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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001012870-01-501268.txt : 20010620
<SEC-HEADER>0001012870-01-501268.hdr.sgml : 20010620
ACCESSION NUMBER:		0001012870-01-501268
CONFORMED SUBMISSION TYPE:	S-3
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20010619

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			UTSTARCOM INC
		CENTRAL INDEX KEY:			0001030471
		STANDARD INDUSTRIAL CLASSIFICATION:	COMMUNICATIONS EQUIPMENT, NEC [3669]
		IRS NUMBER:				521782500
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		S-3
		SEC ACT:		
		SEC FILE NUMBER:	333-63356
		FILM NUMBER:		1663479

	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>S-3
<SEQUENCE>1
<FILENAME>ds3.txt
<DESCRIPTION>FORM S-3
<TEXT>

<PAGE>

     As filed with the Securities and Exchange Commission on June 19, 2001
                                                     Registration No. 333-

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

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                                   FORM S-3
                            REGISTRATION STATEMENT
                                     Under
                          The Securities Act of 1933

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

                                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
          incorporation or organization)                         Identification Number)
</TABLE>

                            1275 Harbor Bay Parkway
                           Alameda, California 94502
                                (510) 864-8800
  (Address, including zip code, and telephone number, including area code, of
                   Registrant's principal executive offices)

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

                                  Hong L. Lu
                     President and Chief Executive Officer
                                UTSTARCOM, INC.
                            1275 Harbor Bay Parkway
                           Alameda, California 94502
                                (510) 864-8800
(Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

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

                                  Copies to:

<TABLE>
<S>                                                <C>
                Carmen Chang, Esq.                              Alan F. Denenberg, Esq.
               Nora L. Gibson, Esq.                              Davis Polk & Wardwell
         Wilson Sonsini Goodrich & Rosati                         1600 El Camino Real
             Professional Corporation                             Menlo Park, CA 94025
                650 Page Mill Road                                   (650) 752-2000
               Palo Alto, CA 94304
                  (650) 493-9300
</TABLE>

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

   Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

   If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]

   If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]

   If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

   If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

   If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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

                        CALCULATION OF REGISTRATION FEE

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                       Proposed Maximum  Proposed Maximum
 Title of Each Class of Securities     Amount to be     Offering Price       Aggregate         Amount of
         to be Registered               Registered         Per Share      Offering Price   Registration Fee
- -----------------------------------------------------------------------------------------------------------
 <S>                                 <C>               <C>               <C>               <C>
 Common Stock $0.00125 par
  value..........................       10,350,000          $22.53         $233,185,500         $58,297
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(c) under the Securities Act, and is based upon the
    average of the high and low prices of the Registrant's common stock as
    reported on The Nasdaq National Market on June 14, 2001.

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

   The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission acting pursuant to said
Section 8(a) may determine.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the     +
+Securities and Exchange Commission is effective. This prospectus is not an    +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted.             +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                             Subject to Completion
                   Preliminary Prospectus dated June 19, 2001

PROSPECTUS

                                9,000,000 Shares

                                UTSTARCOM, INC.

                                  Common Stock

                       -----------

    UTStarcom is selling 6,050,000 shares and UTStarcom stockholders are
selling 2,950,000 shares.

    The shares are quoted on The Nasdaq National Market under the symbol
"UTSI." On June 18, 2001, the last sale price of the shares as reported on The
Nasdaq National Market was $21.94 per share.

    Investing in the common stock involves risks that are described in the
"Risk Factors" section beginning on page 6 of this prospectus.

                       -----------

<TABLE>
<CAPTION>
                                                                 Per Share   Total
                                                                 ---------   -----
     <S>                                                         <C>       <C>
     Public offering price.....................................      $         $
     Underwriting discount.....................................      $         $
     Proceeds, before expenses, to UTStarcom...................      $         $
     Proceeds, before expenses, to the selling stockholders....      $         $
</TABLE>

    The underwriters may also purchase up to an additional 1,350,000 shares
from UTStarcom, at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.

    Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

    The shares will be ready for delivery on or about     , 2001.

                       -----------

Merrill Lynch & Co.

         Banc of America Securities LLC

                    HSBC

                                                      U.S. Bancorp Piper Jaffray

                       -----------

                   The date of this prospectus is     , 2001.
<PAGE>

                           [INSIDE FRONT COVER PAGE]

                     PHOTOGRAPHS, DESCRIPTIONS AND CAPTIONS

Photographs depicting UTStarcom product line.

      Top: Color photos of WACOS, our IP-based multiservice softswitch.
Caption: "WACOS is an IP-based softswitching platform that supports both voice
and data services over wireless and wireline access networks. In one platform,
WACOS delivers the functions of a local switch, tandem switch, mobile switch,
VoIP gateway, SS7 gateway, IP router and Internet access server. WACOS enables
service providers' migration from existing circuit-switched platforms to a
next-generation, IP-based packet-switched architecture."

      Middle: Color photos of PAS, our wireless access system. Caption: "Our
PAS wireless access system transforms existing copper networks into high-
capacity wireless networks capable of providing both voice and data services
within a city or community. PAS enables service providers to quickly and
economically deploy wireless services in urban or suburban areas where minimum
or no cable infrastructures exist."

      Bottom: Color photos of AN-2000, our broadband access platform. Caption:
"The AN-2000 broadband access platform is a flexible access platform that
provides a complete solution for broadband voice and data services over fiber,
copper or wireless transmission media. AN-2000 delivers today's revenue-
generating services while enabling migration to future technologies and
services."
<PAGE>

                     [INSIDE GATE-FOLD OF FRONT COVER PAGE]

              IMAGES, DIAGRAM, DIAGRAM DESCRIPTIONS AND CAPTIONS.

1. Center: Diagram of a linked communications network depicting our AN-2000
   platform, PAS system and WACOS platform.

2. Center left: Diagram of an AN-2000 deployment. Traditional voice service
   connects to a central office switch over a standard digital interface. The
   central office switch connects to a remotely located AN-2000 central office
   terminal over a standard digital interface. Internet services connect to a
   data switch, which connects to the same central office terminal over a
   standard digital interface. The central office terminal connects to two AN-
   2000 remote terminals. The connections are made through a high performance
   robust digital transmission technology, known as SDH. A computer using our
   Netman software is connected to the central office terminal and the remote
   terminals. The remote terminals connect to subscribers to provide wireline
   telephone service, leased line, ISDN and xDSL.

3. Center middle: Diagram of a PAS deployment. Traditional voice service
   connects to a central office switch over a standard digital interface.
   Internet service connects to a data switch over a standard digital
   interface. The central office and data switches each connect to two separate
   PAS remote terminals over a standard digital interface. A PAS air traffic
   controller connects to each of the PAS remote terminals. A computer using
   our Netman software is connected to a PAS air traffic controller and the PAS
   remote terminals. The PAS remote terminals connect to radio port controllers
   over a standard digital interface. The radio port controllers provide
   wireless city-wide mobile phone, wireless local loop and mobile data
   services.

4. Center right: Diagram of a WACOS deployment. A private backbone connected to
   Internet service is connected to the local access network through a
   backbone/Internet gateway. A wireless gateway and a V5/PSTN gateway are
   located on the access network. The gateways connect with the PAS system and
   AN-2000 platform. The gateways also allow for large-scale wireless mobile
   phone service, voice over IP and broadband access. An operational support
   system provides customer care, billing and management capabilities.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
Prospectus Summary.......................................................   1
Risk Factors.............................................................   6
Forward-Looking Statements...............................................  24
Use of Proceeds..........................................................  25
Dividend Policy..........................................................  25
Price Range of Our Common Stock..........................................  26
Capitalization...........................................................  27
Dilution.................................................................  28
Selected Consolidated Financial Data.....................................  29
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  31
Business.................................................................  41
Management...............................................................  59
Principal and Selling Stockholders.......................................  63
Underwriting.............................................................  66
Legal Matters............................................................  69
Experts..................................................................  69
Where You Can Find Additional Information................................  70
</TABLE>

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

      You should rely only on the information contained or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized any person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. Information contained on our Web site is not part of this prospectus. We
are not, and the underwriters are not, making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus is accurate as of the date on
the front cover of this prospectus only. Our business, financial condition,
results of operations and prospects may have changed since that date.

      UTStarcom is registered as a trademark in the United States. UTStarcom,
WACOS, PAS, Airstar and WLL are registered as trademarks in China. This
prospectus also includes product names, trade names and trademarks of other
companies. All other product names, trade names and trademarks appearing in
this prospectus are the property of their respective holders.

      In this prospectus, references to and statements regarding China refer to
the People's Republic of China, excluding Hong Kong, Macau and Taiwan,
references to "U.S. dollars," or "$" are to United States Dollars, and
references to "Renminbi" are to Renminbi, the legal currency of China.

      Unless specifically stated, information in this prospectus assumes:

    . an exchange rate of 8.3 Renminbi for one U.S. dollar, the exchange
      rate in effect as of March 31, 2001; and

    . the underwriters will not exercise their over-allotment option and no
      other person will exercise any other outstanding options or warrants.

<PAGE>


                               PROSPECTUS SUMMARY

      This summary highlights selected information contained elsewhere in, or
incorporated by reference into, this prospectus. You should read the entire
prospectus carefully, including "Risk Factors" and the information incorporated
by reference, including the consolidated financial statements and related
notes, before making an investment decision.

                                UTStarcom, Inc.

      We design and market wireline and wireless broadband enabled access and
switching equipment that supports migration to next generation IP-based
networks. To date, substantially all of our sales have been to service
providers in China. Our integrated suite of products provides migration to next
generation networks and allows service providers to offer efficient and
expandable voice, data and Internet access services. Because our systems are
based on widely adopted international communications standards, service
providers can easily integrate our systems into their existing networks and
deploy our systems in new broadband, Internet Protocol and wireless network
rollouts. Internet Protocol, or IP, refers to a set of rules developed for
communicating information over the Internet.

      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 develop a communications infrastructure,
pent-up demand for communication services and robust economic growth. The
Ministry of Information Industry, the regulatory body that oversees
telecommunications in China, forecasts that communications equipment capital
expenditures will reach $31.7 billion in 2001, an increase of 26.8% from $25.0
billion in 2000. While growth in China's communications market is currently
driven predominantly by voice services, the increasing demand for data services
presents a growing opportunity. Gartner Group estimates that Internet
subscribers in China will grow from 8.9 million in 1999 to 51.0 million in
2004, representing a compound annual growth rate of 41.8%. 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 gross domestic product will grow at a compound annual rate of 7.7%
through 2005.

      Service providers require network solutions that address all of their
access needs and offer migration to next generation networks. These service
providers require products that enable them to quickly, and with minimal
incremental investment, address the changing demands of their subscribers for
expanded and more advanced services over time. Given the rapid growth in
emerging communications markets such as China, network solutions must be
scalable 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. In addition, service providers
require products that provide an integrated product solution and an economical
migration path to next generation networks. Our wireless and wireline broadband
enabled access and switching equipment is designed to deliver the following key
benefits to service providers:

      Migration to Next Generation Networks. Our products are designed with the
flexibility to allow service providers to deliver voice, data and video
services on a platform which offers the ability to migrate to next generation
broadband wireline and wireless networks based on IP and open standards. Our
products enable service providers to effectively time their network equipment
expenditures and rapidly introduce new services as demand warrants.
<PAGE>


      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. This flexibility is
particularly important in China, as the communications services market is
undergoing rapid change and growth. 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.

      Modular, Scalable Solution. All of our products are based on a modular
design, using a combination of off-the-shelf components and proprietary
hardware and software modules. By delivering a modular system, we enable
service providers to purchase only the functionality and capacity needed and to
purchase additional functionality and capacity over time as subscriber demand
warrants. Furthermore, as demand for communications services in China grows,
our scalable products 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.

      Open Standards-Based Platform. 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. Our open platforms allow service providers to
connect our products to equipment from multiple vendors and thus integrate
multiple voice and data traffic types within one system. 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 strengthened our relationships
with the Telecommunications Administrations in some of China's most modernized
and rapidly growing provinces. We also maintain 12 sales and customer support
sites in China that allow us to deploy a customer support representative onsite
anywhere in China within 24 hours. Additionally, through our relationships at
the national, provincial and local levels, we receive a flow of information on
market changes and insight into service provider needs and related
opportunities.

      Our objective is to be a leading provider of wireline and wireless
broadband enabled access and switching equipment. The principal elements of our
strategy are as follows:

    . leverage our installed base of systems and service provider
      relationships to capitalize on an increasing demand for data and
      broadband services;

    . continue to develop products and technologies for market-driven
      solutions and penetrate the emerging IP-based switching market;

    . further capitalize on China's large population, low teledensity and
      strong demand for communications services by increasing our sales,
      support and development staff and delivering new, market-driven
      products and technologies; and

    . leverage our success in China to address other growing communications
      markets.

      Service providers have installed approximately 4.6 million lines of our
PAS wireless access system, which we believe is the most widely deployed
wireless local access system in China. Approximately 3.0 million lines of our
wireline AN-2000 broadband access platform have been deployed in China,
including installations in the six largest regional communications markets. Our
newest product, WACOS, is targeted at

                                       2
<PAGE>

the emerging broadband, IP-based switching and wireless markets. In addition to
our efforts in mainland China, one of our customers recently announced the
launch of service for the first PAS network in Taiwan, and we have shipped our
AN-2000 product to a service provider in India.

      We incorporated in Delaware as Unitech Industries Inc. in 1991. 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. Our principal
executive offices are located at 1275 Harbor Bay Parkway, Alameda, California,
94502 and our telephone number is (510) 864-8800.

                                       3
<PAGE>

                                  The Offering

<TABLE>
 <C>                                            <S>
 Common stock offered by UTStarcom............    6,050,000 shares
 Common stock offered by the selling
  stockholders................................    2,950,000 shares
 Shares outstanding after the offering........  104,007,063 shares
 Use of proceeds..............................  We estimate that our net
                                                proceeds from this offering
                                                without exercise of the over-
                                                allotment will be approximately
                                                $     million. We intend to use
                                                these net proceeds for general
                                                corporate purposes, including
                                                research and development,
                                                expansion of our sales and
                                                marketing organization, and
                                                working capital. We may also
                                                use a portion of the proceeds
                                                from this offering to acquire
                                                or invest in complementary
                                                businesses, technologies or
                                                products.

                                                We will not receive any
                                                proceeds from the sale of
                                                shares by the selling
                                                stockholders.

 Risk factors.................................  See "Risk Factors" and other
                                                information included in this
                                                prospectus for a discussion of
                                                factors you should carefully
                                                consider before deciding to
                                                invest in shares of the common
                                                stock.

 Nasdaq National Market symbol................  UTSI
</TABLE>

      The number of shares that will be outstanding after the offering is based
on the number of shares outstanding as of May 31, 2001 and excludes:

    . options to purchase 13,666,082 shares of common stock outstanding under
      our stock option plans at a weighted average exercise price of $9.44
      per share, and 4,210,343 additional shares available for grant under
      our stock option plans as of May 31, 2001;

    . 3,760,195 shares of common stock reserved for issuance under our 2000
      Employee Stock Purchase Plan as of May 31, 2001; and

    . 32,000 shares of common stock reserved for issuance upon the exercise
      of warrants outstanding as of May 31, 2001, at a weighted average
      exercise price of $2.50 per share.

      The number of shares outstanding after the offering assumes that the
underwriters' over-allotment option is not exercised. If the over-allotment
option is exercised in full, we will issue and sell an additional 1,350,000
shares.

                                       4
<PAGE>

                      SUMMARY CONSOLIDATED FINANCIAL DATA

      The summary consolidated financial data below should be read together
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the consolidated financial statements and the related notes
incorporated by reference into this prospectus.

<TABLE>
<CAPTION>
                                                                           Three Months
                                   Year Ended December 31,               Ended March 31,
                          ---------------------------------------------- -----------------
                           1996     1997      1998      1999      2000    2000      2001
                          -------  -------  --------  --------  -------- -------  --------
                                                                           (unaudited)
                                     (in thousands, except per share data)
<S>                       <C>      <C>      <C>       <C>       <C>      <C>      <C>
Consolidated Statement
 of Operations Data:
Net sales...............  $35,542  $75,597  $105,167  $187,516  $368,646 $58,587  $119,181
Gross profit............   13,220   26,802    41,025    74,813   128,181  20,613    41,413
Operating income
 (loss).................    1,237   (3,390)    3,013    16,719    33,780  (2,583)   13,399
Net income (loss)
 applicable to common
 stockholders...........     (310)      30      (300)  (18,514)   27,013  (4,249)    9,362
Earnings (loss) per
 share:
  Basic(1)..............  $ (0.04) $  0.00  $  (0.04) $  (2.13) $   0.34 $ (0.12) $   0.10
  Diluted(2)............  $ (0.04) $  0.00  $   0.00  $  (2.13) $   0.27 $ (0.12) $   0.09
Shares used in per share
 calculations:
  Basic(1)..............    8,344    7,320     7,582     8,678    79,696  35,867    95,873
  Diluted(2)............    8,344    7,320    77,050     8,678   101,867  35,867   104,262
</TABLE>

<TABLE>
<CAPTION>
                                                             March 31, 2001
                                                         -----------------------
                                                          Actual  As Adjusted(3)
                                                         -------- --------------
                                                               (unaudited)
                                                             (in thousands)
<S>                                                      <C>      <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents(4)............................ $175,535
Working capital.........................................  383,892
Total assets............................................  642,054
Total short-term debt...................................   55,427
Total long-term debt....................................   12,048
Total stockholders' equity..............................  428,764
</TABLE>
- --------
(1) Based on the number of shares outstanding as of March 31, 2001. Excludes
    (i) options to purchase 14,525,512 shares of our common stock that were
    outstanding under our stock option plans as of March 31, 2001 with a
    weighted average exercise price of $8.30 per share, and 3,481,343
    additional shares that were available for grant under the stock option
    plans, (ii) 3,816,656 shares of common stock reserved for issuance under
    our 2001 Employee Stock Purchase Plan as of March 31, 2001, and (iii)
    32,000 shares of common stock reserved for issuance upon the exercise of
    warrants outstanding as of March 31, 2001 with a weighted average exercise
    price of $2.50 per share.

(2) Based on the number of shares outstanding as of March 31, 2001. Excludes
    (i) 3,481,343 shares available for grant under the stock option plans as of
    March 31, 2001, and (ii) 14,525,512 stock options outstanding as of March
    31, 2001 with a weighted average exercise price of $8.30 per share and
    32,000 warrants outstanding as of March 31, 2001 with a weighted average
    exercise price of $2.50 per share, if anti-dilutive.

(3) Adjusted to reflect the receipt of the estimated net proceeds from the sale
    of 6,050,000 shares of common stock offered by us in this prospectus at the
    assumed public offering price of $   per share, after deducting the
    estimated underwriting discount and offering expenses.

(4) Includes restricted cash of $5.1 million as of March 31, 2001.


                                       5
<PAGE>

                                  RISK FACTORS

      You should carefully consider the risks described below before making a
decision to buy our common stock. The risks and uncertainties described below
are not the only ones facing our company. If any of the following risks
actually occur, our business could be harmed, the trading price of our common
stock could decline and you may lose all or part of your investment. You should
also refer to the other information contained in or incorporated by reference
into this prospectus, including the financial statements and related notes
incorporated herein.

                         Risks Relating to Our Company

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 possible 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 will likely
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;

    . write-downs or write-offs of excess or obsolete inventory;

    . 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 for accounts receivable in China and other
      countries.

      The limited performance history of some of our products, our limited
forecasting experience and processes and the emerging nature of our target
markets make forecasting our future sales and operating results difficult. Our
expense levels are based, in part, on our expectations regarding future sales,
and these expenses are largely fixed, particularly in the short term. In
addition, to enable us to promptly fill orders, we maintain inventories of
finished goods, components and raw materials. As a result, we commit to
considerable costs in advance of anticipated sales. 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. We may not have adequate reserves to offset write-downs or write-
offs.

                                       6
<PAGE>

We have only recently become profitable and may not be able to sustain
profitability

      We have only recently become profitable and may not be able to remain
profitable in future periods. As of March 31, 2001, we had retained earnings of
only $1.6 million. We anticipate continuing to incur significant sales and
marketing, research and development and general and administrative expenses,
and, as a result, we will need to generate higher revenues to remain
profitable. Numerous factors could negatively impact our results of operations,
including a decrease in sales, price pressures and significant fixed costs. Our
past results should not be relied on as an indication of our future
performance, and our results for the first quarter of 2001 should not be used
as an indication of expected results for the full year.

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:

    . AN-2000: Advanced Fibre Communications, Inc.; Alcatel Alsthom CGE,
      S.A.; Datong Telecom Technology Co. Ltd.; Huawei Technology Co., Ltd.;
      Lucent Technologies, Inc.; and Zhongxing Telecommunications Equipment.

    . PAS: Lucent and Zhongxing.

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

      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 existing and potential competitors may
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 and offer significant discounts on handsets or other 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 foreign 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 their ability 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 may not be able to compete successfully against current
or future competitors, and competitive pressures in the future may materially
adversely affect our business, financial condition and results of operations.

                                       7
<PAGE>

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. For the year ended December 31,
2000, one customer, Hangzhou Telecommunications Bureau, accounted for 12.1% of
our net sales. In the three months ended March 31, 2001, one customer, Shaoxing
Telecommunications Bureau, accounted for 14.0% of our net sales. Our dependence
on large system deployments makes our ability to provide systems in a timely
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 and lead to
fluctuations in our operating results.

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 or willingness 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 operating results and 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 typically been lower than sales during
the fourth quarter of the preceding fiscal year, and we expect this trend to
continue. We do not have the ability to forecast with any degree of certainty
the impact of the decreased business activity during the Lunar New Year on our
sales and operating results.
Our market is subject to rapid technological change, and to compete
effectively, we must continually introduce new products that achieve market
acceptance

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

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

      Even if we are able to develop and introduce new products, they may not
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;

                                       8
<PAGE>

    . 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 PAS, our wireless access system, will depend in
part upon consumer acceptance of the mobility limitations of this service
relative to other wireless service systems, such as GSM or CDMA. 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 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 or reputation problems or loss of customers, any one of which could
harm our business.

      We contract with third parties in China to undertake high volume
manufacturing and assembly of our handsets. In addition, we sometimes use third
parties for high volume assembly of circuit boards. We do not have any long-
term contracts with these third party manufacturers, and in the event that
these manufacturers are unable or unwilling to continue to manufacture our
products, we may be unable to secure alternative manufacturers or could
experience delays in qualifying new manufacturers. We currently manufacture
internally only a very limited quantity of our handsets. However, if future
demand for our handsets requires additional manufacturing capacity, we may
invest in and build additional manufacturing facilities, most likely in China.
However, new manufacturing facilities may not attain the same quality or level
of efficiencies as those of our existing third party manufacturers.

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

                                       9
<PAGE>

      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 components and assemblies for
handsets could severely harm our business. A worldwide shortage of handsets
existed in 2000, and there continues to be a shortage of low-priced handsets,
which we have found to be popular with many consumers in China. We have only
used third parties to assemble and manufacture handsets in China for us for a
limited period of time. These manufacturers may be unable to produce adequate
quantities of high-quality handsets to meet the demand of our customers.

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 sales and marketing partners or if
these partners 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; and

    . rapid technological change.

      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 these efforts or delivering our products to market in a timely
manner. Any redesign may not 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 profit, as a
percentage of net sales

      Our gross profit, as a percentage of net sales, varies among our product
groups. Our gross profit, as a percentage of net sales, is generally higher on
our access network system products and is significantly lower on our handsets.
We also anticipate that the gross profit, as a 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 efficiencies can be realized. Our overall gross
profit, as a 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
manufacturing costs. As a result of a growth in sales of lower margin handsets
over the past few quarters, we have experienced a decline in overall gross
profit, as a percentage of net sales. We are likely to continue to experience
downward pressure on our gross profit, as a percentage of net sales.

                                       10
<PAGE>

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 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 ventures.

      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, the law in
China 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 business, economic,
political, regulatory and legal risks

      We market and sell our products in mainland China and other markets,
including India and Taiwan. The expansion of our existing multi-national
operations and entry into additional international markets will require

                                       11
<PAGE>

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;

    . potentially adverse tax consequences; and

    . political and economic instability.

      Multi-national 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 multi-national 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 an additional tax liability may result from audits of our
intercompany pricing policies.

      In markets outside of China, we rely on a number of original equipment
manufacturers, third-party distributors, resellers, agents and licensors to
market and sell our network access products. If these original equipment
manufacturers, distributors, resellers, agents or licensors 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 may not successfully compete in these markets, our
products may not be accepted and we may not 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. Fluctuations in currency
exchange rates in the future may have a material adverse effect on our results
of operations.

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 governmental
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
some markets.

                                       12
<PAGE>

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 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. 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, both in the
      U.S. and internationally;

    . 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 may acquire complementary businesses, products and technologies. Any
anticipated benefits of an acquisition may not be realized. We have in the past
and will continue to evaluate acquisition prospects that would complement our
existing product offerings, augment our market coverage, enhance our
technological capabilities, or that may otherwise offer growth opportunities.
Acquisitions of other companies may result in dilutive issuances of equity

                                       13
<PAGE>

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 may not be able to continue to identify suitable parties for new ventures
and investments in the future. The failure to form or maintain new ventures, or
to identify suitable investment opportunities, could significantly limit our
ability to expand our operations. Many of our investments have been in
privately held companies, many of which can still be considered in the start-up
or development stages. These investments are inherently risky as the market for
the technologies or products they have under development are typically in the
early stages and may never materialize. We have recognized an impairment charge
in respect of our long-term investments, and we may incur future investment
losses. Moreover, these new ventures or investments require significant
management time and will present significant challenges. These activities may
not be successful and we may not 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, trademarks, trade secret
laws and contractual obligations to protect our technology. We have applied for
16 patents in the United States, three of which have been issued. We have also
filed patent applications in other countries. Additional patents may not be
issued on our pending patent applications and our issued patents may not be
upheld. Moreover, we have not yet obtained, and may not 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 and technology, 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
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

                                       14
<PAGE>

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 as a
result of these blackouts or other events and any losses or damages incurred by
us could have a material adverse effect on our business.

  Risk Relating to the Structure and Regulation of China's Telecommunications
                                    Industry

China's telecommunications industry is subject to extensive government
regulation

      China's telecommunications industry is heavily regulated by the Ministry
of Information Industry. 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. Additionally, the Ministry of Information Industry can decide 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,
the rates that are charged to subscribers for those services 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 or which render our
products noncompetitive, our ability to sell products in China may be limited,
resulting in substantial harm to our operations.

      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. 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 a
review by the Ministry of Information Industry. Subsequently, at the end of
June 2000, the Ministry of Information Industry issued a notice stating that it
had concluded its review of PHS-based equipment and that the continued
deployment of PHS-based systems, such as our PAS system, in China's county-
level cities and towns and villages would be permitted. In addition, the notice
stated that deployments within large and medium-sized cities would only be
allowed in very limited areas of dense population, such as campuses, commercial
buildings and special development zones. The notice confirmed, however, that
new city-wide deployments of our PAS system in large and medium cities would
not be permitted. Failure of the Ministry of Information Industry to permit the
sale or deployment of our PAS system, or the sale or deployment of our other
products, or the imposition of additional limitations on their sale in the
future could have a material adverse effect on our business and financial
condition. The Ministry of Information Industry may conduct further reviews or
evaluations of PHS-based telecommunications equipment or may change its
position regarding PHS-based systems in the future.

China's telecommunications regulatory framework is in the process of being
developed, which has led to uncertainties regarding how to conduct our business
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. We do not know the nature and scope of regulation that the
Telecommunications Law 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.

      China's telecommunications regulatory framework is in the process of
being developed. In September 2000, the State Council issued the
Telecommunications Regulations of the People's Republic of China, known as the
Telecom Regulations. The Telecom Regulations cover telecommunications services
and market

                                       15
<PAGE>

regulations, pricing, interconnection and connection, as well as
telecommunications construction and security issues. In May 2001, the Ministry
of Information Industry issued the Administrative Measures of Network Access
Licenses to implement the Telecom Regulations. Regulations in this area often
require subjective interpretation and, given the relative infancy of the
Telecom Regulations and the implementing regulations, we do not know how the
regulations will be interpreted or enforced. As a result, our attempts to
comply with these regulations may be deemed insufficient by the appropriate
regulatory agencies, which could subject us to penalties that adversely affect
our business.

We do not have some of the licenses we are required to have to sell our network
access products in China

      Under China's current regulatory structure, the communications products
that we offer in China must meet government and industry standards, and a
network access license for the equipment must be obtained. Without the license,
the equipment is not allowed to be connected to public telecommunications
networks or sold in China. Moreover, we must ensure that the quality of the
telecommunications equipment for which we have obtained a network access
license is stable and reliable, and may not lower the quality or performance of
other installed licensed products. The State Council's product quality
supervision department, in concert with the Ministry of Information Industry,
will perform spot checks to track and supervise the quality of licensed
telecommunications equipment and publish the results of such spot checks.

      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. We have obtained the
required network access licenses for our AN-2000 platform. We have applied for,
but have not yet received, a network access license for our PAS system. Based
upon conversations with the Ministry of Information Industry, we understand
that our PAS system is considered to still be in the trial period and that
sales of our PAS system may continue to be made by us during this trial period,
but a license will ultimately be required. Network access licenses will also be
required for most additional products that we are selling or may sell in China,
including our WACOS platform. If we fail to obtain the required licenses, we
could be prohibited from making further sales of the unlicensed products,
including our PAS system, in China, which would substantially harm our
business, financial condition and results of operations. 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 a product is in the trial period in a manner that is
inconsistent with the information received by our counsel in China, either of
which could have a material adverse effect on our business and financial
condition.

Software incorporated in our products has not been registered in accordance
with relevant Chinese regulations, and our ability to sell the products
incorporating the software may be affected

      In October 2000, the Ministry of Information Industry issued regulations
which prohibit the production and sale of software products, or products
incorporating software, in China unless the software is registered with the
government. We are in the process of applying for registration of our software.
Based upon verbal advice received from the Ministry of Information Industry, we
believe that since these regulations only recently came into effect, we will be
able to continue to sell products incorporating our software during the period
in which the regulations are being implemented and our applications are
pending. However, this implementation period may not last long enough for us to
complete the registration of our software. Moreover, the Chinese government may
interpret or apply the regulations in such a way as to prohibit sales of
products incorporating our unregistered software prior to registration. If the
government prohibits sales pending registration, or if we fail in our efforts
to register our software, we could be prohibited from making further sales of
products incorporating our unregistered software in China, which could
substantially harm our business and financial condition.

                                       16
<PAGE>

Most of our customers in China are part of the China Telecom system and are
subject to its ultimate control

      Our main customers in China are the local Telecommunications Bureaus,
which operate under China Telecom, China's state-owned fixed line operator, and
are 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, for implementation in large cities, even before these
sales were prohibited by the Ministry of Information Industry. As virtually all
of our sales are generated from our operations in China, other decisions by
China Telecom restricting or prohibiting the sales or deployment of our
products could cause substantial harm to our business.

Our business may suffer if the China Telecom system undergoes further
restructuring

      In February 1999, the State Council approved a restructuring plan for the
China Telecom system, under which the telecommunications operations of the
China Telecom system were separated along four business lines: fixed line,
mobile, paging and satellite communications services. Following the
announcement, we observed a reduction in orders from Telecommunications
Bureaus, which we attributed to the uncertainties surrounding the restructuring
and the ultimate impact the restructuring would have on the Telecommunication
Bureaus. In May 2001, China media sources reported that China Telecom would
undergo further restructuring in an effort to stimulate additional competition
in the telecommunications market. As the details and timing of the proposed
restructuring are not yet publicly known, we cannot be certain what impact the
restructuring will have on our business operations. However, we may experience
another decline in orders and related revenues similar to that which we
experienced following the 1999 restructuring, resulting from uncertainty among
our Telecommunications Bureau customers associated with any new restructuring.

Our ability to sell our PAS wireless system could be significantly impaired if
China Telecom is granted or otherwise acquires a mobile license, which will
allow China Telecom to deliver cellular services

      Under the current regulatory structure, China Telecom holds and operates
the fixed line telephone and data communications assets in China and is
prohibited from offering cellular services. To offer wireless services to end
users, the Telecommunications Bureaus must offer services that can be delivered
over wireline networks, such as those delivered over our PAS wireless system.
China Telecom has applied for a mobile license with the Ministry of Information
Industry. If the Ministry of Information Industry grants a mobile license to
China Telecom or if China Telecom otherwise acquires a mobile license, local
Telecommunications Bureaus will be free to offer cellular services, such as GSM
or CDMA, to their customers and they may therefore elect not to deploy our PAS
system. If this were to occur, we could lose current and potential customers
for our PAS system, and our financial condition and results of operations could
be harmed.

Changes in telecommunications rates may result in decreased demand for our
products

      In November 2000, the Ministry of Information Industry announced
significant changes in rates for telecommunications services in China. While
long distance, international, leased line and Internet connection fees were cut
by up to 70%, the rates for local telephone services, which include certain
types of wireless access services such as those offered over our PAS system,
were increased, from approximately $0.01 per minute to approximately $0.02 per
minute. The increase in rates may result in a reduced demand by end users for
wireless services delivered over our PAS system and a corresponding decline in
demand for our 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.

                                       17
<PAGE>

                Risks Relating to Conducting Operations in China

Sales in China have accounted for substantially all of our sales, and
therefore, our business, financial condition and results of operations are to a
significant degree subject to economic, political and social events in China

      Approximately $116.8 million, or 98.0%, of our net sales for the three
months ended March 31, 2001, $364.0 million, or 98.8%, of our net sales in
fiscal 2000, and $186.1 million, or 99.3%, of our net sales in fiscal 1999,
occurred in China. Additionally, a substantial portion of our fixed assets are
located in China. Of our total fixed assets, approximately 76.8% as of March
31, 2001, 75.0% as of December 31, 2000, and 53.7% as of December 31, 1999 were
located 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 fixed by China's national government and is subject to changes in
China's governmental policies and to international economic and political
developments. China may choose to devalue the Renminbi against the U.S. dollar.
Additionally, China's national government has considered from time to time
whether to partially or fully abandon the official exchange rate for Renminbi
to the U.S. dollar. The abandonment of this official exchange rate policy may
lead to sharp depreciation of the Renminbi against the U.S. dollar and other
foreign currencies and to significantly more volatility in the Renminbi
exchange rate in the future, both of which would adversely affect our financial
results and make our future results more subject to fluctuation.

      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 some 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.

      Our business could be substantially harmed if we are unable to convert
and remit our sales received in Renminbi into U.S. dollars. Under existing
foreign exchange laws, Renminbi held by our China subsidiaries

                                       18
<PAGE>

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

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.
China may 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.

Governmental policies in China 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.

Economic policies in China could negatively 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

                                       19
<PAGE>

balance of payments position. In the past, the economy of China has been
primarily a planned economy subject to one- and five-year state plans adopted
by central government authorities and largely implemented by provincial and
local authorities which set production and development targets.

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

China's expected entry into the WTO creates uncertainty as to the future
economic and business environments in China

      China is expected to enter the World Trade Organization some time late in
2001 or in 2002. Entry into the WTO will require China to further reduce
tariffs and eliminate other trade restrictions. While China's entry into the
WTO and the 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 enters 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. The tax
holidays applicable to our two principal subsidiaries, UTStarcom China and
Hangzhou UTStarcom, which together accounted for approximately 98% of our
revenues in 2000, will expire at the end of 2002. At that time, the tax rates
for these two subsidiaries will increase from 7.5% to 15%, and from 10% to 15%,
respectively, which will negatively impact our financial condition and results
of operations.

We may be exposed to contingent tax liabilities in China resulting from our
failure to withhold sufficient amounts for China's income tax purposes

      We employ a number of U.S. citizens who work on a full time basis in
China. These expatriate employees participate in our stock option plans and
have exercised a number of options granted under the plans. The option
exercises generated income which may be subject to personal income taxes under
China's income tax laws. We withheld U.S. taxes in connection with these option
exercises, but did not withhold China income taxes on the option exercises, and
the employees have not yet paid any taxes in China which may be due. Should the
employees fail to pay the income taxes, we may be liable for such taxes in our
capacity as withholding agent. In the event that it is determined that taxes
are due in China, we will apply for a refund from the U.S. tax authorities
corresponding to the amount over-withheld in the U.S. due to the foreign tax
credit which would then be applicable. In addition, our failure to collect and
remit China withholding tax may also subject us to penalties.

                                       20
<PAGE>

China's legal system embodies uncertainties that could negatively impact our
business

      China has a civil law legal system. 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
contracts based on existing law may be uncertain and sporadic and it may be
difficult to obtain swift and equitable enforcement, or to obtain enforcement
of a judgment by a court of another jurisdiction. The relative inexperience of
China's judiciary in many cases creates additional uncertainty as to the
outcome of any litigation. Further, interpretation of statutes and regulations
may be subject to government policies reflecting domestic political changes.

      China has adopted a broad range of related laws, administrative rules and
regulations that govern the conduct and operations of foreign investment
enterprises and restrict the ability of foreign companies to conduct business
in China. These laws, rules and regulations provide some incentives to
encourage the flow of investment into China, but also subject foreign
companies, and foreign investment enterprises, including our subsidiaries in
China, to a set of restrictions which may not always apply to domestic
companies in China. Although China is increasingly according foreign companies
and 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, we may not be able to secure the requisite governmental
approval for our activities and products. Failure to obtain the requisite
governmental approval for any of our activities or products could substantially
harm our business.

            Risks Relating to the Offering and our 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;

    . changes in governmental regulations or policies in China, such as the
      temporary suspension of sales of our PAS system that occurred in May
      and June of 2000, which caused our stock price to drop;

    . 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.

                                       21
<PAGE>

Our existing stockholders have significant control of our management and
affairs, which they could exercise against your best interests

      Following the completion of this offering, SOFTBANK CORP. and its related
companies will beneficially own 43.14% of our outstanding stock. As a result,
SOFTBANK CORP. will have the ability to control all matters submitted to our
stockholders for approval and exert significant influence over our management
and affairs. This concentration of ownership may delay or prevent a change of
control or discourage a potential acquiror from making a tender offer or
otherwise attempting to obtain control of our company, which could decrease the
market price of our common stock. Matters that could require stockholder
approval include:

    . election and removal of directors;

    . merger or consolidation of our company; and

    . sale of all or substantially all of our assets.

      The interests of SOFTBANK CORP. may not always coincide with our
interests. SOFTBANK CORP., acting through its designees on the Board of
Directors and through its ownership of voting securities, will have the ability
to control our actions irrespective of the desires of our other stockholders or
directors.

Following this offering, substantial numbers of shares of our common stock will
become available for sale in the public market, which could cause the market
price of our stock to decline

      Upon completion of this offering, 104,007,063 shares of our common stock
will be outstanding, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options or warrants after May 31, 2001.
Of these shares, all of the shares sold in this offering and 35,698,988
additional shares will be freely tradable without restriction under the
Securities Act, unless purchased by our officers, directors and some of our
significant security holders.

      Upon completion of the offering, approximately 59,308,075 shares of our
common stock will be subject to restrictions under Rule 144 of the Securities
Act. The market price of our common stock could drop significantly if the
holders of these shares sell them or are perceived by the market as intending
to sell them. In addition to the adverse effect a price decline could have on
the holders of our common stock, a price decline would likely impede our
ability to raise additional capital through the issuance of additional shares
of our common stock or other equity securities.

      In connection with this offering, we, our executive officers, our
directors, the selling stockholders and SOFTBANK CORP. and its related
companies have agreed, with exceptions, not to sell or transfer any common
stock commencing on the date of this prospectus for a period ending 90 days
after the date of this prospectus, without first obtaining the written consent
of Merrill Lynch. Our executive officers and one of our non-employee directors
have agreed, only with respect to their shares subject to plans adopted under
Rule 10b5-1 under the Securities Exchange Act of 1934, to similar restrictions
on transfers of common stock during the period commencing June 19, 2001 and
ending two weeks following the date of this prospectus.

      Beginning two weeks following the date of this prospectus, our executive
officers and one of our non-employee directors may sell up to 250,000 shares of
our common stock per month pursuant to plans adopted under Rule 10b5-1 at
predetermined trading prices and quantities. These executive officers and that
director may also sell an additional number of shares which they otherwise
would have been able to sell under the plans but for the lock-up restrictions
described above, representing that number of shares of our common stock up to
the product of 250,000 and the number of months, or a portion thereof, during
the period commencing on June 19, 2001 and ending two weeks following the date
of this prospectus. See "Management--10b5-1 Plans" and "Underwriting" for
further description about the plans and the lock-up restrictions.

                                       22
<PAGE>

Delaware law and our charter documents contain provisions that could discourage
or prevent a potential takeover, even if the transaction would benefit our
stockholders

      Other companies may seek to acquire or merge with us. An acquisition or
merger of our company could result in benefits to our stockholders, including
an increase in the value of our common stock. Some provisions of our
Certificate of Incorporation and Bylaws, as well as provisions of Delaware law,
may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable. These provisions include:

    . authorizing the Board of Directors to issue additional preferred
      stock;

    . prohibiting cumulative voting in the election of directors;

    . limiting the persons who may call special meetings of stockholders;

    . prohibiting stockholder action by written consent;

    . creating a classified Board of Directors pursuant to which our
      directors are elected for staggered three year terms; and

    . establishing advance notice requirements for nominations for election
      to the Board of Directors and for proposing matters that can be acted
      on by stockholders at stockholder meetings.

Our management may not use the proceeds of this offering in ways which increase
our market share or operating results

      Our management has broad discretion over the use of proceeds of this
offering. In addition, our management has not designated a specific use for the
proceeds of this offering. Accordingly, it is possible that our management may
allocate the proceeds differently than investors in this offering would have
preferred, or that we fail to maximize our return on the proceeds.


                                       23
<PAGE>

                           FORWARD-LOOKING STATEMENTS

      This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934 and information relating to us that are based on the
beliefs of our management as well as assumptions made by and information
currently available to management. We intend such forward-looking statements to
be covered by the safe harbor provisions for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995, and we are
including this statement for purposes of complying with these safe harbor
provisions. These forward-looking statements include but are not limited to
those statements concerning the following: the growth of China's
telecommunications equipment and subscriber markets; our plan to expand our
presence in China and other growing telecommunications markets; our expectation
that our PAS wireless access system and other communications products will
continue to be allowed in China under the country's regulatory scheme;
fluctuations in our overall gross profit, gross profit as a percentage of net
sales, product mix and selling prices; our plans for expanding our selling and
marketing campaigns; our expectation that there will be increases in selling,
marketing, research and development, general and administrative expenses; the
capabilities of our WACOS, PAS and AN-2000 products; our expectation that
existing cash and cash equivalents will be sufficient to finance our operations
for at least the next 12 months; and our estimate of the amount of net proceeds
from this offering and the intended uses for those proceeds. Additional forward
looking statements may be identified by the words "anticipate," "believe,"
"extend," "intend," "will" and similar expressions, as they relate to us or our
management.

      The forward-looking statements contained in this prospectus are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions, including those set forth under "Risk Factors" and the following:

    . devaluation of the Renminbi and fluctuations of exchange rates;

    . changes in China's government, economic or regulatory policies;

    . uncertainty regarding the commercial acceptance of our network access
      and switching equipment and technologies;

    . uncertainty regarding our future operating results;

    . our ability to introduce new and enhanced products;

    . delays or losses of sales due to long sales and delivery cycles for
      our products;

    . the possibility of lower prices, reduced gross profit as a percentage
      of net sales and loss of market share due to increased competition;
      and

    . increased demands on our resources due to anticipated growth.

      Investors are cautioned that these forward-looking statements are
inherently uncertain. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
or outcomes could vary materially from those described in this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.

                                       24
<PAGE>

                                USE OF PROCEEDS

      We estimate our net proceeds from the sale of the 6,050,000 shares of
common stock offered by us in this offering will be approximately $
million, or approximately $         million if the underwriters exercise their
over-allotment option in full, based on the assumed public offering price of
$        per share and after deducting the underwriting discount and estimated
offering expenses. We will not receive any of the proceeds from the sale of
shares by the selling stockholders.

      We presently intend to use the net proceeds from this offering for
general corporate purposes, including research and development, expansion of
our sales and marketing organization and working capital. Our management will
have broad discretion in the application of the net proceeds of this offering.
Pending any use, we intend to invest the net proceeds in government securities
and short-term, investment-grade, interest-bearing securities.

      From time to time, we may evaluate opportunities to acquire or invest in
complementary businesses, technologies or products and may use a portion of the
net proceeds from this offering to enter into these type of transactions. At
this time, we do not have any understandings, commitments or agreements with
respect to any material acquisitions.

                                DIVIDEND POLICY

      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 to
which we are a party may limit or prevent the payment of dividends on our
common stock.

                                       25
<PAGE>

                        PRICE RANGE OF OUR COMMON STOCK

<TABLE>
<CAPTION>
                                                                   High   Low
                                                                  ------ ------
<S>                                                               <C>    <C>
Fiscal 2000
- -----------------------------------------------------------------
First Quarter (from March 3, 2000)............................... $93.50 $41.00
Second Quarter...................................................  77.63  16.75
Third Quarter....................................................  32.88  18.00
Fourth Quarter...................................................  23.00  12.31

Fiscal 2001
- -----------------------------------------------------------------
First Quarter.................................................... $28.00 $13.56
Second Quarter (through June 18, 2001)...........................  27.28  12.50
</TABLE>

      Our common stock has been traded on The Nasdaq National Market under the
symbol "UTSI" since our initial public offering on March 3, 2000. The preceding
table sets forth the high and low sales prices per share of our common stock as
reported on The Nasdaq National Market for the periods indicated. As of
March 31, 2001 we had approximately 236 stockholders of record. On June 18,
2001 the last reported sale price of our common stock on The Nasdaq National
Market was $21.94 per share.

                                       26
<PAGE>

                                 CAPITALIZATION

      The following table sets forth on an unaudited basis our capitalization
as of March 31, 2001 and as adjusted to reflect the sale of the 6,050,000
shares of common stock we are offering at an assumed public offering price of
$   per share and the receipt of the estimated net proceeds, after deducting
the underwriting discounts and our estimated offering expenses. You should read
this table in conjunction with the consolidated financial statements and notes
incorporated by reference into this prospectus, and "Selected Consolidated
Financial Data" included elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                              As of March 31,
                                                                   2001
                                                             ------------------
                                                                          As
                                                              Actual   Adjusted
                                                             --------  --------
                                                               (in thousands
                                                               except share
                                                                   data)
<S>                                                          <C>       <C>
Long-term debt, net of current portion...................... $ 12,048  $ 12,048
                                                             ========  ========

Stockholders' equity:
  Preferred stock, $0.00125 par value; no shares issued and
   outstanding.............................................. $    --   $    --
  Common stock, $0.00125 par value; actual--250,000,000
   shares authorized, 96,172,216 shares issued and
   outstanding; as adjusted--104,007,063 shares issued and
   outstanding..............................................      122
  Additional paid-in capital................................  432,207
  Deferred stock compensation...............................   (5,129)
  Retained earnings.........................................    1,554
  Notes receivable from stockholders........................     (292)
  Other comprehensive income................................      302
                                                             --------  --------
    Total stockholders' equity..............................  428,764
                                                             --------  --------
      Total capitalization.................................. $440,812  $
                                                             ========  ========
</TABLE>
- --------
The table above excludes:

  . 14,525,512 shares of common stock issuable upon exercise of options
    outstanding as of March 31, 2001 at a weighted average exercise price of
    $8.30 per share;

  . 3,816,656 shares of common stock reserved for issuance under our 2000
    Employee Stock Purchase Plan as of March 31, 2001; and

  . 32,000 shares of common stock issuable upon exercise of warrants
    outstanding as of March 31, 2001 with a weighted average exercise price
    of $2.50 per share.

                                       27
<PAGE>

                                    DILUTION

      The net tangible book value of our common stock as of March 31, 2001 was
approximately $406.6 million, or $4.23 per share. Net tangible book value per
share represents the amount of our total assets, excluding net intangible
assets, less our total liabilities, divided by the total number of shares of
our common stock outstanding.

      Without taking into account any other changes in net tangible book value
after March 31, 2001, other than to give effect to the sale of 6,050,000 shares
of common stock offered by us in this prospectus at the assumed public offering
price of             per share and after deducting the underwriting discount
and estimated offering expenses payable by us, the net tangible book value of
our common stock as of March 31, 2001 would have been approximately $
million, or $        per share. This represents an immediate increase in net
tangible book value of $        per share to existing stockholders and an
immediate dilution of $        per share to new investors purchasing common
stock in this offering. The following table illustrates this per share
dilution:

<TABLE>
<S>                                                               <C>   <C>
Assumed public offering price per share..........................       $
  Net tangible book value per share as of March 31, 2001......... $4.23
  Increase per share attributable to new investors............... $
                                                                  -----
Net tangible book value per share after this offering............       $
                                                                        --------
Dilution per share to new investors..............................       $
                                                                        ========
</TABLE>

      The foregoing discussion and table assume that the underwriters do not
exercise their over-allotment option. This table also assumes that no options
or warrants were exercised after March 31, 2001. As of March 31, 2001, there
were 5,317,691 shares of outstanding options, which were exercisable within 60
days of March 31, 2001 at a weighted average exercise price of $5.99 and
warrants outstanding to purchase a total of 32,000 shares of common stock at a
weighted average exercise price of $2.50 per share. If all these options and
warrants had been exercised as of March 31, 2001, our net tangible book value
on that date would have been $438.6 million or $4.32 per share, the increase in
net tangible book value attributable to new investors would have been $
per share and the dilution in net book value to new investors would have been
$      per share.

                                       28
<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

      You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and the related notes
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in or incorporated by reference into this
prospectus. The consolidated statement of operations data for the years ended
December 31, 1998, 1999 and 2000 and consolidated balance sheet data at
December 31, 1999 and 2000 are derived from, and are qualified by reference to,
our audited consolidated financial statements incorporated by reference into
this prospectus. The consolidated statement of operations data for the years
ended December 31, 1996 and 1997 and the consolidated balance sheet data at
December 31, 1996, 1997 and 1998 have been derived from audited financial
statements not included in or incorporated by reference into this prospectus.
The consolidated financial statements for the three months ended March 31, 2000
and 2001 and the consolidated balance sheet data at March 31, 2001 are derived
from our unaudited consolidated financial statements incorporated by reference
into this prospectus and include, in the opinion of our management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation of our financial condition, the results of
our operations and our cash flows for such periods. Historical results are not
necessarily indicative of results to be expected in any future period, and
results for the three months ended March 31, 2001 should not be viewed as an
indication of results to be expected for the full year.

<TABLE>
<CAPTION>
                                                                            Three Months
                                   Years Ended December 31,               Ended March 31,
                          ----------------------------------------------  -----------------
                           1996     1997      1998      1999      2000     2000      2001
                          -------  -------  --------  --------  --------  -------  --------
                                     (in thousands, except per share data)
<S>                       <C>      <C>      <C>       <C>       <C>       <C>      <C>
Consolidated Statement
 of Operations Data:
Net sales...............  $35,542  $75,597  $105,167  $187,516  $368,646  $58,587  $119,181
Cost of sales (includes
 deferred stock
 compensation expense of
 $0, $0, $0, $12, $90,
 $0 and $0).............   22,322   48,795    64,142   112,703   240,465   37,974    77,768
                          -------  -------  --------  --------  --------  -------  --------
Gross profit............   13,220   26,802    41,025    74,813   128,181   20,613    41,413
                          -------  -------  --------  --------  --------  -------  --------

Operating expenses:
 Selling, general and
  administrative
  (includes deferred
  stock compensation
  expense of $0, $0,
  $390, $4,256, $4,676,
  $1,802 and $681)......    8,042   21,211    23,211    35,122    48,055   11,064    14,131
 Research and
  development (includes
  deferred stock
  compensation expense
  of $0, $0, $22,
  $1,285, $6,795, $4,595
  and $578).............    3,899    8,941    14,681    18,648    41,452   10,909    12,412
 Amortization of
  intangible assets.....       42       40       120       332     4,894    1,223     1,471
 In-process research and
  development...........      --       --        --      3,992       --       --        --
                          -------  -------  --------  --------  --------  -------  --------
  Total operating
   expenses.............   11,983   30,192    38,012    58,094    94,401   23,196    28,014
                          -------  -------  --------  --------  --------  -------  --------
Operating income
 (loss).................    1,237   (3,390)    3,013    16,719    33,780   (2,583)   13,399
Interest and other
 income (expenses)......      858    2,033    (1,138)   (2,212)   10,829      772       452
Equity in net income
 (loss) of affiliated
 companies..............     (291)      73      (773)    1,348      (288)    (279)     (244)
                          -------  -------  --------  --------  --------  -------  --------
Income (loss) before
 income taxes, minority
 interest and cumulative
 effect of a change in
 accounting principle...    1,804   (1,284)    1,102    15,855    44,321   (2,090)   13,607
Income tax expense......      575      400     1,423       626    14,021      918     3,652
Minority interest in
 (earnings) loss of
 consolidated
 subsidiaries...........     (743)     301       914    (2,110)   (2,307)    (261)     (593)
                          -------  -------  --------  --------  --------  -------  --------
Income (loss) from
 continuing operations..      486   (1,383)      593    13,119    27,993   (3,269)    9,362
Income (loss) from
 discontinued
 operations.............      301    1,413      (893)   (1,656)      --       --        --
Cumulative effect of the
 application of SAB 101
 "Revenue Recognition in
 Financial Statements"..      --       --        --        --       (980)    (980)      --
                          -------  -------  --------  --------  --------  -------  --------
Net income (loss).......      787       30      (300)   11,463    27,013   (4,249)    9,362
Preferred stock
 dividend...............   (1,097)     --        --        --        --       --        --
Beneficial conversion
 feature of Series F
 preferred stock........      --       --        --    (29,977)      --       --        --
                          -------  -------  --------  --------  --------  -------  --------
Net income (loss)
 applicable to common
 stockholders...........  $  (310) $    30  $   (300) $(18,514) $ 27,013  $(4,249) $  9,362
                          =======  =======  ========  ========  ========  =======  ========
Income (loss) per share
 from continuing
 operations:
 Basic..................  $  0.06  $ (0.19) $   0.08  $   1.51  $   0.35  $ (0.09) $   0.10
                          =======  =======  ========  ========  ========  =======  ========
 Diluted................  $  0.06  $ (0.19) $   0.01  $   1.51  $   0.27  $ (0.09) $   0.09
                          =======  =======  ========  ========  ========  =======  ========
Earnings (loss) per
 share:
 Basic..................  $ (0.04) $   --   $  (0.04) $  (2.13) $   0.34  $ (0.12) $   0.10
                          =======  =======  ========  ========  ========  =======  ========
 Diluted................  $ (0.04) $   --   $    --   $  (2.13) $   0.27  $ (0.12) $   0.09
                          =======  =======  ========  ========  ========  =======  ========
</TABLE>

                                       29
<PAGE>

<TABLE>
<CAPTION>
                                                                         Three Months
                                  Years Ended December 31,             Ended March 31,
                          -------------------------------------------- -----------------
                           1996     1997    1998      1999      2000    2000      2001
                          -------  ------- -------  --------  -------- -------  --------
                                    (in thousands, except per share data)
<S>                       <C>      <C>     <C>      <C>       <C>      <C>      <C>
Pro forma amounts
 assuming application of
 SAB101 "Revenue
 Recognition in
 Financial Statements"
 is applied
 retroactively:
Net income (loss)
 applicable to common
 stockholders...........  $  (310) $    30 $  (300) $(19,494) $ 27,993 $(3,269) $  9,362
                          =======  ======= =======  ========  ======== =======  ========
Earnings (loss) per
 share:
 Basic..................  $ (0.04) $   --  $ (0.04) $  (2.25) $   0.35 $ (0.09) $   0.10
                          =======  ======= =======  ========  ======== =======  ========
 Diluted................  $ (0.04) $   --  $   --   $  (2.25) $   0.27 $ (0.09) $   0.09
                          =======  ======= =======  ========  ======== =======  ========
Shares used in per share
 calculations:
 Basic..................    8,344    7,320   7,582     8,678    79,696  35,867    95,873
                          =======  ======= =======  ========  ======== =======  ========
 Diluted................    8,344    7,320  77,050     8,678   101,867  35,867   104,262
                          =======  ======= =======  ========  ======== =======  ========

<CAPTION>
                                     As of December 31,
                          -------------------------------------------- As of March 31,
                           1996     1997    1998      1999      2000         2001
                          -------  ------- -------  --------  -------- -----------------
                                           (in thousands)
<S>                       <C>      <C>     <C>      <C>       <C>      <C>      <C>
Consolidated Balance
 Sheet Data:
Cash and cash
 equivalents............  $18,246  $35,049 $17,626  $ 87,364  $149,112     $175,535
Working capital.........   34,382   59,076  57,416   128,973   369,861      383,892
Total assets............   49,610  101,097 142,121   271,788   591,837      642,054
Total short-term debt...    1,127    1,579  38,426    43,338    43,381       55,427
Long-term debt..........      --       --      --        --     12,048       12,048
Convertible preferred
 stock..................   39,912      --      --        --        --          --
Total stockholders'
 equity.................   39,519   72,513  72,336   165,720   412,319      428,764
</TABLE>

                                       30
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ substantially from
those anticipated in these forward-looking statements as a result of many
factors, including those discussed in "Risk Factors" and elsewhere in this
prospectus. The following discussion should be read in conjunction with our
consolidated financial statements and related notes thereto incorporated by
reference into this prospectus.

Overview

      We design and market wireline and wireless broadband enabled access and
switching equipment that supports migration to next generation IP-based
networks. Our operations are conducted primarily by our foreign subsidiaries
that manufacture, distribute, and support our products, principally in China.
Our systems and 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, IP and wireless network rollouts.

      We have only recently become profitable and may not be able to remain
profitable in future periods. As of March 31, 2001, we had retained earnings of
only $1.6 million. We anticipate continuing to incur significant sales and
marketing, research and development and general and administrative expenses,
and, as a result, we will need to generate higher revenues to remain
profitable.

      We have derived substantially all of our revenues from sales of
communications equipment to service providers in China. 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. The evaluation period
for our products by potential customers may span a year or more and our
business generally depends on a relatively small number of large deployments.
We sell our products in China through a direct sales force.

      Approximately 98.0% of our net sales for the three months ended March 31,
2001 and approximately 98.8 % of our net sales for the twelve months ended
December 31, 2000 were made in China. Accordingly, our business, financial
condition and results of operations are likely to be influenced by the
political, economic and legal environment in China, and by the general state of
China's economy. 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.

      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.

      Additionally, 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 typically been lower
than sales during the fourth quarter of the preceding year, and we expect this
trend to continue. We 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.

                                       31
<PAGE>

      We recognize revenue from equipment sales on delivery when contractual
obligations are substantially complete, remaining obligations are
inconsequential and perfunctory, and collection of the resulting receivable is
reasonably assured. We recognize revenue from equipment sales with installation
requirements 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, we allocate revenue 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. Some components
and materials used in our products are purchased from a single supplier or a
limited group of suppliers and, in some cases, are subject to our obtaining
Chinese import permits and approvals. We also rely on third party manufacturers
in China to manufacture most of our handsets.

      Our gross profit has been affected by material costs, product mix and
average selling prices. Our gross profit, as a percentage of net sales, varies
among our product families. The gross profit, as a percentage of net sales, on
our mobile phone handsets is very low compared to our other products. 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 cost of sales. As
a result of a growth in sales of lower margin handsets over the past few
quarters, we have experienced a decline in overall gross profit, as a
percentage of net sales. We are likely to continue to experience downward
pressure on our gross profit, as a percentage of net sales.

      Selling, general and administrative expenses include compensation and
benefits, professional fees, sales commissions, provision for uncollectible
accounts receivable and travel and entertainment costs. A large percentage of
our costs are fixed and are difficult to quickly reduce in periods of reduced
sales. 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, 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. A large percentage of our costs are fixed and are
difficult to quickly reduce in periods of reduced sales. 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.

      Net deferred stock compensation represents the difference between the
fair value of common stock and the option exercise price for the options at the
date of grant. Deferred compensation is presented as a reduction of
stockholders' equity, with amortization recorded over the vesting period of the
option, which is generally four years. In connection with the grant of stock
options to our employees, we recorded no net deferred stock compensation during
the three months ended March 31, 2001 and $3.6 million of net deferred stock
compensation during the three months ended March 31, 2000. In connection with
the grant of stock options to our employees, we recorded net deferred stock
compensation of $2.4 million during the twelve months ended December 31, 2000
and $15.9 million during the twelve months ended December 31, 1999. In
connection with grants to non-employees during the twelve months ended December
31, 1999, we recorded deferred compensation of $7.4 million. We recorded stock
compensation expense of approximately $1.3 million during the three months
ended March 31, 2001, $6.4 million during the three months ended March 31,
2000, $11.6 million during the twelve months ended December 31, 2000 and
$5.6 million during the twelve months ended December 31, 1999. At March 31,
2001, approximately $5.1 million remained to be amortized.

                                       32
<PAGE>

      We employ a number of U.S. citizens who work on a full time basis in
China. These expatriate employees participate in our stock option plans and
have exercised a number of options granted under the plans. The option
exercises generated income which may be subject to personal income taxes under
China's income tax laws. We have withheld U.S. taxes in connection with these
option exercises, but did not withhold China income taxes on the option
exercises, and the employees have not yet paid any taxes in China which may be
due. Should the employees fail to pay the income taxes, we may be liable for
such taxes in our capacity as withholding agent. In addition, our failure to
collect and remit China withholding tax may also subject us to penalties. In
the event that it is determined that taxes are due in China, we will apply for
a refund from the U.S. tax authorities corresponding to the amount over-
withheld in the U.S. due to the foreign tax credit.

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

      Consolidated equity in net income (loss) of affiliated companies
comprises our share of the earnings from our Guangdong manufacturing
subsidiary, which is accounted for using the equity method, as we do not have
voting control over all significant 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. The tax
holidays applicable to our two principal subsidiaries, UTStarcom China and
Hangzhou UTStarcom, which together accounted for approximately 98.8% of our
revenues in 2000, will expire at the end of 2002. At that time, the tax rates
for these two subsidiaries will increase from 7.5% to 15%, and from 10% to 15%,
respectively, which will negatively impact our financial condition and results
of operations by increasing our tax rate.

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

Recent Developments

      On July 24, 2000, we entered into an agreement with Stable Gain to
purchase intellectual property and related fixed assets, and to transfer
development employees to us for consideration of $10.7 million in the form of
shares of our common stock, provided government approvals and other
deliverables were obtained within 12 months. The final approvals were obtained
in March 2001, and the transfer of common stock was completed in the second
quarter of fiscal 2001. At March 31, 2001, the obligation in respect of the
purchase consideration was included in long-term obligations and upon
completion has been reclassified as equity. On August 18, 2000, we entered into
a separate agreement to purchase additional related fixed assets from Stable
Gain for a total consideration of $0.3 million. The total purchase
consideration of $11.0 million was allocated to property and equipment,
intangible assets, and goodwill under the purchase method of accounting.
Goodwill totaling $7.4 million was recorded at the time of the acquisition of
assets.

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

                                       33
<PAGE>

Results of Operations

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

<TABLE>
<CAPTION>
                                         Years Ended          Three Months
                                        December 31,         Ended March 31,
                                      ---------------------  -----------------
                                      1998    1999    2000    2000      2001
                                      -----   -----   -----  -------   -------
<S>                                   <C>     <C>     <C>    <C>       <C>
Percentage of Net Sales:
Net sales............................ 100.0%  100.0%  100.0%   100.0%    100.0%
Cost of sales........................  61.0    60.1    65.2     64.8      65.3
                                      -----   -----   -----  -------   -------
Gross profit.........................  39.0    39.9    34.8     35.2      34.7
                                      -----   -----   -----  -------   -------
Operating expenses:
  Selling, general and
   administrative....................  22.1    18.7    13.1     18.9      11.9
  Research and development...........  13.9    10.0    11.2     18.6      10.4
  Amortization of intangible assets..   0.1     0.2     1.3      2.1       1.2
  In-process research and
   development.......................    --     2.1      --       --        --
                                      -----   -----   -----  -------   -------
    Total operating expenses.........  36.1    31.0    25.6     39.6      23.5
                                      -----   -----   -----  -------   -------
Operating income.....................   2.9     8.9     9.2     (4.4)     11.2
Interest and other income
 (expenses)..........................  (1.1)   (1.2)    2.9      1.3       0.4
Equity in net income (loss) of
 affiliated companies................  (0.7)    0.7    (0.1)    (0.5)     (0.2)
                                      -----   -----   -----  -------   -------
Income before income taxes, minority
 interest, and cumulative effect.....   1.1     8.4    12.0     (3.6)     11.4
Income tax expense...................   1.4     0.3     3.8      1.6       3.1
Minority interest in (earnings) loss
 of consolidated subsidiaries........   0.9    (1.1)   (0.6)    (0.4)     (0.5)
                                      -----   -----   -----  -------   -------
Income from continuing operations....   0.6     7.0     7.6     (5.6)      7.9
Loss from discontinued operations....  (0.8)   (0.9)     --       --        --
                                      -----   -----   -----  -------   -------
Cumulative effect on prior years of
 the application of SAB 101 "Revenue
 Recognition in Financial
 Statements".........................    --      --    (0.3)    (1.7)       --
                                      -----   -----   -----  -------   -------
Net income (loss)....................  (0.2)    6.1     7.3     (7.3)      7.9
Beneficial conversion feature of
 Series F preferred stock............    --   (16.0)     --       --        --
                                      -----   -----   -----  -------   -------
Net income (loss) applicable to
 common stockholders.................  (0.2)%  (9.9)%   7.3%    (7.3)%     7.9%
</TABLE>

      Three Months Ended March 31, 2001 Compared to Three Months Ended March
31, 2000

      Net Sales. Our net sales increased 103.4% to $119.2 million for the three
months ended March 31, 2001 from $58.6 million for the corresponding period in
2000, primarily due to increases in sales volume of our PAS system. Sales of
communications equipment for the three months ended March 31, 2001 were
$85.8 million, an increase of $42.4 million or 97.7%, as compared to the three
months ended March 31, 2000. Sales of handsets for the three months ended March
31, 2001 were $33.4 million, an increase of $18.2 million or 119.7%, as
compared to the three months ended March 31, 2000. Sales of communications
equipment and sales of handsets increased due to the continued growth in
spending on telecommunications infrastructure in China and subscriber growth,
as China continues to modernize its telecommunications infrastructure.
Customers that accounted for 10% or more of our net sales for the periods were
Shaoxing Telecommunications Bureau, which accounted for 14.0% of our net sales
for the three months ended March 31, 2001, and Hangzhou Telecommunications
Bureau, which accounted for 39.6% of our net sales for the three months ended
March 31, 2000.

      Effective January 1, 2000, we adopted Staff Accounting Bulletin 101,
issued by the Securities and Exchange Commission in December 1999. In light of
the guidance issued in SAB 101, we changed our method

                                       34
<PAGE>

of recognizing revenue in some contracts. We previously recognized revenue as
contract stages were completed and accepted. We now recognize revenue upon
final acceptance of the contract. In addition, some of our 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 changes from adopting SAB 101, we recorded a
cumulative adjustment in the first quarter of 2000 of $1.0 million 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.

      Gross Profit. Gross profit increased 100.9% to $41.4 million for the
three months ended March 31, 2001 from $20.6 million for the corresponding
period in 2000. Gross profit, as a percentage of net sales, decreased to 34.7%
for the three months ended March 31, 2001 from 35.2% for the three months ended
March 31, 2000. The decrease in gross profit, as a percentage of net sales, was
primarily due to increases in sales of lower margin handsets, which comprised
28.0% of net sales for the three months ended March 31, 2001 compared to 26.0%
in the corresponding period in 2000.

      Selling, General and Administrative. Selling, general and administrative
expenses increased 27.7% to $14.1 million for the three months ended March 31,
2001 from $11.1 million for the corresponding period in 2000. The increase in
selling, general and administrative expenses was primarily due to increased
sales and administrative personnel and related expenses, including sales
commissions, associated with the growth in net sales and the expansion of our
overall level of business activities. Selling, general and administrative
expenses as a percentage of net sales decreased to 11.9% for the three months
ended March 31, 2001 from 18.9% for the corresponding period in 2000. The
decrease in selling, general and administrative expenses as a percentage of net
sales 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 incur additional expenses related to
anticipated growth of our business and operations.

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

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

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

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

                                       35
<PAGE>

      Equity in Income (Loss) of Affiliated Companies. Consolidated equity in
the net loss of affiliated companies was $0.2 million for the three months
ended March 31, 2001 and $0.3 million for the corresponding period in 2000. The
net loss at our Guangdong manufacturing subsidiary remained constant, as demand
for the AN-2000, its main product, remained relatively constant.

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

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

      Cumulative Effect. Due to changes from adopting SAB 101, we recorded a
cumulative adjustment in first quarter of 2000 of $1.0 million or $0.01 per
share, basic and diluted. The impact in the first quarter of 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, 2000, 1999 and 1998

      Net Sales. Our net sales increased to $368.6 million in 2000 from $187.5
million in 1999 and $105.2 million in 1998. The 96.6% increase from 1999 to
2000 and the 78.2% increase from 1998 to 1999 were 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. In 1998 no
customers accounted for over 10% of our net sales.

      Gross Profit. Gross profit increased 71.3% to $128.2 million in 2000 from
$74.8 million in 1999, which represented a 82.4% increase from $41.0 million in
1998. Gross profit, as a percentage of net sales, was 34.8% in 2000, 39.9% in
1999, and 39.0% in 1998. The decrease in gross profit in 2000, as a percentage
of net sales, was primarily due to increases in sales of lower margin handsets,
which comprised 28.9% of net sales in 2000 compared to 9.6% in 1999. The
increase in gross profit in 1999, 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 36.8% to $48.1 million in 2000 from $35.1 million in 1999,
which represented a 51.3% increase from $23.2 million in 1998. The increase in
selling, general and administrative expenses across the periods 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. The increase in selling,
general and administrative expenses in 1999 as compared to 1998 also reflected
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 13.1% in 2000 from 18.7% in 1999 and 22.1%
in 1998. The decrease in selling, general and administrative expenses as a
percentage of net sales for the three periods was due primarily to economies of
scale associated with the significant increases in net sales.

      Research and Development. Research and development expenses increased
122.3% to $41.5 million in 2000 from $18.6 million in 1999, which represented a
26.5% increase 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 $6.8 million in 2000 from $1.3 million in 1999 and

                                       36
<PAGE>

$22,000 in 1998. As a percentage of net sales, research and development
expenses were 11.2% in 2000, 10.0% in 1999 and 13.9% in 1998.

      Amortization of Intangible Assets. Amortization of intangible assets
increased to $4.9 million in 2000 from $0.3 million in 1999 and $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 from the date of
acquisition.

      Interest Income (Expenses), Net. Net interest income was $8.9 million in
2000, and net interest expenses were $1.0 million in 1999 and $0.1 million in
1998. The increase in interest income from 2000 to 1999 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. The increase in interest expense
from 1999 to 1998 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 income was $1.9 million in 2000,
and net other expenses were $1.2 million in 1999 and $1.0 million in 1998. The
change from 2000 to 1999 was primarily due to a one-time gain on non-trade
receivables which related to receipts of balances previously considered
uncollectible. 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 loss of affiliated companies was $0.3 million in 2000, 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 2000 and 1999 was primarily due to the decrease in net income at our
Guangdong manufacturing subsidiary. The change between 1999 and 1998 was
primarily due to the increase in net income at our Guangdong manufacturing
subsidiary.

      Income Tax Expenses. Income tax expenses were $14.0 million in 2000, $0.6
million in 1999 and $1.4 million in 1998. The increase in the income tax
expenses between 2000 and 1999 was due to our increasing income. The decrease
in income tax expenses between 1999 and 1998 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 of Consolidated Subsidiaries. Minority
interest in earnings of consolidated subsidiaries was $2.3 million in 2000 and
$2.1 million in 1999, and minority interest in loss of consolidated
subsidiaries was $0.9 million in 1998. The change between the three periods was
primarily due to the increased profitability at our Zhejiang manufacturing
subsidiary.

      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-

                                       37
<PAGE>

for-one basis at a price below the expected offering price 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

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

      During 2000, we invested $10.0 million in Softbank China, an investment
fund established by SOFTBANK CORP. focused on investments in Internet companies
in China. SOFTBANK CORP. and its related companies are significant stockholders
of our company. Our investment constitutes 10% of the funding for Softbank
China, with SOFTBANK CORP. 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. Many of the fund's investments
are and will be in privately held companies, many of which can still be
considered in the start-up or development stages. These investments are
inherently risky as the market for the technologies or products the companies
have under development are typically in these early stages and may never
materialize. During the three months ended March 31, 2001, based upon a review
of the carrying value of this investment, an impairment charge of $1.0 million
was recognized to provide for the decline in the fair value below the carrying
value of this investment. Due to the risky nature of these investments, we may
experience further losses in connection with this investment in Softbank China.

      Net cash used in operations for the three months ended March 31, 2001 was
$31.6 million, which was primarily due to an increase in inventories, accounts
receivable and other current and non-current assets of $34.1 million, $8.8
million and $18.5 million respectively, and a decrease in accounts payable of
$3.3 million. The uses of cash were partially offset by depreciation and
amortization expense of $3.3 million, amortization of deferred stock
compensation expense of $1.3 million, a long-term investment impairment charge
of $1.0 million, an increase in income taxes payable and other current
liabilities of $5.1 million and an increase in deferred revenue of $12.3
million. Net cash 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 provided by investing activities for the three months ended
March 31, 2001 of $44.6 million was primarily due to sales and maturities of
short-term investments of $51.1 million, offset by the acquisition of property,
plant and equipment of $4.5 million, and investment in affiliates of $2.0
million. Proceeds from sales and maturities of short-term investments were used
to finance working capital requirements. Net cash 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.

                                       38
<PAGE>

     Net cash provided by financing activities for the three months ended
March 31, 2001 of $13.4 million was primarily due to net proceeds of $10.7
million from borrowing under our lines of credit and $2.7 million from the
issuance of common stock through the exercise of stock options. 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 sales in China are generally denominated in Renminbi. Our sales
outside China are generally denominated in U.S. dollars. Due to the
limitations on converting Renminbi, we are limited in our ability to engage in
currency hedging activities in China. We cannot guarantee that fluctuations in
currency exchange rates, especially a devaluation in the Renminbi, which is
currently fixed against the U.S. dollar, 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 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, such financing may not be available to us on commercially reasonable
terms, or at all.

Quantitative and Qualitative Disclosures About Market Risks

     We are 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 in instruments with maturities of 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 March 31, 2001 (in
thousands, except interest rates):

<TABLE>
<S>                                                                     <C>
   Cash and cash equivalents..........................................  $175,535
   Average interest rate..............................................      2.9%
   Short-term investments.............................................  $ 32,949
   Average interest rate..............................................      5.7%
   Total investment securities........................................  $208,485
   Average interest rate..............................................      3.3%
</TABLE>

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

                                      39
<PAGE>

Recent Accounting Pronouncements

      In June 1998, the Financial Accounting Standards Board, or 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. We adopted SFAS No. 133 on January 1, 2001, and the
adoption did not have an impact on our financial statements.

      In September 2000, the FASB issued SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which revises the standards for accounting for securitizations
and other transfers of financial assets and collateral and requires entities
that have securitized financial assets to provide specific disclosures. SFAS
140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. We adopted SFAS
No. 140 on January 1, 2001, and the adoption did not have an impact on our
financial statements.

                                       40
<PAGE>

                                    BUSINESS

Overview

      We design and market wireline and wireless broadband enabled access and
switching equipment that supports migration to next generation IP-based
networks. To date, substantially all of our sales have been to service
providers in China. Our integrated suite of products provides migration to next
generation networks and allows service providers to offer efficient and
expandable voice, data and Internet access services. Because our systems are
based on widely adopted international communications standards, service
providers can easily integrate our systems into their existing networks and
deploy our systems in new broadband, Internet Protocol and wireless network
rollouts. Internet Protocol, or IP, refers to a set of rules developed for
communicating information over the Internet.

      We provide a range of network service solutions based on three principle
technology platforms: WACOS, PAS and AN-2000. WACOS is an IP-based multiservice
softswitch designed to provide voice and data switching and gateway functions
in integration with PAS and AN-2000 or on a standalone basis. PAS allows
service providers to offer voice, data and value-added services over mobile and
fixed wireless networks. As of May 31, 2001, we had approximately 4.6 million
lines installed in 144 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. As of May 31, 2001, approximately 3.0
million lines of our wireline AN-2000 access system have been deployed in
China, including deployments in the six largest regional communications
markets.

Industry Background

      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. The Ministry of Information Industry, the
regulatory body that oversees telecommunications in China, forecasts that
communications equipment capital expenditures will reach $31.7 billion in 2001,
a 26.8% increase from $25.0 billion in 2000.

      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 2000 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 56.7%, in France of 58.0%, in Hong Kong of 57.8% and
in the United States of 67.3%. While growth in the China communications market
is currently driven predominantly by voice services, the increasing demand for
data services presents a growing opportunity. Gartner Group estimates that
Internet subscribers in China will grow from 8.9 million in 1999 to 51.0
million in 2004, representing a compound annual growth rate of 41.8%.

      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 gross domestic product will grow at a compound
annual rate of 7.7% through 2005.

      Communications Needs of Developing Countries. Demand for voice and data
communications services in developing countries 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 2001 report by the
International Telecommunication Union, in 1999 developing countries invested
$55.9 billion in communications infrastructure, representing 29.6% of all
communications infrastructure spending worldwide. Governments are increasingly
implementing and funding infrastructure

                                       41
<PAGE>

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.

      Communications Network Architecture in China. The development of China's
communications infrastructure involves installing a nationwide network of high-
bandwidth fiber-optic backbone networks and connecting each business and
residential subscriber to this backbone. The wireline and wireless systems that
link local subscribers to these backbone networks are referred to as the last
mile or the local access network. The high growth rate, geographic dispersion
and diverse communications needs of residences and businesses in China means
that 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 provide services quickly,
efficiently and cost-effectively. Given the relative absence of a legacy
communications infrastructure in China, these service providers have been less
constrained and thus often seek to deploy the latest best-of-breed systems with
the flexibility to handle voice and data services.

      Needs of Communications Service Providers. Service providers require
network solutions that address all of their access needs and offer easy
migration to next generation networks. These service providers require products
that enable them to quickly, and with minimal incremental investment, address
the changing demands of their subscribers for expanded or more advanced
services over time. Given the rapid growth in emerging communications markets
such as China, network solutions must be scalable 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. In addition, service providers require products that provide an
integrated product solution and an economical migration path to next generation
networks focused on the following technologies:

    . IP-Based Networks. An increasing amount of voice and data traffic
      travels across IP-based networks instead of traditional circuit-based
      networks. The principal advantages of IP-based networks over circuit-
      based networks are lower cost, higher speed and the support of
      multiple applications including e-mail, Internet access, video and
      voice in a single network. As a result of these advantages, investment
      in IP-based networks is increasing while investment in circuit-based
      networks is decreasing.

    . Open Standards and Platforms. Service providers require equipment that
      complies with standard industry interfaces and protocols and is
      interoperable with the existing infrastructure. This open platform
      approach allows service providers to add new complementary services to
      their existing networks without compatibility issues. Service
      providers also require platforms that are reprogrammable and
      upgradable in order to adapt to new standards.

    . Broadband Networks. Service providers are focused on upgrading their
      networks to offer broadband services while preserving the investment
      in their existing infrastructure. New broadband networks, such as
      digital subscriber line or xDSL, are expected to provide end users
      with additional applications and services, resulting in additional
      revenue for service providers.

    . Wireless Access Networks. Given the rapid growth in emerging
      communications markets such as China, service providers are focused on
      quickly deploying solutions to meet customer needs. Wireless access
      solutions allow for rapid deployment of relatively inexpensive
      networks that give service providers significant revenue potential and
      cost advantages over wireline networks. In addition, service providers
      require wireless networks that will allow for migration to third
      generation wireless networks, referred to as 3G networks.

                                       42
<PAGE>

    . Value Added Services. Service providers are focused on capitalizing on
      new broadband networks to provide end users with value added services
      that will serve to differentiate their product offerings, build
      customer loyalty and generate incremental revenue.

Although markets such as China represent substantial opportunities for
communications equipment vendors, few companies have delivered market specific
products that have the ability to smoothly migrate to the next generation
technologies, coupled with the local presence that service providers require.

The UTStarcom Solution

      We design and market wireline and wireless broadband enabled access and
switching equipment that supports migration to next generation IP-based
networks. We believe our key competitive advantages are:

      Migration to Next Generation Networks. Our products are designed with the
flexibility to allow service providers to deliver voice, data and video
services on a platform which offers the ability to migrate to next generation
broadband wireline and wireless networks based on IP and open standards. As a
result, service providers can preserve their investment in existing networks
and generate significant incremental revenue from this investment while
migrating to next generation networks over time. Our products enable service
providers to effectively time their network equipment expenditures and rapidly
introduce new services as demand warrants.

      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 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 that 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.

      Modular, Scalable Solutions. All of our products are based on a modular
design, using a combination of off-the-shelf components and proprietary
hardware and software modules. 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 focused on 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 scalable products 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.

      Open Standards-Based Platforms. 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. Our open platforms allow 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

                                       43
<PAGE>

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 12 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 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 wireline and wireless
broadband enabled access and switching equipment. The principal elements of our
strategy are as follows:

      Leverage Our Installed Base to Capitalize on Demand for Broadband
Services. We believe we are well positioned to leverage our installed base of
systems and service provider relationships to capitalize on an increasing
demand for data and broadband services. To meet this demand, we intend to:

    . continue to develop our WACOS IP-based multiservice softswitch
      platform, which is designed to enable geographically dispersed
      gateways and servers to interact over high speed IP networks to serve
      millions of subscribers;

    . enhance our PAS system to enable the provisioning of high-speed data
      services over 128 Kilobits per second, or Kbps, wireless links;

    . focus our development efforts on products that enable migration to 3G
      wireless technologies;

    . continue to provide broadband upgrades to our installed based of AN-
      2000 platforms to enable the delivery of broadband services over
      copper connections through digital subscriber line, or xDSL,
      technologies;

    . broaden our PAS system with value-added services, such as our wireless
      content and applications which we offer in Taiwan under the brand name
      MiMi; and

    . work with original equipment manufacturers to offer service providers
      a complete solution for IP-based networks.

      Penetrate Emerging IP-based Switching Market. We believe the increase in
Internet usage, particularly voice over IP traffic, has resulted in a market
need for a next-generation IP-based switching platform. Accordingly, we have
made a substantial investment in developing our WACOS platform, which is
designed to integrate with our existing products and can be scaled in response
to increased demand. We believe that WACOS can deliver value to service
providers, both as a stand-alone system and in combination with our PAS system
and AN-2000 platform. We intend to incorporate additional functionality into
the WACOS platform in the future, which we believe will enable us to enter new
markets in China and around the world.

      Expand Presence in China. We intend to further capitalize on China's
large population, low teledensity and strong 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;


                                       44
<PAGE>

    . developing new products to address the demands of our existing and
      future customer base;

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

    . increasing our local research and development and manufacturing
      capabilities.

      Penetrate Other Growing Communications Markets. We have started offering
our products in other growing communications markets outside of mainland China.
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 sales relationships. Our sales division
is currently targeting expansion into Africa, Europe, India, Latin America,
Taiwan, and other Pacific Rim markets. We have created regional offices with
sales and customer support operations in Manila, Miami, New Delhi, Shanghai,
Taipei, and Tel Aviv, and plan to establish local direct sales representative
offices in key regions around the world. To date, we have deployed our products
in a number of growing communications markets outside of mainland China, such
as India and Taiwan.

Products

      We provide communications equipment for service providers that operate
wireless and wireline networks. Our wireless and wireline access networks and
IP-based switching systems use our three principal technology platforms:

    . WACOS -- our IP-based multiservice softswitch;

    . PAS -- our wireless access system; and

    . AN-2000 -- our broadband access platform.

      Each comprises multiple hardware and software subsystems that can be
offered in various combinations to suit individual customer needs. In addition,
through original equipment manufacturer relationships, we provide customers in
China with equipment for deployment in metropolitan area networks.

    Our IP-Based Multiservice Softswitch (WACOS)

      WACOS is an IP-based multiservice softswitch designed to replace
traditional central office switches. WACOS provides voice over IP gateway
functions, broadband and narrowband remote access services and associated
billing, provisioning and service management operations support systems. WACOS
combines softswitch functionality with our wireless technology to provide
highly scalable mobile switching centers, which can operate with our PAS
system.

      WACOS networks are distributed, which means that many geographically
dispersed gateways and servers can interact over a high speed IP network to
serve millions of subscribers. Gateways provide hardware resources to process
voice and data and support widely used interface protocols. Servers provide
functions like call routing, accounting, authorization, billing, provisioning,
fault monitoring and recovery.

      We have developed an advanced and comprehensive operations support system
for management of WACOS equipment, billing for WACOS services and customer care
for WACOS subscribers. This operations support system uses an online Internet-
based user interface, which enables phone company personnel and individual
subscribers to access provisioning and billing information through the Internet
from an ordinary web-browser.

      We are also working to develop a set of capabilities including mobile
switching center, radio network controller and general packet radio service
node in support of 3G wireless technologies. WACOS applications

                                       45
<PAGE>

are also being developed to provide wireline local exchange functionality,
voice over IP gateways to enable legacy public networks to connect to low-cost
IP-based long distance trunk lines and also to provide modem and fax pools that
would allow WACOS to act as a remote access server for dial-up users who wish
to access IP networks. We are also developing IP routing capabilities to
integrate in our WACOS platform to further improve functionality and reduce
cost to our customers. We intend to continue to develop WACOS for many
applications in response to evolving market requirements and technology trends.

    Our Wireless Access System (PAS)

      PAS is a wireless access system that uses microcellular radios to offer
mobile and fixed access. When compared to macrocellular systems like GSM and
CDMA, PAS offers lower costs, easier radio planning, higher traffic capacity,
better voice quality, better data transmission speed, lighter and lower powered
handsets and better support of advanced information services. PAS is a low
mobility system, which means that it is designed for deployment in high
capacity urban and suburban areas, rather than for larger regional areas
covered by GSM and CDMA system deployments. For additional coverage or
capacity, PAS can easily be deployed in indoor spaces such as office buildings,
airports and shopping malls. PAS can provide wireless mobile phone service at
traffic densities of upwards of 15,000 subscribers per square kilometer.

      The PAS wireless access network employs a mobile switching network based
on our AN-2000 technology. 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 digital interface or an analog 2-wire
interface. These open interfaces to the central office allow PAS to access any
of the operator's installed switching capacity and to deliver existing switch-
based services, such as caller ID, call forwarding, and voice mail, to wireless
subscribers. IP-based PAS uses the WACOS platform instead of the AN-2000
platform. This eliminates the dependence on an existing local exchange switch
and permits PAS to be installed in a greenfield environment. 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 easily. IP-based PAS also brings many important benefits associated with
WACOS. Both PAS and IP-based PAS support 64 Kbps mobile Internet access along
with voice. Additionally, a PAS handset can be used with a personal computer or
handheld device to establish a wireless connection.

      In conjunction with our PAS system, we offer wireless content and
applications similar to NTT DoCoMo's iMode service. This service, known in our
Taiwan market as Mobile Information, Mobile Internet, or MiMi, utilizes a high
function handset with expanded LCD display that can be used to browse the
worldwide web, and send and receive e-mail and short messages. Chinese as well
as English characters are supported, and local content providers in Taiwan are
accumulating hundreds of information services including news, stock quotes and
sports results, job postings, dating services, chat rooms, and fortune telling.
MiMi can accurately determine a user's location and can list local restaurants,
hospitals or other location-sensitive information when queried.

      Our Netman network management system, which is integrated with our
network access products, provides for centralized management of our PAS
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, optimization and distribution of software updates.
Netman uses 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.

      As of May 31, 2001, service providers have installed our PAS system in
144 locations in China, representing a total installed capacity of
approximately 4.6 million lines.

                                       46
<PAGE>

    Our Broadband Access Platform (AN-2000)

      AN-2000 is a broadband access platform supporting a mix of services that
include:

    . traditional analog voice;

    . 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 lines, or
      IDSL, and high-data-rate digital subscriber lines, or HDSL; and

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

      Our AN-2000 platform contains both central office terminals and remote
terminals that are linked together by fiber, microwave radio or copper to form
a digital access network. The remote terminals are located close to the
subscribers and offer last-mile wireline connections for voice and data
services to the subscribers. Each AN-2000, which is scalable from 16 to 5,000
lines, can be connected into a loop to form a metropolitan access network of up
to 32,000 subscriber lines. By connecting multiple metropolitan access
networks, a metropolitan service network can potentially service hundreds of
thousands of subscribers.

      The AN-2000 offers a V5.2 exchange interface that benefits service
providers by shifting network intelligence out into the access network,
reducing reliance on costly and proprietary distributed central office switch
architectures. 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.

      For broadband services based on ADSL, the AN-2000 has integral
multiplexing capability for up to 155 Mbps of Asynchronous Transfer Mode, or
ATM, traffic over fiber and a modular architecture for virtually unlimited
bandwidth for IP Ethernet. The AN-2000 can serve as a multi-service access node
in which ADSL is delivered from a remote location combined with voice and
leased line services or it can be configured as a pure central-office based
Digital Subscriber Loop Access Multiplexer, which increases density and
functionality. In either application we offer a Broadband Remote Access Server
shelf to provide service management features over point-to-point-protocol-on-
ethernet, known as PPOE. As with PAS, our integrated Netman network management
system provides centralized management of the AN-2000. The ADSL service is
compatible with most customer premise modems provided by third-party vendors.
As of May 31, 2001, service providers have deployed approximately 3.0 million
AN-2000 subscriber lines.

Our OEM Products for Metropolitan Area Networks (MANS)

      We partner with original equipment manufacturers, known as OEMs, to
permit us to offer our customers a broader range of products. This OEM strategy
allows us to provide benefits to our customers and also allows us to learn
about specific technologies and market segments that help us to shape our
overall strategic planning. One such initiative is our program to penetrate
China's Metropolitan Area Networks, known as MANS, where we have partnered with
original equipment manufacturers Foundry Networks to provide Layer2/Layer3
switching and Zaffire, Inc. to provide dense wave division multiplexing for the
deployment of advanced citywide gigabit Ethernet networks.

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 local
Telecommunications Bureaus in a wide variety of provinces. Historically we have
focused

                                       47
<PAGE>

on marketing and selling our products to Telecommunications Bureaus in
Guangdong, Zhejiang, Fujian, Shandong and Jiangsu provinces and the
municipality of Shanghai. According to China's National Bureau of Statistics,
these six regions represented 26.3% of China's population and 42.4% of China's
gross domestic product in 1998. 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.

                                       48
<PAGE>

     The following table is a list of our customers in China who have each
purchased more than $500,000 of our products during 2000 and the first quarter
of 2001.

Beijing Municipality

                           Heilongjiang Province

                                                      Shaanxi Province

                           Haerbin
                           Telecommunications
                           Bureau

Beijing                                               Wuzhong
 Telecommunications        Henan Province              Telecommunications
 Administration                                        Bureau

                           Jiaozuo
                           Telecommunications         Xian Telecommunications
                           Bureau                     Bureau

JT Telecom

                                                      Shandong Province

Fujian Province

                           Luohe Telecommunications
                           Bureau

Putian                                                Dongying
Telecommunications         Hubei Province             Telecommunications
Bureau                                                Bureau

                           Fengjie
Quanzhou                   Telecommunications         Jinan Telecommunications
Telecommunications         Bureau                     Bureau
Bureau

Guangdong Province

                           Yibing                     Jining
                           Telecommunications         Telecommunications
                           Bureau                     Bureau

Dongguan
Telecommunications         Hunan Province
Bureau

                           Binzhou
Foshan                     Telecommunications         Linyi Telecommunications
Telecommunications         Bureau                     Bureau
Bureau

                           Jiangsu Province

                           Changzhou
                           Telecommunications         Pingdu
                           Bureau                     Telecommunications
                                                      Bureau

                                                      Shanghai Municipality

Jiangmen
Telecommunications                                    Cenxi Telecommunications
Bureau                                                Bureau

                           Taizhou
                           Telecommunications         Sichuan Province
Meizhou                    Bureau
Telecommunications
Bureau

                                                      Chongqing
                           Xuzhou                     Telecommunications
                           Telecommunications         Bureau
Qingyuan                   Bureau                     Neijiang
Telecommunications         Yancheng                   Telecommunications
Bureau                     Telecommunications         Bureau
                           Bureau

                           Jilin Province

Sanshui                    Siping                     Suining
Telecommunications         Telecommunications         Telecommunications
Bureau                     Bureau                     Bureau

                           Liaoning Province

                           Benxi Telecommunications
Shanwei                    Bureau                     Xinhui
Telecommunications                                    Telecommunications
Bureau                                                Bureau

                                                      Yunnan Province

                           Heshan
                           Telecommunications         Kunming
Shaoguan                   Bureau                     Telecommunications
Telecommunications                                    Bureau
Bureau

                                                      Zhejiang Province

                           Liaoyang                   Fuyang
                           Telecommunications         Telecommunications
Yunfu Telecommunications   Bureau                     Bureau
Bureau                     Liaoyang Tel. Instrument   Hangzhou
Zhangzhou                  Co.                        Telecommunications
Telecommunications         Panjin                     Bureau
Bureau                     Telecommunications
                           Bureau

                           Ningxia Autonomous         Quzhou
Zhanjiang                  Province                   Telecommunications
Telecommunications                                    Bureau
Bureau

                           Shizhuishan
                           Telecommunications
                           Bureau                     Ruian Telecommunications
Zhaoqing                   Yinchuan                   Bureau
Telecommunications         Telecommunications
Bureau                     Bureau                     Shaoxing
                                                      Telecommunications
                                                      Bureau

Zhuhai
Telecommunications
Bureau

Guangxi Autonomous
Province

                                                      Shengzhou
Laibin                                                Telecommunications
Telecommunications                                    Bureau
Bureau                                                Tonglu
Liuzhou                                               Telecommunications
Telecommunications                                    Bureau
Bureau                                                Wencheng
Wuzhou                                                Telecommunications
Telecommunications                                    Bureau
Bureau

Guizhou Province

Luoding
Telecommunications
Bureau

                                                      Wenling
Hebei Province                                        Telecommunications
                                                      Bureau

Baoding
Telecommunications                                    Wenzhou Zongheng Corp.
Bureau                                                Xiaoshan
Chengde                                               Telecommunications
Telecommunications                                    Bureau
Bureau                                                Xinchang
Handan                                                Telecommunications
Telecommunications                                    Bureau
Bureau                                                Yuhang
Qinhuangdao                                           Telecommunications
 Telecommunications                                   Bureau
 Bureau                                               Zhuji Telecommunications
                                                      Bureau

Xingtai
Telecommunications
Bureau
Xuanhua
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. For the three months ended March 31, 2001, Shaoxing
Telecommunications Bureau accounted for 14.0% of our revenues. No other
customer accounted for more than 10% of our revenues for the three months ended
March 31, 2001.

                                       49
<PAGE>

      We also sell our network access equipment to service providers in high
growth communications markets outside of mainland China. These markets
accounted for about 1.2% of our net sales in 2000 and 2.0% of our net sales for
the three months ended March 31, 2001. We have shipped our equipment to service
providers in India, Mauritius, Russia and Taiwan and entered into contracts in
Bangladesh, Haiti and Japan. We have also begun trial deployments in Thailand,
the United States and Vietnam and have an agreement to deploy a field trial in
India.

      As of December 31, 2000, our backlog totaled approximately $191.9
million, compared to approximately $71.8 million as of December 31, 1999. We
include in our backlog contracts and purchase orders for which we anticipate
delivery to occur within 12 months and for products delivered but for which
final acceptance has not been received. Because contracts and purchase orders
are generally subject to cancellation or delay by customers with limited or no
penalty, our backlog is not necessarily indicative of future revenues or
earnings.

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, Chengdu, Fuzhou, Guangzhou, Hangzhou, Jinan, Kunming,
Shanghai, Shenyang, Wuhan, Xian, 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 China allow us to distinguish
ourselves from competing equipment providers and build customer loyalty. The
customer service operation in 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 May 31, 2001, we employed 643 people in sales, marketing and
customer support in China.

      Our sales efforts in markets outside of mainland China combine direct
sales, original equipment manufacturers, distributors, resellers, agents and
licensors. 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 have also assigned permanent staff to our office
in New Delhi, India, 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 resolution. 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 United Arab Emirates, our local in-country
sales partners also provide customer support.

Technology

      We believe the following key technologies have been instrumental in our
ability to provide leading broadband wireline and wireless access networks and
IP-based switching systems.

      X-over-IP. X-over-IP refers to the transmission of various forms of
traffic, including voice, video, fax, music and broadcast, over IP networks. An
X-over-IP network requires the following equipment:

    . media gateways at the edge of the network that convert legacy media
      like telephone lines, fax and data modems, or other non-IP data
      interfaces to IP and incorporate quality of service functionality
      designed to avoid delay and packet loss due to congestion;

                                       50
<PAGE>

    . softswitching servers that perform address translation, service
      monitoring and assurance, billing, authorization, supplementary
      services like call forwarding, conferencing, and other signaling
      translations; and

    . an IP network that provides high speed IP routing and transmission.

Our WACOS platform provides the media gateway and the softwitching server and,
when combined with industry-standard IP routers, creates a complete X-over-IP
network.

      The WACOS gateway converts incoming TDM formats from POTS, ISDN, SS7 and
leased lines into packetized voice over IP. The packetization process utilizes
programmable digital signal processors that can code voice, fax and standard
56Kbps modem signals into IP. The gateway also terminates the associated TDM
format signaling protocols and generates IP based signaling protocols like
H.323, MGCP and SIP. The WACOS gateway also provides IP routing functions that
allow the IP packets to penetrate deeper into the core network with queuing,
and route selection, consistent with the desired quality of service for each
particular call.

      The WACOS softswitch provides switching intelligence to manage the calls
in the network as they progress from gateway to gateway. The WACOS operations
support system provides the database management for service provisioning,
authorization and flexible billing.

      Service providers are increasingly offering X-over-IP services to reduce
costs, reduce obsolescence, provide easier upgrades and generate incremental
revenue through value-added voice and data services.

      Softswitch Mobility Management. We are a founding member of the
International Softswitch Consortium, an industry group formed to promote
compatibility and interoperability of softswitch technologies. Based on our
knowledge of the industry, we believe we are one of the first companies to
develop a softswitch architecture to support mobile applications.

      Softswitches control the signaling and call management functions in an X-
over-IP network. Of the many possible types of softswitching services, mobile
telephony and information delivery services are among the most demanding and
complex. Mobile networks must track subscriber's locations dynamically whether
or not they are on a call. They must provide real-time handovers between base
stations, perform authorization of roaming visitors, provide real-time billing
for pre-paid services and flexible routing to its roamers in foreign networks
and support messaging, file transfer and assignment of data bandwidths. Based
on our knowledge of the industry, we believe that our WACOS platform is one of
the first systems to provide mobile switching functionality.

      WACOS employs our proprietary, object oriented signaling protocol for
mobility, known as SNSP, which we believe provides advantages over other
similar protocols. WACOS is commercially deployed with mobility support for our
PAS wireless infrastructure. The WACOS gateway is also being developed to
support the future WCDMA and TD-SCDMA radio network control protocols as well
as the payload protocols for 3G. WACOS will serve as an IP-based mobile
switching center and IP-based radio network controller. With this focus on
mobility services, WACOS is targeting one of the most complex and commercially
important segments of softswitch applications.

      PAS Value-Added Services. PAS offers a full suite of integrated value-
added services, which are easily customized, including short message services,
location services, web browsing, e-mail, voice mail, and 64kbps internet
access. As part of our current research and development efforts, we are
focusing on developing 128K and 256K packet mode wireless data delivery.

      We have licensed certain protocols and architectures that support the web
browsing functions from KDDI, a Japanese service provider, and have optimized
them for performance, hardware simplicity and

                                       51
<PAGE>

Chinese character support as well as integrated them with PAS. We have
developed additional protocols and architecture used in this technology.

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 insight
provided from these relationships allowed us to develop 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.

      In the past we have made, and expect to continue to make, significant
investments in research and development. Our research and development
expenditures totaled $12.4 million in the three months ended March 31, 2001,
$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,
AN-2000 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 Acer NeWeb Corporation, Japan Radio Co., Ltd.,
Kyocera Corporation and Sanyo Electric Co., Ltd., 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 China,
we undertake final assembly and test our wireless infrastructure products at
our own facilities and have recently begun to manufacture some of these
products ourself. We contract with third parties in China to undertake high
volume assembly and manufacturing of our handsets and we conduct final
assembly, testing and packaging at our own facilities. In addition, we
sometimes use third parties for high volume assembly of circuit boards.

                                       52
<PAGE>

Structure and Regulation of the Telecommunications Industry in China

      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 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 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 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. Additionally, the Ministry of
Information Industry can decide 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, the rates that are charged to subscribers for those
services and the content of material available in China over the Internet.
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.

      Statutory Framework. 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. We do not
know the nature and scope of regulation that the Telecommunications Law would
create, and it is unclear if and when the Telecommunications Law will be

                                       53
<PAGE>

adopted. If the Telecommunications Law is adopted, we expect it to become the
basic telecommunications statute and the source of telecommunications
regulations in China.

      The State Council issued the Telecommunications Regulations of the
People's Republic of China in September 2000, known as the Telecom Regulations.
The Telecom Regulations cover telecommunications services and market
regulations, pricing, interconnection and connection, as well as
telecommunications construction and security issues. These regulations 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. As with the
Telecommunications Law, we are uncertain what affect, if any, the Telecom
Regulations will have on our business as presently conducted.

      Licenses for Communication Equipment. Beginning January 1, 1999, China's
government required that all telecommunications equipment connected to public
or private telecommunications networks within China, which includes equipment
that we sell in 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. Subsequently, the State Council issued the Telecom Regulations in
September 2000. In May 2001, the Ministry of Information Industry issued the
Administrative Measures of Network Access Licenses, known as the Access License
Measures, to implement the Telecom Regulations and to replace the old access
license regulation. Both the Telecom Regulations and the Access License
Measures require the government to implement 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 and
industry standards, and a network access license for the equipment must be
obtained. Without the license, the equipment is not allowed to be connected to
public networks or sold in China. The Telecom Regulations require that
manufacturers ensure that the qualify 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 other installed licensed
products. The State Council's product quality supervision department, in
concert with the Ministry of Information Industry, will 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.

      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. We have obtained the
required network access licenses for our AN-2000 system. We have applied for,
but have not yet received, a network access license for our PAS system. Based
upon conversations with the Ministry of Information Industry, we understand
that our PAS system is considered to still be in the trial period and that
sales of our PAS system may continue to be made by us during this trial period,
but a license will ultimately be required. Network access licenses will also be
required for most additional products that we are selling or may sell in China,
including our WACOS platform. If we fail to obtain the required licenses, we
could be prohibited from making further sales of the unlicensed products,
including our PAS system, in China, which would substantially harm our
business, financial condition and results of operations. 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 a product is in the trial period in a manner that is
inconsistent with information received by our counsel in China, either of which
could have a material adverse effect on our business and financial condition.

      Software Registration. On October 27, 2000, the Ministry of Information
Industry issued the Administrative Regulations on Software Products, known as
the Software Regulations, to enhance software product management and stimulate
the development of the software industry in China. Under the Software
Regulations, the government imposes a registration and filing system on
software and products incorporating software. Software will not be allowed to
be produced and sold in China without registration and filing. Registration and
filing of domestic software products should be applied for by the developers or
producers of the software. Registration under the Software Regulations is valid
for five years and can be renewed upon

                                       54
<PAGE>

expiration. The Ministry of Information Industry is responsible for the overall
management of software. The local offices of the Ministry of Information
Industry at the provincial level are responsible for the management and
examination of and approval for the registration of the domestic software
within their own territories. The designated agencies authorized by these local
offices are responsible for acceptance for registration of software. Before
registration is approved by the government agencies, software products need to
be tested by the authorized testing institutions.

      We are in the process of applying for registration for our software.
Based upon verbal advice received from the Ministry of Information Industry, we
believe that since the Software Regulations only recently came into effect, we
will be able to continue to sell our products incorporating our software during
the period in which these regulations are being implemented and our application
is pending. However, this implementation period may not last long enough for us
to complete the registration of our software. Moreover, the Chinese government
may interpret or apply the Software Regulations in such a way as to prohibit
sales of products incorporating our unregistered software prior to
registration. If the government prohibits sales pending registration, or if we
fail in our efforts to register our software, we could be prohibited from
making further sales of products incorporating the unregistered software in
China, which could substantially harm our business and financial condition.

Competition

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

    . AN-2000: Advanced Fibre Communications, Inc.; Alcatel Alsthom CGE,
      S.A.; Datong Telecom Technology Co. Ltd.; Huawei Technology Co., Ltd.;
      Lucent Technologies, Inc.; and Zhongxing Telecommunications Equipment.

    . PAS: Lucent and Zhongxing.

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

      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 existing and potential competitors may
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 and offer significant discounts on handsets or other 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 their ability 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

                                       55
<PAGE>

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 may not be able to compete successfully against current
or future competitors. In addition, competitive pressures in the future may
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;

    . for PAS, the availability, cost and functionality of our handsets;

    . short delivery and installation intervals;

    . design and installation support;

    . ease of integration with the backbone network;

    . flexibility in supporting multiple interfaces and services;

    . operational cost and 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 three U.S. patents for existing
products. The terms of one of these patents will expire in 2016, while the
terms of the remaining two patents will expire in 2019. We have submitted
thirteen additional U.S. patent applications and twenty-four foreign patent
applications. We cannot assure you that any of our patents will issue 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 and Taiwan. We may not
be able to obtain patents in China on our products or the technology that we
use to manufacture our products. KDDI, a Japanese service provider, has
licensed key technology to us that serves as the base for our MiMi service in
Taiwan. 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.

                                       56
<PAGE>

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 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 May 31, 2001, we employed a total of 1,951 full-time employees. We
also from time to time employ part-time employees and hire contractors. Of the
total number of full-time employees, 862 are in research and development, 234
in manufacturing, 679 in marketing, sales and support, and 176 in
administration. We have 1,690 employees located in China, 236 employees located
in the United States, and 25 employees in other countries. In addition to our
total full-time employees, the Guangdong manufacturing joint venture has 112
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.

                                       57
<PAGE>

Facilities

<TABLE>
<CAPTION>
                                                                                  Date of Lease
  Location                           Functions                     Square Footage   Expiration
  --------                           ---------                     -------------- --------------
<S>               <C>                                              <C>            <C>
Alameda, CA         Headquarters, Administration, Sales/Customer       25,576     January, 2003
                         Support, Research and Development
Iselin, NJ        Sales/Customer Support, Research and Development     35,809       July, 2004
Miramar, FL                    Sales/Customer Support                  12,736     November, 2001
Shenzhen, China               Research and Development                 18,678       May, 2003
Hefei, China                  Research and Development                  2,153       July, 2002
Hangzhou, China       Administration, Sales/Customer Support,          83,926      March, 2002
                           Engineering and Manufacturing
Hangzhou, China       Administration, Sales/Customer Support,          89,340     February, 2002
                             Research and Development,
                                 and Manufacturing
Huizhou, China                     Manufacturing                       73,216     December, 2001
Beijing, China           UTSC Headquarters Administration,             16,695       July, 2001
                               Sales/Customer Support
Shanghai, China                Sales/Customer Support                   8,214      April, 2003
Wuhan, China                   Sales/Customer Support                   1,066      April, 2003
Chengsha, China                Sales/Customer Support                     592      March, 2002
Guangzhou, China               Sales/Customer Support                  11,936      April, 2004
Chengdu, China                 Sales/Customer Support                   1,851     December, 2001
Jinan, China                   Sales/Customer Support                   3,875      March, 2002
Kunming, China                 Sales/Customer Support                   2,676     February, 2003
Xian, China                    Sales/Customer Support                   4,133     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                     613       May, 2002
Hong Kong, China               Sales/Customer Support                     800       June, 2002
Gurgaon, India                 Sales/Customer Support                   3,024       June 2004
Herzlia, Israel                Sales/Customer Support                     969       May, 2002
</TABLE>

      We have entered into 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 at a cost of $5.7 million. 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 and estimating is
completed, we will decide whether to proceed with the actual building of the
manufacturing facility. In addition, as we expand into markets outside of
China, our facility needs may increase according to business needs.

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 prospectus, we are not
involved in any material legal proceedings.

                                       58
<PAGE>

                                   MANAGEMENT

Executive Officers and Directors

      Our executive officers and directors, and their ages as of March 31,
2001, are as follows:

<TABLE>
<CAPTION>
 Name                          Age Position(s)
 ----                          --- ----------
 <C>                           <C> <S>
 Masayoshi Son...............   43 Chairman of the Board of Directors
 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..............   49 Vice President, International Sales
 Gerald Soloway..............   52 Vice President, Engineering
 Thomas J. Toy...............   46 Director
 Chauncey Shey...............   44 Director
 Larry D. Horner.............   66 Director
</TABLE>

      Masayoshi Son has served as our Chairman of the Board of Directors since
October 1995. For more than 16 years, Mr. Son served as President and Chief
Executive Officer and as a director of SOFTBANK CORP., a leading global
provider of Internet content, technology and services. Mr. Son also serves as a
director of PASONA SOFTBANK Inc., Yahoo Japan Corporation, Aozora Bank, Ltd.
and E*TRADE Group, Inc. Mr. Son also serves as Chairman of the Board of
Directors and Chief Executive Officer of SOFTBANK Holdings Inc. and Chairman of
the Board of Directors of SOFTBANK America Inc. From April 1998 to October
1999, Mr. Son served as a director of Ziff-Davis, Inc. Mr. Son holds a B.A. in
Economics from the University of California at Berkeley.

      Hong Liang Lu has served as our President and Chief Executive Officer and
as 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 served as 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 served as President and Chief Executive Officer
of Unison World, Inc., a software development company. From 1979 to 1983, he
served as 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 served as our Executive Vice President and Vice Chairman of
the Board of Directors since October 1995. Mr. Wu has also served as the
President and Chief Executive Officer of one of our subsidiaries, UTStarcom
China, since October 1995. Mr. Wu was a co-founder of, and from February 1991
to September 1995 served as Senior Vice President of, StarCom Network Systems,
Inc., a company that marketed and distributed third party telecommunications
equipment. From 1988 to 1991, Mr. Wu served as a member of the technical staff
of Bellcore Laboratories. From 1987 through 1988, Mr. Wu served as 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,

                                       59
<PAGE>

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.

      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.

      Thomas J. Toy has served as a director since July 1995. Since March 1999,
Mr. Toy has served as Managing Director of Pacrim Venture Partners, a
professional venture capital firm specializing in investments in the
information technology sector. Prior to that he was a partner at Technology
Funding, a professional venture capital firm, from January 1987 to March 1999.
While at Technology Funding, Mr. Toy was Managing Director of Corporate Finance
and headed the firm's investment committee. Mr. Toy also serves as a director
of White Electronic Designs Inc. Mr. Toy holds B.A. and M.M. degrees from
Northwestern University.

      Chauncey Shey has served as a director since October 1995. Mr. Shey has
served as President of SOFTBANK China Holdings since December 1999. From July
1999 to December 1999, he served as President of DirecTouch Communications
Limited. From October 1995 to July 1999, Mr. Shey served as our Executive

                                       60
<PAGE>

Vice President in charge of Research and Development. From March to
October 1995, he served as Executive Vice President of StarCom Network Systems,
Inc., where he worked in research and development as well as in operation and
strategy planning. From March 1991 to March 1995, he served as Executive Vice
President of StarCom Products, Inc., a consulting business that developed
software products and provided expertise in the fields of computers and
telecommunications. In that position he was responsible for operations,
financial management and marketing. From December 1990 to December 1991,
Mr. Shey served as a consultant at Bell Labs. He holds a B.S. in Electrical
Engineering from Shanghai Jiao Tong University and an M.S. in Computer Science
from the State University of New York at New Paltz.

      Larry D. Horner has served as a director since January 2000. Since 1994,
Mr. Horner has served as Chairman of Pacific USA Holdings Corp. He continues to
serve as Chairman of the Board and Chief Executive Officer of Asia Pacific Wire
& Cable Corporation Limited, and as a director of American General Corp.,
Phillips Petroleum Company, Atlantis Plastics, Inc., Laidlaw Holdings Inc. and
Newmark Homes Corp. Mr. Horner formerly served as Chairman and Chief Executive
Officer of KPMG Peat Marwick from 1984 to 1990. Mr. Horner is a Certified
Public Accountant, holds a B.S. from the University of Kansas and is a graduate
of the Stanford Executive Program.

2001 Director Option Plan

      On March 2, 2001, the Board of Directors adopted, and in May 2001, our
stockholders approved, our 2001 Director Option Plan. Only those directors who
are not our employees will receive stock option grants under the 2001 Director
Plan. At the time of adoption, 1,200,000 shares of common stock were reserved
for issuance under the 2001 Director Option Plan. As of May 31, 2001, Larry D.
Horner, Chauncey Shey, Masayoshi Son and Thomas J. Toy were the only directors
eligible for grants under the 2001 Director Option Plan. All grants of options
to eligible directors under the 2001 Director Option Plan are automatic and
nondiscretionary. As of May 31, 2001, there were options to purchase 320,000
shares of common stock outstanding under the 2001 Director Option Plan.

Rule 10b5-1 Plans

      Rule 10b5-1(b) under the Securities Exchange Act of 1934 prohibits
trading by an insider of a company when the insider is in possession of
material inside information. To address concerns about the breadth of this
standard, the Securities and Exchange Commission has provided guidance that a
person is not liable if a trade was made pursuant to a preexisting trading plan
adopted in good faith. Thus, if an insider adopts a trading plan when the
insider was not aware of material nonpublic information, which plan contains
the amounts, prices, and times of the stock sales to be made in the future, a
stock sale made pursuant to the plan is not improper even if the insider later
became aware of material nonpublic information.

      Based on this guidance from the Securities and Exchange Commission, each
of our executive officers and one of our non-employee directors have
established trading plans pursuant to Rule 10b5-1 that provide for the periodic
sale of common stock held by each such officer and director. Each of the plans
contains a trading formula that sets forth the dates, times, and amounts of the
stock sales to be made under the plan. Each of the plans contains a minimum
sales price, under which sales will not be executed. Some of the plans provide
for sales of additional shares of stock in the event our stock price exceeds a
specified price. Each of the plans are established with a brokerage firm, which
is instructed to make the trades in accordance with the trading formula set
forth in the plan.

Indemnification of Directors and Executive Officers and Limitation of Liability

      We have adopted provisions in our certificate of incorporation that limit
the personal liability of our directors for monetary damages arising from their
breach of fiduciary duty as directors to the fullest extent permitted by
Delaware law. This limitation of liability does not apply to liabilities
arising under the federal securities laws and does not affect the availability
of equitable remedies such as injunctive relief or recession.

                                       61
<PAGE>

      Our certificate of incorporation also authorizes us to indemnify our
officers, directors, employees and agents who are made or threatened to be made
a party to an action or proceeding, whether criminal, civil, administrative or
investigative, to the fullest extent permitted under Delaware law.

      As permitted by the Delaware General Corporation Law, our bylaws provide
that:

    . we are required to indemnify our directors and officers to the fullest
      extent permitted by the Delaware General Corporation Law;

    . we are required to advance expenses, as incurred, to our directors and
      officers in connection with a legal proceeding to the fullest extent
      permitted by the Delaware General Corporation Law;

    . we may indemnify our other employees and agents to the extent that we
      indemnify our officers and directors; and

    . the rights to indemnification provided in the bylaws are not
      exclusive.

      We have entered into indemnification agreements with each of our current
directors and executive officers. These agreements provide our directors and
executive officers with additional protection regarding the scope of the
indemnification set forth in our certificate of incorporation and bylaws.

      We currently have a directors' and officers' insurance policy. At
present, there is no pending litigation or proceeding involving any director,
officer or employee of ours in which indemnification by us is sought. In
addition, we are not aware of any threatened litigation or proceeding that may
result in a claim for indemnification.

      The purchase agreement, a form of which is attached as Exhibit 1.1 to the
registration statement, of which this prospectus forms a part, provides for
indemnification by the underwriters of us, our officers and directors and the
selling stockholders, and by us and the selling stockholders of the
underwriters, for certain liabilities arising under the Securities Act or
otherwise.

      Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

                                       62
<PAGE>

                       PRINCIPAL AND SELLING STOCKHOLDERS

      The following table sets forth information known to us regarding the
beneficial ownership of our common stock as of May 31, 2001, and as adjusted to
reflect the sale of shares of common stock offered by us and the selling
stockholders by this prospectus, by:

    . each stockholder who is known by us to beneficially own more than 5%
      of our common stock;

    . each stockholder who is selling shares in this offering;

    . each of our directors;

    . each of our executive officers listed on the Summary Compensation
      Table in our proxy statement relating to our 2001 annual meeting of
      stockholders; and

    . all of our executive officers and directors as a group.

<TABLE>
<CAPTION>
                           Ownership of Shares             Ownership of Shares
                          Prior to Offering(1)               After Offering
                          ---------------------  Shares   ---------------------
Name and Address of                               Being
Beneficial Owner            Number   Percentage  Offered    Number   Percentage
- -------------------       ---------- ---------- --------- ---------- ----------
<S>                       <C>        <C>        <C>       <C>        <C>
Officers and Directors
Masayoshi Son(2)........  44,868,264   45.80%         --  44,868,264   43.14%
 c/o SOFTBANK CORP.
 24-1 Nihonbashi-
  Hakozakicho Chuo-ku,
 Tokyo 103-8501 JAPAN

Ying Wu(3)..............   5,971,112    6.06%   1,000,000  4,971,112    4.75%
 c/o UTStarcom (China)
  Ltd.
 11th Floor, CNT
  Manhattan Building No.
  6
 Chao Yang Men Be Da Jie
  Street
 Beijing, 100027 China

Chauncey Shey(4)........   5,074,209    5.16%   1,500,000  3,574,209    3.42%
 788 Hong Xu Road, #43
  Suite 1501
 Shanghai, 201103 China

Hong Liang Lu(5)........   3,515,155    3.57%     200,000  3,315,155    3.17%

Bill Huang(6)...........     953,944       *          --     953,944       *

Shao-Ning J. Chou(7)....     383,361       *      150,000    233,361       *

Paul Berkowitz(8).......     341,333       *      100,000    241,333       *

Michael Sophie(9).......     111,791       *          --     111,791       *

Gerald Soloway(10)......     102,706       *          --     102,706       *

Thomas J. Toy(11).......      56,737       *          --      56,737       *

Larry D. Horner(12).....      25,937       *          --      25,937       *

All executive officers
 and directors as a
 group
 (11 persons)(13).......  61,404,549   61.29%   2,950,000 58,454,549   55.02%

5% Stockholders

Entities affiliated with
 SOFTBANK CORP.(14).....  44,864,514   45.80%         --  44,864,514   43.14%
 c/o SOFTBANK CORP. 24-1
 Nihonbashi-Hakozakicho
  Chuo-ku,
 Tokyo 103-8501 JAPAN

Other Selling
 Stockholders
</TABLE>
- --------
  *  Less than 1%.

 (1) Assumes no exercise of the underwriters' over-allotment option. Beneficial
     ownership is determined in accordance with the rules of the Securities and
     Exchange Commission and generally includes voting

                                       63
<PAGE>

    power or investment power with respect to securities. All shares of common
    stock subject to options exercisable within 60 days following May 31,
    2001, are deemed to be outstanding and beneficially owned by the person
    holding those options for the purpose of computing the number of shares
    beneficially owned and the percentage ownership of that person. They are
    not, however, deemed to be outstanding and beneficially owned for the
    purpose of computing the percentage ownership of any other person.
    Accordingly, percent ownership is based on: (i) before this offering,
    97,957,063 shares of common stock outstanding as of May 31, 2001 plus any
    shares issuable pursuant to options held by the person or group in
    question which may be exercised either within 60 days of May 31, 2001, or
    upon the closing of this offering; and (ii) after this offering, an
    additional 6,050,000 shares to be issued by us in the offering. Except as
    indicated in the other footnotes to this table and subject to applicable
    community property laws, based on information provided by persons named in
    the table, each person or entity has sole voting and investment power with
    respect to the shares shown as beneficially owned. Unless otherwise
    indicated, the address of each of the individuals named in the table above
    is 1275 Harbor Bay Parkway, Alameda, CA 94502.

 (2) Represents 44,864,514 shares beneficially owned by entities affiliated
     with SOFTBANK CORP., a Japanese corporation. Mr. Son is President, Chief
     Executive Officer and major stockholder of SOFTBANK CORP. Mr. Son
     disclaims beneficial ownership of these shares except to the extent of
     his proportionate ownership interest of SOFTBANK CORP. Includes 3,750
     shares issuable upon exercise of options that are exercisable within 60
     days of May 31, 2001.

 (3) Includes 1,905,000 shares registered in the name of Wu Partners, a
     California Limited Partnership, of which Mr. Wu is general partner.
     Includes up to 250,000 issuable upon redemption by Wu Partners of its
     interest in Altavera Capital Fund LLP. Includes 10,500 shares registered
     in the name of Yalan Wang Wu, 25,307 shares registered in the name of
     Ashley Wu, and 25,307 shares registered in the name of Richard Yu. Yalan
     Wang Wu is Mr. Wu's wife and Ashley Wu and Richard Wu are Mr. Wu's
     children. Mr. Wu may be deemed the beneficial owner of the shares.
     Includes 551,992 shares issuable upon exercise of options that are
     exercisable within 60 days of May 31, 2001. Mr. Wu serves as our
     Executive Vice President and Vice Chairman of the Board of Directors.
     Mr. Wu also serves as President and Chief Executive Officer of one of our
     subsidiaries, UTStarcom China.

 (4) Includes 2,443,888 shares owned by Shey Partners, a California Limited
     Partnership, of which Mr. Shey is a general partner. Includes up to
     150,000 shares issuable upon redemption by Shey Partners of its interest
     in the Altavera Capital Fund LLP. Includes up to 71,112 shares issuable
     upon redemption by Shey Partners in its interest of ML-Montclair Capital.
     Includes 19,000 shares registered in the name of Qiwei Qiu, trustee of
     the Rebecca Shey Trust--1997 UTA dated December 20, 1997. Qiwei Qiu,
     trustee, is Mr. Shey's wife and Rebecca Shey is Mr. Shey's daughter. Mr.
     Shey may be deemed the beneficial owner of the shares. Includes 394,926
     shares issuable upon exercise of options that are exercisable within 60
     days of May 31, 2001. Mr. Shey serves as one of our directors and from
     October 1995 to July 1999 served as our Executive Vice President in
     charge of Research and Development.

 (5) Includes 229,000 shares owned by the Lu Family Limited Partnership, of
     which Mr. Lu is a general partner. Includes 5,332 registered in the name
     of Brian Lu, 5,332 shares registered in the name of Benjamin Lu, and
     5,332 shares registered in the name of Melissa Lu. Brian Lu, Benjamin Lu
     and Melissa Lu are Mr. Lu's children. Mr. Lu may be deemed the beneficial
     owner of the shares. Includes 453,127 shares issuable upon exercise of
     options that are exercisable within 60 days of May 31, 2001. Mr. Lu
     serves as our President and Chief Executive Officer and as one of our
     directors.

 (6) Includes 106,000 shares owned by the 2000 Huang Family Limited
     Partnership, of which Mr. Huang is a general partner. Includes 5,700
     shares registered in the name of Alexander Huang, and 5,700 shares
     registered in the name of Helen Huang. Alexander Huang and Helen Huang
     are Mr. Huang's children. Mr. Huang may be deemed the beneficial owner of
     the shares. Includes 60,532 shares issuable upon exercise of options that
     are exercisable within 60 days of May 31, 2001. Mr Huang serves as our
     Chief Technology Officer and from December 1996 to September 1999 served
     as our Vice President of Strategic Product Planning.

                                      64
<PAGE>

 (7) Includes 381,409 shares issuable upon exercise of options that are
     exercisable within 60 days of May 31, 2001. Mr. Chou serves as our
     Executive Vice President and Chief Operating Officer of China Operations
     and from March 1997 to December 1998 was our Vice President of China
     Operations.

 (8) Includes 23,420 shares registered in the name of Patricia Berkowitz;
     13,000 shares registered in the name of Karen Louise Berkowitz; 14,000
     shares registered in the name of Amy Beth Berkowitz; and 14,000 shares
     registered in the name of Lisa Ann Berkowitz. Patricia Berkowitz is Mr.
     Berkowitz's spouse. Karen Louise Berkowitz, Amy Beth Berkowitz and Lisa
     Ann Berkowitz are Mr. Berkowitz's children. Includes 113,196 shares
     issuable upon exercise of options that are exercisable within 60 days of
     May 31, 2001. Mr. Berkowitz serves as our Vice President of International
     Sales and from July 1996 to November 1998 was our Vice President of
     Product Management and Planning.

 (9) Includes 109,324 shares issuable upon exercise of options that are
     exercisable within 60 days of May 31, 2001. Mr. Sophie serves as our Vice
     President of Finance and Chief Financial Officer.

(10) Includes 500 shares registered in the name of Rachel Soloway, Dr.
     Soloway's daughter. Includes 85,006 shares issuable upon exercise of
     options that are exercisable within 60 days of May 31, 2001. Dr. Soloway
     serves as our Vice President of Engineering and from April 1998 to January
     1999 was our Director of Strategic Marketing.

(11) Includes 55,937 shares issuable upon exercise of options that are
     exercisable within 60 days of May 31, 2001. Mr. Toy serves as one of our
     directors.

(12) Includes 25,937 shares issuable upon exercise of options that are
     exercisable within 60 days of May 31, 2001. Mr. Horner serves as one of
     our directors.

(13) Includes 2,235,066 shares issuable upon exercise of options that are
     exercisable within 60 days of May 31, 2001.

(14) Includes 44,651,630 shares registered in the name of SOFTBANK America,
     Inc., a Delaware corporation, and 212,884 shares registered in the name of
     SOFTBANK Ventures, Inc., a Japanese corporation. SOFTBANK America, Inc.,
     is a wholly owned subsidiary of SOFTBANK Holdings Inc., a Massachusetts
     corporation. SOFTBANK Holdings Inc. and SOFTBANK Ventures, Inc., are
     wholly owned subsidiaries of SOFTBANK CORP., a Japanese corporation.

                                       65
<PAGE>

                                  UNDERWRITING

General

      Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America
Securities LLC, HSBC Securities (USA) Inc. and U.S. Bancorp Piper Jaffray Inc.
are acting as representatives of the underwriters named below. Subject to the
terms and conditions described in a purchase agreement among us, the selling
stockholders and the underwriters, we and the selling stockholders have agreed
to sell to the underwriters, and the underwriters severally have agreed to
purchase from us and the selling stockholders, the number of shares listed
opposite their names below.

<TABLE>
<CAPTION>
                                                                       Number of
          Underwriter                                                   Shares
          -----------                                                  ---------
     <S>                                                               <C>
     Merrill Lynch, Pierce, Fenner & Smith
          Incorporated................................................
     Banc of America Securities LLC...................................
     HSBC Securities (USA) Inc. ......................................
     U.S. Bancorp Piper Jaffray Inc. .................................
                                                                       ---------

          Total....................................................... 9,000,000
                                                                       =========
</TABLE>

      The underwriters have agreed to purchase all of the shares sold under the
purchase agreement if any of these shares are purchased. If an underwriter
defaults, the purchase agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.

      We and the selling stockholders have agreed to indemnify the underwriters
against some liabilities, including liabilities under the Securities Act, or to
contribute to payments the underwriters may be required to make in respect of
those liabilities.

      The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreement, such as the receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right
to withdraw, cancel or modify offers to the public and to reject orders in
whole or in part.

Commissions and Discounts

      The representatives have advised us and the selling stockholders that the
underwriters propose initially to offer the shares to the public at the public
offering price on the cover page of this prospectus and to dealers at that
price less a concession not in excess of $      per share. The underwriters may
allow, and the dealers may reallow, a discount not in excess of $         per
share to other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.

      The following table shows the total public offering price, underwriting
discount and proceeds before expenses to us and the selling stockholders. This
information assumes either no exercise or full exercise by the underwriters of
their over-allotment option.

<TABLE>
<CAPTION>
                                           Per Share Without Option With Option
                                           --------- -------------- -----------
<S>                                        <C>       <C>            <C>
Public offering price....................     $           $             $
Underwriting discount....................     $           $             $
Proceeds, before expenses, to UTStarcom..     $           $             $
Proceeds, before expenses, to the selling
 stockholders............................     $           $             $
</TABLE>

                                       66
<PAGE>

      The expenses of the offering, not including the underwriting discount,
are estimated at $1.0 million and are payable by us.

Over-Allotment Option

      We have granted an option to the underwriters to purchase up to 1,350,000
additional shares at the public offering price, less the underwriting discount.
The underwriters may exercise this option for 30 days from the date of this
prospectus solely to cover any over-allotments. If the underwriters exercise
this option, each will be obligated, subject to conditions contained in the
purchase agreement, to purchase a number of additional shares proportionate to
that underwriter's initial amount reflected in the table above.

No Sales of Similar Securities

      We, our executive officers, directors, the selling stockholders and
SOFTBANK CORP. and its related companies, have agreed, with exceptions, not to
sell or transfer any common stock commencing on the date of this prospectus,
except in the case of our executive officers and one non-employee director,
commencing on June 19, 2001, and ending on the date 90 days after the date of
this prospectus, without first obtaining the written consent of Merrill Lynch.
Specifically, we and these other individuals and entities have agreed not to
directly or indirectly

    . offer, pledge, sell or contract to sell any common stock,

    . sell any option or contract to purchase any common stock,

    . purchase any option or contract to sell any common stock,

    . grant any option, right or warrant for the sale of any common stock,

    . lend or otherwise dispose of or transfer any common stock,

    . request or demand that we file a registration statement related to the
      common stock, or

    . enter into any swap or other agreement that transfers, in whole or in
      part, the economic consequence of ownership of any common stock
      whether any such swap or transaction is to be settled by delivery of
      shares or other securities, in cash or otherwise.

      This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock. It also applies to common stock owned now or acquired later by the
person executing the agreement or for which the person executing the agreement
later acquires the power of disposition. Notwithstanding the foregoing,
beginning two weeks following the date of this prospectus, our executive
officers and one non-employee director may sell up to 250,000 shares per month
pursuant to plans adopted under Rule 10b5-1 under the Securities Exchange Act
of 1934 at predetermined trading prices and quantities. In addition, those
executive officers and that director may sell that number of shares which they
would have been able to otherwise sell under the plans but for the restrictions
described above, representing that number of shares of our common stock up to
the product of 250,000 and the number of months, or a portion thereof, during
the period commencing on June 19, 2001 and ending two weeks following the date
of this prospectus. See "Management--10b5-1 Plans" for a description of 10b5-1
plans.

Quotation on The Nasdaq National Market

      The shares are quoted on The Nasdaq National Market under the symbol
"UTSI."

                                       67
<PAGE>

Price Stabilization and Short Positions

      Until the distribution of the shares is completed, rules of the
Securities and Exchange Commission may limit underwriters and selling group
members from bidding for and purchasing our common stock. However, the
representatives may engage in transactions that stabilize the price of the
common stock, such as bids or purchases to peg, fix or maintain that price.

      If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the representatives may reduce that short
position by purchasing shares in the open market. The representatives may also
elect to reduce any short position by exercising all or part of the over-
allotment option described above. Purchases of the common stock to stabilize
its price or to reduce a short position may cause the price of the common stock
to be higher than it might be in the absence of these purchases.

      Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the
representatives or the lead managers will engage in these transactions or that
these transactions, once commenced, will not be discontinued without notice.

Passive Market Making

      In connection with this offering, underwriters and selling group members
may engage in passive market making transactions in the common stock on The
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Exchange Act during a period before the commencement of offers or sales of
common stock and extending through the completion of the distribution. A
passive market maker must display its bid at a price not in excess of the
highest independent bid for that security. However, if all independent bids are
lowered below the passive market maker's bid, that bid must then be lowered
when specified purchase limits are exceeded.

Other Relationships

      Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America
Securities LLC and U.S. Bancorp Piper Jaffray Inc. acted as the representatives
of the underwriters of our March 2000 initial public offering. Some of the
underwriters and their affiliates have engaged in, and may in the future engage
in, investment banking and other commercial dealings in the ordinary course of
business with us. They have received customary fees and commissions for these
transactions.

                                       68
<PAGE>

                                 LEGAL MATTERS

      Certain legal matters relating to the validity of the securities offered
hereby will be passed upon for us by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Wilson Sonsini Goodrich &
Rosati is our corporate counsel. Carmen Chang, a member of Wilson Sonsini
Goodrich & Rosati is our Assistant Secretary. In addition, certain individual
attorneys employed by Wilson Sonsini Goodrich & Rosati beneficially own shares
of our common stock. As of May 31, 2001, these individuals beneficially owned
an aggregate of approximately 5,000 shares of our common stock. Legal matters
relating to the laws in China are being passed upon for us by Jun He Law
Offices, Beijing, China. The validity of the common stock offered by this
prospectus will be passed upon for the underwriters by Davis Polk & Wardwell,
Menlo Park, California.

                                    EXPERTS

      The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
2000, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

      Summary information relating to the independent appraisal of Wacos, Inc.
performed in connection with our acquisition of the non-affiliated minority
interest of Wacos has been included in this prospectus and in the registration
statement of which this prospectus is a part in reliance on the report of
Willamette Management Associates, independent appraisers, given upon the
authority of said firm as experts in valuation.

                                       69
<PAGE>

                   WHERE YOU CAN FIND ADDITIONAL INFORMATION

      We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's Public Reference Rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. The Public Reference Room in
Washington, D.C. is located at 450 Fifth Street, N.W. Please call the SEC at 1-
800-SEC-0330 for further information on the public conference rooms. Our SEC
filings are also available to the public from the SEC's web site at
http://www.sec.gov.

      The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13a, 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") until our offering is completed.

    (1) Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;

    (2) Annual Report on Form 10-K/A for the year ended December 31, 2000;

    (3) Annual Report on Form 10-K for the year ended December 31, 2000; and

    (4) The description of our common stock contained in our Registration
        Statement on Form 8-A, filed with the Securities and Exchange
        Commission on February 23, 2000, and any further amendment or report
        filed hereafter for the purpose of updating any such description.

      You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:

      UTStarcom, Inc.
      1275 Harbour Bay Parkway, Suite 100
      Alameda, California 94502
      (510) 864-8800

      We intend to furnish our stockholders annual reports containing
consolidated financial statements audited by our independent accountants, and
quarterly reports containing unaudited consolidated financial data for the
first three quarters of each fiscal year.

                                       70
<PAGE>

                            [INSIDE BACK COVER PAGE]

      UTStarcom Logo
<PAGE>

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

                                9,000,000 Shares


                                UTStarcom, Inc.


                                  Common Stock

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

                              P R O S P E C T U S

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


                              Merrill Lynch & Co.

                         Banc of America Securities LLC

                                      HSBC

                           U.S. Bancorp Piper Jaffray

                                       , 2001

 ----------------------------------------------------------------------------
 ----------------------------------------------------------------------------
<PAGE>

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

      The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale and
distribution of the securities being registered. All amounts are estimates
except the Securities and Exchange Commission registration fee, the NASD filing
fee and The Nasdaq National Market additional listing fee.

<TABLE>
<CAPTION>
                                                                     Amount To
                                                                      Be Paid
                                                                     ----------
<S>                                                                  <C>
Securities and Exchange Commission registration fee................. $   58,297
NASD filing fee.....................................................     24,319
Nasdaq National Market additional listing fee.......................     17,500
Printing and engraving expenses.....................................    150,000
Legal fees and expenses.............................................    500,000
Accounting fees and expenses........................................     75,000
Blue sky fees and expenses..........................................      3,000
Transfer agent and registrar fees and expenses......................     15,000
Miscellaneous.......................................................    156,884
                                                                     ----------
Total............................................................... $1,000,000
                                                                     ==========
</TABLE>

Item 15. Indemnification of Directors and Officers

      Under Section 145 of the Delaware General Corporation Law, we can
indemnify any person who is, or is threatened to be made, a party to any
threatened, pending or completed legal action, suit or proceeding, whether
civil, criminal, administrative or investigative other than action by us or on
our behalf, by reason of the fact that such person is or was one of our
officers or directors, or is or was serving at our request as a director,
officer, employee or agent of another corporation or enterprise. The indemnity
may include expenses including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to our best interests, and, for criminal proceedings, had
no reasonable cause to believe his or her conduct was illegal. Under Delaware
law, we may also indemnify officers and directors in an action by us or on our
behalf under the same conditions, except that no indemnification is permitted
without judicial approval if the officer or director is adjudged to be liable
to us in the performance of his or her duty. Where an officer or director is
successful on the merits or otherwise in the defense of any action referred to
above, we must indemnify him or her against the expenses which such officer or
director actually and reasonably incurred.

      Our certificate of incorporation contains a provision to limit the
personal liability of our directors for violations of their fiduciary duty.
This provision eliminates each director's liability to us or our stockholders
for monetary damages to the fullest extent permitted by Delaware law. The
effect of this provision is to eliminate the personal liability of directors
for monetary damages for actions involving a breach of their fiduciary duty of
care, including any such actions involving gross negligence.

      Our bylaws provide for indemnification of our officers and directors to
the fullest extent permitted by applicable law.

      We have also entered into indemnification agreements with our directors
and officers. The indemnification agreements provide indemnification to our
directors and officers under certain circumstances for acts or omissions which
may not be covered by directors' and officers' liability insurance. We have
also obtained directors' and officers' liability insurance, which insures
against liabilities that our directors or officers may incur in such
capacities.

                                      II-1
<PAGE>

      The purchase agreement, a form of which is attached as Exhibit 1.1 to
this registration statement, provides for indemnification by the underwriters
of us, our officers and directors and the selling stockholders, and by us and
the selling stockholders of the underwriters, for certain liabilities arising
under the Securities Act or otherwise.

Item 16. Exhibits

<TABLE>
<CAPTION>
 Exhibit                               Description
 ------- ----------------------------------------------------------------------
 <C>     <S>
  1.1**  Form of Purchase Agreement.
  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 incorporated herein by reference from the Registrant's Annual
         Report on Form 10-K for the year ended December 31, 2000, as amended.
  4.2*   Specimen Common Stock Certificate.
  4.3*   Third Amended and Restated Registration Rights Agreement dated
         December 14, 1999.
  5.1**  Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
 10.64** 2001 Director Option Plan.
 10.65+  Strategic Alliance, Purchase and License Agreement between UTStarcom,
         Inc. and Telecommunications D'Haiti S.A.M. dated as of April 12, 2001.
 23.1    Consent of PricewaterhouseCoopers LLP.
 23.2**  Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
         (included in Exhibit 5.1).
 23.3    Consent of Willamette Management Associates.
 24.1    Power of Attorney (see page II-4).
</TABLE>
- --------
 * Incorporated by reference from the Registrant's Annual Report on Form 10-K
   for the Year ended December 31, 2000, as amended, filed March 1, 2001,
   Commission File No. 000-29661.

** To be filed by amendment.

 + 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.

Item 17. Undertakings

      (a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

      (b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

      (c) The undersigned Registrant hereby undertakes that:

        (1) for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and

                                      II-2
<PAGE>

contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it was declared effective.

        (2) for the purpose of determining liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

                                      II-3
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alameda, State of
California, on June 19, 2001.

                                          UTSTARCOM, INC.


                                                   /s/ Hong Liang Lu
                                          By: _________________________________
                                                       Hong Liang Lu
                                                Chief Executive Officer and
                                                         President

                               POWER OF ATTORNEY

      KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Hong Liang Lu and Michael Sophie and
each of them singly, as true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities to sign the Registration Statement filed
herewith and any or all amendments to said Registration Statement (including
post-effective amendments and registration statements filed pursuant to Rule
462 and otherwise), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
granting unto said attorneys-in-fact and agents the full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the foregoing, as to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or his substitute, may lawfully do or cause
to be done by virtue hereof.

      Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons in the capacities indicated on behalf of the Registrant on June 19,
2001.

<TABLE>
<CAPTION>
             Signature                              Title
             ---------                              -----

<S>                                  <C>                                  <C>
       /s/ Hong Liang Lu             Chief Executive Officer, President
____________________________________ (Principal Executive Officer) and
           Hong Liang Lu             Director

       /s/ Michael Sophie            Chief Financial Officer (Principal
____________________________________ Financial and Accounting Officer)
           Michael Sophie

       /s/ Masayoshi Son             Chairman of the Board of Directors
____________________________________
           Masayoshi Son

          /s/ Ying Wu                              Director
____________________________________
              Ying Wu

</TABLE>

                                      II-4
<PAGE>

<TABLE>
<CAPTION>
             Signature               Title
             ---------               -----

<S>                                  <C>
       /s/ Chauncey Shey             Director
____________________________________
           Chauncey Shey

       /s/ Thomas J. Toy             Director
____________________________________
           Thomas J. Toy

      /s/ Larry D. Horner            Director
____________________________________
          Larry D. Horner
</TABLE>



                                      II-5
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
 Number                                Description
 ------- ----------------------------------------------------------------------
 <C>     <S>
  1.1**  Form of Purchase Agreement.
  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 incorporated herein by reference from the Registrant's Annual
         Report on Form 10-K for the year ended December 31, 2000, as amended.
  4.2*   Specimen Common Stock Certificate.
         Third Amended and Restated Registration Rights Agreement dated
  4.3*   December 14, 1999.
  5.1**  Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
 10.64** 2001 Director Option Plan.
 10.65+  Strategic Alliance, Purchase and License Agreement between UTStarcom,
         Inc. and Telecommunications D'Haiti S.A.M. dated as of April 12, 2001.
 23.1    Consent of PricewaterhouseCoopers LLP.
         Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
 23.2**  (included in Exhibit 5.1).
 23.3    Consent of Willamette Management Associates.
 24.1    Power of Attorney (see page II-4).
</TABLE>
- --------
 * Incorporated by reference from the Registrant's Annual Report on Form 10-K
   for the Year ended December 31, 2000, as amended, filed on March 1, 2001,
   Commission File No. 000-29661.

** To be filed by amendment.

+  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.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.65
<SEQUENCE>2
<FILENAME>dex1065.txt
<DESCRIPTION>STRATEGIC ALLIANCE AGREEMENT
<TEXT>

<PAGE>

                                                                   EXHIBIT 10.65

     [*] 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 [*] Lines                               Contract No. HT041101
Teleco Network Expansion

<TABLE>
<CAPTION>
                               Table of Contents
                                                                            Page
                                                                            ----
<S> <C>                                                                   <C>
1.   Definitions.............................................................  1
     1.1   "Functional Verification".........................................  1
     1.2   "Commercial Service"..............................................  1
     1.3   "Effective Date"..................................................  1
     1.4   "Product".........................................................  1
     1.5   "Services"........................................................  1
     1.6   "Documentation"...................................................  1
     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"....................................  2
2.   Term....................................................................  2
3.   Project Scope...........................................................  2
4.   Project Business Plan and Schedule......................................  3
5.   Purchase Orders.........................................................  4
     5.1   Order Submission..................................................  4
6.   Price, Financing and Payment Terms......................................  4
     6.1   Pricing and Shipment..............................................  4
     6.2   Taxes, Duties and Levies..........................................  4
     6.3   Financing and Form of Payment.....................................  4
7.   Advance Payment Guarantee...............................................  5
8.   Liquidated Damages......................................................  6
9.   Installation and Acceptance.............................................  6
     9.1   Site Availability.................................................  6
     9.2   Installation......................................................  6
     9.3   Equipment Acceptance..............................................  8
10.  Obligations and Rights of Parties.......................................  8
11.  Project Coordination Committee and Executive Board...................... 11
12.  Functional Verification................................................. 11
13.  Licenses................................................................ 11
14.  Title and Risk.......................................................... 12
15.  Warranty................................................................ 12
</TABLE>

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion

<TABLE>
<CAPTION>
                               Table of Contents
                                  (continued)
                                                                            Page
                                                                            ----
<S> <C>                                                                   <C>
     15.1  Limited Warranty.................................................. 12
     15.2  Disclaimer of Warranties.......................................... 13
     15.3  Inherently Dangerous Applications................................. 13
     15.4  Product Returns................................................... 13
16.  Indemnification......................................................... 13
     16.1  Indemnity......................................................... 13
     16.2  Limitations....................................................... 14
     16.3  Disclaimer........................................................ 14
17.  Limitation of Liability................................................. 14
18.  Termination............................................................. 14
19.  Training................................................................ 15
20.  Governing Law and Regulations........................................... 15
21.  General Provisions...................................................... 15
     21.1  No Liability for Other Party's Acts............................... 15
     21.2  Independent Contractors........................................... 15
     21.3  Notices........................................................... 15
     21.4  Security Interest................................................. 16
     21.5  No Assignment..................................................... 16
     21.6  Jurisdiction...................................................... 16
     21.7  Publicity......................................................... 16
     21.8  No Violation of Applicable Law.................................... 16
     21.9  Conflicting Exhibits.............................................. 16
     21.10 No Waiver......................................................... 17
     21.11 Arbitration....................................................... 17
     21.12 Non-Monetary Remedies............................................. 17
     21.13 Force Majeure..................................................... 17
     21.14 Entire Agreement.................................................. 17
     21.15 May Be Executed in Counterparts................................... 17
     21.16 Contract Validity................................................. 17

Exhibit A:  Section 7 Economic Proposal and Equipment Lists
Exhibit B:  End-User Software License
Exhibit C:  Mutual Non-Disclosure and Confidentiality Agreement
Exhibit D:  Business Plan and Project Commercial Milestones
Exhibit E:  Project Implementation Schedule
Exhibit F:  Training and Technology Transfer
Exhibit G:  Final Acceptance Certificate
</TABLE>

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
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 Patrick A. Joseph, Directeur General of
TELECO, appointed by the President du Conseil d'Administrationon Gouverneur de
la Banque de la Republique d'Haiti on March 2001, 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.

          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

                                      -1-
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


initial Project's phase and in French after the completion of the Projects 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".

          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 prices listed in Exhibit A.  The

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


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 charged 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 amendments to them.

     Prices for installation and related charges are subject to change due to
[*].  [*] 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.

     Buyer, as National Telecommunications Operator of Haiti, shall provide all
of its [*] to facilitate the Project Development.

     Company will provide [*] 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

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


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 [*] 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 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.

     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 [*] 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.

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


               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:

                    [*]

     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 rated 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 two quarterly 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 first-rated 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.

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
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 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.

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


               (c)  Mechanical -- Provide all patching, painting, concrete
                    ----------
openings, conduits, ducts, floors, walls 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 property 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
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, 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 harmless from any such damage to Buyer's property.

     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 standard installation practices and recommendations.
Company shall perform acceptance testing according to Company standards and
specifications on the installed Equipment and Buyer

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


agrees to monitor said testing. Upon completion thereof, as described above,
Company shall notify Buyer that the Equipment has been installed and operates in
accordance with the criteria set forth in Company Specifications.

     If the Equipment does not perform according to the acceptance test criteria
and Company, after having been notified in writing of the defects fails to cure
such defect within [*] of receipt of such notice ("Cure Period"), Buyer has the
right to return the Equipment [*] if such Equipment is shipped to Company no
later than [*] 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 conclusion 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 set forth 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
provisioned 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.

     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

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


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 optimum 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.

     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.

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


     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 [*]
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.

     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 [*] after payment due date.

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


     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.

     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.

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


     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 defective directly
attributed to manufacturing defects.

     The warranty service shall be administered in accordance with Company
recommendations and practices in effect at the time of shipment.  Buyer shall
notify Company in writing immediately upon discovery of any defects within the
warranty period for return authorization and instructions.  Upon receipt of the
returned Equipment prepaid by Buyer, Company' 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's 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.

                                      12
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


          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.

          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 agrees, 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

                                      13
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


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 16.1
                -----------
above, Company has no liability to BUYER for (i) any infringement of patent or
copyright claims alleging infringement by completed equipment or 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.

          16.3  Disclaimer.  COMPANY'S LIABILITY ARISING OUT OF OR RELATING TO
                ----------
THIS SECTION 16 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 16 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:
          -----------

                                      14
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


          (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 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.

                                      -15-
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


     COMPANY:     UTStarcom, Inc.
                  Attn:  Omar Graibe
                  Title:  Managing Director
                  Caribbean & LatinAmerican (CALA)
                  1581 Pines Blvd. #308,
                  Pembroke Pines, FL 33027 USA
                  Fax:  +1 (954) 447 3320

     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.

          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.

                                      -16-
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


          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 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.

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


     IN WITNESS WHEREOF, a duly authorized representative of each party has
executed this Agreement as of the date set forth below.

<TABLE>
<CAPTION>

COMPANY                                  BUYER
<S>                                    <C>
By:  /s/ Omar A. Graibe                  By:  /s/ Patrick A. Joseph
   ---------------------------------        ------------------------------------
Name:    Omar A. Graibe                  Name:    Patrick A. Joseph

Title:   Managing Director, Caribbean    Title:   Directeur General, Telecommunications
         and Latin America               d'Haiti S.A.M.

Date:    04/12/01                        Date:  04/12/01
</TABLE>

<PAGE>

Price and Equipment Lists                                              Exhibit A
                                                           Contract No. HT041101

                                      [*]

<PAGE>

[*]Strategic Alliance [*] Lines                            Contract No. HT041101
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.

                                     -20-

<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
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.

                                      -2-
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion



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.

     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.

                                      -22-
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion

     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.

     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.

                                      -23-
<PAGE>

Strategic Alliance [*] Lines                               Contract No. HT041101
Teleco Network Expansion


EXHIBIT D:  BUSINESS PLAN AND PROJECT COMMERCIAL MILESTONES
- ---------

                                      [*]

                                      -24-
<PAGE>

Project Implementation Schedule                                        Exhibit E
                                                           Contract No. HT041101


                                      [*]

                                      -25-
<PAGE>

EXHIBIT F:  TRAINING AND TECHNOLOGY TRANSFER
- ---------

                                      -26-
<PAGE>

                                TRAINING COURSE

                Participants:   [*]
                Time:           [*]
                Duration:       [*]

Objectives:

       .      Describe the proposed 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 [*] as part of its operations
              with the various elements of proposed solution.

Training Course Summary:

     [*]

     [*]

                                      -27-
<PAGE>

     EXHIBIT G:  FINAL ACCEPTANCE CERTIFICATE
     ---------

                                      -28-
<PAGE>

                          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

_______________________________________

                                      -29-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>dex231.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP
<TEXT>

<PAGE>

                                                                    EXHIBIT 23.1

                     CONSENT OF PRICEWATERHOUSECOOPERS LLP

      We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated January 24, 2001 relating to the
consolidated financial statements, which appears in UTStarcom, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2000. We also consent to
the incorporation by reference of our report dated January 24, 2001 relating to
the financial statement schedules, which appears in such Annual Report on Form
10-K. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.

/s/ PricewaterhouseCoopers LLP

San Francisco, California
June 19, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.3
<SEQUENCE>4
<FILENAME>dex233.txt
<DESCRIPTION>CONSENT OF WILLAMETTE MANAGEMENT ASSOCIATES
<TEXT>

<PAGE>

                                                                    EXHIBIT 23.3

                        CONSENT OF INDEPENDENT APPRAISER

      We hereby consent to the use in the Registration Statement on Form S-3 of
UTStarcom, Inc. ("UTStarcom"), any amendments thereto and any prospectuses (the
"Registration Statement"), 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 sections entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Experts"
contained in the Registration Statement and in the Notes to Consolidated
Financial Statements incorporated by reference into the Registration Statement.

                                          WILLAMETTE MANAGEMENT ASSOCIATES

                                                 /s/ Steven D. Garber
                                     Signature: _______________________________

Date: June 19, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
