C>                                                                                                         <C>
1.       DEFINITIONS..................................................................................................1

         1.1      "Functional Verification"...........................................................................1
         1.2      "Commercial Service"................................................................................1
         1.3      "Effective Date"....................................................................................1
         1.4      "Product"...........................................................................................2
         1.5      "Services"..........................................................................................2
         1.6      Documentation.......................................................................................2
         1.7      "Software"..........................................................................................2
         1.8      "Software License Agreement"........................................................................2
         1.9      "Non-Disclosure Agreement"..........................................................................2
         1.10     "Warranty Period"...................................................................................2
         1.11     "Business Plan".....................................................................................2
         1.12     "Training"..........................................................................................2
         1.13     "Final Acceptance Certificate"......................................................................3

2        TERM.........................................................................................................3


3        PROJECT SCOPE................................................................................................3


4        PROJECT BUSINESS PLAN AND SCHEDULE...........................................................................4


5        PURCHASE ORDERS..............................................................................................4

         5.1      Order Submission....................................................................................4

6        PRICE, FINANCING AND PAYMENT TERMS...........................................................................5

         6.1      Pricing and Shipment................................................................................5
         6.2      Taxes, Duties and Levies............................................................................5
         6.3      Financing and Form of Payment.......................................................................5

7        ADVANCE PAYMENT GUARANTEE....................................................................................6


8        LIQUIDATED DAMAGES...........................................................................................7


9        INSTALLATION AND ACCEPTANCE..................................................................................7

         9.1      Site Availability...................................................................................7
         9.2      Installation........................................................................................7
         9.3      EQUIPMENT ACCEPTANCE................................................................................9

10       OBLIGATIONS AND RIGHTS OF PARTIES............................................................................9


11       PROJECT COORDINATION COMMITTEE AND EXECUTIVE BOARD..........................................................12
</TABLE>

                                                                             -i-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


<TABLE>
<S>     <C>                                                                                                         <C>
12       FUNCTIONAL VERIFICATION.....................................................................................12

13       LICENSES....................................................................................................13


14       TITLE AND RISK..............................................................................................13


15       WARRANTY....................................................................................................13

         15.1     Limited Warranty...................................................................................13
         15.2     Disclaimer of Warranties...........................................................................14
         15.3     Inherently Dangerous Applications..................................................................14
         15.4     Product Returns....................................................................................15

16       INDEMNIFICATION.............................................................................................15

         16.1     Indemnity..........................................................................................15
         16.2     Limitations........................................................................................15

17       LIMITATION OF LIABILITY.....................................................................................16


18       TERMINATION.................................................................................................16


19       TRAINING....................................................................................................17


20       GOVERNING LAW AND REGULATIONS...............................................................................17


21       GENERAL PROVISIONS..........................................................................................17

         21.1     No Liability for Other Party's Acts................................................................17
         21.2     Independent Contractors............................................................................17
         21.3     Notices............................................................................................17
         21.4     Security Interest..................................................................................18
         21.5     No Assignment......................................................................................18
         21.6     Jurisdiction.......................................................................................18
         21.7     Publicity..........................................................................................18
         21.8     No Violation of Applicable Law.....................................................................19
         21.9     Conflicting Exhibits...............................................................................19
         21.10    No Waiver..........................................................................................19
         21.11    Arbitration........................................................................................19
         21.12    Non-Monetary Remedies..............................................................................19
         21.13    Force Majeure......................................................................................19
         21.14    Entire Agreement...................................................................................20
         21.15    May be Executed in Counterparts....................................................................20
         21.16    Contract Validity..................................................................................20
</TABLE>

                                                                            -ii-

<PAGE>


STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


<TABLE>
<S>     <C>                                                                                                         <C>
22       EXHIBIT A:  SECTION 7 ECONOMIC PROPOSAL AND EQUIPMENT LISTS.................................................20

         22.1     Price Validity.....................................................................................20

         EXHIBIT B: END-USER SOFTWARE LICENSE........................................................................22


23       EXHIBIT: C MUTUAL NON-DISCLOSURE AND CONFIDENTIALITY AGREEMENT..............................................23


24       EXHIBIT D: BUSINESS PLAN AND PROJECT COMMERCIAL MILESTONES..................................................26


25       EXHIBIT E: PROJECT IMPLEMENTATION SCHEDULE..................................................................26


26       EXHIBIT F: TRAINING AND TECHNOLOGY TRANSFER.................................................................26
</TABLE>


                                                                           -iii-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


               STRATEGIC ALLIANCE, PURCHASE AND LICENSE AGREEMENT


THIS STRATEGIC ALLIANCE, PURCHASE AND LICENSE AGREEMENT (the "Agreement") is
made by and between UTSTARCOM, INC., a Delaware corporation, having offices at
1275 Harbor Bay Parkway, Suite 100, Alameda, California 94502, United States of
America (hereinafter referred to as "Company"), duly represented by Mr. Omar A
Graibe, Managing Director, Caribbean and Latin America of Company and
TELECOMMUNICATIONS D'HAITI S.A.M., hereinafter referred to as TELECO or BUYER, a
company, with its principal place of business at Port Au Prince, Republic of
Haiti, duly represented by Monsieur Jean-Francois Chamblain, Directeur General
of TELECO, appointed by the President du Conseil d'Administrationon Gouverneur
de la Banque de la Republique d'Haiti on September 1998, and duly authorized by
the Government of Haiti to enter into and sign this contract.

         WHEREAS, BUYER desires to purchase and license, from time to time,
certain of Company's products and services; and

         WHEREAS, Company wishes to enter a strategic alliance, sell and license
such products and services to BUYER upon the terms and conditions set forth
herein.

         NOW, THEREFORE, the parties agree as follows:

1.       DEFINITIONS

For the purpose of this Agreement, the terms below shall have the following
definitions:

1.1      "Functional Verification"

"Functional Verification" means completion of tests performed by Company in
accordance with the Functional Verification test procedure to be provided by
Company and approved by the BUYER prior to the commencement of the tests.

1.2      "Commercial Service"

"Commercial Service means the earliest date when any of BUYER's subscribers or
customers begins to use the Product.

1.3      "Effective Date"

"Effective Date" means the earliest date by which duly authorized officers of
both parties have signed this Agreement.
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


1.4      "Product"

"Product" means collectively all hardware and software components and subsystems
provided by Company as more fully described in EXHIBIT A attached hereto.

1.5      "Services"

"Services" means collectively labor delivered by Company and/or its
subcontractors for the purpose of training, installation, repair or other
purposes.

1.6      Documentation

"Documentation" means all user manuals, training manuals, Software release
notes, and other similar, written materials to be provided in English during the
initial Project's phase and in French after the completion of the Project's
first phase, provided with the System, as may be updated by Company from time to
time.

1.7      "Software"

"Software"--the executable (object code) version of software as developed by
and/or licensed to Company for use in the Product.

1.8      "Software License Agreement"

"Software License Agreement" means the Software License Agreement between the
parties and attached hereto as EXHIBIT B.

1.9      "Non-Disclosure Agreement"

"Non-Disclosure Agreement" means the Mutual Non-Disclosure and Confidentiality
Agreement between the parties and attached hereto as EXHIBIT C.

1.10     "Warranty Period"

"Warranty Period" -- a period starting on the date of Functional Verification as
applicable per Limited Equipment Warranty coverage described herein this
Contract.

1.11     "Business Plan"

"Business Plan" - The Business Plan of the Project details Project
Implementation Schedule, financial parameters of the Strategic Alliance,
Purchase and License Agreement and the Financial Returns for each party of this
Strategic Alliance and attached hereto as EXHIBIT D.

1.12      "Training".  Exhibit "F"

                                                                             -2-
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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


1.13     "Final Acceptance Certificate".  Exhibit "G".

2        TERM

The term of this Agreement shall commence on the Effective Date and unless
otherwise terminated as provided herein, shall continue in full force and
effect.

3        PROJECT SCOPE

The purpose of this Contract is to rule and establish the conditions, rights,
obligations, responsibilities and other related stipulations under which both
parties will jointly develop a Project for a minimum of [*] wireless access
lines that will allow TELECO to provide Access Services to its residential and
business customers throughout the Republic of Haiti.

(i), as a key pre-requisite to accomplish the investment and financial
commitments being made by the Company to execute the planned project as per the
parameters set forth in the Business Plan and TELECO's objectives for the
deployment of new telephone lines to provide telephone services in the
designated serving areas where pent-up demand exists, (ii) and derive the
necessary revenues from these that will make the expansion feasible. The Project
shall be developed in accordance to the Business Plan included in EXHIBIT D of
this Agreement.

To develop the Project both parties agreed that Company will engineer,
manufacture or supply, install, test and put into service telecommunication
equipment, and related services including but not limited to the sale of the
services to end users and the Software (as defined below) as described in
EXHIBIT A ("Equipment and Services") at Company, Inc.' prices listed in EXHIBIT
A. The equipment could be installed wherever it is required and agreed by
Company, as per Company standards practices and recommendations, in the Buyer
premises or third party locations. All charges and/or fees related to renting of
space, facilities, rights of ways, civil works, expansions to existing
telecommunications infrastructure needed to accommodate the equipment/solution
for this project, from third parties, as needed to install the contracted
equipment, will be charge to [*] and their cost properly adjusted in the
contract value as relevant data becomes available from the planned field
engineering surveys completion.

[*] will purchase and pay for such equipment, services, land, facilities, rights
of ways, licenses, and other necessary project elements as agreed in this
Contract, its annexes or any amendements to them.

Prices for installation and related charges are subject to change due to [*].
Buyer agrees to pay all such additional charges as invoiced by Company.

During the execution of Contract both parties could agree on additional
extensions to the Contract Scope at the then prevailing prices. Such extensions
could include additional equipment, services, new functionalities of the
equipment not included in this project and currently inherent to the offered
equipment or new features to be developed in the future by the Company.

                                                                             -3-
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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


Buyer, as National Telecommunications Operator of Haiti, shall provide all of
its infrastructure and resources to facilitate the Project Development.

Company will provide turnkey network deployment as described and agreed to in
this Agreement, its Annexes and the Proposal, including Product and Services as
detailed in EXHIBIT A.

The scope of contract may be extended by mutual agreement of the parties. The
terms and conditions of such extension(s) shall be made through amendments to
the original contract.

4        PROJECT BUSINESS PLAN AND SCHEDULE

Equipment will be deployed in phases, [*]. Deployment is as per scheduled as
detailed in EXHIBIT E.

This contract is based on the Business Plan presented in EXHIBIT D, "Business
Plan". The Business Plan is a fundamental part of the Contract. It details the
Project Commercial Milestones, the financial parameters that will rule the
Contract and it establishes the expected financial returns agreed and projected
by both parties. One of the key purposes of this Contract and Business Plan is
to ensure the success of the project and its financial returns on the investment
in order to ensure the successful execution of the Project both from an economic
and financial standpoint. This signifies that the revenue streams generated from
the initial phases of the project, shall provide the funding needed to carry out
the project subsequent phases to achieve the Project Plan stated Goals. In
accordance with the aforementioned and to ensure the actual compliance of the
Business Plan in practice, every [*], TELECO and Company will review the actual
results yielded by Project against the Business Plan goals and will agree on the
necessary adjustments warranted to ensure that Company obtains the payments for
the goods and services contracted by TELECO under the terms of this Agreement
and the financial returns or charges established in the Business Plan as well as
the benefits due to TELECO. If for any reason these financial returns are not as
projected in the Business Plan TELECO will provide the additional funding that
guarantees the payment of product and services as well as the financial product
and charges due to Company.

Prior to delivery, Company, Inc. reserves the right to make substitutions,
modifications and improvements to the Equipment, provided that such
substitution, modification or improvement shall not materially affect
performance in the application originally agreed to with Customer.

5        PURCHASE ORDERS

5.1      Order Submission

BUYER will purchase and/or license Products according to the Scope of this
Strategic Alliance Agreement by submitting, from time to time as per Project
Schedules and Phases indicated in Business Plan and Project Schedule (EXHIBITS D
AND E), purchase orders by hard copy or facsimile. Company will accept orders in
compliance with the terms of this contract and will inform BUYER in writing of
expected shipment dates.

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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


All purchase orders submitted by BUYER shall be subject to the terms and
conditions of this Agreement. No additional or different provisions appearing
anywhere on BUYER's purchase orders or other correspondence shall be binding on
Company. Any such terms and will be deemed to be stricken.

6        PRICE, FINANCING AND PAYMENT TERMS

6.1      Pricing and Shipment

Prices for the Product and Services purchased and/or licensed hereunder shall be
as described in EXHIBIT A to this Agreement (the "Prices"). Prices for the
Product are in [*]. Unless otherwise specified by Company in writing, the Prices
for the Products [*] any freight, transportation, handling or Services, which
are listed, separately as applicable.

6.2      Taxes, Duties and Levies

The Prices and/or any payments or disbursements to Company from this Agreement
[*] any customs duties, value added tax, income tax or any other direct or
indirect tax, charge, duty, levy or assessment which may be levied or charged by
any national, state, local or other governmental authority, agency or
instrumentality of the Republic of Haiti, currently applicable or created in the
future by any authority of the Republic of Haiti. Any such amounts charged,
levied or assessed, whether withheld at source or otherwise, will be [*] to the
prices otherwise chargeable to and payable by BUYER pursuant to this Agreement.

6.3      Financing and Form of Payment

Payment of goods, services and other charges due to Company shall be made by
TELECO as follows:

1)       Down payment of [*] per cent of the Project Total Contract Value of
each individual phase of the [*] Access Lines project payable [*] within [*]
from Contract Signature.

2)       Payment of Contract remaining balance due to Company shall be paid by
TELECO in [*] installments [*] as follows:

These installments shall come from the total revenues collected from users who
subscribe to access lines provided by the Buyer with this project. Both parties
agreed that total revenues would consist of the following:

a)       [*]:

b)       [*].

c)       [*].


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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


d)       [*].

e)       [*].

Total revenues have been estimated in the Business Plan based on conservative
figures below the actual applicable values. The actual values could be higher
and will depend on the official tariffs approved and applicable in Haiti by
TELECO. All revenues collected by TELECO shall be automatically deposited when
subscriber pays for their services in an escrow account at a mutually agreeable
international financial institution whose joint beneficiaries shall be the
Company and Buyer. At the end of each [*], the Company and TELECO will review
the balance of the escrow account. The Company shall be entitled to collect the
[*] installments owed to Company as per the mutually agreed project
implementation schedule. The escrow account shall be kept with a minimum balance
equivalent to the amount of a [*] installment and the remaining funds in the
account shall be disbursed to TELECO. If for any reason, the funds deposited in
the escrow account are not sufficient to cover the [*] contract installment,
TELECO shall pay from its own funding the difference owed to the Company within
a period of [*] from payment due date.

As a guarantee to Company efforts and investment, Buyer shall provide Company an
acceptable Guarantee acceptable to Company, such as any of the following: I) an
[*] L/C for an amount [*] in a first rate international financial institution
acceptable to Company, ii) IOU's with the collateral of [*], iii) any other form
of guarantee acceptable to Company. The amount of the herewith indicated
guarantee shall be equivalent to [*] installments of the project value in favor
of Company. This guarantee shall allow partial disbursements that could be
exercised by Company if Buyer delays the payment of any outstanding balance for
more than [*]. If disbursements are applied to Guarantee. Buyer shall reinstate
the original value of L/C and/or guarantee within [*] of notification from
Company. Failure to reinstate the value of this guarantee will become a breach
of contract; in such case Company could exercise the L/C and/or Guarantee and
collect by any means the balance due from the entire contract. This guarantee
shall cover the total contract value and shall be valid during the contract
term. In addition, Government of Haiti Guarantee should be issued by Banc
Nationale D'Haiti, majority owner of TELECO, in favor of Company to serve as
guarantee to the contracted project.

All payments are non-refundable.

7        ADVANCE PAYMENT GUARANTEE

Company shall provide for the benefit of BUYER an advance payment guarantee
issued by a first-rate international bank, in the amount of the Initial Payment
as set forth in Article 6.3, (the "Guarantee"). The Guarantee shall become
effective upon Company's receipt of the Initial Payment due from BUYER under the
terms of Section 6, and shall expire upon shipment of the Product, unless
extended by mutual written agreement of the parties.

                                                                             -6-
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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


8        LIQUIDATED DAMAGES

In the event Company fails to complete deployment to a sufficient degree to
allow Commercial Service to begin by the date specified in the mutually agreed
project plan, BUYER may assess against Company liquidated damages, for each week
of such delay, in the amount of [*] of the total price under the applicable
purchase order for the delayed item or items, provided that the total amount of
liquidated damages that may be assessed under this Agreement shall not exceed
[*] of the total Product price set forth in the applicable purchase order, and
further provided that the assessment of such liquidated damages by BUYER shall
be its [*] remedy for Company's delay in preparing the BUYER network for
commercial service by the date specified in the mutually agreed project plan.

Notwithstanding the foregoing provisions of this Section, Company shall not be
responsible for any delay or failure to deliver the Product, and BUYER shall not
be entitled to any liquidated damages or termination rights, to the extent such
delay or failure results from: (a) any delay or failure by BUYER or any third
party not under Company's control to perform its obligations under or related to
this Agreement or any of its Exhibits or attachments; or (b) any force majeure
event.

9        INSTALLATION AND ACCEPTANCE

9.1      Site Availability

BUYER shall prepare within the timeframe agreed to by the parties site(s) for
the installation of the Product that meets the environmental and other
requirements of the Product for its installation as specified by Company. BUYER
shall provide access to the sites and the Product for Company's personnel and
other authorized representatives.

9.2      Installation

Company or its subcontractors shall install the Product at the site(s). BUYER
undertakes and agrees to use its best efforts to avoid delay in the commencement
or performance of the installation by any act or omission of the BUYER or any of
BUYER's employees, agents or representatives.

The Buyer shall, [*], on the signing of this agreement, and at all times
thereafter during the period of project execution hereunder be responsible for
the following, including site preparation, clean-up, site security, power,
equipment warehousing, provide unrestricted access to network facilities and
equipment sites.

(a)      Allow employees or agents of Company, Inc. free access to premises and
         facilities where the Equipment is warehoused, existing network
         facilities and sites where contracted equipment will be installed at
         all hours consistent with the requirements of the installation.

(b)      ENVIRONMENTAL - Assure that the premises will meet all temperature,
         humidity controlled, air-conditioned, and other environmental
         requirements set forth in the applicable

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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


         Equipment specifications and will be dry and free from dust and in such
         condition as not to be injurious to the employees or agents of Company,
         Inc. or the Equipment to be installed.

(c)      MECHANICAL - Provide all patching, painting, concrete openings,
         conduits, ducts, floors, wall s and ceilings reinforcements and/or
         modifications, as deemed necessary to house the contracted equipment,
         or other mechanical modifications pertinent to this installation as
         required.

(d)      ELECTRICAL - Provide ample electric current of proper voltage for any
         necessary purpose suitably terminated in rooms or any places where
         equipment is to be installed, including but not limited to poles and
         towers, where it is required. Provide properly ground copper conductor
         of ample capacity (minimum #6 AWG) at the Equipment locations. Provide
         the required - 48vDc power feeds and 120/240 VAC power feeds, all
         separately fused outlets, as may be required per individual equipment
         site.

(e)      Provide for the termination of any existing service agreement and for
         the removal of any existing equipment and cable, as required.

(f)      Provide suitable and easily accessible floor space, as well as secured
         storage, to permit storing adjacent to where Equipment will be used,
         and for secure storage of tools, test sets, and employee's personal
         effects for the duration of project.

(g)      APPROVALS - Buyer shall be responsible for the timely and proper
         securing of all permits, licenses, rights of ways, consents, including
         landlords, issuance of frequency spectrum operating licenses and
         approvals from the corresponding regulatory authorities, i.e. CONATEL,
         legal requirements and fees thereof associated in connection with these
         for the acquisition, installation and operation in its network of the
         contracted Equipment.

(h)      Buyer specifically agrees to indemnify and hold Company, Inc. harmless
         from all liability and costs arising from the Buyer and its
         contractors, subcontractors and employees for site preparation efforts
         or for the latent conditions of the site.

Company, Inc. will install the contracted network access Equipment at the
designated network points of presence (POPs) indicated in the contract technical
schedules and revisions thereof that may result from the network planning, field
and site surveys to be conducted. Company, Inc., however, will not be
responsible for performing civil works, i.e., construction, modifications, power
distribution, painting, plastering, ducts, existing equipment relocations,
repairs to Buyer's premises resulting from the installation of the contracted
Equipment except as expressly agreed by Company in the contract technical
schedules. Buyer hereby holds Company, Inc. harmless from any such damage to
Buyer's property.

                                                                             -8-
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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


It is the sole responsibility of the Buyer to perform the installation of
subscriber premises equipment, its proper alignment, and service activation as
line and/or Buyer contracts services with its subscribers.

Both Buyer and Company, Inc. shall complete the installation services in
accordance with Company, Inc.' standard installation practices and
recommendations. Company, Inc. shall perform acceptance testing according to
Company standards and specifications on the installed Equipment and Buyer agrees
to monitor said testing. Upon completion thereof, as described above, Company,
Inc. shall notify Buyer that the Equipment has been installed and operates in
accordance with the criteria set forth in Company, Inc. Specifications.

If the Equipment does not perform according to the acceptance test criteria and
Company, Inc. after having been notified in writing of the defects fails to cure
such defect within [*] days of receipt of such notice ("Cure Period"), Buyer has
the right to return the Equipment [*] if such Equipment is shipped to Company,
Inc. no later than [*] days after expiration of the Cure Period.

9.3      EQUIPMENT ACCEPTANCE

The commercial in-service handling of first call at the end of each deployment
phase described in the Price Summary contained in Exhibit 'A" shall constitute
the acceptance by Buyer of the equipment delivered.

Company and BUYER shall accordingly execute the Acceptance Certificate forthwith
at the cunclusion of each deployment phase, substantially in the form shown in
Exhibit G.

10       OBLIGATIONS AND RIGHTS OF PARTIES

OBLIGATIONS OF COMPANY:

a)       Engineer, deliver, install and to put in operation the network
         expansion and necessary and suitable equipment with all its accessories
         contracted by the Buyer, and its interconnection, according to
         parameters and conditions setforth in this Contract.

b)       Furnish new equipment of most recent version, good quality and
         compatible with the existing PSTN network of Buyer as per international
         accepted standards.

c)       Train and transfer the necessary knowledge to the qualified TELECO
         personnel to operate, exploit and maintain the equipment that will be
         provision under the terms of the contract.

d)       Provide the technical services required to perform the design and
         commissioning of the proposed network expansion solution, excluding the
         installation and placement in service of the subscriber premises
         equipment and necessary wire cable plant. Drop wire installation and
         modifications or installation at customer premises are to be carried
         out and at the cost of [*] Company will provide and install the
         necessary cable between the RPs and RPCs.

                                                                             -9-
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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


OBLIGATIONS OF BUYER:

a)       Make available to the Company all existing equipment and network
         infrastructure required to perform the contracted equipment and
         expansions, including but not limited to: PSTN facilities, equipment
         sites, switching systems, PDH and SDH transmission network, inclusive
         the Banc Nationale D'Haiti SDH points of presence and associated
         transmission backbone equipment, ducts, poles, buildings, cable plant,
         radio towers, rights of way, as well as, all the necessary technical
         engineering information, facilities, licenses and approvals needed to
         deploy and interconnect the contracted solution.

b)       Under the terms of the agreement the Buyer or its designated commercial
         agent is solely responsible for all promotions, sales-marketing,
         commercial infrastructure, including points of sales and personnel
         necessary to promote and commercialize the lines and services
         contracted within the Republic of Haiti.

c)       Put in operation the structure and equipment supplied by the Company to
         operate, exploit and to maintain the equipment network expansion
         contracted, including installation of equipment at end-user premises,
         installation and provisioning of primary and secondary drop wire cable
         plant as well as internal installation and repairs at customer
         premises, training of end-user, Buyer service, billing and collections
         activities necessary to conduct the marketing, sale, installation,
         service processing, billing and collection activities of the
         lines/services contracted.

d)       Insure, by its own account and risk, the contracted equipment,
         personnel and goods deployed in its facilities, stored in its
         warehouses and under the control of its personnel against all the
         possible risks.

e)       The Buyer is solely responsible to ensure through its best efforts,
         capacity and experience the optimun profitability, continuity and
         regularity of the service, including lines and services sold by the
         Company and/or its designated commercial agent and disburse all
         collected revenues due to Company/Agent for the sales of the lines and
         services.

f)       Permit the use of its installations when required by the Company to
         perform equipment installations, interconnections, testing, and any
         other activity related to the implementation/operation of the project.

g)       Provision of the services to the users in the coverage zones
         established; and to the billing and collections for the corresponding
         connection fees, monthly charges, user fees and other charges from the
         provision of services to the users.

h)       Keep separate accounting and financial records of the project according
         with international accounting practices.

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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


i)       Perform, timely, according to project schedule and engineering the
         adequate extensions to existing equipment to interconnect the project
         with the existing infrastructure.

j)       Buyer agrees to grant the Company and/or its designated agent full
         rights and privileges to conduct marketing and promotional activities
         and use of information and the facilities related to this contract to
         showcase and demonstrate its equipment capacities and attributes to
         other potential clients.

k)       Buyer agrees to grant Company the necessary Government of the Republic
         of Haiti importation exemptions free of any import duties, levies and
         restrictions to import test equipment, tools, vehicles, computing
         equipment, office equipment, miscellaneous hardware, and other elements
         needed for the turnkey implementation of the contracted project.

l)       Buyer agrees to facilitate Company personnel and its sub-contractors
         and respective family members the necessary entry visas and work
         permits to live and work in the Republic of Haiti during the course of
         the project.

m)       Buyer agrees to reinvest in the subsequent project phases, the revenues
         from project's revenue generation.

RIGHTS OF BUYER:

a.       Exploit the equipment and keep the financial product from the revenue
         of the equipment once the financing of project and all other related
         charges has been covered.

b.       Participate in the project field installation activities to obtain
         knowledge of the equipment and of the processes of installation and
         placement in operation, for which TELECO will appoint personnel
         properly qualified under the supervision of the Company.

c.       Hands-on training to receive technology and knowledge transfer for the
         operation, exploitation and corrective and preventive maintenance of
         the contracted equipment/solution.

RIGHTS OF COMPANY

a)       Access to Buyer premises to install the equipment, perform equipment
         test, interconnections or any other activities related to the project
         execution and integration to the existing network.

b)       Company or a firm representing company must have full access to
         accounting files and Accounting Books of Project and to all information
         related with the Project. Company could conduct audits to the project'
         operations. To do such audits, Company reserves the right to do it
         directly or through a specialized firm that will be hired for such
         purpose. In such cases, Buyer shall be notified [*] before such audits
         are going to be conducted. All project information shall be
         confidential and could not be released without the written consent of
         both parties.

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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


c)       To receive the payments, to cover the investment made in equipment and
         services as well as the financing charges and any other charges related
         to the project, from the total revenues deposited in the escrow account
         and collected from the subscribers connected to the installed equipment
         with the project.

d)       To receive interest at an interest rate [*] for any delayed payment
         whose delay exceeds [*] days after payment due date.

11       PROJECT COORDINATION COMMITTEE AND EXECUTIVE BOARD

Company and Buyer agree to install [*] after Contract Signature a Project
Coordination Committee "The Committee" whose main purpose will be to coordinate
all activities related to project execution and performance and solve any
differences that may arise during contract execution. The Committee will consist
of one representative from TELECO and one representative from Company. The
Committee shall be responsible for the development and coordination of
operational aspects, commercial aspects and the development of procedures to
effectively provide service to the end users as well as any action required to
secure the success and profitability of the project. Any action or
recommendation from the Committee shall be based on the Contract Terms and
Conditions.

The Committee shall meet at least once every week and produce a weekly report or
on a per call basis as required by any of the two members appointed to it. For
each of the members, each party shall appoint a substitute that shall represent
the principal in the event that this one cannot assist to any specific meetings.
Extraordinary meetings could be call by either party, meeting place and date
shall be agreed, if no agreement is mutually reach, meeting shall be enforce to
be held 8 calendar days after written notification of request of meeting.

If any matter is not resolved by the Committee, the General Director of TELECO
or its designated representative and the Sales Vice president of Company or its
designated representative shall constitute the Executive Board "The Board" of
the Project and will solve any matter regarding this. In any event any
recommendation or resolution of the Committee, which involves or commits money
beyond [*] from either side or a significant deviation from deliverables
(schedule or functions) or any expansion beyond [*] shall be approved by the
Board.

12       FUNCTIONAL VERIFICATION

Company shall perform functional Verification tests in accordance with the
Functional Verification Test procedure to be provided by Company prior to the
commencement of the tests. The BUYER undertakes and agrees to ensure that there
will be no delay in the commencement or performance of the Functional
Verification by any act or omission of the BUYER or any of BUYER's employees,
agents or representatives.

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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


13       LICENSES

Company hereby grants BUYER a [*] License to use the Software and the
Documentation solely in connection with the Products purchased by BUYER pursuant
to this Agreement, at the Site(s) and for the purpose and in the manner for
which the Product was designed and intended by Company, all in accordance with
the software license provisions set forth in EXHIBIT B attached hereto. In no
event shall BUYER have the right to market, sell, lease, license, sublicense,
assign, distribute or otherwise transfer the Products or any part thereof
without the express prior written consent of Company.

BUYER shall not remove nor alter, nor permit the removal or alteration of, any
Company or third-party trademarks, copyright notices, tags, labels or other
identifying markings placed on any Products, products, packages or containers
provided hereunder without the prior written consent of Company. In no event
shall BUYER have the right to market, sell, lease, license or otherwise
distribute the Products.

14       TITLE AND RISK

Title to the Product shall pass to BUYER upon Company's shipment of the
Product(s) to BUYER [*]. Risk of loss to the Product shall pass to BUYER in
accordance with [*].

Title to all Software and Documentation shall remain vested in Company. All
intellectual property rights to the Product, Documentation, Applications and
Software or any part thereof, including without limitation all patents,
trademarks, trade names, copyrights, designs, know how and trade secrets shall
remain vested in Company and its licensors at all times.

15       WARRANTY

15.1     Limited Warranty.

Company warrants that the non-Software Products, as delivered, will be free from
defects in materials and workmanship during the Warranty Period.

This warranty will apply to hardware items directly manufactured by Company
except the telephone subscriber terminal equipment, shall expire after [*] from
the date of shipment or [*] from the date of functional verification is
completed as defined herein this contract's Clause 1 Definitions, numerals 1.1
"Functional Verification" and 1.2 "Commercial Service" and Clause 12 "Functional
Verification". However, with respect to the telephone terminal equipment, the
Company agrees to provide the Customer a [*] additional supply of terminals over
the purchased quantity to support the warranty of units found defectived
directly attributed to manufacturing defects.

The warranty service shall be administered in accordance with Company, Inc.
recommendations and practices in effect at the time of shipment. Buyer shall
notify Company, Inc. in writing immediately upon discovery of any defects within
the warranty period for return authorization and instructions.

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STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
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Upon receipt of the returned Equipment prepaid by Buyer, Company, Inc.' sole
obligation shall be to repair and/or replace the part found to be defective, at
its option. Replacement Equipment may be new, or repaired. Returned replaced
Equipment shall become Company, Inc.' property. Replacement Equipment shall be
warranted for the unexpired portion of the returned Equipment's warranty.

The foregoing warranty is contingent upon proper use of the Products in the
applications for which they were intended. This warranty shall not apply to
defects or failures to a Product which was subjected to: (i) accident, neglect
or misuse; (ii) failure of or defect in electrical power, external electrical
circuitry, air-conditioning or humidity control; (iii) the use of software or
Product not provided by Company or approved in writing by Company for use with
the Product; (iv) unusual stress; (v) improper use or maintenance; (vi)
electro-static discharges; (vii) unusual operational or environmental stress or
(vii) modification, adjustment, repair, service or installation by any party
other than Company, or persons authorized and certified by Company.

Company's sole liability and BUYER's exclusive remedy shall be limited to
repair, replacement, credit or refund, [*]. [*]shall pay all freight charges for
shipment of any replacement Product to BUYER during the Warranty Period.
Replacement or repair of a Product shall not extend the original warranty for
that Product or repair part.

15.2     Disclaimer of Warranties

COMPANY MAKES NO WARRANTIES OR CONDITIONS, EXPRESS, STATUTORY, IMPLIED, OR
OTHERWISE, AND COMPANY SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES AND
CONDITIONS OF NONINFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. NOTWITHSTANDING THE FOREGOING, COMPANY DOES NOT EXCLUDE LIABILITY TO
THE EXTENT THAT SUCH LIABILITY MAY NOT BE EXCLUDED OR LIMITED BY LAW.

15.3     Inherently Dangerous Applications.

THE PRODUCTS ARE NOT AUTHORIZED FOR USE AS CRITICAL COMPONENTS IN LIFE SUPPORT
DEVICES OR SYSTEMS OR FOR USE IN AVIATION, NUCLEAR OR ANY OTHER INHERENTLY
DANGEROUS APPLICATION WITHOUT THE EXPRESS WRITTEN APPROVAL OF THE MANAGING
DIRECTOR OF COMPANY. LIFE SUPPORT DEVICES OR SYSTEMS ARE THOSE WHICH ARE
INTENDED TO SUPPORT OR SUSTAIN LIFE AND WHOSE FAILURE TO PERFORM CAN REASONABLY
BE EXPECTED TO RESULT IN A SIGNIFICANT INJURY TO THE USER. CRITICAL COMPONENTS
ARE THOSE COMPONENTS WHOSE FAILURE TO PERFORM CAN REASONABLY BE EXPECTED TO
CAUSE FAILURE OF A LIFE SUPPORT DEVICE OR SYSTEM OR AFFECT ITS SAFETY OR
EFFECTIVENESS.

                                                                            -14-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


15.4     Product Returns

In order to return Product that BUYER believes is defective, BUYER shall (i)
notify Company in writing that such Product is believed to be defective and
furnish a detailed explanation of any alleged problem; (ii) obtain a RMA number
from Company for the alleged defective Product; and (iii) within [*] of receipt
of the RMA number, return such Product to Company, [*], with the RMA number
prominently attached to Company's facility in Miami, U.S.A. or such other
location as Company may designate in writing in each case during the Warranty
Period.

BUYER shall pay shipping charges for returned Product shipped to Company and
Company shall pay shipping charges for returned product shipped to BUYER.

16       INDEMNIFICATION

16.1     Indemnity.

BUYER agrees that Company has the right to defend, or at its option to settle,
and Company agree, at its own expense, to defend or at its option to settle, any
third party claim, suit or proceeding (collectively, "Action") brought against
BUYER alleging the Products infringe any United States patent, copyright or
Trademark in existence as of the Effective Date and enforceable in the BUYER's
country, subject to the limitations hereinafter set forth.

Company will have sole control of any such Action or settlement negotiations,
and Company agrees to pay, subject to the limitations hereinafter set forth, any
final judgment entered against BUYER on such issue in any such Action defended
by Company. BUYER agrees that Company will be relieved of the foregoing
obligations unless BUYER notifies Company promptly in writing of such Action,
gives Company authority to proceed as contemplated herein, and gives Company
proper and full information and assistance to settle and/or defend any such
Action. If it is adjudicatively determined, or if Company believes, that the
Products, or any part thereof, infringe any patent, copyright or trademark, or
if the sale or use of the Products, or any part thereof, is, as a result,
enjoined, then Company may, at its election, option, and expense: (i) procure
for BUYER the right under such patent, copyright or trademark to sell or use, as
appropriate, the Products or such part thereof; or (ii) replace the Products, or
part thereof, with other noninfringing suitable Products or parts; or (iii)
suitably modify the Products or part thereof; or (iv) remove the Products, or
part thereof, terminate distribution or sale thereof and refund the payments
paid by BUYER for such Products less a reasonable amount for use and damage.
Company will not be liable for any costs or expenses incurred without its prior
written authorization, or for any installation costs of any replaced Products.

16.2     Limitations

Notwithstanding the provisions of Section 14.1 above, Company has no liability
to BUYER for (i) any infringement of patent or copyright claims alleging
infringement by completed equipment or

                                                                            -15-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


any assembly, circuit, combination, method or process in which any of the
Products may be used but not covering the Products standing alone; (ii) any
trademark infringements involving any marking or branding not applied by or
requested by Company, or involving any marking or branding applied by Company at
the request of BUYER; or (iii) the modification of the Products, or any part
thereof, unless such modification was made by Company, where such infringement
would not have occurred but for such modifications.

DISCLAIMER. COMPANY'S LIABILITY ARISING OUT OF OR RELATING TO THIS SECTION 14
SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID BY BUYER TO COMPANY FOR THE
ALLEGEDLY INFRINGING PRODUCTS THAT ARE THE SUBJECT OF THE INFRINGEMENT CLAIM.
THE FOREGOING PROVISIONS OF THIS SECTION 14 STATE THE ENTIRE LIABILITY AND
OBLIGATIONS OF COMPANY AND THE EXCLUSIVE REMEDY OF BUYER AND ITS CUSTOMERS, WITH
RESPECT TO ANY ALLEGED PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT BY THE
PRODUCTS OR ANY PART THEREOF.

17       LIMITATION OF LIABILITY

Notwithstanding any other clause in this Agreement, in no event will Company be
liable for any special, indirect, incidental, punitive or consequential damages
(including without limitation any damages for loss of data, use or profits)
arising from or in connection with this Agreement or the use or performance of
any Product whether in an action based on contract, tort or any other legal
theory, whether or not Company has been notified of the possibility thereof.

Notwithstanding any other clause in this Agreement, in no event will Company's
total aggregate liability for any damages arising from or in connection with
this Agreement or the use or performance of any Product whether in actions based
on contract, tort or any other legal theory, and whether or not Company has been
notified of the possibility thereof, exceed the price paid by the BUYER for the
relevant item or component of Product giving rise to the claim amortized on a
straight line basis over [*] from the date of the applicable purchase order.

18       TERMINATION

This Agreement may be terminated by either party:

a) if the other party is in material breach of this Agreement and fails to cure
such breach within [*] of receiving written notice of the breach. Provided that
the breaching party continues to make diligent and good faith efforts to cure
the breach, the breaching party shall be granted a [*] extension of time to cure
the breach.

b) Upon [*] prior written notice if any of the following circumstances remain
uncured: (i) if the other party becomes insolvent or unable to pay its debts in
the ordinary course of its business; (ii) if a voluntary or involuntary petition
under applicable bankruptcy laws is filed by or against the other

                                                                            -16-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


party; (iii) if a receiver is appointed for the business affairs of the other
party or the other party makes an assignment for the benefit of creditors; or
(iv) if the other party liquidates or ceases doing business as a going concern.

Any provision of this Agreement, which by its nature survives termination, shall
survive termination of this Agreement.

19       TRAINING

Company shall offer technical training for BUYER's personnel in accordance with
EXHIBIT F

20       GOVERNING LAW AND REGULATIONS

BUYER agrees to comply with all relevant laws, export or otherwise of the United
States to assure that the Product and Documentation are not exported or
otherwise transferred in violation of such laws. Prior to exporting or
transferring the Product or Documentation, BUYER shall obtain Company's written
consent and a license from the U.S. Department of Commerce and/or any other
appropriate agency of the U.S. Government, as required.

21       GENERAL PROVISIONS

21.1     No Liability for Other Party's Acts

Neither party shall be liable for any losses, injuries, or damages caused by or
attributable to the acts and/or omissions of the other party, its employees, or
its agents.

21.2     Independent Contractors

The parties hereto agree that they are independent contractors. This Agreement
shall not be construed to create or result in a partnership or joint venture
between the parties hereto, nor to make either party the agent of the other
party. This Agreement shall not create any third party beneficiary rights.

21.3     Notices

Any notices, requests, demands or other communications required or permitted
under this Agreement shall be in writing and shall be sufficiently communicated
if delivered (i) in person or by means of a recognized courier service, (ii)
sent by facsimile with written confirmation sent by regular airmail, or (iii) if
sent by registered airmail, return receipt requested, to the recipient party at
its address appearing in the preamble hereof or to such other address as such
party may have designated for such purpose by notice previously given to the
other party in accordance with the terms hereof.

                                                                            -17-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION

- ------------------------------------- ------------------------------------------
COMPANY:                              UTStarcom, Inc.
                                      Attn: Russell Boltwood
                                      Title: Director Legal Affairs
                                      1275 Harbor Bay Parkway
                                      Alameda, Ca.  94502 USA
                                      Fax:  +1 510 864 8802
- ------------------------------------- ------------------------------------------

BUYER:                                Telecommunications D'Haiti S.A.M.
                                      Title: Alphonse Inevil
                                      Title: Director
                                      FAX: +509 45 2775
- ------------------------------------- ------------------------------------------

Notices shall be deemed to have been received if delivered in person, on the
same day; if sent by facsimile, 24 hours after transmission; if sent by
registered mail, seven (7) days after deposit into the respective national mail
Product.

21.4     Security Interest

Company reserves, and BUYER hereby grants to Company, a security interest in [*]
until Company has received payment in full. BUYER agrees at Company's request to
execute any and all financing statements and to take such other action as
Company may reasonably request to carry out the intent of this Section.

21.5     No Assignment

Neither party may assign its rights and/or obligations hereunder without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. Notwithstanding the aforementioned, Company reserves the
right and Buyer agrees, that Company could assign to a third party institution
its financial rights related to this Agreement.

21.6     Jurisdiction

This Agreement shall be governed by, and construed in accordance with, the laws
of California, U.S.A., without reference to the conflict of laws provisions
thereof.

21.7     Publicity

The substance and timing of any written or other public disclosure relating to
this Agreement, in the form of a press release or similar disclosure shall be
subject to the prior written approval of both parties.

                                                                            -18-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


21.8     No Violation of Applicable Law

If any provision of this Agreement is held to be invalid under any applicable
law, such provision shall be ineffective to the extent of such violation without
invalidating other provisions of this Agreement.

21.9     Conflicting Exhibits

In the event that any provision of the Exhibits or any other attachments to this
Agreement are deemed to be in conflict with the provisions of this Agreement,
the provisions of this Agreement shall control.

21.10    No Waiver

Any failure by either party to enforce strict performance by the other party of
any provision herein shall not constitute a waiver of the right to subsequently
enforce such provision or any other provision of this Agreement.

21.11    Arbitration

Any controversy or claim arising out of or related to this Agreement shall be
submitted to binding arbitration in San Francisco, State of California, U.S.A.
in accordance with the then prevailing International Chamber of Commerce ("ICC")
procedural Arbitration Rules. Any such arbitration shall be held in English
before a single arbitrator who shall be knowledgeable in telecommunications and
data processing Products. The parties consent and submit to the jurisdiction of
the Courts of the State of California, United States of America in connection
with any award made by the arbitrator(s). Each party shall bear its own costs
and expenses (including attorneys' fees) incurred in connection with this
section.

21.12    Non-Monetary Remedies

The parties hereby acknowledge that monetary damages may not be a sufficient
remedy for breaches of the licensing provisions set forth in EXHIBIT B or of the
Non-Disclosure Agreement annexed hereto as EXHIBIT C and that either party may
be entitled to such injunctive or equitable relief for actions or claims
alleging such breach(es) as may be deemed proper by a court of competent
jurisdiction.

21.13    Force Majeure

Neither party shall be liable for damages resulting from its failure to perform
its obligations hereunder (other than the obligation to make payments owing to
the other party) if such failure arises out of or in connection with any act of
war, civil disturbance, strikes, earthquake, flood, embargo, failure or
unavailability of means of communication, failure or unavailability of means of

                                                                            -19-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


transportation or any other cause or event of force majeure beyond the
reasonable control of the party failing to perform or of its agents and
contractors.

21.14    Entire Agreement

This Agreement and the Exhibits hereto constitute the entire agreement between
Company and BUYER relating to the subject matter hereof and supersede all
statements, representations, and understandings, which have been made by either
party or their agents or representatives prior to the execution of this
Agreement. No modification of this Agreement shall be binding upon either party
unless made in writing and executed on behalf of that party by its duly
authorized representative.

21.15    May be Executed in Counterparts

This Agreement may be executed in counterparts and by facsimile such that when
taken together the counterparts shall be deemed a true original of the Agreement
between the parties.

21.16    Contract Validity

The validity of this Contract is contingent upon TELECO obtaining the License
approval to operate in the proposed solution frequency band.

22       EXHIBIT A: SECTION 7 ECONOMIC PROPOSAL AND EQUIPMENT LISTS.

22.1     Price Validity

PRICES ARE BASED ON BUYER'S ACQUISITION OF A MINIMUM OF [*] WIRELESS ACCESS
LINES AS DEFINED IN THE ANNEXES TO EXHIBIT D.

Pricing as specified here will be honored as herein listed for the term and
conditions set forth in this agreement.


                                                                            -20-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


IN WITNESS WHEREOF, a duly authorized representative of each party has executed
this Agreement as of the date set forth below.

      COMPANY                                                      BUYER

By:   /s/ OMAR A. GRAIBE                       By:  /s/ JEAN-FRANCOIS CHAMBLAIN
      --------------------------------              ----------------------------
Name:  Omar A. Graibe                          Name:  Jean-Francois Chamblain

Title:  Managing Director, Caribbean           Title:  Directeur General,
        and Latin America                              Telecommunications
                                                       d'Haiti S.A.M.

Date:  12/05/00                                Date:  12/05/00




                                                                            -21-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION



EXHIBIT B: END-USER SOFTWARE LICENSE

The following terms and conditions shall constitute the license ("License") by
which software that accompanies, whether by being embedded into a hardware
element or component or by means of a separate media such as diskette or compact
disc, or otherwise ("Software"), is transferred in connection with products
("Products") supplied by Company ("Licensor").

GRANT. The person who acquires any Product ("Licensee") may install and use the
Software [*]. Licensee may copy the Software only for backup purposes, provided
that Licensee reproduces all copyright and other proprietary notices that are on
the original copy of the Software.

RESTRICTIONS. Licensee may not use, copy, modify, or transfer the Software, or
any copy thereof, in whole or in part, except as expressly permitted by this
License. Licensee may not reverse engineer, disassemble, decompile, or translate
the Software, or otherwise attempt to derive the source code of the Software, or
permit any other person to do any of the foregoing. Any attempt to transfer any
right, duty or obligation in this License is void. Licensee may not rent, lease,
loan, resell for profit, or distribute the Software, or any part thereof.
License may not modify or create derivative works based on the Software in whole
or in part.

OWNERSHIP. The Software is not sold but is only licensed to Licensee for use
only in accordance with this License, and Licensor reserves all rights not
expressly granted to Licensee.

COPYRIGHT. United States copyright laws and international treaty protect the
Software. Licensor or its suppliers or licensors owns the Software.

TERM. This License will terminate immediately upon notice to Licensee if
Licensee materially breach any term or condition of this License. Licensee
agrees upon termination promptly to destroy the Software and all copies thereof.

WARRANTY DISCLAIMER. THE SOFTWARE IS PROVIDED TO LICENSEE "AS IS" AND LICENSOR
AND ITS SUPPLIERS EXPRESSLY DISCLAIM ALL WARRANTIES INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT.

LIMITATION OF REMEDIES. IN NO EVENT SHALL LICENSOR OR ITS SUPPLIERS BE LIABLE TO
LICENSEE OR TO ANY OTHER PERSON FOR ANY LOST PROFIT, CORRUPTION OR LOSS OF DATA,
INTERRUPTION OF BUSINESS, OR OTHER EXEMPLARY, SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGE OF ANY KIND ARISING OUT OF THE USE OR INABILITY TO USE THE
SOFTWARE, EVEN IF LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS OR
DAMAGE AND WHETHER OR NOT SUCH LOSS OR DAMAGE IS FORESEEABLE.

                                                                            -22-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


EXPORT LAW. The Software and related technology are subject to U.S. export
control laws and may be subject to export or import regulations in other
countries. Licensee agrees strictly to comply with all such laws and regulations
and acknowledge that Licensee has the responsibility to obtain such licenses to
export, re-export or import as may be required.

GENERAL. The laws of the State of California, USA, will govern this License. The
Federal and State Courts located in San Francisco County, California, USA shall
have sole jurisdiction over all disputes arising in connection with this
License. If any provision of this License is held to be unenforceable, that
provision will be removed and the remaining provisions will remain in full
force. This License is the complete and exclusive statement of the agreement
between Licensee and Licensor and supersedes all prior agreements, oral or
written, and all other communications between Licensee and Licensor in relation
to the subject matter of licensing the Software.

Licensee agrees to the terms and conditions set forth above in this License as
of the effective date of this agreement date stated below:

23       EXHIBIT C:  MUTUAL NON-DISCLOSURE AND CONFIDENTIALITY AGREEMENT

THIS AGREEMENT IS ENTERED INTO BY AND BETWEEN COMPANY, INC., 1275 HARBOR BAY
PARKWAY, SUITE 100, ALAMEDA, CA 94502 ("Company") AND TELECOMMUNICATIONS D'HAITI
S.A.M. ("BUYER").

1.       This Agreement shall apply to all confidential and proprietary
         information disclosed by the parties to the other, including but not
         limited to confidential product planning information, product
         specifications and other proprietary and business and technical
         information (hereinafter referred to as "Confidential Information"). As
         used herein, "Confidential Information" shall be in written, graphic,
         machine recognizable or other tangible or electronic form and marked
         "Confidential" or "Proprietary" or shown by implication that it is
         imparted or disclosed in confidence, or if disclosed orally or
         visually, shall be reduced to writing in summary form, identified as
         "Confidential Information" and sent to the Receiving Party within 15
         days following such oral or visual disclosure.

2.       Company and BUYER mutually agree to hold the other party's Confidential
         Information in strict confidence and not to disclose such Confidential
         Information to any third parties except after receiving prior consent
         by the disclosing party in writing. Company and BUYER shall use the
         same degree of care to avoid disclosure of such Confidential
         Information as each employs with respect to its own proprietary
         information of like importance or a greater degree if reasonable.

3.       Company and BUYER agree that they will not use the other party's
         Confidential Information for any purpose other than for the intended
         purposes, without the prior written permission of the other party.

                                                                            -23-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


4.       Company and BUYER mutually agree they may disclose such Confidential
         Information to their respective responsible employees with a bona fide
         need to know, and Company and BUYER agree to instruct all such
         employees not to disclose such Confidential Information to third
         parties and will ensure that such employees have agreed to similar
         non-disclosure provisions with Company or the BUYER, its own employees
         respectively.

5.       Information shall not be deemed Confidential Information and the
         receiving party shall have no obligation regarding any information for
         which it can be proven in written documentation (a) is already known to
         the receiving party at the time that it is disclosed without use of the
         Confidential Information; (b) is or becomes publicly known through no
         wrongful act contrary to this Agreement of the receiving party; (c) is
         rightfully received from a third party without obligation of confidence
         or restriction on disclosure from receiving party and without breach of
         this Agreement; (d) is independently developed by the receiving party
         without use of Confidential Information; (f) is disclosed pursuant to a
         requirement of a valid court order provided that the Receiving Party
         provides (i) prior written notice for the disclosing party of such
         obligation and (ii) the opportunity to oppose such disclosure and (iii)
         it is disclosed for the extent and purposes or the order only.

6.       All Confidential Information shall remain the property of the
         disclosing party, and upon the written request of either party, the
         other party shall promptly return to the disclosing party all
         Confidential Information disclosed to it and all copies thereof or at
         the disclosing party's option shall destroy all such Confidential
         Information and shall provide the receiving party with a certificate
         that all Confidential Information has been destroyed.

7.       Company and BUYER recognize and agree that nothing contained in this
         Agreement shall be construed as granting any rights, by license or
         otherwise to any Confidential Information disclosed pursuant to this
         Agreement.

8.       This agreement shall be binding upon and inure to the benefit of the
         party's successors and assigns. This Agreement shall not be assignable
         by either party for the written consent of the other party, and any
         purported assignment not permitted hereunder shall be void. This
         document constitutes the entire agreement between the parties with
         respect to the subject matter hereof, and shall supersede all previous,
         understandings and agreements, either oral or written, between the
         parties or any official or representative thereof.

9.       The obligations undertaken by each party pursuant to this Agreement
         shall remain in effect for three years from the last date of disclosure
         of Confidential Information, and shall survive any termination or
         expiration hereof.

10.      None of the Confidential Information disclosed by the parties
         constitutes any representation, warranty, assurance, guarantee or
         inducement by either party to the either with respect to the
         infringement of trademarks, patents, copyrights; any right of privacy;
         or any rights of third persons.

                                                                            -24-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


11.      The parties hereto are independent contractors.

12.      This Agreement may be modified only by written amendment signed by both
         parties. This Agreement shall be construed in accordance with the laws
         of the State of California without regard to the conflict of laws
         provisions and shall be subject to the jurisdiction of the courts of
         the State of California.

13.      The receiving party may make copies of Confidential Information only to
         the extent necessary for the purpose of this Agreement provided that
         the copies are marked "Confidential" and treated as Confidential
         Information in accordance with the terms of this Agreement.

14.      Accordingly, nothing in this Agreement will be construed as a
         representation or inference prohibiting either party from developing
         products, having products developed for it, from entering into joint
         ventures, alliances, or licensing arrangements that all without
         violation of this Agreement, compete with the products or systems
         embodying the Confidential Information.


                                                                            -25-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION



24       EXHIBIT D: BUSINESS PLAN AND PROJECT COMMERCIAL MILESTONES

25       EXHIBIT E: PROJECT IMPLEMENTATION SCHEDULE

26       EXHIBIT F: TRAINING AND TECHNOLOGY TRANSFER



                                                                            -26-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION










                                    EXHIBIT A

                           PRICES AND EQUIPMENT LISTS

                                       [*]




                                                                            -27-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION











                                    EXHIBIT D

                                  BUSINESS PLAN

                                       AND

                          PROJECT COMMERCIAL MILESTONES

                                       [*]




                                                                            -28-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION













                                    EXHIBIT E

                         PROJECT IMPLEMENTATION SCHEDULE

                                       [*]




                                                                            -29-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION



















                                    EXHIBIT F

                                    TRAINING




                                                                            -30-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


                                 TRAINING COURSE

                      Participants:         [*]

                      Time:                 [*]

                      Duration:             [*]

OBJECTIVES:

- -    Describe the porposed solution features and characteristics, including an
     introduction to the PHS air interface characteristics and to facilitate
     network planning and system configuration.

- -    Describe the features and functions of each component of the proposed
     solution equipment set, to support the operation and maintenance of the
     equipment by Teleco's personnel during and after the installation.

- -    Train personnel in the use of the NETMAN Network Management System as art
     of its operations with the various elements of the proposed solution.

Training Course Summary:

[*]


                                                                            -31-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION














                                    EXHIBIT G

                          FINAL ACCEPTANCE CERTIFICATE



                                                                            -32-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


                          FINAL ACCEPTANCE CERTIFICATE

DATE:
      ---------------------

CONTRACT #:
            --------------------------------

PHASE #:
         --------------------------------------------

PHASE AMOUNT:
             ----------------------------------------

CUSTOMER:
         ---------------------------------------------

BY ITS SIGNATURE BELOW, THE ABOVE-NAMED CUSTOMER CERTIFIES THAT:

1)       WITH RESPECT TO THE CONTRACT IDENTIFIED ABOVE, THE CUSTOMER HAS FULLY
         ACCEPTED DELIVERY OF THE EQUIPMENT DESCRIBED IN THE ABOVE-REFERENCED
         CONTRACT PHASE, WITH TITLE FULLY PASSING TO THE CUSTOMER.

2)       INSTALLATION OF THE EQUIPMENT HAS BEEN FULLY COMPLETED FOR THE CUSTOMER
         BY UTSTARCOM AND/OR ITS AGENTS OR SUBCONTRACTORS.

3)       ALL TRIAL PERIODS, PRELIMINARY TESTING, COMMISSIONING AND FINAL
         ACCEPTANCE TESTING AS REQUIRED FOR THE ABOVE-DESCRIBED PHASE HAS BEEN
         COMPLETED TO THE FULL SATISFACTION OF THE CUSTOMER.

4)       ALL SERVICES TO BE PROVIDED TO THE CUSTOMER PRIOR TO AND AS A PART OF
         FINAL ACCEPTANCE TESTING, AS REQUIRED BY THE ABOVE-DESCRIBED CONTRACT,
         HAVE BEEN SUBSTANTIALLY COMPLETED TO THE FULL SATISFACTION OF THE
         CUSTOMER.

5)       UTSTARCOM IS ENTITLED TO FULL PAYMENT OF THE CONTRACT AMOUNT FOR THE
         PHASE IDENTIFIED ABOVE.

6)       THE CUSTOMER'S SIGNATURE OF THIS FINAL ACCEPTANCE CERTIFICATE IN NO WAY
         RELIEVES UTSTARCOM OF ANY WARRANTY, POST-ACCEPTANCE MAINTENANCE, OR
         EQUIPMENT UPGRADE OBLIGATIONS CONTAINED WITHIN THE ABOVE-REFERENCED
         CONTRACT.

7)       THIS CERTIFICATE SUPERSEDES ANY CONTRARY ORAL OR WRITTEN AGREEMENTS OR
         NEGOTIATIONS THAT MAY HAVE OCCURRED PRIOR TO THE SIGNING OF THIS
         CERTIFICATE.


- ----------------------------------------
NAME


- ----------------------------------------
TITLE


- ----------------------------------------
CUSTOMER NAME


- ----------------------------------------

                                                                            -33-
<PAGE>

STRATEGIC ALLIANCE [*]                                    CONTRACT NO. HT 112300
TELECO NETWORK EXPANSION


                           MEMORANDUM OF UNDERSTANDING

        REFERENCE: STRATEGIC ALLIANCE [*] LINES TELECO NETWORK EXPANSION



Pursuant to Contract reference No. HT112300, Strategic Alliance between
UTStarcom Inc, and TELECO for the provision of [*] wireless access lines of PAS
equipment manufacture by UTStarcom, Inc. UTStarcom hereby agrees to provide
TELECO [*] the new software releases that become commercially available for this
market, during a maximum period of [*] after the completion of last phase of
project. [*] per [*] is usually issued.

This MoU will be superceded by a formal service contract for software rigth to
use upgrades and does not involve the provision of any additional hardware
required for the software release implementations required for new features or
functions.

By Telecommunications d' Haiti S. A. M.         By UTStarcom, Inc





Jean Francois Chamblain                         Omar A. Graibe
Directeur General                               CALA Managing Director

                                                                            -34-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>9
<FILENAME>a2040014zex-21_1.txt
<DESCRIPTION>EXHIBIT 21.1
<TEXT>

<PAGE>
                                                                    EXHIBIT 21.1

                              LIST OF SUBSIDIARIES

UTStarcom China Ltd., a company organized under the laws of the People's
Republic of China.

Hangzhou UTStarcom Telecommunications Co., Ltd., a company organized under the
laws of the People's Republic of China.

Guangdong UTStarcom Telecom Co., Ltd., a company organized under the laws of the
People's Republic of China.

AbacusChina, Inc., a company organized under the laws of the Cayman Islands.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>10
<FILENAME>a2040014zex-23_1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>

<PAGE>
                                                                    EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS

    We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 333-44548) of UTStarcom, Inc. of our report
dated January 24, 2001 relating to the financial statements, which appears in
this Form 10-K. We also consent to the incorporation by reference of our report
dated January 24, 2001 relating to the financial statement schedules, which
appears in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP

San Francisco, CA
February 28, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>11
<FILENAME>a2040014zex-23_2.txt
<DESCRIPTION>EXHIBIT 23.2
<TEXT>

<PAGE>
                                                                    EXHIBIT 23.2

                        CONSENT OF INDEPENDENT APPRAISER

    We hereby consent to the use in the Annual Report on Form 10-K (Reg. No.
000-29661) of UTStarcom, Inc. ("UTStarcom"), and any amendments thereto, and any
other filings pursuant to the Securities Exchange Act of 1934, as amended (the
"Public Filings"), of all summary information contained therein relating to our
independent appraisal of Wacos, Inc. ("Wacos") in connection with the
acquisition of Wacos by UTStarcom in December 1999. We also consent to the
references to our firm in the Notes to Consolidated Financial Statements
contained in the Public Filings.

WILLAMETTE MANAGEMENT ASSOCIATES

Signature:  /s/ STEVEN D. GARBER
        ----------------------------------------------

Date: February 13, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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