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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001012870-02-000931.txt : 20020414
<SEC-HEADER>0001012870-02-000931.hdr.sgml : 20020414
ACCESSION NUMBER:		0001012870-02-000931
CONFORMED SUBMISSION TYPE:	S-3/A
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20020228

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/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-82458
		FILM NUMBER:		02561016

	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/A
<SEQUENCE>1
<FILENAME>ds3a.txt
<DESCRIPTION>AMENDMENT NO. 2 TO FORM S-3
<TEXT>
<PAGE>


   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2002

                                                     REGISTRATION NO. 333-82458

================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

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

                                AMENDMENT NO. 2

                                      TO
                                   FORM S-3
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933

                               ----------------
                                UTSTARCOM, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                   DELAWARE                        52-1782500
       (STATE OR OTHER JURISDICTION OF          (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)       IDENTIFICATION NUMBER)

                            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:

              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

      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. [_]



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

      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 FEBRUARY 28, 2002


PROSPECTUS

                               10,000,000 SHARES

                           [LOGO] LOGO OF UT STARCOM

                                 COMMON STOCK

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

      SOFTBANK America Inc. is selling 10,000,000 shares.


      The shares are quoted on The Nasdaq National Market under the symbol
"UTSI." On February 27, 2002, the last sale price of the shares as reported on
The Nasdaq National Market was $20.81 per share.


      INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 5 OF THIS PROSPECTUS.

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

<TABLE>
<CAPTION>
                                                              PER SHARE TOTAL
                                                              --------- -----
  <S>                                                         <C>       <C>
  Public offering price......................................     $       $

  Underwriting discount......................................     $       $

  Proceeds, before expenses, to SOFTBANK America Inc.........     $       $
</TABLE>

      The underwriters may also purchase up to an additional 1,500,000 shares
from us at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover overallotments.

      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            , 2002.

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

                          JOINT BOOK-RUNNING MANAGERS

MERRILL LYNCH & CO.                                  CREDIT SUISSE FIRST BOSTON

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

SALOMON SMITH BARNEY
                     BANC OF AMERICA SECURITIES LLC
                                          U.S. BANCORP PIPER JAFFRAY
                                                               HSBC

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

               The date of this prospectus is            , 2002.

<PAGE>

<TABLE>
<S>                <C>                  <C>                  <C>
Carrier's Backbone                       UTStarcom Network         Application
     Network                                 Solutions

       PSTN                             [Graphic of AN-2000]  [Graphic of computer]
                                             Broadband              Broadband
                                              AN-2000
                                                             [Graphic of telephone]
                                                                    Telephony

      QoSIP                               [Graphic of PAS]     [Graphic of house,
                                              Wireless       telephone and computer]
                                                PAS              Fixed Wireless

     Internet      [Graphic of mSwitch]   [Graphic of 3G]    [Graphic of cell phone]
                        Softswitch               3G                 Mobility
                         mSwitch
                                                               [Graphic of laptop
                                                                    computer]
                                                                   Multimedia
</TABLE>

<PAGE>

                               TABLE OF CONTENTS

Prospectus Summary........................................................  1

Risk Factors..............................................................  5

Forward-Looking Statements................................................ 23

Use of Proceeds........................................................... 24

Dividend Policy........................................................... 24

Price Range of Our Common Stock........................................... 24

Capitalization............................................................ 25

Selected Consolidated Financial Data...................................... 26

Management's Discussion and Analysis of Financial Condition and Results of
  Operations.............................................................. 28

Business.................................................................. 39

Management................................................................ 57

Principal and Selling Stockholders........................................ 61

Underwriting.............................................................. 64

Legal Matters............................................................. 67

Experts................................................................... 67

Where You Can Find Additional Information................................. 68

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

      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.
SOFTBANK America Inc., we 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
and PAS are registered as trademarks in China. We have applied to register the
mSwitch and Netman 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
mainland China, 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 December 31, 2001; and

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

                                       i

<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, manufacture and market wireline and wireless broadband access
and switching equipment that enables migration to next generation IP-based
networks. Historically, substantially all of our sales have been to service
providers in China, however we are currently expanding to include other growing
communications markets outside of 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 of China's commitment to developing a communications
infrastructure, strong demand for communications services and robust economic
growth. While growth in China's communications market is currently driven
predominantly by voice services, the increasing demand for data services also
presents a growing opportunity both in China and in other international
markets. The Gartner Group estimates that Internet users in China will grow
from 20.0 million in 2001 to 51.0 million in 2004, representing a compound
annual growth rate of 36.6%. China's ability to invest heavily in its
communications infrastructure is fueled by the country's strong economic
activity. According to the Economist Intelligence Unit, China's gross domestic
product, or GDP, grew 7.3% in 2001. The Economist Intelligence Unit also
estimates that China's GDP will grow at a compound annual growth rate of 7.5%
from 2001 to 2005.

      Voice and data 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. 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 to initially serve a few hundred subscribers, yet economically scale
to serve several hundred thousand subscribers over time. In addition, service
providers require products that provide an integrated product solution and an
economical migration path to next generation networks.

      We believe our key competitive advantages are:

      MIGRATION TO NEXT GENERATION IP NETWORKS.  Our products are designed with
the flexibility to allow service providers to deliver voice and data services
over today's circuit-based networks and offer 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 their
investment in our products, while migrating to next generation networks over
time. Our products enable service providers to effectively time their network
equipment expenditures, expand voice and data capacity and rapidly introduce
new services as demand warrants.

      COST-EFFECTIVE SOLUTIONS.  Our products are designed to provide operators
with a high return on their investment. By reducing network complexity,
integrating high performance capabilities and providing a flexible

                                      1

<PAGE>

migration path to next generation networks, our products cost less to deploy
and maintain than most alternative technologies.

      CONVERGENCE OF VOICE AND DATA SERVICES.  We have designed our systems to
offer a high degree of flexibility in terms of subscriber capacity and types of
traffic delivered. 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.

      WIRELESS ACCESS NETWORKS.  Our wireless access solutions are ideally
suited for the requirements of service providers in emerging communications
markets. Service providers can deploy our products quickly to cost-effectively
meet customer demand. Our systems allow service providers to rapidly add new
subscribers and to scale network capacity in response to demand. Our IP-based
wireless access solutions also provide a platform for service providers to
migrate to third generation, or 3G, mobile 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 our facility in Hangzhou
in Zhejiang province. 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 modern and rapidly
growing provinces. We also maintain 15 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 local levels through pre-sales
design and consulting services. Additionally, through our relationships at the
national, provincial and local levels we receive a flow of information
regarding market changes and insight into unique service provider needs and
related opportunities. As part of this strategy to develop a local presence in
markets that we serve, we also have sales, support and engineering personnel in
Taiwan and India.

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

     .  capitalize on the emerging IP-based switching market;

     .  leverage our installed base to capitalize on demand for wireless and
        wireline broadband services;

     .  expand our presence in China; and

     .  penetrate other growing communications markets worldwide.

      As of December 31, 2001, we had sold approximately 6.6 million lines of
PAS equipment servicing approximately 3.0 million subscribers in 210 cities in
China. Based on our knowledge of China's communications market, we believe that
PAS is the most widely deployed wireless local access system in China. In the
Taiwan market, there were approximately 160,000 subscribers using our PAS
systems as of December 31, 2001. For wireline networks, we provide a
broadband-ready access platform called AN-2000. As of December 31, 2001,
approximately 3.2 million lines of our wireline AN-2000 access platform have
been deployed in China, including deployments in the six largest regional
communications markets. Another 800,000 lines of our AN-2000 access platform
have been deployed in markets outside of China.

      We were 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.

                                      2

<PAGE>

                                 THE OFFERING


<TABLE>
<S>                           <C>

Common stock offered by
  SOFTBANK America Inc.......  10,000,000 shares

Shares outstanding after the
  offering................... 109,304,164 shares

Use of proceeds.............. We will not receive any proceeds from the sale of shares
                              by SOFTBANK America Inc.

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 December 31, 2001 and excludes:

     .  options to purchase 12,578,417 shares of common stock outstanding under
        our stock option plans at a weighted average exercise price of $12.22
        per share, and 2,450,501 additional shares available for grant under
        our stock option plans as of December 31, 2001;

     .  3,716,294 shares of common stock available for purchase under our 2000
        Employee Stock Purchase Plan as of December 31, 2001; and

     .  32,000 shares of common stock reserved for issuance upon the exercise
        of warrants outstanding as of December 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' overallotment option is not exercised. If the overallotment
option is exercised in full, the number of shares outstanding after the
offering will be 110,804,164.


                                      3

<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>
                                                                            YEARS ENDED DECEMBER 31,
                                                                 ----------------------------------------------
                                                                  1997      1998      1999      2000     2001
                                                                 -------  --------  --------  -------- --------
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                              <C>      <C>       <C>       <C>      <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales....................................................... $75,597  $105,167  $187,516  $368,646 $626,840
Gross profit....................................................  26,802    41,025    74,813   128,181  224,548
Operating income (loss).........................................  (3,390)    3,013    16,719    33,780   76,728
Income (loss) from continuing operations........................  (1,383)      593    13,119    27,993   56,954
Net income (loss) available to common stockholders..............      30      (300)  (18,514)   27,013   56,954
Earnings (loss) per share--income from continuing operations:
   Basic........................................................ $ (0.19) $   0.08  $  (1.94) $   0.35 $   0.56
   Diluted...................................................... $ (0.19) $   0.01  $  (1.94) $   0.28 $   0.52
Earnings (loss) per share--net income:
   Basic........................................................ $    --  $  (0.04) $  (2.13) $   0.34 $   0.56
   Diluted...................................................... $    --  $     --  $  (2.13) $   0.27 $   0.52
Shares used in per share calculations:
   Basic........................................................   7,320     7,582     8,678    79,696  101,433
   Diluted......................................................   7,320    77,050     8,678   101,867  108,612
</TABLE>

<TABLE>
<CAPTION>
                                                                      DECEMBER 31, 2001
                                                                      -----------------
                                                                       (IN THOUSANDS)
<S>                                                                   <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents(1).........................................    $  321,136
Working capital......................................................       591,103
Total assets.........................................................     1,005,880
Total short-term debt................................................        58,434
Total long-term debt.................................................        12,048
Total stockholders' equity...........................................       681,887
</TABLE>
- --------
(1)Includes restricted cash of $5.2 million as of December 31, 2001.

                                      4

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

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

      Factors that may affect our future operating results include:

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

     .  cancellation, deferment or delay in implementation of large contracts;

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

     .  price reductions by our competitors;

     .  changes in our customers' subscriber growth rate;

     .  currency fluctuations;

     .  market acceptance of our products and product enhancements;

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

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

     .  the decline in business activity we typically experience during the
        Lunar New Year, which leads to decreased sales during our first fiscal
        quarter.

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

                                      5

<PAGE>

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.

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

      We are increasingly facing intense competition in our target markets,
especially 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, particularly
with the reduction of trade restrictions as a result of China's admission to
the World Trade Organization, or WTO. Many of our competitors have
significantly greater financial, technical, product development, sales,
marketing and other resources than we do. As a result, our competitors may be
able to respond more quickly to new or emerging technologies and changes in
service provider requirements. Our competitors may also be able to devote
greater resources than we can to the development, promotion and sale of new
products. These competitors may also be able to offer significant financing
arrangements to service providers, in some cases facilitated by government
policies, which is a competitive advantage in selling systems to service
providers with limited financial and currency resources. Increased competition
is likely to result in price reductions, reduced gross profit as a percentage
of net sales and loss of market share, any one of which could materially harm
our business, financial condition and results of operations.

      Moreover, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties,
including Telecommunications Administrations, Telecommunications Bureaus and
other local organizations, to increase the ability of their products to address
the needs of prospective customers in our target markets. Accordingly,
alliances among competitors or between competitors and third parties may emerge
and rapidly acquire significant market share. To remain competitive, we believe
that we must continue to partner with Telecommunications Administrations and
other local organizations, maintain a high level of investment in research and
development and in sales and marketing, and manufacture and deliver products to
service providers on a timely basis and without significant defects. If we fail
to meet any of these objectives, our business, financial condition and results
of operations could be harmed.

      The introduction of inexpensive wireless telephone service or other
competitive services in China may also have an adverse impact on sales of our
PAS systems and handsets 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.

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


      As of December 31, 2001, our backlog totaled approximately $360.7
million, compared to approximately $191.9 million as of December 31, 2000. We
include in our backlog contracts and purchase orders for which we anticipate
delivery to occur within 12 months and products delivered but for which final
acceptance has not yet 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. In addition, we have a number of large contracts under which
realization of our backlog is dependent on the successful implementation of our
products by our customers and in some cases, the successful development of
regional infrastructures.


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
affects the customer's ability to pay us could harm our

                                      6

<PAGE>

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

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, technologies or services 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, including the possible adoption and
implementation of third generation, or 3G systems, 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;

     .  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 components 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

                                      7

<PAGE>

development efforts and cause significant customer relation 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, import duties and registration requirements.
Non-payment of required import duties could subject us to penalties and fines
and could adversely affect our ability to manufacture and sell our products in
China. In addition, import duties increase the cost of our products and may
make them less competitive.

      In particular, an integral component of our PAS system is the handset
used by subscribers to make and receive mobile telephone calls. Our inability
to obtain a sufficient number of high quality components and assemblies for
handsets could severely harm our business. From time to time, there has been a
worldwide shortage of handsets, and there currently exists 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 resellers or manufacturers'
representatives, or if these resellers or representatives are not successful in
their sales or marketing efforts, we may be unsuccessful in our expansion
efforts outside China.

                                      8

<PAGE>

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
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.

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 A SUBSIDIARY 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 currently
own a 51.0% interest in a joint venture that operates the Guangdong

                                      9

<PAGE>

manufacturing facility. However, even though we own a majority interest in this
joint venture, we do not have sole power to control all of the policies and
decisions of this jointly-owned subsidiary. 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. China
law requires unanimous approval of the board of directors for some significant
corporate actions, including:

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

     .  liquidation or dissolution of the joint venture;

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

     .  a merger of the joint venture with another economic entity.

      Our operating results and cash flow depend on the operating results and
cash flow of our subsidiaries and the payment of funds by those subsidiaries to
us. These subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay dividends or otherwise provide
financial benefits to us. Moreover, with respect to our Guangdong manufacturing
joint venture, any payment of dividends to us must be agreed to by our joint
venture partner, whose interests in receiving dividend distributions may not
coincide with ours. In addition, applicable law in some countries including
China limits the ability of a subsidiary to pay dividends for various reasons
including the absence of sufficient distributable reserves. In the event of any
insolvency, bankruptcy or similar proceedings, creditors of the subsidiaries
would generally be entitled to priority over us with respect to assets of the
affected subsidiary.

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

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

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

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

     .  unexpected changes in regulatory requirements or the regulatory
        environment;

     .  changes in governmental control or influence over our customers;

     .  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.

                                      10

<PAGE>

      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 multinational companies
operate. An additional tax liability may be incurred if it is determined that
intercompany pricing was not done at arm's length. We believe we have
adequately estimated and recorded our liability arising from intercompany
pricing, but 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, or OEMs, and third-party distributors and agents to market and
sell our network access products. If these OEMs, distributors or agents fail to
provide the support and effort necessary to service developing markets
effectively, our ability to maintain or expand our operations outside of China
will be negatively impacted. We 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.

WE ARE SUBJECT TO RISKS RELATING TO CURRENCY EXCHANGE RATE FLUCTUATIONS

      We are exposed to foreign exchange rate risk because our sales to China
are denominated in Renminbi and portions of our accounts payable are
denominated in Japanese Yen. Due to the limitations on converting Renminbi, we
are limited in our ability to engage in currency hedging activities in China.
Although the impact of currency fluctuations of Renminbi to date has been
insignificant, fluctuations in currency exchange rates in the future may have a
material adverse effect on our results of operations.

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

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

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

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

      Our expansion has placed and will continue to place a significant strain
on our management, operational, financial and other resources. To manage our
growth effectively, we will need to take various actions, including:

     .  enhancing management information systems and forecasting procedures;

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

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

     .  expanding, training and managing our employee base; and

     .  expanding our finance, administrative and operations staff.

                                      11

<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. 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.

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 who are resident in China.
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 merit.

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. For
example, in November 2001, we acquired Advanced Communication Devices
Corporation, a system on chip semiconductor company. 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 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 the
acquired company.

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
patents in the United States, three of which have been

                                      12

<PAGE>


issued. We have also filed patent applications in other countries. Additional
patents may not be issued from our pending patent applications and our issued
patents may not be upheld. In addition, we have, from time to time, chosen to
abandon previously filed applications. 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 venture 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
trade secrets and other intellectual property rights. Any intellectual property
litigation could be costly and could cause diversion of management's attention
from the operation of our business. Adverse determinations in any litigation
could result in the loss of our proprietary rights, subject us to significant
liabilities or require us to seek licenses from third parties which may not be
available on commercially reasonable terms, if at all. We could also be subject
to court orders preventing us from manufacturing or selling our products.

BUSINESS INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS

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

WE HAVE BEEN NAMED AS A DEFENDANT IN SECURITIES LITIGATION

      On October 31, 2001, a putative stockholder class action lawsuit was
filed against our company, some of our directors and officers and various
underwriters for our initial public offering. The complaint alleges undisclosed
improper underwriting practices concerning the allocation of IPO shares, in
violation of the federal securities laws. Similar complaints have been filed
concerning the IPOs of more than 300 companies, and the litigation has been
coordinated in federal court for the Southern District of New York as IN RE
INITIAL PUBLIC OFFERING SECURITIES LITIGATION, 21 MC 92. We believe we have
meritorious defenses to the claims against us and intend to defend the
litigation vigorously. However, as litigation is by its nature uncertain, an
unfavorable resolution of the lawsuit could have a material adverse effect on
our business, results of operations, or financial condition.

 RISKS 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

                                      13

<PAGE>

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 systems and handsets, 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 systems and
handsets, 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 citywide 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
systems and handsets, 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. However, with
China's recent admission into the WTO the Ministry of Information Industry,
under the direction of the State Council, must shortly present the first 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. 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 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.

OUR BUSINESS MAY SUFFER AS A RESULT OF THE RECENT RESTRUCTURING OF CHINA TELECOM

      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 Telecommunications
Bureaus.

                                      14

<PAGE>

      On December 11, 2001, the Chinese government announced that China Telecom
would be further split into two entities by region, Northern and Southern. The
10 Northern provinces, municipalities and autonomous regions of China Telecom
will be merged with China Netcom Co. Ltd. and China Jitong Network
Communications Co. Ltd. to form a new company which we refer to as the New CNC.
The remaining 21 provinces, municipalities and autonomous regions will
constitute the Southern entity, which will keep the name of China Telecom. The
New CNC will inherit 30% of the old China Telecom's national backbone network,
with the rest going to the New China Telecom. As the announcement of this
change is very recent and its implementation is ongoing, 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 the
restructuring. Moreover, following any restructuring, the New CNC, the New
China Telecom or any other entity that may replace it as a result of any
subsequent restructuring may restrict or prohibit the sales of our products,
which could cause substantial harm to 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,
performs spot checks to track and supervise the quality of licensed
telecommunications equipment and publishes 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 systems and
handsets. Based upon conversations with the Ministry of Information Industry,
we understand that our PAS systems and handsets are considered to still be in
the trial period and that sales of our PAS systems and handsets 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 mSwitch
platform. If we fail to obtain the required licenses, we could be prohibited
from making further sales of the unlicensed products, including our PAS systems
and handsets, 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 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

                                      15

<PAGE>

from making further sales of products incorporating our unregistered software
in China, which could substantially harm our business and financial condition.

MOST OF OUR CUSTOMERS IN CHINA ARE PART OF THE CHINA TELECOM SYSTEM AND ARE
SUBJECT TO ITS ULTIMATE CONTROL, AND, FOLLOWING THE RESTRUCTURING OF CHINA
TELECOM, MOST WILL BE PART OF THE NEW CHINA TELECOM OR THE NEW CNC AND WILL BE
SUBJECT TO THEIR 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. The Telecommunications Bureaus will
operate under the ultimate control of the New China Telecom or the New CNC
after the restructuring of China Telecom. Policy statements may be issued, or
decisions may be made by these entities, 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 most of our
sales are generated from our operations in China, any decisions by China
Telecom and, thereafter, the New China Telecom or the New CNC, restricting or
prohibiting the sales or deployment of our products could cause substantial
harm to our business.

OUR ABILITY TO SELL OUR PAS WIRELESS SYSTEMS AND HANDSETS COULD BE
SIGNIFICANTLY IMPAIRED IF CHINA TELECOM OR THE RESULTING ORGANIZATIONS
FOLLOWING THE REORGANIZATION OF CHINA TELECOM ARE GRANTED OR OTHERWISE ACQUIRE
MOBILE LICENSES, WHICH WILL ALLOW CHINA TELECOM OR SUCH RESULTING ENTITIES TO
DELIVER CELLULAR SERVICES

      China Telecom holds and operates and, after the restructuring, the New
China Telecom and the New CNC will hold and operate, the fixed line telephone
and data communications assets in China and will be 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 systems and
handsets. China's media sources have widely reported that after the
restructuring of China Telecom, the Ministry of Information Industry may grant
a mobile license to either one or both of the New CNC and the New China
Telecom. If the Ministry of Information Industry does grant a mobile license to
the New China Telecom or the New CNC, or if such entities otherwise acquire
mobile licenses, 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 systems and handsets. If this were to
occur, we could lose current and potential customers for our PAS systems and
handsets, and our financial condition and results of operations could be harmed.

CHANGES IN TELECOMMUNICATIONS RATES OR PRICING POLICIES 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 systems
and handsets, 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 or change telecommunications pricing policies, including
allowing carriers to set prices based on market conditions, 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.

                                      16

<PAGE>

               RISKS RELATING TO CONDUCTING OPERATIONS IN CHINA

SALES IN CHINA HAVE ACCOUNTED FOR MOST 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 $565.9 million, or 90.3%, of our net sales in fiscal 2001,
$364.0 million, or 98.8%, of our net sales in fiscal 2000, and $183.6 million,
or 97.9%, 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 75.3% as of December 31, 2001, 75.0% as of December
31, 2000, and 53.7% as of December 31, 1999 were in China. We expect to make
further investments in China in the future. Therefore, our business, financial
condition and results of operations are to a significant degree subject to
economic, political and social events in China.

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


      China's government imposes controls on the convertibility of Renminbi
into foreign currencies and, in certain cases, the remittance of currency out
of China. Under the current foreign exchange control system, sufficient foreign
currency may not be available to satisfy our currency needs. Shortages in the
availability of foreign currency may restrict the ability of our Chinese
subsidiaries to obtain and remit sufficient foreign currency to pay dividends
to us, or otherwise satisfy their foreign currency denominated obligations,
such as payments to us for components which we export to them and for
technology licensing fees. We may also experience difficulties in completing
the administrative procedures necessary to obtain and remit needed foreign
currency.

      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 can

                                      17

<PAGE>

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 SUBJECTS FOREIGN INVESTORS IN THE TELECOMMUNICATIONS INDUSTRY TO
OWNERSHIP AND GEOGRAPHIC LIMITATIONS

      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.
Currently, foreign investors may engage in such activities only in accordance
with certain ownership and geographic limitations. 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 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

                                      18

<PAGE>

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

      Since 1978, increasing emphasis had been placed on decentralization and
the utilization of market forces in the development of China's economy.
Economic reform measures adopted by China's government may be inconsistent or
ineffectual, and we may not in all cases be able to capitalize on any reforms.
Further, these measures may be adjusted or modified in ways which could result
in economic liberalization measures that are inconsistent from time to time or
from industry to industry or across different regions of the country. China's
economy has experienced significant growth in the past 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 ENTRY INTO THE WORLD TRADE ORGANIZATION CREATES UNCERTAINTY AS TO THE
FUTURE ECONOMIC AND BUSINESS ENVIRONMENTS IN CHINA

      China's entry into the WTO was approved in September 2001. Entry into the
WTO will require China to further reduce tariffs and eliminate non-tariff
barriers, which include quotas, licenses and other restrictions by 2005 at the
latest. 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. China's
entry into the WTO could have a negative impact on China's economy with a
resulting negative impact on our business.

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


      Our subsidiaries and joint venture 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. Two of our
principal subsidiaries, UTStarcom China and Hangzhou UTStarcom, accounted for
approximately 90.1% of our revenues in 2001. The tax holidays applicable to,
UTStarcom China will expire at the end of 2002. At that time, the tax rate will
increase from 7.5% to 15% and will negatively impact our financial condition
and results of operations. The tax holiday applicable to our other principal
subsidiary, Hangzhou UTStarcom, expired in 2001 and is now subject to annual
review. Consequently, its tax rate could increase from 10% to 15% if it is
unable to maintain a tax holiday in 2002. If we are unable to extend this tax
holiday to 2002, our financial condition and results of operations may be
negatively impacted. Additionally, the Chinese government is considering the
imposition of a "unified" corporate income tax that would phase out, over time,
the preferential tax treatment to which foreign-funded enterprises, such as
UTStarcom, are currently entitled. While it is not certain whether the
government will implement such a unified tax structure or whether, if
implemented, UTStarcom will be grandfathered into the new tax structure, if the
new tax structure is implemented, it will adversely affect our financial
condition.


                                      19

<PAGE>

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 that may be subject to personal income taxes under
China's income tax laws. We did not withhold China income taxes on the option
exercises, and the employees have not yet paid any taxes in China that 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, on behalf of our employees, will
apply for a refund from the U.S. tax authorities corresponding to the amount of
the foreign tax credit which would then be applicable. The refund amounts are
required to be paid to us by the employees who receive them. In addition, our
failure to collect and remit China withholding tax may also subject us to
penalties.

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

      China has a civil law 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 existing laws
or contracts based on existing law may be uncertain and sporadic and it may be
difficult to obtain swift and equitable enforcement, or to obtain enforcement
of a judgment by a court of another jurisdiction. The relative inexperience of
China's judiciary in many cases creates additional uncertainty as to the
outcome of any litigation. Further, interpretation of statutes and regulations
may be subject to government policies reflecting domestic political changes.
Moreover, government policies and internal rules promulgated by governmental
agencies may not be published in time, or at all. As a result, we may operate
our business in violation of new rules and policies without having any
knowledge of their existence.

      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 that may not always apply to domestic companies
in China. As a result of its admission into the WTO, China is increasingly
according foreign companies and foreign investment enterprises established in
China the same rights and privileges as Chinese domestic companies. 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
government approval for any of our activities or products could substantially
harm our business.

                                      20

<PAGE>

           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 systems 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.

A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK HELD BY SOFTBANK AMERICA
INC. MAY BECOME AVAILABLE FOR SALE IN THE PUBLIC MARKET, WHICH COULD CAUSE THE
MARKET PRICE OF OUR STOCK TO DECLINE

      Following the completion of this offering, SOFTBANK America Inc. will
beneficially own 34,651,630 shares, or 31.7%, of our outstanding shares of
common stock. If the overallotment option is exercised in full, SOFTBANK
America Inc. will beneficially own 31.3% of our outstanding shares of common
stock. Subject to compliance with Rule 144 of the Securities Act, SOFTBANK
America Inc. may sell these shares in the public market. The market price of
our common stock could decline if SOFTBANK America Inc. sells these shares or
the market perceives that SOFTBANK America Inc. intends to sell them. In
connection with this offering, SOFTBANK America Inc. has agreed, with
exceptions, not to sell or transfer any common stock held by it commencing on
the date of this prospectus for a period ending 180 days after the date of this
prospectus, without first obtaining the written consent of Merrill Lynch.

SOFTBANK AMERICA INC. HAS SIGNIFICANT INFLUENCE OVER OUR MANAGEMENT AND
AFFAIRS, WHICH IT COULD EXERCISE AGAINST YOUR BEST INTERESTS

      Following the completion of this offering, SOFTBANK America Inc. will
still beneficially own 31.7% of our outstanding stock. If the overallotment
option is exercised in full, SOFTBANK America Inc. will beneficially own 31.3%
of our outstanding shares of common stock. As a result, SOFTBANK America Inc.
will have the ability to exercise significant influence over 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.

                                      21

<PAGE>

      The interests of SOFTBANK America Inc. may not always coincide with our
interests. SOFTBANK America Inc. acting through its designee on the Board of
Directors and through its ownership of voting securities, will have the ability
to exercise significant influence over our actions irrespective of the desires
of our other stockholders or directors.

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.

                                      22

<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 mSwitch, 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;

     .  regarding our future operating results;

     .  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 unanticipated 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.

                                      23

<PAGE>

                                USE OF PROCEEDS


      If the overallotment option is exercised in full, we estimate our net
proceeds from the sale of the 1,500,000 shares of common stock offered by us in
this prospectus will be approximately $29.7 million, based on an assumed public
offering price of $20.81 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 SOFTBANK America Inc.


      We presently intend to use any 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 from this
offering. Pending any use, we intend to invest the net proceeds in government
securities and in 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
any net proceeds from this offering to enter into these types of transactions.
At this time, we do not have any understanding, commitments or agreements with
respect to such material transaction.

                                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.

                        PRICE RANGE OF OUR COMMON STOCK


<TABLE>
<CAPTION>
                                                           HIGH   LOW
                                                          ------ ------
        <S>                                               <C>    <C>
        FISCAL 2000
        -----------
        1st Quarter (from March 3, 2000)................. $93.50 $41.00
        2nd Quarter......................................  77.63  16.75
        3rd Quarter......................................  32.88  18.00
        4th Quarter......................................  23.00  12.31

        FISCAL 2001
        -----------
        1st Quarter...................................... $28.00 $13.56
        2nd Quarter......................................  27.28  12.50
        3rd Quarter......................................  25.61  12.98
        4th Quarter......................................  31.43  15.51

        FISCAL 2002
        -----------
        1st Quarter (through February 27, 2002).......... $35.66 $20.67
</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
December 31, 2001 we had approximately 205 stockholders of record. On February
27, 2002 the last reported sale price of our common stock on The Nasdaq
National Market was $20.81 per share.


                                      24

<PAGE>

                                CAPITALIZATION

      The following table sets forth our capitalization as of December 31,
2001. 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
                                                                       DECEMBER 31,
                                                                           2001
                                                                      ---------------
                                                                      (IN THOUSANDS,
                                                                          EXCEPT
                                                                         SHARE AND
                                                                      PER SHARE DATA)
<S>                                                                   <C>
Long-term debt, net of current portion...............................    $ 12,048

Stockholders' equity:
   Preferred stock, $0.00125 par value; 5,000,000 shares authorized;
     no shares issued and outstanding................................          --
   Common stock, $0.00125 par value; 250,000,000 shares authorized,
     109,304,164 shares issued and outstanding.......................         138
   Additional paid-in capital........................................     638,697
   Deferred stock compensation.......................................      (6,045)
   Retained earnings.................................................      49,146
   Notes receivable from stockholders................................        (381)
   Accumulated other comprehensive income............................         332
                                                                         --------
       Total stockholders' equity....................................     681,887
                                                                         --------
          Total capitalization.......................................    $693,935
                                                                         ========
</TABLE>

- --------
The table above excludes:

     .  options to purchase 12,578,417 shares of common stock outstanding under
        our stock option plans at a weighted average exercise price of $12.22
        per share, and 2,450,501 additional shares available for grant under
        our stock option plans as of December 31, 2001;

     .  3,716,294 shares of common stock available for purchase under our 2000
        Employee Stock Purchase Plan as of December 31, 2001; and

     .  32,000 shares of common stock reserved for issuance upon the exercise
        of warrants outstanding as of December 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' overallotment option is not exercised. If the overallotment
option is exercised in full, the number of shares outstanding after the
offering will be 110,804,164.


                                      25

<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, 1999, 2000 and 2001 and consolidated balance sheet data at
December 31, 2000 and 2001 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, 1997 and 1998 and the consolidated balance sheet data at
December 31, 1997, 1998 and 1999 have been derived from audited financial
statements not included in or incorporated by reference into this prospectus.
Historical results are not necessarily indicative of results to be expected in
any future period.

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                    -----------------------------------------------
                                                     1997      1998      1999      2000      2001
                                                    -------  --------  --------  --------  --------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>      <C>       <C>       <C>       <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $75,597  $105,167  $187,516  $368,646  $626,840
Cost of sales (includes stock compensation
 expense of $0, $0, $12, $90, and $41).............  48,795    64,142   112,703   240,465   402,292
                                                    -------  --------  --------  --------  --------
Gross profit.......................................  26,802    41,025    74,813   128,181   224,548
                                                    -------  --------  --------  --------  --------
Operating expenses:
 Selling, general and administrative (includes
   stock compensation expense of $0, $390,
   $4,256, $4,676 and $2,499)......................  21,211    23,211    35,122    48,055    75,764
 Research and development (includes stock
   compensation expense of $0, $22, $1,285,
   $6,795 and $2,660)..............................   8,941    14,681    18,648    41,452    59,809
 Amortization of goodwill and intangible assets....      40       120       332     4,894     7,527
 In-process research and development...............      --        --     3,992        --     4,720
                                                    -------  --------  --------  --------  --------
   Total operating expenses........................  30,192    38,012    58,094    94,401   147,820
                                                    -------  --------  --------  --------  --------
Operating income (loss)............................  (3,390)    3,013    16,719    33,780    76,728
Interest and other income (expenses)...............   2,033    (1,138)   (2,212)   10,829     2,647
Equity in net income (loss) of affiliated
 companies.........................................      73      (773)    1,348      (288)   (1,276)
                                                    -------  --------  --------  --------  --------
Income (loss) before income taxes, minority
 interest and cumulative effect of a change in
 accounting principle..............................  (1,284)    1,102    15,855    44,321    78,099
Income tax expense.................................     400     1,423       626    14,021    19,823
Minority interest in (earnings) loss of
 consolidated subsidiaries.........................     301       914    (2,110)   (2,307)   (1,322)
                                                    -------  --------  --------  --------  --------
Income (loss) from continuing operations...........  (1,383)      593    13,119    27,993    56,954
Income (loss) from discontinued operations.........   1,413      (893)   (1,656)       --        --
Cumulative effect of the application of SAB 101
 "Revenue Recognition in Financial Statements".....      --        --        --      (980)       --
                                                    -------  --------  --------  --------  --------
Net income (loss)..................................      30      (300)   11,463    27,013    56,954
Beneficial conversion feature of Series F
 preferred stock...................................      --        --   (29,977)       --        --
                                                    -------  --------  --------  --------  --------
Net income (loss) applicable to common
 stockholders...................................... $    30  $   (300) $(18,514) $ 27,013  $ 56,954
                                                    =======  ========  ========  ========  ========
Basic earnings (loss) per share:
   Income (loss) from continuing operations........ $ (0.19)     0.08  $  (1.94) $   0.35  $   0.56
   Income (loss) from discontinued operations......    0.19     (0.12)    (0.19)       --        --
   Cumulative effect on prior years of the
    application of SAB 101 "Revenue Recognition
    in Financial Statements".......................      --        --        --     (0.01)       --
                                                    -------  --------  --------  --------  --------
   Net income (loss)............................... $  0.00  $  (0.04) $  (2.13) $   0.34  $   0.56
                                                    =======  ========  ========  ========  ========
Diluted earnings (loss) per share:
   Income (loss) from continuing operations........ $ (0.19) $   0.01  $  (1.94) $   0.28  $   0.52
   Income (loss) from discontinued operations......    0.19     (0.01)    (0.19)       --        --
   Cumulative effect on prior years of the
    application of SAB 101 "Revenue Recognition
    in Financial Statements".......................      --        --        --     (0.01)       --
                                                    -------  --------  --------  --------  --------
   Net income (loss)............................... $  0.00  $   0.00  $  (2.13) $   0.27  $   0.52
                                                    =======  ========  ========  ========  ========
Shares used in per share calculations:
   Basic...........................................   7,320     7,582     8,678    79,696   101,433
                                                    =======  ========  ========  ========  ========
   Diluted.........................................   7,320    77,050     8,678   101,867   108,612
                                                    =======  ========  ========  ========  ========
</TABLE>

                                      26

<PAGE>

<TABLE>
<CAPTION>

                                               AS OF DECEMBER 31,
                                 ----------------------------------------------
                                   1997     1998     1999     2000      2001
                                 -------- -------- -------- -------- ----------
                                                 (IN THOUSANDS)
<S>                              <C>      <C>      <C>      <C>      <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents (1)... $ 35,049 $ 17,626 $ 87,364 $149,112 $  321,136
Working capital.................   59,076   57,416  128,973  369,861    591,103
Total assets....................  101,097  142,121  271,788  591,837  1,005,880
Total short-term debt...........    1,579   38,426   43,338   43,381     58,434
Long-term debt..................       --       --       --   12,048     12,048
Total stockholders' equity......   72,513   72,336  165,720  412,319    681,887
</TABLE>
- --------
(1)Includes restricted cash of $5.2 million as of December 31, 2001.

                                      27

<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, manufacture and market wireline and wireless broadband access
and switching equipment that enables 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 cost-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.


      We incorporated in Delaware in 1991. Since our incorporation, we have
focused our resources on developing products for China's communications market.
We shipped our first network access products in 1993. In 1995, we acquired
StarCom Network Systems, Inc. and changed our name to UTStarcom, Inc. In 1996,
we introduced our advanced, V5.1 and V5.2 compliant, multi-service network
access platform, the AN-2000. Late in 1996, we introduced our PAS wireless
access system. In December 1999, we completed the acquisition of the portion of
our Wacos, Inc. subsidiary owned by the minority shareholders. Wacos, Inc. is a
research and development subsidiary that develops IP-based switching systems.
In November 2001, we completed the acquisition of Advanced Communications
Devices Corporation, or ACD, for $21.3 million. In addition, we issued shares
of restricted common stock valued at $5.0 million to ACD employees who will
continue to perform services for us, vesting over a period of five years or
upon the achievement of certain performance milestones. The first milestone was
met in December 2001, resulting in a charge of $1.3 million to operations. ACD
is a System-on-Chip (SoC) semiconductor company focusing on LAN and IP
switching technology. We conduct our operations in China through wholly owned
subsidiaries and a joint venture.


      We have derived substantially all of our revenues from sales of
telecommunications equipment to service providers in China. However, we are
currently expanding our sales to service providers in other growing
communications markets outside of 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 90.3% of our net sales for the year ended December 31, 2001
and approximately 98.8% of our net sales for the year 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, competitive and social conditions in China, including changes in
governmental policies with respect to laws and regulations, changes in
telecommunications industry and regulatory rules and policies,
anti-inflationary measures, currency conversion and remittance abroad, and
rates and methods of taxation. Our first and second largest customers accounted
for 6.6% and 5.9% of our net sales for the year ended December 31, 2001, and
9.0% and 5.0% of accounts receivable, respectively, as of December 31, 2001.
Our first and second largest customers accounted for 12.1% and 6.0% of our net
sales, respectively, for the year ended December 31, 2000 and 7.0% and 0.2% of
the accounts receivable, respectively, as of December 31,

                                      28

<PAGE>

2000. Our first and second largest customers accounted for 30.2% and 10.7% of
our net sales, respectively, in 1999 and 39.0% and 6.0% of the accounts
receivable, respectively, as of December 31, 1999. 89.9% of our net sales
during 2001 were to entities affiliated with the government of China. Accounts
receivable balances from these entities or state owned enterprises were
$192.8 million as of December 31, 2001. We extend credit to our customers in
China without requiring collateral. We monitor our exposure for credit losses
and maintain allowances for doubtful accounts.

      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 a 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,
performs spot checks to track and supervise the quality of licensed
telecommunications equipment and publishes 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 systems and
handsets. Based upon conversations with the Ministry of Information Industry,
we understand that our PAS systems and handsets are considered to still be in
the trial period and that sales of our PAS systems and handsets 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 mSwitch
platform. If we fail to obtain the required licenses, we could be prohibited
from making further sales of the unlicensed products, including our PAS systems
and handsets, 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, financial condition and results of
operations.

      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 and many other countries in Asia
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.

      Revenues from sales of telecommunications equipment are recognized when
persuasive evidence of an agreement exists, delivery of the product has
occurred as evidenced by customer acceptance, the fee is fixed or determinable
and collectibility is reasonably assured. Where multiple elements exist in an
arrangement, revenue is allocated to the different elements based upon
verifiable objective evidence of the fair value of the elements. Revenues from
sales of telecommunications equipment involving significant production,
modification or customization of the product or where services being provided
are deemed to be essential to the functionality of the product are recognized
using the percentage of completion method if the project cost can be reasonably
estimated. If the cost cannot be reasonably estimated, the completed contract
method is applied. Any payments received prior to revenue recognition are
recorded as deferred revenue.

                                      29

<PAGE>

      Revenues from sales of telecommunications equipment incorporating
software not considered incidental to the product as a whole ("software
contracts") are recognized when persuasive evidence of an agreement exists, the
product has been delivered as evidenced by customer acceptance, the fee is
fixed or determinable and collectability is probable. Revenues from software
contracts with multiple elements are recognized using the residual method when
there is vendor specific objective evidence of the fair value of all
undelivered elements in an arrangement but vendor specific objective evidence
of fair value does not exist for one or more of the delivered elements in an
arrangement. Under the residual method, the fair value of the undelivered
elements, as indicated by vendor specific objective evidence, is deferred and
the difference between the total arrangement fee and the amount deferred for
the undelivered elements is recognized as revenue related to the delivered
elements regardless of any separate prices stated within the contract for each
element. If the fee due from the customer is not fixed or determinable due to
extended payment terms, revenue is recognized as payments become due from the
customer, assuming all other criteria for revenue recognition are met.

      Revenues from engineering service contracts are recognized upon
completion of the project, or using the percentage of completion method when
project costs can be reasonably estimated.

      Effective January 1, 2000, we adopted Staff Accounting Bulletin 101 ("SAB
101") issued by the Securities and Exchange Commission in December 1999. In
light of the guidance issued in SAB 101, we changed our method of recognizing
revenue for 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. We
recorded a cumulative adjustment in the first quarter of fiscal 2000 of $1.0
million. The impact of the cumulative adjustment was a decrease in net income
of $1.0 million or $0.01 per share, basic and diluted, for the year ended
December 31, 2000.

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

      Our gross profit has been affected by product mix, average selling prices
and material costs. 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 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.

      Selling, general and administrative expenses include compensation and
benefits, professional fees, sales commissions, provision for doubtful 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.

                                      30

<PAGE>

      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 $5.0 million, $2.4 million and $15.9
million of net deferred stock compensation during the years ended December 31,
2001, 2000 and 1999, respectively. In connection with grants to non-employees
during 1999, we recorded deferred compensation of $7.4 million. We recorded
stock compensation expense of approximately $5.2 million during the year ended
December 31, 2001, $11.6 million during the year ended December 31, 2000, and
$5.6 million during the year ended December 31, 1999. At December 31, 2001,
approximately $6.0 million of deferred stock compensation remained to be
amortized.

      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 acquisitions of Stable Gain
International Ltd. and ACD.

      Consolidated equity in net income (loss) of affiliated companies
comprises our 51.0% 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. We have entered into an agreement
to purchase the remaining 49.0% equity interest and we are in the process of
applying for the relevant governmental approvals.


      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. Two of our
principal subsidiaries, UTStarcom China and Hangzhou UTStarcom, accounted for
approximately 90.1% of our revenues in 2001. The tax holiday applicable to
UTStarcom China will expire at the end of 2002. At that time, the tax rate for
this subsidiary will increase from 7.5% to 15%. The tax holiday applicable to
Hangzhou UTStarcom expired in 2001 and is now subject to annual review.
Consequently, its tax rate could increase from 10% to 15% if it is unable to
maintain a tax holiday in 2002. The expiration of the tax holiday applicable to
UTStarcom China, and the failure to maintain the tax holiday applicable to
Hangzhou UTStarcom, will negatively impact our financial condition and results
of operations by increasing our tax rate. Additionally, the Chinese government
is considering the imposition of a "unified" corporate income tax that would
phase out, over time, the preferential tax treatment to which foreign-funded
enterprises, such as UTStarcom, are currently entitled. It is not certain
whether the government will implement such a unified tax structure, or if
implemented whether it will adversely affect our financial results.



      Minority interest in (earnings) loss of consolidated subsidiaries
represents the share of earnings in Hangzhou UTStarcom, our Zhejiang
manufacturing joint venture, that was owned by our joint venture partner prior
to the time we acquired 100% of Hangzhou UTStarcom.


                                      31

<PAGE>

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                                YEARS ENDED DECEMBER 31,
                                                                                ----------------------
                                                                                 1999    2000    2001
                                                                                -----    -----   -----
<S>                                                                             <C>      <C>     <C>
PERCENTAGE OF NET SALES
Net sales......................................................................  100.0 % 100.0 % 100.0 %
Cost of sales..................................................................   60.1    65.2    64.2
                                                                                -----    -----   -----
Gross profit...................................................................   39.9    34.8    35.8
Operating expenses:
   Selling, general and administrative.........................................   18.7    13.1    12.1
   Research and development....................................................   10.0    11.2     9.5
   Amortization of goodwill and intangible assets..............................    0.2     1.3     1.2
   In-process research and development costs...................................    2.1      --     0.8
                                                                                -----    -----   -----
       Total operating expenses................................................   31.0    25.6    23.6
Operating income...............................................................    8.9     9.2    12.2
Interest and other income (expenses)...........................................   (1.2)    2.9     0.5
Equity in net income (loss) of affiliated companies............................    0.7    (0.1)   (0.2)
                                                                                -----    -----   -----
Income before income taxes and minority interest...............................    8.4    12.0    12.5
Income tax expense.............................................................    0.3     3.8     3.2
Minority interest in earnings of consolidated subsidiaries.....................   (1.1)   (0.6)   (0.2)
                                                                                -----    -----   -----
Income from continuing operations..............................................    7.0     7.6     9.1
Loss from discontinued operations..............................................   (0.9)     --      --
                                                                                -----    -----   -----
Net income before cumulative effect of change in accounting principle..........    6.1     7.6     9.1
Beneficial conversion feature of Series F preferred stock......................  (16.0)     --      --
Cumulative effect on prior years of the application of SAB 101 "Revenue
  Recognition in Financial Statements".........................................     --    (0.3)     --
                                                                                -----    -----   -----
Net income (loss) available to common stockholders.............................   (9.9)%   7.3 %   9.1 %
                                                                                =====    =====   =====
</TABLE>

      COMPARISON OF YEARS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000

      NET SALES.  Our net sales increased 70.0% to $626.8 million in 2001 from
$368.6 million in 2000. This increase was primarily due to an increase in sales
volume of our PAS and IP-based PAS systems. Sales of telecommunications
equipment for the year ended December 31, 2001 were $438.9 million, an increase
of $176.9 million or 67.5%, as compared to the corresponding period in 2000.
Sales of subscriber handsets for the year ended December 31, 2001 were $187.9
million, an increase of $81.3 million or 76.3%, as compared to the
corresponding period in 2000. Sales of telecommunications equipment and
subscriber handsets increased due to the continued growth in spending on
telecommunications infrastructure in China, as China continues to modernize
such infrastructure. In 2001, no customer accounted for more than 10% our net
sales. In 2000, sales to Hangzhou Telecommunications Bureau accounted for 12.1%
of our net sales.

      GROSS PROFIT.  Gross profit increased 75.2% to $224.5 million in 2001
from $128.2 million in 2000. Gross profit, as a percentage of net sales,
increased to 35.8% in 2001 from 34.8% in 2000. The increase in gross profit, as
a percentage of net sales, was primarily due to increased margins on our
handsets, which comprised 30.0% of net sales in 2001 compared to 28.9% in 2000.

      SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses increased 57.7% to $75.8 million in 2001 from $48.1 million in 2000.
The increase in selling, general and administrative expenses was primarily due
to increased sales and administrative personnel and related expenses, including
sales

                                      32

<PAGE>

commissions, associated with the growth in net sales and the expansion of our
overall level of business activities. This increase was partly offset by a
decrease in non-cash stock compensation expense which decreased to $2.5 million
in 2001 from $4.7 million in 2000. Selling, general and administrative expenses
as a percentage of net sales decreased to 12.1% in 2001 from 13.1% 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 further invest in infrastructure and incur
additional expenses related to the anticipated growth of our business and
operations.

      RESEARCH AND DEVELOPMENT.  Research and development expenses increased
44.3% to $59.8 million in 2001 from $41.5 million 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, partly offset by a decrease in non-cash
stock compensation expense which decreased to $2.7 million in 2001 from $6.8
million in 2000. As a percentage of net sales, research and development
expenses decreased to 9.5% in 2001 from 11.2% in 2000. This reduction was
attributable to the decrease in non-cash compensation expense and an increase
in sales in 2001. We expect our research and development expenses to increase
in absolute dollar amounts in future periods as we expand our research and
development organization to support new product development.

      AMORTIZATION OF INTANGIBLE ASSETS.  Amortization of intangible assets
increased to $7.5 million in 2001 from $4.9 million in 2000. The increase in
amortization of intangible assets was primarily due to the amortization of
additional goodwill associated with the acquisition of Stable Gain, a software
development company, for $11.0 million, in the first quarter of 2001.

      IN-PROCESS RESEARCH AND DEVELOPMENT COSTS.  In-process research and
development costs resulted from our acquisition of ACD in November 2001. The
aggregate purchase price of ACD was approximately $21.3 million which, based
upon an independent appraisal by Willamette Management Associates of the assets
acquired and liabilities assumed, was allocated to the specifically
identifiable tangible and intangible assets acquired. In connection with the
ACD acquisition, $4.7 million of in-process research and development costs were
charged to operations in November 2001. There were no in-process research and
development charges in 2000.

      INTEREST INCOME (EXPENSE), NET.   Interest income was $8.6 million in
2001 compared to interest income of $12.2 million in 2000. Interest expense was
$3.9 million in 2001 compared to $3.3 million in 2000. Interest income
decreased in 2001 due to lower interest rates, which was partially offset by
higher average cash balances as a result of the completion of our follow-on
public offering in July 2001. Interest expense increased due to higher
borrowings in 2001 as compared to 2000.

      OTHER INCOME (EXPENSES), NET.  Net other expense was $2.0 million in 2001
and net other income was $1.9 million in 2000. The decrease in other income in
2001 was primarily due to impairment write-downs of $3.4 million relating to
our investment portfolio.

      EQUITY IN NET INCOME (LOSS) OF AFFILIATED COMPANIES.  Consolidated equity
in net loss of affiliated companies was $1.3 million in 2001 and $0.3 million
in 2000. The change between the two periods was primarily due to the increase
in losses at our Guangdong manufacturing subsidiary.

      INCOME TAX EXPENSE.  Income tax expense was $19.8 million in 2001 and
$14.0 million in 2000. The increase in income tax expense was due to our
increasing income. Our effective tax rate improved from 32% in 2000 to 25% in
2001 primarily due to a favorable settlement with the Internal Revenue Service
upon examination of our corporate income tax returns filed for the years 1997,
1998 and 1999.

      MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES.  Minority
interest in earnings of consolidated subsidiaries was $1.3 million in 2001 and
$2.3 million in 2000. The change between the two periods was primarily due to
the increased profitability at our Zhejiang manufacturing subsidiary.

                                      33

<PAGE>

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

      NET SALES.  Our net sales increased 96.6% to $368.6 million in 2000 from
$187.5 million in 1999. This increase was primarily due to an increase in sales
volume of our PAS system. Sales of telecommunications equipment for the year
ended December 31, 2000 were $262.1 million, an increase of $92.7 million or
54.7%, as compared to the corresponding period in 1999. Sales of subscriber
handsets for the year ended December 31, 2000 were $106.6 million, an increase
of $88.5 million or 489.0%, as compared to the corresponding period in 1999. In
2000, sales to Hangzhou Telecommunications Bureau accounted for 12.1% of our
net sales. In 1999, sales to Xian Telecommunications Bureau and Kunming
Telecommunications Bureau accounted for 30.2% and 10.7% of our net sales,
respectively.

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

      SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses increased 36.8% to $48.1 million in 2000 from $35.1 million in 1999.
The increase in selling, general and administrative expenses was primarily due
to increased sales and administrative personnel and related expenses, including
sales commissions, associated with the growth in net sales and the expansion of
our overall level of business activities. Selling, general and administrative
expenses as a percentage of net sales decreased to 13.1% in 2000 from 18.7% in
1999. The decrease in selling, general and administrative expenses as a
percentage of net sales was primarily due 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. 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. As a
percentage of net sales, research and development expenses increased to 11.2%
in 2000 from 10.0% in 1999.

      AMORTIZATION OF INTANGIBLE ASSETS.  Amortization of intangible assets
increased to $4.9 million in 2000 from $0.3 million in 1999. The increase in
amortization of intangible assets was due to the increase in amortization
associated with our December 1999 acquisition of the portion of our Wacos, Inc.
subsidiary owned by the minority shareholders.

      IN-PROCESS RESEARCH AND DEVELOPMENT COSTS.  There were no in-process
research and development charges in 2000. In-process research and development
costs in 1999 resulted from our acquisition of the portion of our Wacos, Inc.
subsidiary owned by the minority shareholders 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. In connection with the
Wacos acquisition, $4.0 million of in-process research and development costs
were charged to operations in December 1999.

      INTEREST INCOME (EXPENSE), NET.  Net interest income was $8.9 million in
2000 and net interest expense was $1.0 million in 1999. The increase in
interest income was primarily due to increased interest income from higher
average cash balances as a result of the completion of our initial public
offering in March 2000 and sale of our preferred stock in November and December
1999.

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

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<PAGE>

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

      INCOME TAX EXPENSE.  Income tax expense was $14.0 million in 2000 and
$0.6 million in 1999. 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 $2.3 million in 2000 and
$2.1 million in 1999. The change between the two periods was primarily due to
the increased profitability at our Zhejiang manufacturing subsidiary.

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

LIQUIDITY AND CAPITAL RESOURCES

      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 in which we sold 11,500,000 shares of common stock. On
August 3, 2001, we completed a follow-on public offering and sold an aggregate
of 7,400,000 shares of common stock in which we raised net proceeds of
$139.9 million.

      As of December 31, 2001 we had lines of credit totaling $260.2 million of
which our total borrowings were $70.5 million, with the remainder available for
future borrowings. Of the amount borrowed, $12.0 million was included in
long-term debt. We are not a guarantor of any debt not included in the
consolidated balance sheet. As of December 31, 2001, we had working capital of
$591.1 million, including $321.1 million of cash and cash equivalents, $86.2
million of short-term investments and $58.4 million of Renminbi-denominated
bank borrowings.

      During 2000, we invested $8.0 million and during 2001, we invested an
additional $2.0 million in Softbank China (the "fund"), an investment fund
established by SOFTBANK CORP. focused on investments in Internet companies in
China. This investment permits us to participate in the anticipated growth of
Internet-related businesses in China. An entity affiliated with SOFTBANK CORP.,
SOFTBANK America Inc., is a significant stockholder in our company. Our
investment constitutes 10.0% of the funding for Softbank China, with SOFTBANK
CORP. contributing the remaining 90.0%. 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. Our
Chief Executive Officer is the chairman of the board of the fund and has not
participated in day-to-day management of 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 the early stages and may
never materialize. During the year ended December 31, 2001, based upon a review
of the carrying value of this investment, an impairment charge of $1.7 million
was recognized to provide for the other than temporary decline in the fair
value below the carrying value of this investment. The balance remaining in
this investment as of December 31, 2001 was $8.3 million.

      We have also invested directly in a number of private technology-based
companies in the early stages of development. We continually evaluate the
carrying value of these investments for possible impairment based on

                                      35

<PAGE>

achievement of business objectives and milestones, the financial condition and
prospects of these companies and other relevant factors. During the fourth
quarter of 2001, based upon a review of the carrying value of these
investments, an impairment charge of $1.7 million was recognized to provide for
the other than temporary decline in the fair value below the carrying value of
these investments. Due to the risky nature of these investments, we may
experience further losses in connection with our investment in Softbank China
and our other investments in private technology companies.

      Net cash provided by operations in 2001 of $40.2 million was primarily
due to net income of $57.0 million adjusted for depreciation and amortization
expense of $18.5 million, amortization of deferred stock compensation expense
of $5.2 million, non-qualified stock option exercise tax benefits of $15.3
million, inventory reserve of $11.1 million, allowance for doubtful accounts of
$6.2 million and an increase in accounts payable, income taxes payable and
other current liabilities and deferred revenue of $39.1 million, $3.4 million
and $86.2 million, respectively. This was partially offset by an increase in
inventories, accounts receivable and other current and non-current assets of
$121.2 million, $39.2 million and $52.6 million, respectively. 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
$63.5 million, $87.2 million and $4.9 million, respectively. The uses of cash
were partially offset by net income of $27.0 million plus depreciation and
amortization expense of $9.5 million, non-qualified stock option exercise tax
benefits of $7.6 million, amortization of deferred stock compensation expense
of $11.6 million, inventory reserve of $2.8 million, allowance for doubtful
accounts of $6.0 million and an increase in accounts payable and other current
liabilities and deferred revenue of $14.1 million and $28.0 million,
respectively.

      Net cash used in investing activities in 2001 of $43.7 million was
primarily due to purchases of property, plant and equipment of $30.2 million,
investments in affiliates of $9.8 million, and net purchases of short-term
investments of $2.1 million. Net cash used in investing activities in 2000 of
$111.4 million was primarily due to the acquisition of property, plant and
equipment of $19.5 million, investment in affiliates of $8.2 million, which
included our $8.0 million investment in Softbank China, and net purchases of
short-term investments of $83.8 million.

      We have purchased the rights to use 49 acres of land located in Zhejiang
Science and Technology Industry Garden of Hangzhou Hi-tech Industry Development
Zone. We have completed the design layout for a new manufacturing facility.
Construction of the new facility is expected to be completed in 2003 at a
projected cost of $70.0 million.


      We have entered into agreements to purchase the remaining minority
interests in two of our joint ventures. In December 2001, we agreed to acquire
the remaining 49% ownership in Guangdong UTStarcom, Ltd. for a total of $3.6
million in cash payable in 2002. In January 2002, we agreed to acquire the
remaining 12% ownership in UTStarcom (Hangzhou) Communications Co., Ltd. for a
total of $14.5 million in cash payable in 2002.


      Net cash provided by financing activities in 2001 of $175.5 million was
primarily due to $160.6 million of proceeds from our follow-on public offering
of common stock in August 2001 and exercise of stock options, and net proceeds
from borrowings under our line of credit arrangements of $15.1 million. Net
cash provided by financing activities in 2000 of $219.3 million was primarily
due to net proceeds of $198.2 million from the issuance of common stock through
our initial public offering and exercise of stock options, and net proceeds of
$20.8 million from borrowing under our lines of credit.

      Our international sales are generally denominated in local currencies.
Due to the limitations on converting Renminbi, we are limited in our ability to
engage in currency hedging activities in China. As of December 31, 2001, we
were not engaged in any hedging activities and did not hold any derivative
financial instruments. Although the impact of currency fluctuations to date has
been insignificant, we cannot guarantee that fluctuations in currency exchange
rates in the future will not have a material adverse effect on revenues from

                                      36

<PAGE>

international sales and, correspondingly, on our business, financial condition
and results of operations. We also have contracts negotiated in Japanese Yen
for purchasing portions of our inventories and supplies. We have a
multi-currency bank account in Japanese Yen for purchasing portions of our
inventories and supplies. The balance of this Japanese Yen account as of
December 31, 2001 was approximately $6.7 million.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      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, fixed income corporate bonds and tax
exempt instruments. In accordance with our investment policy, all short-term
investments are invested in "investment grade" rated securities with minimum A
or better ratings. Currently, most of our short-term investments have AA or
better ratings.

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

<TABLE>
<CAPTION>
           (IN THOUSANDS, EXCEPT INTEREST RATES)
           <S>                                               <C>
           Cash and cash equivalents........................ $321,136
           Average interest rate............................    1.2 %
           Short-term investments........................... $ 86,176
           Average interest rate............................    3.8 %
           Total investment securities...................... $407,312
              Average interest rate.........................    1.8 %
</TABLE>

      FOREIGN EXCHANGE RATE RISK.  We are exposed to foreign exchange rate risk
because most of 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 December 31, 2001 was approximately $6.7 million.

RECENT ACCOUNTING PRONOUNCEMENTS

      In June 1998, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivatives and Hedging Activities," as amended by SFAS No.
138. SFAS No. 133 established 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 had no impact on our consolidated financial statements.

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<PAGE>

      In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
that the purchase method of accounting be used for all business combinations
initiated or completed after June 30, 2001. SFAS No. 141 also specifies the
criteria that intangible assets acquired in a business combination must meet to
be recognized and reported apart from goodwill. SFAS No. 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually. SFAS No. 142
also requires that intangible assets with definite useful lives be amortized
over their respective estimated useful lives to their estimated residual
values, and reviewed for impairment in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" (SFAS No. 121).


      SFAS No. 141 is effective immediately, except with regard to business
combinations that were initiated prior to July 1, 2001, which we accounted for
using the purchase method of accounting. SFAS No. 142 will be effective for
fiscal years beginning after December 15, 2001, and was adopted by us on
January 1, 2002. The adoption of these accounting standards will eliminate
amortization of goodwill commencing January 1, 2002. However, impairment
reviews may result in future periodic write-downs. We expect, due to the
elimination of goodwill amortization expense effective January 1, 2002, that
net income will increase by approximately $7.3 million in 2002 because existing
goodwill from past acquisitions will no longer be amortized. SFAS No. 142 will
also require us to perform a transitional assessment by June 30, 2002, to
determine whether there is an impairment of goodwill. Any such transitional
impairment loss will be recognized as a change in accounting principle in the
consolidated statement of operations. We have not yet performed the initial
goodwill impairment test prescribed in SFAS No. 142. However, we do not
anticipate that such test will result in a significant impairment charge.


      On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001
and interim periods within those fiscal years. This statement supercedes SFAS
No. 121, and amends APB 30 "Reporting the Results of Operations--Reporting the
Effects of Disposal of a Segment of a Business." SFAS No. 144 requires that
long-lived assets that are to be disposed of by sale be measured at the lower
of book value or fair value less cost to sell. Additionally, SFAS No. 144
expands the scope of discontinued operations to include all components of an
entity with operations that (1) can be distinguished from the rest of the
entity and (2) will be eliminated from the ongoing operations of the entity in
a disposal transaction. We do not expect that the adoption of SFAS No. 144 will
have a significant impact on our consolidated financial statements.

                                      38

<PAGE>

                                   BUSINESS

OVERVIEW

      We design, manufacture and market wireline and wireless broadband access
and switching equipment that enables migration to next generation IP-based
networks. Historically, substantially all of our sales have been to service
providers in China, however we are currently expanding to include other growing
communications markets outside of 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: mSwitch, PAS and AN-2000. mSwitch is an IP-based,
multiservice softswitch designed to provide voice and data switching and
gateway functions either integrated with PAS or 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 using specially designed PAS
handsets. As of December 31, 2001, we had sold approximately 6.6 million lines
of PAS equipment servicing approximately 3.0 million subscribers in 210 cities
in China. Based on our knowledge of China's communications market, we believe
that PAS is the most widely deployed wireless local access system in China. In
the Taiwan market, there were approximately 160,000 subscribers using our PAS
systems as of December 31, 2001. For wireline networks, we provide a
broadband-ready platform called AN-2000. As of December 31, 2001, approximately
3.2 million lines of our wireline AN-2000 access platform have been deployed in
China, including deployments in the six largest regional communications
markets. Another 800,000 lines of our AN-2000 access platform have been
deployed in markets outside of China.

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 of China's
commitment to developing a communications infrastructure, strong demand for
communications services and robust economic growth.

      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. The International Telecommunication Union reported as of
January 2001 that China, with a population of approximately 1.3 billion, had a
fixed-line teledensity rate of only 11.2%. In contrast, according to the
International Telecommunication Union, fixed-line teledensity rates in 2001 for
the United Kingdom, France, Hong Kong and the United States were 58.2%, 58.0%,
57.8% and 70.0%, respectively. While growth in China's communications market is
currently driven predominantly by voice services, the increasing demand for
data services also presents a growing opportunity both in China and in other
international markets. The Gartner Group estimates that Internet users in China
will grow from 20.0 million in 2001 to 51.0 million in 2004, representing a
compound annual growth rate of 36.6%. In order to support this anticipated
growth in data traffic, service providers in China must continue to expand
their networks. We believe this is best achieved by deploying IP-based
equipment.

      China's ability to invest heavily in its communications infrastructure is
fueled by the country's strong economic activity. According to the Economist
Intelligence Unit, China's gross domestic product, or GDP, grew 7.3% in 2001.
The Economist Intelligence Unit also estimates that China's GDP will grow at a
compound annual growth rate of 7.5% from 2001 to 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

                                      39

<PAGE>

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
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 are 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 SERVICE PROVIDERS.  Voice and data 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. 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 to initially serve a few hundred
subscribers, yet economically scale to serve several hundred thousand
subscribers over time. In addition, service providers require the following:

     .  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, short-messaging, Internet
        access, video and voice in a single network. Because of these
        advantages, investment in IP-based networks is increasing while
        investment in circuit-based networks is decreasing.

     .  RETURN ON INVESTMENT.  As competition intensifies, service providers
        require the ability to offer advanced and flexible services to their
        customers. Service providers must ensure these new services drive
        subscriber growth and ultimately revenue and profitability. As a
        result, service providers are focused on return on investment, enabling
        them to deploy technology that provides increased services today while
        also providing a cost-effective migration path to future expansion and
        functionality.

     .  INTEGRATED VOICE AND DATA SOLUTIONS.  Service providers are
        increasingly looking to expand their service offerings beyond
        traditional voice services to provide data and other value-added
        services. As advanced high speed data networks are deployed, service
        providers will require solutions that can be upgraded to adapt to new
        technologies while preserving the investment in their existing
        infrastructure. These networks will enable service providers to
        differentiate their service offerings, build customer loyalty and
        generate incremental revenue.

     .  RAPID DEPLOYMENT.  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

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<PAGE>

        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 convergence of voice and
        data and migration to third generation networks, referred to as 3G
        networks.

     .  COMMITMENT TO LOCAL MARKETS.  Service providers value equipment vendors
        that have made a strong commitment to their local markets. This
        commitment includes direct sales forces and local service organizations
        to respond to the needs of service providers and their subscribers.

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

THE UTSTARCOM SOLUTION

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

      MIGRATION TO NEXT GENERATION IP NETWORKS.  Our products are designed with
the flexibility to allow service providers to deliver voice and data services
over today's circuit-based networks and offer 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 their
investment in our products while migrating to next generation networks over
time. Our products enable service providers to effectively time their network
equipment expenditures, expand voice and data capacity and rapidly introduce
new services as demand warrants.

      COST-EFFECTIVE SOLUTIONS.  Our products are designed to provide operators
with a high return on their investment. By reducing network complexity,
integrating high performance capabilities and providing a flexible migration
path to next generation networks, our products cost less to deploy and maintain
than most alternative technologies.

      CONVERGENCE OF VOICE AND DATA SERVICES.  We have designed our systems to
offer a high degree of flexibility in terms of subscriber capacity and types of
traffic delivered. 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.

      WIRELESS ACCESS NETWORKS.  Our wireless access solutions are ideally
suited for the requirements of service providers in emerging communications
markets. Service providers can deploy our products quickly to cost-effectively
meet customer demand. Our systems allow service providers to rapidly add new
subscribers and to scale network capacity in response to demand. Our IP-based
wireless access solutions also provide a platform for service providers to
migrate to 3G mobile 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 our facility in Hangzhou
in Zhejiang province. 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 modern and rapidly
growing provinces. We also maintain 15 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 local levels through pre-

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<PAGE>

sales design and consulting services. Additionally, through our relationships
at the national, provincial and local levels we receive a flow of information
regarding market changes and insight into unique service provider needs and
related opportunities. As part of this strategy to develop a local presence in
markets that we serve, we also have sales, support and engineering personnel in
Taiwan and India.

STRATEGY

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

      CAPITALIZE ON THE 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 are making a substantial investment in developing our mSwitch platform,
which is designed to integrate with our existing products and can be scaled in
response to increased demand. We believe that mSwitch 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 mSwitch platform in the future, which we believe will enable us to
enter new markets in China and around the world.

      LEVERAGE OUR INSTALLED BASE TO CAPITALIZE ON DEMAND FOR WIRELESS AND
WIRELINE 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:

     .  leverage our installed base of AN-2000 platforms and our working
        relationships with providers to offer our wireless access systems;

     .  continue to enhance functionality and increase features of our mSwitch
        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 systems and handsets 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 base of AN-2000
        platforms to enable the delivery of broadband services over copper
        connections through digital subscriber line, or xDSL, technologies;

     .  broaden our PAS systems to enable value-added services, such as
        wireless content and applications which our customers offer in China
        under the brand name C-Mode and in Taiwan under the brand name MiMi; and

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

      EXPAND OUR PRESENCE IN CHINA.  We intend to further capitalize on
favorable market conditions in China, including its 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 in China;

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

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<PAGE>

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

     .  increasing our local research and development and manufacturing
        capabilities.

      PENETRATE OTHER GROWING COMMUNICATIONS MARKETS WORLDWIDE.  We have
started offering our products in other growing communications markets outside
of mainland China. We anticipate penetrating these markets in several ways,
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, Japan, Latin America, Taiwan, and other Pacific Rim
markets. We have established regional offices to focus on non-China market
development with sales and customer support operations in Hanoi, Manila, Miami,
New Delhi, New Jersey, Shanghai, Taipei, Tel Aviv, and Tokyo 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, including India, Japan 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:

     .  mSwitch--our IP-based multiservice softswitch;

     .  PAS--our wireless access system which includes handsets; 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 (MSWITCH)

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

      mSwitch networks are distributed, which means that many geographically
dispersed gateways and servers can interact over a high speed, IP-based 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 mSwitch equipment, billing for mSwitch services and customer
care for mSwitch subscribers. This operations support system uses an online
Internet-based user interface, which enables service provider 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. To that end, in

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<PAGE>

November 2001, UTStarcom was selected by China's Ministry of Information
Industry, or MII, as one of a select group of participants in China's technical
trial of 3G mobile networks based on the 3GPP WCDMA standard. mSwitch
applications 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 mSwitch 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 mSwitch platform to further improve
functionality and reduce cost to our customers. We intend to continue to
enhance mSwitch with 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 and
specialized handsets 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, faster data
transmission speeds, lighter handsets with lower power requirements and better
support of advanced information services. PAS is a low mobility system, which
means it is designed for deployment in high capacity urban and suburban areas,
rather than 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 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 platform. 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 mSwitch 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 where existing
switching capacity is not available. IP-based PAS also brings many important
benefits associated with our mSwitch platform including scalability. Both PAS
and IP-based PAS support 64Kbps mobile Internet access along with voice. In
2001, we deployed 1.2 million lines of mSwitch-based PAS systems in several
cities in China, and two locations outside of China.

      We also design and manufacture handsets that are specifically configured
to support PAS services. In 2001, we introduced a new PAS handset primarily
designed by UTStarcom. We expect to continue to invest in this area and
introduce several additional handset models in 2002. We also manufacture
several models based on designs licensed from other handset manufacturers. We
compliment our handset design and manufacturing capabilities with additional
handset models directly from leading vendors. Our strategy of designing,
licensing, manufacturing and direct sourcing of handset components provides us
with the flexibility to meet demand, and allows us to offer the broadest line
of PAS handsets in China.

      In conjunction with our PAS system, we enable wireless content and
applications similar to NTT DoCoMo's iMode service. To date, this service has
been launched by our customers in Xian and Hangzhou in China and in Taipei,
Taiwan. This service, known in China as C-mode and 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 and China 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

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<PAGE>

network components and to report on 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 onsite maintenance terminal wherever remote nodes are installed.

      As of December 31, 2001, service providers have installed our PAS system
in 210 locations in China, representing a total installed capacity of
approximately 6.6 million lines with approximately 3.0 million subscribers. In
Taiwan, the number of subscribers using PAS systems reached approximately
160,000 as of December 31, 2001.

      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 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 remote terminal, which is scalable from 16 to
1,520 lines, can be connected into a ring to form a metropolitan access network
of up to 23,000 subscriber lines. By connecting multiple metropolitan access
networks, a metropolitan service network can potentially service hundreds of
thousands of subscribers.

      The AN-2000 platform offers a V5.2 exchange interface that benefits
service providers by shifting network intelligence out into the access network,
reducing reliance on costly 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-2000 platforms.

      For broadband services based on ADSL, the AN-2000 platform has integral
multiplexing capability for up to 384 users to share 155Mbps of Asynchronous
Transfer Mode, or ATM, bandwidth to the Internet or, alternatively, 1.6Gbps in
our IP over Ethernet version. The AN-2000 platforms 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 (DSLAM). Other
DSLs including HDSL and G.SHDSL are also available. We also offer a Broadband
Remote Access Server (B-RAS) to provide service management features, including
authorization, accounting, virtual networking, and protocol translation. As
with PAS, our integrated Netman network management system provides centralized
management of the AN-2000 platforms. The ADSL service is compatible with most
customer premise modems provided by third-party vendors. As of December 31,
2001, service providers have deployed approximately 4.0 million AN-2000 lines
worldwide.

      In 2001, we introduced our IP-DSLAM product, based on an extension of our
AN-2000 technology. This product, which began shipping in the fourth quarter of
2001 to a customer in Japan, provides extremely high

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<PAGE>

density and high functionality at a very attractive price. This product
represents a new generation of DSLAM, which does not require ATM networking,
and is therefore compatible with IP-based networks. Our IP-DSLAM lowers
operator costs by eliminating the need for traditional high cost ATM-based
networks.

      OUR OEM PRODUCTS FOR METROPOLITAN AREA NETWORKS (MANS)

      We partner with original equipment manufacturers, or OEMs, which allows
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 may help us to shape our overall
strategic planning. One such initiative is our program to penetrate China's
Metropolitan Area Networks, or MANs, to provide Layer2/Layer3 switches.

      OUR ACD PRODUCTS

      In addition, we now have in-house system-on-chip (SoC) and application
specific integrated circuit (ASIC) design capabilities focusing on LAN and IP
switching technology to enhance our network switching and broadband access IC
technologies. These capabilities will enable us to continue to develop leading
carrier class broadband access solutions.

MARKETS AND CUSTOMERS

      We provide our communications equipment to local Telecommunications
Bureaus in a wide variety of provinces of China. Market opportunities within
China's 31 provinces vary greatly by region, with the more densely populated
coastal provinces experiencing the strongest economic development. To date, we
have focused primarily on the eastern coastal regions of China including
Guangdong, Zhejiang, Fujian, Shandong, Jiansu, and Shanghai. These provinces
and municipalities represent a disproportionately high percentage of China's
telecommunications subscribers, and influence adoption of technology elsewhere
in China. According to a report published by the Ministry of Information
Industry, China's 10 eastern provinces and municipalities accounted
for approximately 47.7% of China's total telecom investment for the six months
ended June 30, 2001. More recently we have expanded our marketing focus to
include several inland provinces. 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.

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<PAGE>

      The following table is a list of our customers who purchased more than
$1.0 million of our products in 2001.

<TABLE>
<S>                                <C>                                 <C>
BEIJING MUNICIPALITY               HEILONGJIANG PROVINCE               SHANXI PROVINCE
Beijing Telecommunication Bureau   Haerbin Telecommunication Bureau    Taiyuan Telecommunication Bureau
                                                                       Wuzhong Telecommunication Bureau
FUJIAN PROVINCE                    HENAN PROVINCE                      Xian Telecommunication Bureau
Hezhou Telecommunication Bureau    Jiaozuo Telecommunication Bureau
Meizhou Telecommunication Bureau   Xinxiang Telecommunication Bureau   SICHUAN PROVINCE
Putian Telecommunication Bureau                                        Xinhui Telecommunication Bureau
Quanzhou Telecommunication Bureau  HUBEI PROVINCE
                                   Huzhou Telecommunication Bureau     XINJIANG AUTONOMOUS PROVINCE
GUANGDONG PROVINCE                                                     Hami Telecommunication Bureau
Dongguan Telecommunication Bureau  HUNAN PROVINCE                      Hechi Telecommunication Bureau
Fuoshan Telecommunication Bureau   Zhangzhou Telecommunication         Shihezi Telecommunication Bureau
Guangdong UT Starcom                Bureau
Jiangmen Telecommunication Bureau                                      YUNNAN PROVINCE
Luoyang Telecommunication Bureau   NEI MON GOL AUTONOMOUS PROVINCE     Banna Telecommunication Bureau
Qingyuan Telecommunication Bureau  Huhehaote Telecommunication Bureau  Chuxiong Telecommunication Bureau
Shanwei Telecommunication Bureau                                       Dali Telecommunication Bureau
Shaoguan Telecommunication Bureau  JIANGSU PROVINCE                    Diqing Telecommunication Bureau
Shenzhen Telecommunication Bureau  Lianyungang Telecommunication       Kunming Telecommunication Bureau
Yunfu Telecommunication Bureau      Bureau                             Lijiang Telecommunication Bureau
Zhaoqing Telecommunication Bureau  Qinghua Ziguan Biwei Net Corp.--    Lincang Telecommunication Bureau
Zhongshan Telecommunication Bureau  Taian                              Nujiang Telecommunication Bureau
Zhuhai Telecommunication Bureau    Xuzhou Telecommunication Bureau     Yunan Telecommunication Bureau
                                   Yancheng Telecommunication Bureau
GUANGXI AUTONOMOUS PROVINCE        Yancheng Zhongxin Communication     ZHEJIANG PROVINCE
Guangxi Baise Telecommunication     Ind.                               Fuyang Telecommunication Bureau
 Bureau                                                                Hangzhou Telecommunication Bureau
Guilin Telecommunication Bureau    JIANGXI PROVINCE                    Jiaxing Telecommunication Bureau
Qinhzhou Telecommunication Bureau  Shangrao Telecommunication Bureau   Jinhua Telecommunication Bureau
Wuzhou Telecommunication Bureau                                        NingBo Telecommunication Bureau
Liuzhou Telecommunication Bureau   JILIN PROVINCE                      Quzhou Telecommunication Bureau
                                   Siping Telecommunication Bureau     Ruian Telecommunication Bureau
HAINAN PROVINCE                                                        Shaoxing Telecommunication Bureau
Haikou Telecommunication Bureau    LIAONING PROVINCE                   Taizhou Telecommunication Bureau
Qiongshan Telecommunication Bureau Benxi Telecommunication Bureau      Wenzhou Telecommunication Bureau
Sanya Telecommunication Bureau     Liaoyang Telecommunication Bureau   Wenzhou Zongheng Corp.
                                                                       Xiaoshan Telecommunication Bureau
HEBEI PROVINCE                     NINGXIA AUTONOMOUS PROVINCE         Yuhang Telecommunication Bureau
Baoding Telecommunication Bureau   Shizuishan Telecommunication Bureau Zhejiang Telecommunication Bureau
Dongsheng Telecommunication Bureau Yinchuan Telecommunication Bureau
Qinhuangdao Telecommunication                                          OUTSIDE MAINLAND CHINA
 Bureau                            SHAANXI PROVINCE                    BB Technologies Corporation
Xingtai Telecommunication Bureau   Kuitun Telecommunication Bureau     First International Telecom Corp.
Zhangjiakou Telecommunication                                          Himichal Futuristic Communications Ltd.
 Bureau                            SHANDONG PROVINCE                   NEC USA
                                   Dongying Telecommunication Bureau   Mitsubishi Electric Corporation
                                   Jinan Telecommunication Bureau
                                   Taizhou Telecommunication Bureau
</TABLE>

      For the year ended December 31, 2001, no single customer accounted for
more than 10% of our net sales. However, approximately 89.9% of our net sales
during 2001 were to entities affiliated with the government of China.

      We also sell our network access equipment to service providers in high
growth communications markets outside of China. These markets accounted for
approximately 9.7% of our net sales in 2001. We have shipped equipment to
service providers in Bangladesh, India, Japan, Mauritius, Russia, Taiwan,
Thailand and Venezuela. We have also begun trial deployments in the United
States and Vietnam.

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<PAGE>


      As of December 31, 2001, our backlog totaled approximately $360.7
million, compared to approximately $191.9 million as of December 31, 2000. We
include in our backlog contracts and purchase orders for which we anticipate
delivery to occur within 12 months and products delivered but for which final
acceptance has not yet 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,
Nanning, Nanjing, Nei Mon Gol, 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. Our
customer service operation in Hangzhou is co-located with our manufacturing
facility 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 our
customer support center in Hangzhou in the form of field dispatch personnel,
who also provide training on installation, operation and maintenance of
equipment. As of December 31, 2001, we employed over 800 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
licensees. We maintain sales and customer support sites in Iselin, New Jersey
to address North American markets; in Tokyo, Japan to address the Japan market;
in New Delhi, India to address the Indian market; 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; in Hanoi, Vietnam to address the
Vietnam market; and in Shanghai, China to address other Pacific Rim 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. In
many cases 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;

     .  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.

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<PAGE>

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

      The mSwitch 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 mSwitch 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 mSwitch softswitch provides switching intelligence to manage the
calls in the network as they progress from gateway to gateway. The mSwitch
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 subscribers' 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 mSwitch platform is one
of the first systems to provide mobile switching functionality.

      mSwitch employs our proprietary, object oriented signaling protocol for
mobility, known as SNSP, which we believe provides advantages over other
similar protocols. mSwitch is commercially deployed with mobility support for
our PAS wireless infrastructure. The mSwitch 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. mSwitch will serve as an IP-based, mobile
switching center and IP-based radio network controller. With this focus on
mobility services, mSwitch 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 128Kbps and 256Kbps 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 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

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<PAGE>

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 allows us to develop
market-driven products such as PAS and mSwitch. We maintain a strong
relationship between our research centers in the U.S. and China. 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 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 $59.8 million in 2001, $41.5 million in 2000 and $18.6
million in 1999.

MANUFACTURING, ASSEMBLY AND TESTING


      We manufacture or engage in the final assembly and testing of our
mSwitch, PAS systems and handsets and AN-2000 products at facilities in the
Chinese provinces of Guangdong and Zhejiang. 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 recently entered into agreements with both our Guangdong and
Zhejiang joint venture partners to acquire their respective interests in the
joint ventures. We anticipate these transactions to be completed during 2002.


      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 generally use third parties
for high volume assembly of circuit boards. HonXun Electrical Industry in
Hangzhou, a subsidiary of Foxconn Group, manufactures our PAS handsets; Eastcom
Communications manufactures our PAS handsets; and Shanghai Jingling Electronic
manufactures line cards for our IP-ADSL product.

      We have also 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 Wistron 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 ourselves.

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<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.

      The Ministry of Information Industry confirmed in December 2001 that the
State Council had approved a plan to restructure China Telecom. The Ministry of
Information Industry has been authorized to execute the plan. China Telecom
will be split into two regional entities. The assets of the present China
Telecom in North China's Beijing and Tianjin municipalities, the Inner Mongolia
Autonomous Region and Hebei and Shanxi provinces, Northeast China's Liaoning,
Jilin and Heilongjiang provinces, Central China's Henan Province and East
China's Shandong Province will merge with China Netcom Co. Ltd. and China
Jitong Network Communications Co. Ltd. The new company will be named China
Netcom Group Corp., or New CNC. China Telecom's assets in the other 21
provinces, municipalities and autonomous regions will retain the brand name and
intangible assets of the old China Telecom. We refer to this entity as the New
China Telecom. The New CNC will inherit 30% of the old China Telecom's national
backbone network, with the rest going to the New China Telecom. As the
announcement of this change is very recent and its implementation is ongoing,
we cannot be certain what impact the restructuring will have on our business
operations. However, we may experience a decline in orders and related revenues
during such restructuring as a result of uncertainty among our customers
presently operating under China Telecom.

      New CNC and New China Telecom will continue to operate through each of
their own regional networks 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. Local telephone companies are
funded by their own operational revenue from local telephone charges, a portion
of shared long distance revenue through settlement, and headquarter allocation
and cross subsidy, particularly in remote and poor regions. Among the funding
sources, local revenue accounts for the majority of the revenue for local
telephone companies.

      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.

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<PAGE>

      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 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. The Ministry of Information Industry acts exclusively as the industry
regulator and the local Telecommunications Bureaus 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. However, with China's recent entry into the World Trade
Organization, or WTO, the Ministry of Information Industry, under the direction
of the State Council, must shortly present the first 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. In order
to comply with the WTO, subsets of draft telecommunications regulations were
published in December 2001. One of the most significant of the draft
regulations is the "Regulation of Foreign Investment over Telecom Enterprises."
In December 2001, the State Council promulgated the Provisions on the
Regulation of Foreign Invested Telecommunications Enterprises, which lifts the
restrictions on foreign investment in the telecommunications industry, subject
to certain equity ratio and geographic limitations. Also in December 2001, the
Ministry of Information Industry issued the Measures on Regulation of
Telecommunication Business Operation Permits, which details the procedures for
obtaining permits for the operation of telecommunications businesses and makes
it possible for those conducting telecommunications business to obtain the
relevant permits. As we provide equipment rather than services, these two
regulations should not have a direct effect on our business. Nevertheless, as
the two regulations came into effect only recently, we are uncertain whether we
will be indirectly affected by the impact of the two regulations on telecom
service providers.

      Currently, the governing regulation over telecommunications in China is
the Telecommunications Regulations of the People's Republic of China issued by
the State Counsel in September 2000. This set of regulations is known as the
Telecom Regulations. The Telecom Regulations govern 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 effect, 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 quality of the telecommunications equipment for
which they have obtained a network access license is stable and reliable, and
they may not lower the quality or performance of other installed licensed
products. The State Council's product quality supervision department, in

                                      52

<PAGE>

concert with the Ministry of Information Industry, performs spot checks to
track and supervise the quality of telecommunications equipment for which a
network access license has been obtained and publishes 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 mSwitch 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, financial condition and
results of operations.

      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 cannot be produced and
sold in China without registration and filing. The developers and producers of
the software are responsible for the registration and filing of domestic
software products. Registration under the Software Regulations is valid for
five years and can be renewed upon 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 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:

     .  MSWITCH:  Alcatel Alsthom CGE, S.A.; Cisco Systems, Inc.; Clarent
        Corporation; Ericsson LM Telephone Co.; Huawei Technology Co., Ltd.;
        Lucent Technologies, Inc.; Motorola, Inc.; Nokia Corporation; Nortel
        Networks Corporation; Nuera Communications, Inc.; Siemens AG; Sonus
        Networks, Inc.; and Zhongxing Telecommunications Equipment.

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<PAGE>

     .  PAS SYSTEMS AND HANDSETS:  Lucent Technologies, Inc. and Zhongxing
        Telecommunications Equipment.

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

      We are increasingly facing competition from domestic companies in China.
We believe that our strongest competition comes 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, particularly with the reduction of trade restrictions as a result of
China's admission to the WTO. 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 systems 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 affect 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.

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<PAGE>

      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 affect 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 12
additional U.S. patent applications and 27 foreign patent applications. In
addition, we have, from time to time, chosen to abandon previously filed
applications. Patents may not issue and any patents issued may not 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 the MiMi service in Taiwan. Our joint venture in China relies upon our
trademarks, technology and know-how to manufacture and sell our products. Under
the terms of our joint venture agreement, any modifications or enhancements to
or derivatives of our intellectual property developed by the joint venture will
be owned by the joint venture. Any infringement of our proprietary rights could
result in significant litigation costs, and any failure to adequately protect
our proprietary rights could result in our competitors offering similar
products, potentially resulting in loss of a competitive advantage and
decreased revenues. Despite our efforts to protect our proprietary rights,
existing patent, copyright, trademark and trade secret laws afford only limited
protection. In addition, the legal systems of some foreign countries, including
China, do not protect our proprietary rights to the same extent as does the
legal system of the United States.


      Attempts may be made to copy or reverse engineer aspects of our products
or to obtain and use information that we regard as proprietary. Accordingly, we
may not be able to prevent misappropriation of our technology or deter others
from developing similar technology. Furthermore, policing the unauthorized use
of our products is difficult. Litigation may be necessary in the future to
enforce our intellectual property rights or to 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.

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<PAGE>

LEGAL PROCEEDINGS

      On October 31, 2001, a complaint captioned LACEK V. UTSTARCOM, INC., ET.
AL., Civil Action No. 01-CV-9604, was filed in United States District Court for
the Southern District of New York against our company, some of our directors
and officers and various underwriters for our initial public offering.
Plaintiffs allege undisclosed improper underwriting practices concerning the
allocation of IPO shares in exchange for excessive brokerage commissions or
agreements to purchase shares at higher prices in the aftermarket, in violation
of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Substantially similar actions have been filed concerning the initial public
offerings for more than 300 different issuers, and the cases have been
coordinated as IN RE INITIAL PUBLIC OFFERING SECURITIES LITIGATION, 21 MC 92.
The complaint against us seeks unspecified damages on behalf of a purported
class of purchasers of our common stock between March 2, 2000 and December 6,
2000. We believe that we have meritorious defenses to this lawsuit and will
defend this lawsuit vigorously.

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<PAGE>

                                  MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

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

<TABLE>
<CAPTION>
NAME                AGE POSITION
- ----                --- --------
<S>                 <C> <C>
Masayoshi Son...... 44  Chairman of the Board of Directors
Hong Liang Lu...... 47  President, Chief Executive Officer and Director
Ying Wu............ 42  Vice Chairman of the Board of Directors, Executive Vice
                          President and Chief Executive Officer, China Operations
Michael Sophie..... 44  Vice President of Finance, Chief Financial Officer and
                          Assistant Secretary
Bill Huang......... 39  Senior Vice President and Chief Technology Officer
Shao-Ning J. Chou.. 39  Senior Vice President and Chief Operating Officer, China
                          Operations
Paul Berkowitz..... 49  Vice President, International Sales
Gerald Soloway..... 53  Senior Vice President, Engineering
Thomas J. Toy...... 47  Director
Chauncey Shey...... 44  Director
Larry D. Horner.... 67  Director
Howard Kwock....... 52  Vice President, Engineering
</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 BB Technologies Corporation, Yahoo Japan Corporation and Aozora
Bank, Ltd. 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,

                                      57

<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. He
was appointed Senior Vice President in September 2001. 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. He was appointed
Senior Vice President in September 2001. From March 1997 to December 1998, he
was Vice President of China Operations and from February 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 February 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 February 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. He was appointed Senior Vice President of Engineering in September 2001.
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 February 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. and several private companies. Mr. Toy holds
B.A. and M.M. degrees from Northwestern University.

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<PAGE>

      CHAUNCEY SHEY has served as a director since October 1995. Mr. Shey has
served as President of SOFTBANK China Holdings since December 1999. From
February 1999 to December 1999, he served as President of DirecTouch
Communications Limited. From October 1995 to February 1999, Mr. Shey served as
our Executive 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. From 1994
until June 2001, Mr. Horner served as Chairman of Pacific USA Holdings Corp.
and as Chairman of the Board and Chief Executive Officer of Asia Pacific Wire &
Cable Corporation Limited. He is a director of Phillips Petroleum Company,
Atlantis Plastics, 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.

      HOWARD KWOCK was appointed our Vice President of Engineering in September
2001. From March 2001 to September 2001, he served as our Senior Director of
Engineering. From February 2000 to February 2001, Mr. Kwock worked as Director
of Engineering at Zhone Technologies. From June 1995 to January 2001, Mr. Kwock
served as Director of Engineering at Lucent Technologies, formerly Ascend
Communications. Mr. Kwock holds a B.A. in Business Administration from
California State University, Fullerton.

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 recission.

      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

                                      59

<PAGE>

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
SOFTBANK America Inc., and by us and SOFTBANK America Inc. of the underwriters,
for certain liabilities arising under the Securities Act or otherwise. We have
agreed to indemnify SOFTBANK America Inc. against some liabilities, including
liabilities under the Securities Act, and to contribute to payments SOFTBANK
America Inc. may be required to make in respect of those liabilities.


      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.

                                      60

<PAGE>

                      PRINCIPAL AND SELLING STOCKHOLDERS

      The following table sets forth information known to us regarding the
beneficial ownership of our common stock as of December 31, 2001, and as
adjusted to reflect the sale of shares of common stock offered by SOFTBANK
America Inc., 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;

     .  our Chief Executive Officer and each of the other most highly
        compensated executive officers with compensation in excess of $100,000
        per year at the end of the fiscal year ended December 31, 2001; 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 BEING    ------------------------
                                            NUMBER   PERCENTAGE   OFFERED         NUMBER   PERCENTAGE(15)
                                          ---------- ---------- ------------    ---------- --------------
<S>                                       <C>        <C>        <C>             <C>        <C>
Masayoshi Son(2)......................... 44,658,296   40.85%    10,000,000(14) 34,658,296     31.71%
 c/o SOFTBANK CORP.
 24-1 Nihonbashi-Hakozakicho Chuo-ku,
 Tokyo 103-8501 JAPAN

Ying Wu(3)...............................  5,053,844    4.60%            --      5,053,844      4.60%
 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).........................  3,740,865    3.41%            --      3,740,865      3.41%
 788 Hong Xu Road, #43 Suite 1501
 Shanghai, 201103 China

Hong Liang Lu(5).........................  3,473,015    3.17%            --      3,473,015      3.17%

Bill Huang(6)............................    869,979     *               --        869,979       *

Shao-Ning J. Chou(7).....................    314,174     *               --        314,174       *

Michael Sophie(8)........................    155,088     *               --        155,088       *

Gerald Soloway(9)........................    214,140     *               --        214,140       *

Thomas J. Toy(10)........................     61,841     *               --         61,841       *

Larry D. Horner(11)......................     41,041     *               --         41,041       *

All executive officers and directors as a
  group (12 persons)(12)................. 58,821,239   52.80%    10,000,000(14) 48,821,239     43.83%

5% STOCKHOLDERS
Entities affiliated with SOFTBANK
  CORP.(13).............................. 44,651,630   40.85%    10,000,000(14) 34,651,630     31.70%
 c/o SOFTBANK CORP. 24-1
 Nihonbashi-Hakozakicho Chuo-ku,
 Tokyo 103-8501 JAPAN
</TABLE>
- --------
 * Less than 1%.

                                                    FOOTNOTES ON FOLLOWING PAGE

                                      61

<PAGE>


 (1) Assumes no exercise of the underwriters' overallotment option. Beneficial
     ownership is determined in accordance with the rules of the Securities and
     Exchange Commission and generally includes voting power or investment
     power with respect to securities. All shares of common stock subject to
     options exercisable within 60 days following December 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 before and after the offering is based on 109,304,164
     shares of common stock outstanding as of December 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 December 31, 2001, or upon the
     closing of this 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) Includes 44,651,630 shares beneficially owned by an entity 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 6,666 shares
     issuable upon exercise of options that are exercisable within 60 days of
     December 31, 2001. Mr. Son serves as our Chairman of the Board of
     Directors.
 (3) Includes 1,505,500 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 25,307 shares registered
     in the name of Ashley Wu and 25,307 shares registered in the name of
     Richard Yu. Ashley Wu and Richard Wu are Mr. Wu's children. Mr. Wu may be
     deemed the beneficial owner of the shares. Includes 608,903 shares
     issuable upon exercise of options that are exercisable within 60 days of
     December 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 1,756,019 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 407,321 shares
     issuable upon exercise of options that are exercisable within 60 days of
     December 31, 2001. Mr. Shey serves as one of our directors and from
     October 1995 to February 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 395,838 shares issuable upon exercise of
     options that are exercisable within 60 days of December 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 61,783 shares issuable upon exercise of options that are
     exercisable within 60 days of December 31, 2001. Mr Huang serves as our
     Senior Vice President and Chief Technology Officer.
 (7) Includes 124,774 shares issuable upon exercise of options that are
     exercisable within 60 days of December 31, 2001. Mr. Chou serves as our
     Senior Vice President and Chief Operating Officer of China Operations.

                                          FOOTNOTES CONTINUED ON FOLLOWING PAGE

                                      62

<PAGE>

 (8) Includes 152,311 shares issuable upon exercise of options that are
     exercisable within 60 days of December 31, 2001. Mr. Sophie serves as our
     Vice President of Finance and Chief Financial Officer.
 (9) Includes 195,003 shares issuable upon exercise of options that are
     exercisable within 60 days of December 31, 2001. Dr. Soloway serves as our
     Senior Vice President of Engineering.
(10) Includes 61,041 shares issuable upon exercise of options that are
     exercisable within 60 days of December 31, 2001. Mr. Toy serves as one of
     our directors.
(11) Includes 31,041 shares issuable upon exercise of options that are
     exercisable within 60 days of December 31, 2001. Mr. Horner serves as one
     of our directors.
(12) Includes 2,093,566 shares issuable upon exercise of options that are
     exercisable within 60 days of December 31, 2001.
(13) All 44,651,630 shares are registered in the name of SOFTBANK America Inc.,
     a Delaware corporation. SOFTBANK America Inc., is a wholly owned
     subsidiary of SOFTBANK Holdings Inc., a Delaware corporation. SOFTBANK
     Holdings Inc. is a wholly owned subsidiary of SOFTBANK CORP., a Japanese
     corporation. Accordingly, SOFTBANK America Inc., SOFTBANK Holdings Inc.
     and SOFTBANK CORP. may be deemed to have shared voting and investment
     power with respect to such shares.
(14) All 10,000,000 shares being offered are being sold by SOFTBANK America Inc.

(15) If the overallotment option were exercised in full, outstanding shares of
     common stock after the offering would be 110,804,164 and the percentage
     ownership of shares after the offering for each principal and selling
     stockholder would be: Masayoshi Son, 31.28%; Ying Wu, 4.54%; Chauncey
     Shey, 3.36%; Hong Liang Lu, 3.12%; Bill Huang, *; Shao-Ning J. Chou, *;
     Michael Sophie, *; Gerald Soloway, *; Thomas J. Toy, *; Larry D. Horner,
     *; All executive officers and directors as a group, 43.24%; Entities
     affiliated with SOFTBANK CORP., 31.27%.


                                      63

<PAGE>

                                 UNDERWRITING

GENERAL

      Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse
First Boston Corporation, joint book-running managers, along with Salomon Smith
Barney Inc., Banc of America Securities LLC, U.S. Bancorp Piper Jaffray Inc.
and HSBC Securities (USA) Inc., are acting as representatives of the
underwriters named below. Subject to the terms and conditions described in a
purchase agreement among us, SOFTBANK America Inc. and the underwriters,
SOFTBANK America Inc. has agreed to sell to the underwriters, and the
underwriters severally have agreed to purchase from SOFTBANK America Inc., the
number of shares listed opposite their names below.

<TABLE>
<CAPTION>
                                                           NUMBER OF
                   UNDERWRITER                              SHARES
                   -----------                             ---------
           <S>                                             <C>
           Merrill Lynch, Pierce, Fenner & Smith
                    Incorporated..........................
           Credit Suisse First Boston Corporation.........
           Salomon Smith Barney Inc.......................
           Banc of America Securities LLC.................
           U.S. Bancorp Piper Jaffray Inc.................
           HSBC Securities (USA) Inc......................
                                                           ----------
                    Total................................. 10,000,000
                                                           ==========
</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 SOFTBANK America Inc. 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. We have agreed to indemnify SOFTBANK America Inc. against
some liabilities, including liabilities under the Securities Act, and to
contribute to payments SOFTBANK America Inc. 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 SOFTBANK America Inc. that the
underwriters propose initially to offer the shares to the public at the initial
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.

                                      64

<PAGE>

      The following table shows the total public offering price, underwriting
discount and proceeds before expenses to SOFTBANK America Inc. and to us. This
information assumes either no exercise or full exercise by the underwriters of
their overallotment option.

<TABLE>
<CAPTION>
                                                       PER SHARE WITHOUT OPTION WITH OPTION
                                                       --------- -------------- -----------
<S>                                                    <C>       <C>            <C>
Public offering price.................................     $           $             $
Underwriting discount.................................     $           $             $
Proceeds, before expenses, to SOFTBANK America Inc....     $           $             $
Proceeds to UTStarcom.................................     $           $             $
</TABLE>

      The expenses of the offering, not including the underwriting discount,
are estimated at $600,000 and are payable by SOFTBANK America Inc.

OVERALLOTMENT OPTION

      We have granted an option to the underwriters to purchase up to 1,500,000
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 overallotments. 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 above table.

NO SALES OF SIMILAR SECURITIES

      We, our executive officers and directors and SOFTBANK America Inc. have
agreed, subject to limited exceptions, not to sell or transfer any common stock
commencing on the date of this prospectus, and ending, with respect to us and
our executive officers and directors, on the date 90 days after the date of
this prospectus, and, with respect to SOFTBANK America Inc. on the date 180
days after the date of this prospectus, in each case 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 may sell up to an aggregate of 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 may also sell, beginning two weeks following the date of this
prospectus, 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 up to a number of shares of our common stock equal to the product
of 250,000 and the number of months, or a portion thereof, during the period
commencing on or about February 11, 2002 and ending two weeks following the
date of this prospectus.

                                      65

<PAGE>

QUOTATION ON THE NASDAQ NATIONAL MARKET

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

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
overallotment 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

      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.

                                      66

<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 December 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 of UTStarcom, Inc. for the year
ended December 31, 2001, 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 portion of our Wacos, Inc.
subsidiary owned by the minority shareholders 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.

      Summary information relating to the independent appraisal of Advanced
Communication Devices, Inc. performed in connection with our acquisition of
Advanced Communication Devices, Inc. has been included in this prospectus and
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.

                                      67

<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:

     .  Annual Report on Form 10-K for the year ended December 31, 2001, as
        amended; and

     .  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 Harbor 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.

                                      68

<PAGE>

      COLOR PHOTOS OF MSWITCH, OUR IP-BASED MULTISERVICE SOFTSWITCH.

      Caption: mSwitch is an IP-based multiservice softswitch designed to
provide voice over IP gateway functions, broadband and narrowband remote access
services and associated billing, provisioning and service management operations
support systems. mSwitch enables service providers' migration from existing
circuit switched platforms to a next-generation, IP-based packet-switched
architecture.

      COLOR PHOTOS OF PAS, OUR WIRELESS ACCESS SYSTEM.

      Caption: The 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. When integrated with our mSwitch
platform, our IP-based PAS system enables service providers to quickly and
economically deploy wireless services in urban or suburban areas where minimal
or no legacy infrastructure exists.

      COLOR PHOTOS OF AN-2000, OUR BROADBAND ACCESS PLATFORM.

      Caption: The AN-2000 broadband access platform is a flexible access
platform that enables the delivery of broadband voice and data services over
fiber, copper or wireless transmission media. AN-2000 is designed to deliver
today's revenue-generating services while enabling migration to next-generation
technologies and services.

<PAGE>

================================================================================

                               10,000,000 SHARES

                           [LOGO] LOGO OF UT STARCOM

                                 COMMON STOCK

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

                              P R O S P E C T U S

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

                              MERRILL LYNCH & CO.

                          CREDIT SUISSE FIRST BOSTON

                             SALOMON SMITH BARNEY

                        BANC OF AMERICA SECURITIES LLC

                          U.S. BANCORP PIPER JAFFRAY

                                     HSBC

                                          , 2002

================================================================================

<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 and the NASD
filing fee.

<TABLE>
<CAPTION>
                                                                  AMOUNT
                                                                TO BE PAID
                                                                -----------
    <S>                                                         <C>
    Securities and Exchange Commission registration fee........ $ 24,095.95
    NASD filing fee............................................   26,691.25
    Printing and engraving expenses............................  135,000.00
    Legal fees and expenses....................................  300,000.00
    Accounting fees and expenses...............................   75,000.00
    Blue sky fees and expenses.................................    1,000.00
    Transfer agent and registrar fees and expenses.............   10,000.00
    Miscellaneous..............................................   28,212.80
                                                                -----------
       Total................................................... $600,000.00
                                                                ===========
</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, judgements, 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, against the expenses which
such officer or director actually and reasonably incurred, 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.


      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.

      The purchase agreement, a form of which will be attached as Exhibit 1.1
to this registration statement, provides for indemnification by the
underwriters of us, our officers and directors and SOFTBANK America Inc.,

                                     II-1

<PAGE>


and by us and the SOFTBANK America Inc. of the underwriters, for certain
liabilities arising under the Securities Act or otherwise. We have agreed to
indemnify SOFTBANK America Inc. against some liabilities, including liabilities
under the Securities Act, and to contribute to payments SOFTBANK America Inc.
may be required to make in respect of those liabilities.


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.
10.1    Form of Indemnification Agreement between the Registrant and SOFTBANK America Inc.
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 (included on page II-3).
</TABLE>

- --------
 * Previously filed.
** Incorporated by reference from the Registrant's Annual Report on Form 10-K
   for the year ended December 31, 2001 (Commission File No. 000-29661).

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 a part of this registration statement in
             reliance upon Rule 430A and 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-2

<PAGE>

                                  SIGNATURES


   Pursuant to the requirements of the Securities Act of 1933, UTStarcom, Inc.
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 February 27, 2002.


                                          UTSTARCOM, INC.

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


      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 UTStarcom, Inc. on
February 27, 2002.



<TABLE>
<CAPTION>
           SIGNATURE                                   TITLE
           ---------                                   -----
<C>                              <S>

             /s/  *              Chief Executive Officer, President (Principal
- --------------------------------   Executive Officer) and Director
         HONG LIANG LU

      /s/  MICHAEL SOPHIE        Chief Financial Officer (Principal Financial and
- --------------------------------   Accounting Officer)
         MICHAEL SOPHIE

             /s/  *              Chairman of the Board of Directors
- --------------------------------
         MASAYOSHI SON

             /s/  *              Vice Chairman of the Board of Directors
- --------------------------------
            YING WU

             /s/  *              Director
- --------------------------------
         CHAUNCEY SHEY

             /s/  *              Director
- --------------------------------
         THOMAS J. TOY

          /s/       *            Director
- --------------------------------
        LARRY D. HORNER

*By:     /s/  MICHAEL SOPHIE
   -----------------------------
        ATTORNEY-IN-FACT
</TABLE>


                                     II-3

<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.
 4.3**  Third Amended and Restated Registration Rights Agreement dated December 14, 1999.
 5.1*   Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1    Form of Indemnification Agreement between the Registrant and SOFTBANK America Inc.
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 (included on page II-3).
</TABLE>

- --------
 * Previously filed.
** Incorporated by reference from the Registrant's Annual Report on Form 10-K
   for the year ended December 31, 2001 (Commission File No. 000-29661).

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>3
<FILENAME>dex11.txt
<DESCRIPTION>FORM OF PURCHASE AGREEMENT
<TEXT>
<PAGE>

                                                                     EXHIBIT 1.1

================================================================================









                                 UTSTARCOM, INC.
                            (a Delaware corporation)
                        10,000,000 Shares of Common Stock



                               PURCHASE AGREEMENT
                               ------------------














Dated: February ___, 2002


================================================================================

<PAGE>


                                Table of Contents

                                                                            Page
                                                                            ----

SECTION 1.   REPRESENTATIONS AND WARRANTIES ...............................   2

    (a) Representations and Warranties by the Company .....................   2
         (i) Compliance with Registration Requirements ....................   3
         (ii) Incorporated Documents ......................................   3
         (iii) Independent Accountants ....................................   4
         (iv) Financial Statements ........................................   4
         (v) No Material Adverse Change in Business .......................   4
         (vi) Good Standing of the Company ................................   5
         (vii) Good Standing of Subsidiaries ..............................   5
         (viii) Good Standing of Joint Venture ............................   5
         (ix) Capitalization ..............................................   6
         (x) Authorization of Agreement and Registration Statement ........   6
         (xi) Authorization and Description of Securities .................   6
         (xii) Absence of Defaults and Conflicts ..........................   6
         (xiii) Absence of Labor Dispute ..................................   7
         (xiv) Absence of Proceedings .....................................   7
         (xv) Accuracy of Exhibits ........................................   8
         (xvi) Possession of Intellectual Property ........................   8
         (xvii) Absence of Further Requirements ...........................   8
         (xviii) Possession of Licenses and Permits .......................   8
         (xix) Title to Property ..........................................   9
         (xx) Repatriation of Dividends and Other Distributions ...........   9
         (xxi) PRC Taxes ..................................................   9
         (xxii) Taxes .....................................................  10
         (xxiii) Sovereign Immunity .......................................  10
         (xxiv) Choice of Law .............................................  10
         (xxv) Investment Company Act .....................................  10
         (xxvi) Environmental Laws ........................................  10
         (xxvii) Foreign Corrupt Practices Act ............................  11
         (xxviii) Registration Rights .....................................  11
    (b) Representations and Warranties by the Selling Stockholder .........  11
        (i) Accurate Disclosure ...........................................  11
        (ii) Authorization of Agreements ..................................  11
        (iii) Good and Marketable Title ...................................  12
        (iv) Due Execution of Power of Attorney and Custody Agreement .....  12
        (v) Absence of Manipulation .......................................  12
        (vi) Absence of Further Requirements ..............................  12
        (vii) Restriction on Sale of Securities ...........................  12
        (viii) Certificates Suitable for Transfer .........................  13
        (ix) No Association with NASD .....................................  13
    (c) Officer's Certificates ............................................  13

SECTION 2.   SALE AND DELIVERY TO UNDERWRITERS; CLOSING ...................  13

    (a) Initial Securities ................................................  13
    (b) Option Securities .................................................  13
    (c) Payment ...........................................................  14
    (d) Denominations; Registration .......................................  14


                                       i

<PAGE>

SECTION 3.   COVENANTS OF THE COMPANY .....................................  15

    (a) Compliance with Securities Regulations and Commission Requests ....  15
    (b) Filing of Amendments ..............................................  15
    (c) Delivery of Registration Statements ...............................  15
    (d) Delivery of Prospectuses ..........................................  15
    (e) Continued Compliance with Securities Laws .........................  16
    (f) Blue Sky Qualifications ...........................................  16
    (g) Rule 158 ..........................................................  16
    (h) Use of Proceeds ...................................................  16
    (i) Listing ...........................................................  16
    (j) Restriction on Sale of Securities .................................  17
    (k) Reporting Requirements ............................................  17
    (l) No Amendment of 10b5-1 Plans. .....................................  17

SECTION 4.   PAYMENT AND EXPENSES .........................................  17

    (a) Expenses ..........................................................  17
    (b) Termination of Agreement ..........................................  18
    (c) Allocation of Expenses ............................................  18

SECTION 5.   CONDITIONS OF UNDERWRITERS' OBLIGATIONS ......................  18

    (a) Effectiveness of Registration Statement ...........................  18
    (b) Opinion of Counsel for the Company ................................  19
    (c) Opinion of PRC Counsel for the Company ............................  22
    (d) Opinion of Counsel for the Selling Stockholder ....................  27
    (e) Opinion of Counsel for the Underwriters ...........................  28
    (f) Officers' Certificate .............................................  28
    (g) Certificate of the Selling Stockholder ............................  28
    (h) Accountant's Comfort Letter .......................................  28
    (i) Bring-down Comfort Letter .........................................  28
    (j) No Objection ......................................................  29
    (k) Lockup Agreements .................................................  29
    (l) Conditions to Purchase of Option Securities .......................  29
        (i) Officers' Certificate .........................................  29
        (ii) Opinion of Counsel for the Company ...........................  29
        (iii) Opinion of PRC Counsel for the Company ......................  29
        (iv) Opinion of Counsel for the Underwriters ......................  29
        (v) Bring-down Comfort Letter .....................................  29
    (m) Additional Documents ..............................................  29
    (n) Termination of Agreement ..........................................  30

SECTION 6.   INDEMNIFICATION ..............................................  30

    (a) Indemnification of the Underwriters by the Company ................  30
    (b) Indemnification of the Underwriters by the Selling Stockholder ....  31
    (c) Indemnification of the Company, Directors, Officers and the
         Selling Stockholder ..............................................  32
    (d) Actions Against Parties.  Notification. ...........................  32
    (e) Settlement Without Consent If Failure to Reimburse ................  33
    (f) Other Agreements with Respect to Indemnification ..................  33

                                       ii

<PAGE>

SECTION 7.   CONTRIBUTION .................................................  33

SECTION 8.   REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY  34

SECTION 9.   TERMINATION OF AGREEMENT .....................................  35

    (a) Termination; General ..............................................  35
    (b) Liabilities .......................................................  35

SECTION 10.  DEFAULT BY ONE OR MORE OF THE UNDERWRITERS ...................  35

SECTION 11.  DEFAULT BY THE SELLING STOCKHOLDER OR THE COMPANY ............  36

SECTION 12.  NOTICES ......................................................  36

SECTION 13.  PARTIES ......................................................  37

SECTION 14.  GOVERNING LAW AND TIME .......................................  37

SECTION 15.  THE HEADINGS .................................................  37



    SCHEDULES

         Schedule A - Underwriters ...................................  Sch A-1
         Schedule B - Selling Stockholder ............................  Sch B-1
         Schedule C - Pricing Information ............................  Sch C-1
         Schedule D - Joint Venture and Ownership
                      Percentages Held by the Company ................  Sch D-1


    EXHIBITS

         Exhibit A    Form of Opinion of Company's Counsel ...............  A-1
         Exhibit B    Form of Opinion of Company's PRC Counsel ...........  B-1
         Exhibit C    Form of Opinion of Selling Stockholder's Counsel ...  C-1
         Exhibit D    Form of Lockup Agreement for Directors and Officers   D-1
         Exhibit E    Form of Lockup Agreement for SOFTBANK CORP. ........  E-1




                                      iii

<PAGE>


                                 UTSTARCOM, INC.
                            (a Delaware corporation)
                        10,000,000 Shares of Common Stock
                          (Par Value $.00125 Per Share)

                               PURCHASE AGREEMENT

                                                              February ___, 2002

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
        Incorporated
Credit Suisse First Boston Corporation
Salomon Smith Barney Inc.
Banc of America Securities LLC
U.S. Bancorp Piper Jaffray Inc.
HSBC Securities (USA) Inc.
     as Representatives of the several Underwriters

c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

        UTStarcom, Inc., a Delaware corporation (the "Company"), and SOFTBANK
America Inc., a Delaware corporation (the "Selling Stockholder"), confirm their
respective agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Credit Suisse First Boston Corporation, Salomon
Smith Barney Inc., Banc of America Securities LLC, U.S. Bancorp Piper Jaffray
Inc. and HSBC Securities (USA) Inc. are acting as representatives (in such
capacity, the "Representatives"), with respect to the (i) sale by the Selling
Stockholder and the purchase by the Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $.00125
per share, of the Company ("Common Stock") set forth in said Schedules A and B
hereto and (ii) the grant by the Company to the Underwriters of the option
described in Section 2(b) hereof to purchase, acting severally and not jointly,
all or any part of 1,500,000 additional shares of Common Stock to cover
over-allotments, if any. The aforesaid 10,000,000 shares of Common Stock (the
"Initial Securities") to be purchased by the Underwriters and all or any part of
the 1,500,000 shares of Common Stock subject to the option described in Section
2(b) hereof (the "Option Securities") are hereinafter called, collectively, the
"Securities."

<PAGE>


        The Company and the Selling Stockholder understand that the Underwriters
propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.

        The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-82458) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in such prospectus that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted the Rule 430A Information that was
used after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto, schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the Rule 430A
Information, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus, including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the
form first furnished to the Underwriters for use in connection with the offering
of the Securities is herein called the "Prospectus." For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").

        All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.

        Section 1. Representations and Warranties. (a) Representations and
                   ------------------------------
Warranties by the Company. The Company represents and warrants to each
Underwriter as of the date hereof, as of the Closing Time referred to in Section
2(c) hereof, and as of each Date of Delivery (if any) referred to in Section
2(b) hereof, and agrees with each Underwriter, as follows:


                                       2

<PAGE>

                (i) Compliance with Registration Requirements. The Company meets
        the requirements for use of Form S-3 under the 1933 Act. Each of the
        Registration Statement and any Rule 462(b) Registration Statement has
        become effective under the 1933 Act and no stop order suspending the
        effectiveness of the Registration Statement or any Rule 462(b)
        Registration Statement has been issued under the 1933 Act and no
        proceedings for that purpose have been instituted or are pending or, to
        the knowledge of the Company, are contemplated by the Commission, and
        any request on the part of the Commission for additional information has
        been complied with.

                At the respective times the Registration Statement, any Rule
        462(b) Registration Statement and any post-effective amendments thereto
        became effective and at the Closing Time (and, if any Option Securities
        are purchased, at the Date of Delivery), the Registration Statement, the
        Rule 462(b) Registration Statement and any amendments and supplements
        thereto complied and will comply in all material respects with the
        requirements of the 1933 Act and the 1933 Act Regulations and did not
        and will not contain an untrue statement of a material fact or omit to
        state a material fact required to be stated therein or necessary to make
        the statements therein not misleading. Neither the Prospectus nor any
        amendments or supplements thereto, at the time the Prospectus or any
        amendments or supplements were issued and at the Closing Time (and, if
        any Option Securities are purchased, at the Date of Delivery), included
        or will include an untrue statement of a material fact or omitted or
        will omit to state a material fact necessary in order to make the
        statements therein, in the light of the circumstances under which they
        were made, not misleading. The representations and warranties in this
        subsection shall not apply to statements in or omissions from the
        Registration Statement or the Prospectus made in reliance upon and in
        conformity with information furnished to the Company in writing by any
        Underwriter through Merrill Lynch expressly for use in the Registration
        Statement or the Prospectus.

                Each preliminary prospectus and the prospectus filed as part of
        the Registration Statement as originally filed or as part of any
        amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
        complied when so filed in all material respects with the 1933 Act
        Regulations and each preliminary prospectus and the Prospectus delivered
        to the Underwriters for use in connection with this offering was
        identical to the electronically transmitted copies thereof filed with
        the Commission pursuant to EDGAR, except to the extent permitted by
        Regulation S-T.

                (ii) Incorporated Documents. The documents incorporated or
        deemed to be incorporated by reference in the Registration Statement and
        the Prospectus, at the time they were or hereafter are filed with the
        Commission, complied and will comply in all material respects with the
        requirements of the 1934 Act and the rules and regulations of the
        Commission thereunder (the "1934 Act Regulations"), and, when read
        together with the other information in the Prospectus, at the time the
        Registration Statement became effective, at the time the Prospectus was
        issued and at the Closing Time (and, if any Option Securities are
        purchased, at the Date of Delivery), did not and will not contain an
        untrue statement of a material fact or omit to state a material fact
        required to be stated therein or necessary to make the statements
        therein not misleading.


                                       3

<PAGE>

                (iii) Independent Accountants. The accountants who certified the
        financial statements and supporting schedules included or incorporated
        by reference in the Registration Statement are independent public
        accountants as required by the 1933 Act and the 1933 Act Regulations;
        each of the Company, its subsidiaries and its Joint Venture (as defined
        below) maintains a system of internal accounting controls sufficient to
        provide reasonable assurance that (A) transactions are executed in
        accordance with management's general or specific authorizations; (B)
        transactions are recorded as necessary to permit preparation of
        financial statements in conformity with generally accepted accounting
        principles ("GAAP") in China with a reconciliation to GAAP in the United
        States; (C) access to assets is permitted only in accordance with
        management's general or specific authorization; (D) the recorded
        accountability for assets is compared with existing assets at reasonable
        intervals and appropriate actions taken with respect to any differences;
        and (E) each of the Company, its subsidiaries and its Joint Venture has
        made and kept books, records and accounts which, in reasonable detail,
        accurately and fairly reflect the transactions and dispositions of
        assets of such entity and provide a sufficient basis for the preparation
        of combined financial statements in accordance with Chinese GAAP, with a
        reconciliation thereof to U.S. GAAP.

                (iv) Financial Statements. The financial statements (including
        any separate financial statements for any subsidiary or any joint
        venture of the Company other than the Company and its consolidated
        subsidiaries) included or incorporated by reference in the Registration
        Statement and the Prospectus, together with the related schedules and
        notes, present fairly the financial position of the Company and its
        consolidated subsidiaries at the dates indicated and the statement of
        operations, stockholders' equity and cash flows of the Company and its
        consolidated subsidiaries for the periods specified; said financial
        statements have been prepared in conformity with GAAP applied on a
        consistent basis throughout the periods involved, except as may be
        expressly stated in the related notes thereto. The supporting schedules,
        if any, included or incorporated by reference in the Registration
        Statement present fairly in accordance with GAAP the information
        required to be stated therein. The selected financial data and the
        summary financial information included or incorporated by reference in
        the Prospectus present fairly the information shown therein and have
        been compiled on a basis consistent with that of the audited financial
        statements included or incorporated by reference in the Registration
        Statement.

                (v) No Material Adverse Change in Business. Since the respective
        dates as of which information is given in the Registration Statement and
        the Prospectus, except as otherwise stated therein, (A) there has been
        no material adverse change in the condition, financial or otherwise, or
        in the earnings, business affairs or business prospects of the Company,
        its subsidiaries and its Joint Venture (as defined below), considered as
        one enterprise, whether or not arising in the ordinary course of
        business (a "Material Adverse Effect"), (B) there have been no
        transactions entered into by the Company, any of its subsidiaries or the
        Joint Venture, other than those in the ordinary course of business,
        which are material with respect to the Company, its subsidiaries and its
        Joint Venture, considered as one enterprise, and (C) there has been no
        dividend or distribution of any kind declared, paid or made by the
        Company on any class of its capital stock at any time.


                                       4

<PAGE>

                (vi) Good Standing of the Company. The Company has been duly
        organized and is validly existing as a corporation in good standing
        under the laws of the State of Delaware and has corporate power and
        authority to own, lease and operate its properties and to conduct its
        business as described in the Prospectus and to enter into and perform
        its obligations under this Agreement; and the Company is duly qualified
        as a foreign corporation to transact business and is in good standing in
        each other jurisdiction in which such qualification is required, whether
        by reason of the ownership or leasing of property or the conduct of
        business, except where the failure so to qualify or to be in good
        standing would not result in a Material Adverse Effect.

                (vii) Good Standing of Subsidiaries. UTStarcom China, Ltd.,
        UTStarcom (Hangzhou) Communications Co., Ltd. and Advanced Communication
        Devices Corporation (each, a "Subsidiary" and collectively, the
        "Subsidiaries") are the only significant subsidiaries (as defined in
        Rule 1-02 of Regulation S-X) of the Company, and each Subsidiary has
        been duly organized and is validly existing as a corporation in good
        standing under the laws of the jurisdiction of its incorporation, has
        corporate power and authority to own, lease and operate its properties
        and to conduct its business as described in the Prospectus and is duly
        qualified as a foreign corporation to transact business and is in good
        standing in each jurisdiction in which such qualification is required,
        whether by reason of the ownership or leasing of property or the conduct
        of business, except where the failure so to qualify or to be in good
        standing would not result in a Material Adverse Effect; except as
        otherwise disclosed in the Registration Statement, all of the issued and
        outstanding capital stock of each Subsidiary has been duly authorized
        and validly issued, is fully paid and non-assessable and is owned by the
        Company, directly or through subsidiaries, free and clear of any
        security interest, mortgage, pledge, lien, encumbrance, claim or equity;
        with respect to each Subsidiary, none of the outstanding shares of
        capital stock of the Subsidiary was issued in violation of the
        preemptive rights of any securityholder of the Subsidiary pursuant to
        the Subsidiary's charter documents or applicable law or any agreement or
        instrument to which the Subsidiary is a party or by which the Subsidiary
        is bound which has not otherwise been waived by such securityholder.

                (viii) Good Standing of Joint Venture. Guangdong UTStarcom
        Communications Co., Ltd. (the "Joint Venture") has been duly organized
        and is validly existing as a limited liability company in good standing
        under the laws of the People's Republic of China (the "PRC"), and its
        business license is in full force and effect; the joint venture
        contract, the articles of association and other corporate formation
        documents of the Joint Venture comply with the requirements of PRC law
        and are in full force and effect. The Company owns, directly or through
        subsidiaries, an interest in the Joint Venture which ownership
        percentage of the Company is listed in Schedule E hereto. The Joint
        Venture has the power and authority under the laws of the PRC to own,
        lease and operate its assets and properties in accordance with the terms
        of its joint venture contract and its articles of association and to
        conduct its business as currently conducted, as specified in its
        business license and as described in the Prospectus. All registered
        capital required to be paid by each of the Company and the Chinese
        partner has been paid in full to the Joint Venture under the joint
        venture contract and the articles of association for the Joint


                                       5

<PAGE>

        Venture. All of the equity interests of the Joint Venture have been duly
        and validly authorized and issued, are fully paid and non-assessable,
        and are owned by the Company, directly or through subsidiaries, free and
        clear of any security interest, mortgage, pledge, lien, encumbrance,
        claim or equity. The liability of the Company with respect to its equity
        interest in the Joint Venture is limited to its investments therein.
        Neither the Company nor any of the Subsidiaries hold an interest in any
        joint venture that is not a Joint Venture.

                (ix) Capitalization. The authorized, issued and outstanding
        capital stock of the Company, as of December 31, 2001, is as set forth
        in the Prospectus under the caption "Capitalization" (except for
        subsequent issuances, if any, pursuant to this Agreement, pursuant to
        reservations, agreements or employee benefit plans referred to in the
        Prospectus or pursuant to the exercise of convertible securities,
        warrants or options referred to in the Prospectus). The shares of issued
        and outstanding capital stock, including the Securities to be purchased
        by the Underwriters from the Selling Stockholder, have been duly
        authorized and validly issued and are fully paid and non-assessable;
        none of the outstanding shares of capital stock, including the
        Securities to be purchased by the Underwriters from the Selling
        Stockholder, was issued in violation of any preemptive rights of any
        securityholder of the Company pursuant to the Company's Certificate of
        Incorporation or Bylaws or applicable law or any agreement or instrument
        to which the Company is a party or by which the Company is bound which
        has not otherwise been waived by such securityholder.

                (x) Authorization of Agreement and Registration Statement. This
        Agreement has been duly authorized, executed and delivered by the
        Company. The Registration Statement and the Prospectus and the filing of
        the Registration Statement and the Prospectus with the Commission have
        been duly authorized by and on behalf of the Company, and the
        Registration Statement has been duly signed by and on behalf of the
        Company pursuant to such authorization.

                (xi) Authorization and Description of Securities. Any Option
        Securities purchased by the Underwriters from the Company have been duly
        authorized for issuance and sale to the Underwriters pursuant to this
        Agreement and, when issued and delivered by the Company pursuant to this
        Agreement against payment of the consideration set forth herein, will be
        validly issued, fully paid and non-assessable; the Common Stock conforms
        in all material respects to all statements relating thereto contained in
        the Prospectus and such description conforms in all material respects to
        the rights set forth in the instruments defining the same; no holder of
        the Securities will be subject to personal liability by reason of being
        such a holder; and the issuance of the Securities is not subject to any
        preemptive rights of any securityholder of the Company pursuant to the
        Company's Certificate of Incorporation or Bylaws or applicable law or
        any agreement or instrument to which the Company is a party or by which
        the Company is bound which has not otherwise been waived by such
        securityholder.

                (xii) Absence of Defaults and Conflicts. Neither the Company nor
        any of its subsidiaries or the Joint Venture is in violation of its
        articles, charter, by-laws or joint venture contract or in default in
        the performance or observance of any obligation,


                                       6

<PAGE>

        agreement, covenant or condition contained in any contract, indenture,
        mortgage, deed of trust, loan or credit agreement, note, lease or other
        agreement or instrument to which the Company or any of its subsidiaries
        or the Joint Venture is a party or by which it or any of them may be
        bound, or to which any of the property or assets of the Company or any
        subsidiary or the Joint Venture is subject (collectively, "Agreements
        and Instruments"), except for such defaults that would not result in a
        Material Adverse Effect; and the execution, delivery and performance of
        this Agreement and the consummation of the transactions contemplated
        herein and in the Registration Statement (including the issuance and
        sale of the Securities and the use of the proceeds from the sale of the
        Securities as described in the Prospectus under the caption "Use of
        Proceeds") and compliance by the Company with its obligations hereunder
        have been duly authorized by all necessary corporate action and do not
        and will not, whether with or without the giving of notice or passage of
        time or both, conflict with or constitute a breach of, or default or
        Repayment Event (as defined below) under, or result in the creation or
        imposition of any lien, charge or encumbrance upon any property or
        assets of the Company or any subsidiary or the Joint Venture pursuant
        to, the Agreements and Instruments (except for such conflicts, breaches
        or defaults or liens, charges or encumbrances that would not result in a
        Material Adverse Effect), nor will such action result in any violation
        of the provisions of the articles, charter, by-laws or joint venture
        contract of the Company or any subsidiary or the Joint Venture or any
        applicable law, statute, rule, regulation, judgment, order, writ or
        decree, known to the Company of any government, government
        instrumentality or court, domestic or foreign, having jurisdiction over
        the Company or any subsidiary or the Joint Venture or any of their
        assets, properties or operations. As used herein, a "Repayment Event"
        means any event or condition which gives the holder of any note,
        debenture or other evidence of indebtedness (or any person acting on
        such holder's behalf) the right to require the repurchase, redemption or
        repayment of all or a portion of such indebtedness by the Company or any
        subsidiary or the Joint Venture.

                (xiii) Absence of Labor Dispute. No labor dispute with the
        employees of the Company or any subsidiary or the Joint Venture exists
        or, to the knowledge of the Company, is imminent, and the Company is not
        aware of any existing or imminent labor disturbance by the employees of
        any of its or any subsidiary's or the Joint Venture's principal
        suppliers, manufacturers, customers or contractors, which, in either
        case, may reasonably be expected to result in a Material Adverse Effect.

                (xiv) Absence of Proceedings. There is no action, suit,
        proceeding, inquiry or investigation before or brought by any company or
        governmental agency or body, domestic or foreign, now pending, or, to
        the knowledge of the Company, threatened, against the Company or any
        subsidiary or the Joint Venture, which is required to be disclosed in
        the Registration Statement (other than as disclosed therein), or which
        might reasonably be expected to result in a Material Adverse Effect, or
        which might reasonably be expected to materially and adversely affect
        the properties or assets thereof or the consummation of the transactions
        contemplated in this Agreement or the performance by the Company of its
        obligations hereunder; the aggregate of all pending legal or
        governmental proceedings to which the Company or any subsidiary or the
        Joint Venture is a party or of which any of their respective property or
        assets is the subject which are


                                       7

<PAGE>

        not described in the Registration Statement, including ordinary routine
        litigation incidental to the business, could not reasonably be expected
        to result in a Material Adverse Effect.

                (xv) Accuracy of Exhibits. There are no contracts or documents
        which are required to be described in the Registration Statement, the
        Prospectus or the documents incorporated by reference therein or to be
        filed as exhibits thereto which have not been so described and filed as
        required.

                (xvi) Possession of Intellectual Property. The Company, its
        subsidiaries and the Joint Venture own or possess, or can acquire on
        reasonable terms, adequate patents, patent rights, licenses, inventions,
        copyrights, know-how (including trade secrets and other unpatented
        and/or unpatentable proprietary or confidential information, systems or
        procedures), trademarks, service marks, trade names or other
        intellectual property (collectively, "Intellectual Property") necessary
        to carry on the business now operated by them, and neither the Company
        nor any of its subsidiaries nor the Joint Venture has received any
        notice or is otherwise aware of any infringement of or conflict with
        asserted rights of others with respect to any Intellectual Property or
        of any existing facts or circumstances which would render any
        Intellectual Property invalid or inadequate to protect the interest of
        the Company or any of its subsidiaries or the Joint Venture therein, and
        which infringement or, conflict (if the subject of any unfavorable
        decision, ruling or finding) or invalidity or inadequacy singly or in
        the aggregate, would result in a Material Adverse Effect.

                (xvii) Absence of Further Requirements. No filing with, or
        authorization, approval, consent, license, order, registration,
        qualification or decree of, any court or governmental authority or
        agency is necessary or required for the performance by the Company of
        its obligations hereunder in connection with the offering, issuance or
        sale of the Securities or the consummation of the transactions
        contemplated herein, except such as have been already obtained or as may
        be required under the 1933 Act or the 1933 Act Regulations or state
        securities laws.

                (xviii) Possession of Licenses and Permits. Except as otherwise
        stated in the Prospectus and the Registration Statement, the Company,
        its subsidiaries and the Joint Venture possess such permits, licenses,
        approvals, consents and other authorizations (collectively,
        "Governmental Licenses") issued by the appropriate federal, state, local
        or foreign regulatory agencies or bodies (including the PRC State
        Council, the PRC Ministry of Information Industry, the State Development
        Planning Commission, the State Economic and Trade Commission, the China
        Securities Regulatory Commission (the "CSRC"), the Ministry of Foreign
        Trade and Economic Cooperation ("MOF-TEC"), the Ministry of Land and
        Resources, the State Administration of Foreign Exchange ("SAFE"), the
        General Administration of Customs, the relevant Posts and
        Telecommunications Administrations ("PTA") and the relevant Commodity
        Pricing Administration Bureau) necessary to conduct the business now
        operated by them; the Company, its subsidiaries and the Joint Venture
        are in compliance with the terms and conditions of all such Governmental
        Licenses, except where the failure so to comply would not, singly or in
        the aggregate, have a Material Adverse Effect; all of the


                                       8

<PAGE>

        Governmental Licenses are valid and in full force and effect, except
        when the invalidity of such Governmental Licenses or the failure of such
        Governmental Licenses to be in full force and effect would not have a
        Material Adverse Effect; and neither the Company nor any of its
        subsidiaries nor the Joint Venture has received any notice of
        proceedings relating to the revocation, suspension or modification of
        any such Governmental Licenses which, singly or in the aggregate, if the
        subject of an unfavorable decision, ruling or finding, would result in a
        Material Adverse Effect.

                (xix) Title to Property. The Company, its subsidiaries and the
        Joint Venture have good and marketable title to all real property owned
        by the Company, its subsidiaries and the Joint Venture and good title to
        all other properties owned by them, in each case, free and clear of all
        mortgages, pledges, liens, security interests, claims, restrictions or
        encumbrances of any kind except such as (a) are described in the
        Prospectus or (b) do not, singly or in the aggregate, materially affect
        the value of such property and do not interfere with the use made and
        proposed to be made of such property by the Company or any of its
        subsidiaries or the Joint Venture; and all of the leases and subleases
        material to the business of the Company, its subsidiaries and the Joint
        Venture, considered as one enterprise, and under which the Company or
        any of its subsidiaries or the Joint Venture holds properties described
        in the Prospectus, are in full force and effect, and neither the Company
        nor any subsidiary or the Joint Venture has any notice of any material
        claim of any sort that has been asserted by anyone adverse to the rights
        of the Company or any subsidiary or the Joint Venture under any of the
        leases or subleases mentioned above, or affecting or questioning the
        rights of the Company or such subsidiary or the Joint Venture to the
        continued possession of the leased or subleased premises under any such
        lease or sublease.

                (xx) Repatriation of Dividends and Other Distributions. All
        dividends and other distributions declared and payable on the equity or
        other interests in each of the Subsidiaries or the Joint Venture may,
        under the laws and regulations of the PRC, be paid to the Company and
        may be converted into foreign currency that may be freely transferred
        out of the PRC, and except as disclosed in the Registration Statement
        and the Prospectus, all such dividends and distributions will not be
        subject to withholding or other taxes under the laws and regulations of
        the PRC and are otherwise free and clear of any other tax, withholding
        or deduction in the PRC and may be so paid without the necessity of
        obtaining any governmental authorization, whether local, provincial or
        national, in the PRC.

                (xxi) PRC Taxes. Other than as described in the Prospectus, no
        stamp or other issuance or transfer taxes or duties and no capital
        gains, income, withholding or other taxes are payable by or on behalf of
        the Company to the PRC or any political subdivision or taxing authority
        thereof or therein in connection with the issuance, sale and delivery of
        the Securities or the execution, delivery and performance of this
        Agreement. No stamp or other issuance or transfer taxes or duties and no
        capital gains, income or withholding other taxes are payable by or on
        behalf of the Underwriters to the PRC or any political subdivision or
        taxing authority thereof or therein in connection with the sale and
        delivery of the Securities to the Underwriters or by the Underwriters to
        the initial purchasers thereof, or the execution, delivery and
        performance of this Agreement.


                                       9

<PAGE>

                (xxii) Taxes. Each of the Company, its subsidiaries and the
        Joint Venture has filed all reports or filings required thereof for
        taxation purposes, including those required by the PRC or any political
        subdivision thereof, and has paid all taxes required to be paid by it
        and any other assessment, fine or penalty levied against it, to the
        extent that any of the foregoing is due and payable, except for any such
        assessment, fine or penalty that is currently being contested in good
        faith or would not have a Material Adverse Effect.

                (xxiii) Sovereign Immunity. Under the laws of the PRC, neither
        the Company nor any of its subsidiaries nor the Joint Venture, or any of
        their properties, assets or revenues are entitled to any right of
        immunity on the grounds of sovereignty from any legal action, suit or
        proceeding, from set-off or counterclaim, from the jurisdiction of any
        court, from service of process, from attachment to or in aid of
        execution of judgment or from other legal process or proceeding for the
        giving of any relief or for the enforcement of any judgment.

                (xxiv) Choice of Law. Under the laws of the PRC, the courts of
        the PRC recognize and give effect to the choice of law provisions set
        forth herein and enforce judgments of U.S. courts obtained against the
        Company to enforce this Agreement, provided that the judgment (A) was
        not obtained by fraud; (B) was final and conclusive; (C) in the opinion
        of the relevant PRC court after the review of such judgment pursuant to
        international treaties concluded or acceded to by the PRC government or
        in accordance with the principle of reciprocity, or otherwise in
        accordance with the Civil Procedure Law of the PRC, did not contradict
        the basic principles of PRC law; and (D) in the opinion of the relevant
        PRC court after its review of such judgment pursuant to international
        treaties concluded or agreed to by the PRC government or in accordance
        with the principle of reciprocity, or otherwise in accordance with the
        Civil Procedure Law of the PRC, did not violate state sovereignty,
        security or public interest.

                (xxv) Investment Company Act. The Company is not, and upon the
        issuance and sale of the Securities as herein contemplated and the
        application of the net proceeds therefrom as described in the Prospectus
        will not be, an "investment company" or an entity "controlled" by an
        "investment company" as such terms are defined in the Investment Company
        Act of 1940, as amended (the "1940 Act").

                (xxvi) Environmental Laws. Except as described in the
        Registration Statement and except as would not, singly or in the
        aggregate, result in a Material Adverse Effect, (A) neither the Company
        nor any of its subsidiaries nor the Joint Venture is in violation of any
        federal, state, local or foreign statute, law, rule, regulation,
        ordinance, code, policy or rule of common law or any judicial or
        administrative interpretation thereof, including any judicial or
        administrative order, consent decree or judgment, relating to pollution
        or protection of human health, the environment (including, without
        limitation, ambient air, surface water, groundwater, land surface or
        subsurface strata) or wildlife, including, without limitation, laws and
        regulations relating to the release or threatened release of chemicals,
        pollutants, contaminants, wastes, toxic substances, hazardous
        substances, petroleum or petroleum products (collectively, "Hazardous
        Materials") or to the manufacture, processing, distribution, use,
        treatment, storage, disposal, transport or handling of Hazardous
        Materials (collectively, "Environmental Laws"), (B) the


                                       10

<PAGE>

        Company, its subsidiaries and the Joint Venture have all permits,
        authorizations and approvals required under any applicable Environmental
        Laws and are each in compliance with their requirements, (C) there are
        no pending or, to the Company's knowledge, threatened administrative,
        regulatory or judicial actions, suits, demands, demand letters, claims,
        liens, notices of noncompliance or violation, investigation or
        proceedings relating to any Environmental Law against the Company or any
        of its subsidiaries or the Joint Venture and (D) the Company is not
        aware of any events or circumstances that might reasonably be expected
        to form the basis of an order for clean-up or remediation, or an action,
        suit or proceeding by any private of or governmental body or agency,
        against the Company or any of its subsidiaries or the Joint Venture
        relating to Hazardous Materials or any Environmental Laws.

                (xxvii) Foreign Corrupt Practices Act. Neither the Company, any
        of its subsidiaries or the Joint Venture, nor any officer, director,
        employee or agent thereof or any stockholder thereof acting on behalf of
        the Company or any of its subsidiaries or the Joint Venture, has done
        any act or authorized, directed or participated in any act, in violation
        of any provision of the United States Foreign Corrupt Practices Act of
        1977, as amended, applied to such entity or person.

                (xxviii) Registration Rights. Except as described in the
        Registration Statement or as have otherwise been waived in writing,
        there are no persons with registration rights or other similar rights to
        have any securities registered pursuant to the Registration Statement or
        otherwise registered by the Company under the 1933 Act.

        (b) Representations and Warranties by the Selling Stockholder. The
Selling Stockholder represents and warrants to each Underwriter as of the date
hereof, as of the Closing Time and agrees with each Underwriter, as follows:

                (i) Accurate Disclosure. To the actual knowledge of the Selling
        Stockholder, the representations and warranties of the Company contained
        in Section 1(a) hereof are true and correct; the Selling Stockholder has
        read the contents of the Registration Statement and the Prospectus, and,
        based on its actual knowledge, the Selling Stockholder has no reason to
        believe that the Prospectus or any amendments or supplements thereto
        includes any untrue statement of a material fact or omits to state a
        material fact necessary in order to make the statements therein, in the
        light of the circumstances under which they were made, not misleading;
        the Selling Stockholder is not prompted to sell the Securities to be
        sold by the Selling Stockholder hereunder by any information concerning
        the Company or any subsidiary of the Company or the Joint Venture which
        is not set forth in the Prospectus.

                (ii) Authorization of Agreements. The Selling Stockholder has
        the full right, power and authority to enter into this Agreement and a
        Custody Agreement (the "Custody Agreement") and to sell, transfer and
        deliver the Securities to be sold by the Selling Stockholder hereunder.
        The execution and delivery of this Agreement and the Custody Agreement
        and the sale and delivery of the Securities to be sold by the Selling
        Stockholder and the consummation of the transactions contemplated herein
        and compliance by the Selling Stockholder with its obligations hereunder
        have been duly


                                       11

<PAGE>

        authorized by the Selling Stockholder and do not and will not, whether
        with or without the giving of notice or passage of time or both,
        conflict with or constitute a breach of, or default under, or result in
        the creation or imposition of any tax, lien, charge or encumbrance upon
        the Securities to be sold by the Selling Stockholder or any property or
        assets of the Selling Stockholder pursuant to any contract, indenture,
        mortgage, deed of trust, loan or credit agreement, note, license, lease
        or other agreement or instrument to which the Selling Stockholder is a
        party or by which the Selling Stockholder may be bound, or to which any
        of the property or assets of the Selling Stockholder is subject, nor
        will such action result in any violation of the provisions of the
        charter or by-laws or other organizational instrument of the Selling
        Stockholder or any applicable treaty, law, statute, rule, regulation,
        judgment, order, writ or decree of any government, government
        instrumentality or court, domestic or foreign, having jurisdiction over
        the Selling Stockholder or any of its properties.

                (iii) Good and Marketable Title. The Selling Stockholder has and
        will at the Closing Time have good and marketable title to the
        Securities to be sold by the Selling Stockholder hereunder, free and
        clear of any security interest, mortgage, pledge, lien, charge, claim,
        equity or encumbrance of any kind, other than pursuant to this
        Agreement; and upon delivery of such Securities and payment of the
        purchase price therefor as herein contemplated, assuming each such
        Underwriter has no notice of any adverse claim, each of the Underwriters
        will receive good and marketable title to the Securities purchased by it
        from the Selling Stockholder, free and clear of any security interest,
        mortgage, pledge, lien, charge, claim, equity or encumbrance of any
        kind.

                (iv) Due Execution of Custody Agreement. The Selling Stockholder
        has duly executed and delivered, in the form heretofore furnished to the
        Representatives, the Custody Agreement with Equiserve Trust Company,
        N.A., as custodian (the "Custodian"); the Custodian is authorized to
        deliver the Securities to be sold by the Selling Stockholder hereunder
        and to accept payment therefor.

                (v) Absence of Manipulation. The Selling Stockholder has not
        taken, and will not take, directly or indirectly, any action which is
        designed to or which has constituted or which might reasonably be
        expected to cause or result in stabilization or manipulation of the
        price of any security of the Company to facilitate the sale or resale of
        the Securities.

                (vi) Absence of Further Requirements. No filing with, or
        consent, approval, authorization, order, registration, qualification or
        decree of, any court or governmental authority or agency, domestic or
        foreign, is necessary or required for the performance by the Selling
        Stockholder of its obligations hereunder or in the Custody Agreement, or
        in connection with the sale and delivery of the Securities hereunder or
        the consummation of the transactions contemplated by this Agreement,
        except such as may have previously been made or obtained or as may be
        required under the 1933 Act or the 1933 Act Regulations or state or
        foreign securities laws.

                (vii) Restriction on Sale of Securities. The Selling Stockholder
        has signed an agreement in the form of Exhibit E hereto. All the
        Company's securities that are



                                       12

<PAGE>

        "beneficially owned" by entities affiliated with SOFTBANK CORP. within
        the meaning of Rule 13d-3 of the 1934 Act are held of record solely by
        the Selling Stockholder.

                (viii) Certificates Suitable for Transfer. Certificates for all
        of the Securities to be sold by the Selling Stockholder pursuant to this
        Agreement, in suitable form for transfer by delivery or accompanied by
        duly executed instruments of transfer or assignment in blank with
        signatures guaranteed, have been placed in custody with the Custodian
        with irrevocable conditional instructions to deliver such Securities to
        the Underwriters pursuant to this Agreement.

                (ix) No Association with NASD. Neither the Selling Stockholder
        nor any of its affiliates directly, or indirectly through one or more
        intermediaries, controls, or is controlled by, or is under common
        control with, or has any other association with (within the meaning of
        Article I, Section 1(m) of the By-laws of the National Association of
        Securities Dealers, Inc.), any member firm of the National Association
        of Securities Dealers, Inc.

        (c) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries or the Joint Venture delivered to the
Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby; and any certificate signed by or on behalf of the Selling
Stockholder as such and delivered to the Representatives or to counsel for the
Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by the Selling Stockholder to the Underwriters as to
the matters covered thereby.


        Section 2. Sale and Delivery to Underwriters; Closing.
                  ------------------------------------------

        (a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Selling Stockholder agrees to sell to each Underwriter, severally and
not jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Selling Stockholder, at the price per share set forth in Schedule C,
that proportion of the number of Initial Securities set forth in Schedule B
opposite the name of the Selling Stockholder which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter, plus
any additional number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof, bears to
the total number of Initial Securities, subject, in each case, to such
adjustments among the Underwriters as the Representatives in their sole
discretion shall make to eliminate any sales or purchases of fractional
securities.

        (b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional 1,500,000 shares of Common
Stock at the price per share set forth in Schedule C, less an amount per share
equal to any dividends or distributions declared by the Company and payable on
the Initial Securities but not payable on the Option Securities. The option
hereby granted will expire 30 days after the date hereof and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and


                                       13

<PAGE>

distribution of the Initial Securities upon notice by the Representatives to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for such Option Securities. Any such time and date of delivery (a "Date
of Delivery") shall be determined by the Representatives, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, will purchase that proportion of
the total number of Option Securities then being purchased which the number of
Initial Securities set forth in Schedule A opposite the name of such Underwriter
bears to the total number of Initial Securities, subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares.

        (c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Wilson
Sonsini Goodrich & Rosati, 975 Page Mill Road, Palo Alto, California 94304, or
at such other place as shall be agreed upon by the Representatives, the Company
and the Selling Stockholder, at 6:00 A.M. (California time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day)
business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the Representatives, the Company and
the Selling Stockholder (such time and date of payment and delivery being herein
called "Closing Time").

        In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company.

        Payment shall be made to the Company and the Selling Stockholder by wire
transfer of immediately available funds to a bank account designated by the
Company and a bank account designated by the Custodian pursuant to the Custody
Agreement, as the case may be, against delivery to the Representatives for the
respective accounts of the Underwriters of certificates for the Securities to be
purchased by them. It is understood that each Underwriter has authorized the
Representatives, for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the Initial Securities and/or the Option
Securities, if any, which it has agreed to purchase. Merrill Lynch, individually
and not as representative of the Underwriters, may (but shall not be obligated
to) make payment of the purchase price for the Initial Securities or the Option
Securities, if any, to be purchased by any Underwriter whose funds have not been
received by the Closing Time or the relevant Date of Delivery, as the case may
be, but such payment shall not relieve such Underwriter from its obligations
hereunder.

        (d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least two full
business days before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the


                                       14

<PAGE>

Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.

        Section 3. Covenants of the Company. The Company covenants with each
                   ------------------------
Underwriter as follows:

        (a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
and will notify the Representatives immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.

        (b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)) or any amendment, supplement
or revision to either the prospectus included in the Registration Statement at
the time it became effective or to the Prospectus, whether pursuant to the 1933
Act, the 1934 Act or otherwise, will furnish the Representatives with copies of
any such documents a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file or use any such document to which the
Representatives or counsel for the Underwriters shall object.

        (c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.

        (d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably



                                       15

<PAGE>

requested, and the Company hereby consents to the use of such copies for
purposes permitted by the 1933 Act. The Company will furnish to each
Underwriter, without charge, during the period when the Prospectus is required
to be delivered under the 1933 Act or the 1934 Act, such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished to
the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

        (e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement and in the Prospectus. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or for the
Company, to amend the Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include any untrue statements
of a material fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the circumstances existing
at the time it is delivered to a purchaser, or if it shall be necessary, in the
opinion of such counsel, at any such time to amend the Registration Statement or
amend or supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and
file with the Commission, subject to Section 3(b), such amendment or supplement
as may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and the
Company will furnish to the Underwriters such number of copies of such amendment
or supplement as the Underwriters may reasonably request.

        (f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
(domestic or foreign) as the Representatives may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.

        (g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its security
holders as soon as practicable an earnings statement for the purposes of, and to
provide the benefits contemplated by, the last paragraph of Section 11(a) of the
1933 Act.

        (h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds."

        (i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and will
file with the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies that have


                                       16

<PAGE>

securities that are traded in the over-the-counter market and quotations for
which are reported by the Nasdaq National Market.

        (j) Restriction on Sale of Securities. During a period of 90 days from
the date of the Prospectus (the "Lockup Period"), the Company will not, without
the prior written consent of Merrill Lynch, (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any ether agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) any Option Securities to be sold hereunder, (B)
any shares of Common Stock issued by the Company upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus, (C) any shares of Common Stock issued or options
to purchase Common Stock granted pursuant to existing employee benefit plans of
the Company referred to in the Prospectus, (D) any shares of Common Stock issued
pursuant to any non-employee director stock plan or dividend reinvestment plan,
or (E) any shares of Common Stock or securities convertible into or exchangeable
for Common Stock issued in connection with acquisitions (by purchase, merger or
otherwise) of other entities (or substantially all of the assets or operations
of other entities) if the recipients of such securities each executes a lockup
agreement with Merrill Lynch in form and substance substantially similar to the
lockup set forth in this Section 3(i).

        (k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.

        (l) No Amendment of 10b5-1 Plans. During the Lockup Period, the Company
will not permit the amendment of any 10b5-1 Plan unless such amendment does not
become effective until after the expiration of Lockup Period. For purposes of
this Agreement, a "10b5-1 Plan" is a contract adopted prior to the date hereof
under Rule 10b5-1 under the Exchange Act between the Company and any of its
executive officers or directors, a copy of which has been provided to Merrill
Lynch.

        Section 4. Payment and Expenses.
                   --------------------

        (a) Expenses. The Selling Stockholder will pay or cause to be paid all
expenses incident to the performance of the Company's and the Selling
Stockholder's obligations under this Agreement, including (i) the preparation,
printing and filing of the Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment thereto, (ii)
the preparation, printing and delivery to the Underwriters of this Agreement,
any Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and


                                       17

<PAGE>

delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees
and disbursements of the Company's counsel, accountants and other advisors and
the Selling Stockholder's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus and of the Prospectus and any amendments or supplements
thereto, (vii) the preparation, printing and delivery to the Underwriters of
copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and
expenses of any transfer agent or registrar for the Securities, (ix) the filing
fees incident to, and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the
Securities, (x) any stamp duties, capital duties and stock transfer taxes, if
any, payable upon the sale of the Securities to the Underwriters and their
transfer between the Underwriters pursuant to an agreement between such
Underwriters and (xi) the fees and expenses incurred in connection with the
inclusion of the Securities in the Nasdaq National Market. It is understood that
the Selling Stockholder is not responsible for the payment of travel expenses
related to attending or hosting meetings with prospective purchasers of the
Securities.

        (b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Selling Stockholder shall reimburse the Underwriters
for all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.

        (c) Allocation of Expenses. The provisions of this Section 4 shall not
affect any agreement that the Company and the Selling Stockholder may make for
the sharing of such costs and expenses.

        Section 5. Conditions of Underwriters' Obligations. The obligations of
                   ---------------------------------------
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholder
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary or the Joint Venture of the Company or on behalf of the
Selling Stockholder delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:

        (a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or post-effective amendment providing such
information shall have been filed and declared effective an accordance with the
requirements of Rule 430A).


                                       18

<PAGE>

        (b) Opinion of Counsel for the Company. At Closing Time, the
Representatives shall have received the favorable opinion (a draft of which
opinion is attached as Exhibit A hereto), dated as of Closing Time, of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, counsel for the Company, in
form and substance satisfactory to the Representatives and counsel for the
Underwriters, together with signed or reproduced copies of such letter for each
of the other Underwriters to the effect that:

                (i) The Company has been duly incorporated and is validly
        existing as a corporation in good standing under the laws of the State
        of Delaware.

                (ii) The Company has corporate power and authority to own, lease
        and operate its properties and to conduct its business as described in
        the Prospectus and to enter into and perform its obligations under this
        Agreement.

                (iii) The Company is qualified as a foreign corporation to
        transact business and is in good standing in each jurisdiction in which
        the Company owns or leases any material property or conducts any
        material business.

                (iv) The authorized, issued and outstanding capital stock of the
        Company, as of December 31, 2001, is as set forth in the Prospectus
        under the caption "Capitalization" (except for subsequent issuances, if
        any, pursuant to this Agreement or pursuant to reservations, agreements
        or employee benefit plans referred to in the Prospectus or pursuant to
        the exercise of convertible securities or options referred to in the
        Prospectus); the shares of issued and outstanding capital stock of the
        Company, including the Securities to be purchased by the Underwriters
        from the Selling Stockholder, have been duly authorized and validly
        issued and are fully paid and non-assessable; and none of the
        outstanding shares of capital stock of the Company was issued in
        violation of any preemptive rights of any securityholder of the Company
        contained in the Company's Certificate of Incorporation or Bylaws, the
        Delaware General Corporation Law or any written agreement or instrument
        described in or referred to in the Registration Statement or filed as an
        exhibit thereto.

                (v) The Option Securities have been duly authorized for issuance
        and sale to the Underwriters pursuant to this Agreement and, when issued
        and delivered by the Company pursuant to this Agreement against payment
        of the consideration set forth in this Agreement, will be validly
        issued, fully paid and non-assessable.

                (vi) The issuance and sale of the Option Securities, if any, by
        the Company and the sale of the Initial Securities by the Selling
        Stockholder is not subject to preemptive rights of any security holder
        of the Company contained in the Company's Certificate of Incorporation
        or By-laws, the Delaware General Corporation Law or any agreement or
        instrument described in or referred to in the Registration Statement or
        filed as an exhibit thereto, which have not been waived by such
        securityholder.

                (vii) This Agreement has been duly authorized, executed and
        delivered by the Company.



                                       19

<PAGE>

                (viii) The Registration Statement, including any Rule 462(b)
        Registration Statement, has been declared effective under the 1993 Act;
        any required filing of the Prospectus pursuant to Rule 424(b) has been
        made in the manner and within the time period required by Rule 424(b);
        and, to such counsel's knowledge, no stop order suspending the
        effectiveness of the Registration Statement or any Rule 462(b)
        Registration Statement has been issued under the 1933 Act and no
        proceedings for that purpose have been instituted or are pending, or, to
        the knowledge of such counsel, threatened by the Commission.

                (ix) The form of certificate used to evidence the Common Stock
        complies in all material respects with the Company's Certificate of
        Incorporation and Bylaws and the requirements of the Nasdaq National
        Market.

                (x) To such counsel's knowledge, in the United States, there is
        not pending or threatened any action, suit, proceeding, inquiry or
        investigation, to which the Company or any subsidiary or the Joint
        Venture is a party, or to which the property of the Company or any
        subsidiary or the Joint Venture is subject, before or brought by any
        U.S. court or governmental agency or body, which might reasonably be
        expected to result in a Material Adverse Effect, or which might
        reasonably be expected to materially and adversely affect the properties
        or assets thereof or the consummation of the transactions contemplated
        in this Agreement or the performance by the Company of its obligations
        hereunder.

                (xi) The information in the Registration Statement under Item
        15, to the extent that it constitutes matters of law, summaries of legal
        matters, the Company's Certificate of Incorporation and Bylaws,
        descriptions of the Company's capital stock, legal proceedings, or legal
        conclusions, has been reviewed by such counsel and fairly summarizes the
        information in all material respects.

                (xii) To such counsel's knowledge, there are no franchises,
        contracts, indentures, mortgages, loan agreements, notes, leases or
        other instruments required to be described or referred to in the
        Registration Statement or to be filed as exhibits thereto other than
        those described or referred to therein or filed or incorporated by
        reference as exhibits thereto, and the descriptions thereof or
        references thereto are correct in all material respects.

                (xiii) To such counsel's knowledge, the Company is not (i) in
        violation of its Certificate of Incorporation or Bylaws, and (ii) no
        default by the Company exists in the due performance or observance of
        any material obligation, agreement, covenant or condition contained in
        any contract, indenture, mortgage, loan agreement, note, lease or other
        agreement or instrument that is described or referred to in the
        Registration Statement or the Prospectus or filed or incorporated by
        reference as an exhibit to the Registration Statement.

                (xiv) To such counsel's knowledge, no filing with, or
        authorization, approval, consent, license, order, registration,
        qualification or decree of, any U.S. court or governmental authority or
        agency (other than under the 1933 Act and the 1933 Act Regulations,
        which have been obtained, or as may be required under the securities or
        blue


                                       20

<PAGE>

        sky laws of the various states, as to which such counsel need express no
        opinion) is necessary or required in connection with the due
        authorization, execution and delivery of this Agreement or for the
        offering, issuance or sale of the Securities.

                (xv) The execution, delivery and performance of this Agreement
        and the consummation of the transactions contemplated in this Agreement
        and in the Registration Statement (including the issuance and sale of
        the Option Securities (if any) and the use of the proceeds from the sale
        of the Option Securities (if any) as described in the Prospectus under
        the caption "Use Of Proceeds") and compliance by the Company with its
        obligations under this Agreement do not and will not, whether with or
        without the giving of notice or lapse of time or both, conflict with or
        constitute a breach of, or default or Repayment Event (as defined in
        Section 1(a)(xii) of this Agreement) under or result in the creation or
        imposition of any lien, charge or encumbrance upon any property or
        assets of the Company pursuant to any contract, indenture, mortgage,
        deed of trust, loan or credit agreement, note, lease or any other
        agreement or instrument, described in or filed or incorporated by
        reference as an exhibit to the Registration Statement or the Company's
        Annual Report on Form 10-K for the year ended December 31, 2001, to
        which the Company is a party or by which it may be bound, or to which
        any of the property or assets of the Company is subject (except for such
        conflicts, breaches or defaults or liens, charges or encumbrances that
        would not have a Material Adverse Effect), nor will such action result
        in any violation of the provisions of the Certificate of Incorporation
        or By-laws of the Company, or any applicable U.S. law, statute, rule or
        regulation known to such counsel to be customarily applicable to
        transactions of this nature or any judgment, order, writ or decree,
        known to such counsel, of any U.S. government, government
        instrumentality or court, domestic or foreign, having jurisdiction over
        the Company or any of its properties, assets or operations.

                (xvi) To such counsel's knowledge, except as described in the
        Registration Statement or otherwise waived in writing, there are no
        persons with registration rights or other similar rights to have any
        securities registered pursuant to the Registration Statement or
        otherwise registered by the Company under the 1933 Act.

                (xvii) The Company is not an "investment company" or an entity
        "controlled" by an "investment company," as such terms are defined in
        the 1940 Act.

         No facts have come to such counsel's attention that have caused such
counsel to believe that, (i) as of its effective date and as of the date hereof,
the Registration Statement or any amendment thereto (other than the financial
statements and related schedules and the financial data derived from such
financial statements or schedules, as to which such counsel need express no
opinion) contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading, or (ii) as of its issue date or as of the
date hereof, the Prospectus or any amendment or supplement thereto (other than
the financial statements and related schedules and the financial data derived
from such financial statements or schedules, as to which such counsel need
express no opinion) contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. In
addition, such counsel confirms that each of the Registration


                                       21

<PAGE>

         Statement and the Prospectus, and each amendment or supplement thereto
(other than the financial statements and related schedules and the financial
data derived from such financial statements or schedules, as to which such
counsel need express no opinion) as of their respective effective or issue
dates, complied as to form in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations. Such counsel also confirms that the
documents incorporated by reference in the Prospectus (other than the financial
statements and related schedules and the financial data derived from such
financial statements or schedules, as to which such counsel need express no
opinion), when they were filed with the Commission complied as to form in all
material respects with the requirements of the 1934 Act and the 1934 Act
Regulations.

        In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).

        (c) Opinion of PRC Counsel for the Company. At Closing Time, the
Representatives shall have received the favorable opinion (a draft of which
opinion is attached as Exhibit B hereto), dated as of Closing Time, of Jun He
Law Offices, PRC counsel for the Company, in form and substance satisfactory to
the Representatives and counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to the
effect that:

                (i) Each of UTStarcom China, Ltd. and UTStarcom (Hangzhou)
        Communications Co., Ltd. (each, a "PRC Subsidiary" and collectively the
        "PRC Subsidiaries") and the Joint Venture have been duly organized and
        is validly existing and duly qualified as a foreign investment
        enterprise with limited liability under PRC law, and its business
        license is in full force and effect; the joint venture contract and the
        articles of association of each of the PRC Subsidiaries and the Joint
        Venture comply with the requirements of applicable PRC law and are in
        full force and effect; each has full power and authority (corporate and
        other) and has all consents, approvals, authorizations, orders,
        registrations, clearances and qualifications of or with any court,
        governmental agency or body having jurisdiction over it or any of its
        properties required for the ownership or lease of property by it and the
        conduct of its business, and has the legal right and authority to own,
        use, lease and operate its assets and to conduct its business in the
        manner presently conducted and as described in the Prospectus and by
        representatives of the Company; each of the Company, the PRC
        Subsidiaries and the Joint Venture can sue and be sued in its own name
        under the laws of the PRC;

                (ii) The Company, as a foreign corporation for transaction of
        business in the PRC, has all necessary licenses, consents,
        authorizations, approvals, orders, certificates and permits of and from,
        and has made all declarations and filings with all governmental agencies
        to own, use or lease its properties and conduct business in the manner
        presently conducted and as described in the Prospectus and by
        representatives of the Company;


                                       22

<PAGE>

                (iii) The equity interests of the Company in each of the PRC
        Subsidiaries and the Joint Venture have been duly and validly authorized
        and issued, are fully paid and nonassessable except the remaining part
        of the price for acquisition of the remaining equity in HUTs (as defined
        below) which, pursuant to the relevant agreement, shall be paid by the
        Company within ten days following the future completion of registration
        of such acquisition with the relevant local branch of the State
        Administration of Industry and Commerce ("SAIC"), and are legally owned
        directly or indirectly by the Company, free and clear of all liens,
        encumbrances, equities or claims; no additional governmental approval or
        authorization of or filing with any governmental agency is required
        under PRC law for the ownership by the Company of its equity interests
        in each of the PRC Subsidiaries and the Joint Venture, except the
        approval from or registration with the relevant governmental
        authorities, including, without limitation, the relevant local branches
        of the Ministry of Foreign Trade and Economic Cooperation ("MOF-TEC"),
        the SAIC, the State Administration for Foreign Exchange ("SAFE"), the
        State Administration of Taxation and the General Administration of
        Customs, which has been obtained and is in full force and effect except
        that UTStarcom (Hangzhou) Communications Co., Ltd. ("HUTs") is still in
        the progress of making registrations with the relevant governmental
        authorities of the Company's acquisition of the remaining equity
        interests in HUTs, and we expect no material difficulty in completion of
        such registrations; the liability of the Company in respect of its
        equity interests in each of the PRC Subsidiaries and the Joint Venture
        is limited to its investment therein;

                (iv) Based on our general review of the title documents and
        without independent check or verification thereof, the PRC Subsidiaries
        and the Joint Venture have valid title to, or valid leasehold interests
        in, all of their material real and personal property owned by them, in
        each case free and clear of all liens, encumbrances, third party rights
        or interests, defects or any other restrictions except such as do not
        materially affect the value of such property and do not interfere with
        the use made and proposed to be made of such property by them; and any
        real property and buildings held under lease by the PRC Subsidiaries and
        the Joint Venture are held by them under valid and enforceable leases in
        full force and effect, with such exceptions as are not material and do
        not interfere with the use made and proposed to be made of such property
        and buildings by them;

                (v) To the best of our knowledge and other than as set forth in
        the Prospectus, there are no pending actions, suits or proceedings by or
        before any court or governmental agency, authority or body or any
        arbitrator in the PRC to which any of the Company, the PRC Subsidiaries
        and the Joint Venture is a party or of which any property of the
        Company, the PRC Subsidiaries and the Joint Venture is subject which, if
        determined adversely to the Company, the PRC Subsidiaries or the Joint
        Venture, would individually or in the aggregate result in any material
        adverse change or any event involving a prospective material adverse
        change, in or affecting the general affairs, management, financial
        position, stockholders' equity or results of operations of the Company
        and its subsidiaries, taken as a whole; and, to the best of our
        knowledge, no such actions, suits or proceedings are threatened or
        contemplated;




                                       23

<PAGE>

                (vi) The issue and sale of the Option Securities (if any) to be
        sold by the Company and the execution, delivery and performance by the
        Company of this Agreement and the consummation of the transactions
        herein contemplated will not conflict with or result in a breach or
        violation of any of the terms or provisions of, or constitute a default
        under, any indenture, mortgage, deed of trust, loan agreement or other
        agreement or instrument known to us to which any of the PRC Subsidiaries
        and the Joint Venture is a party or by which any of the PRC Subsidiaries
        and the Joint Venture is bound or to which any of the property or assets
        of the PRC Subsidiaries and the Joint Venture is subject, nor will such
        action result in any violation of the provisions of the joint venture
        contract and articles of association or business licenses of any of the
        PRC Subsidiaries and the Joint Venture or any law or statute or any
        order, rule or regulation known to us of any governmental agency having
        jurisdiction over the PRC Subsidiaries and the Joint Venture or any of
        their properties;

                (vii) No governmental authorization, approval or consent of or
        filing with any governmental agency is required under PRC law for the
        consummation by the Company of the transactions contemplated by this
        Agreement;

                (viii) Except as described in the Registration Statement or the
        Prospectus, the PRC Subsidiaries and the Joint Venture have all
        necessary licenses, consents, authorizations, approvals, orders,
        certificates and permits of and from, and have made all declarations and
        filings with all governmental agencies to own, lease, license and use
        their properties and assets and conduct their business in the manner
        presently conducted and as described in the Prospectus and by
        representatives of the Company. Except as described in the Prospectus,
        neither the Company nor any of the PRC Subsidiaries and the Joint
        Venture has any reason to believe that the Ministry of Information
        Industry or any other regulatory body is considering modifying,
        suspending or revoking any such licenses, consents, authorizations,
        approvals, orders, certificates or permits and each of the Company, the
        PRC Subsidiaries and the Joint Venture is in compliance with the
        provisions of all such licenses, consents, authorizations, approvals,
        orders, certificates or permits in all material respects;

                (ix) To the best of our knowledge, none of the PRC Subsidiaries
        and the Joint Venture is in violation of its constituent documents
        (including, without limitation, the joint venture contract and articles
        of association) or in default in the performance or observance of any
        material obligation, agreement, covenant or condition contained in any
        indenture, mortgage, deed of trust, loan, lease or other agreement or
        instrument to which it is a party or by which it or any of its
        properties may be bound; the business and operations conducted by the
        PRC Subsidiaries and the Joint Venture are in compliance with any PRC
        laws and regulations applicable to the PRC Subsidiaries and the Joint
        Venture;

                (x) Current PRC laws and regulations permit foreign investment
        in the telecommunications services industry, subject to certain
        ownership and geographic restrictions. After due inquiry, we have no
        legal basis to form an opinion that any of the Company, the Subsidiaries
        or the Joint Venture invests in, operates, or participates in the

                                       24

<PAGE>

        operation of, any telecommunications services in the PRC as restricted
        by current PRC laws and regulations;

                (xi) All necessary licenses, approvals, certificates or permits
        for the connection of products to telecommunications networks within the
        PRC have been duly obtained for each of the products of the Company, the
        PRC Subsidiaries and the Joint Venture sold, distributed and marketed in
        the PRC for which such licenses, approvals, certificates or permits are
        required, except such as described in the Prospectus;

                (xii) The statements set forth in the Prospectus under the
        captions "Risk Factors," "Business" and "Management's Discussion and
        Analysis of Financial Condition and Results of Operations," to the
        extent such statements relate to matters of PRC law or regulation or to
        the provisions of documents therein described, are fair summaries of
        such matters and are correct in all material respects;

                (xiii) No stamp or other issuance or transfer taxes or duties
        and no capital gains, income, withholding or other taxes are payable by
        or on behalf of the Underwriters to the PRC or to any political
        subdivision or taxing authority thereof or therein in connection with
        (i) the sale and delivery by the Selling Stockholder and the Company of
        the Securities to or for the respective accounts of the Underwriters or
        (ii) the sale and delivery outside the PRC by the Underwriters of the
        Securities to the initial purchasers thereof in the manner contemplated
        in this Agreement;

                (xiv) The entering into, performance and enforcement of this
        Agreement in accordance with its terms and conditions will not subject
        the Underwriters to a requirement to be licensed or otherwise qualified
        to do business in the PRC, nor will any Underwriter be deemed to be
        resident, domiciled, carrying on business through an establishment or
        place in the PRC or in breach of any laws or regulations of the PRC by
        reason of entering into, performance or enforcement of this Agreement;

                (xv) All dividends and other distributions declared and payable
        upon the equity interests in the PRC Subsidiaries and the Joint Venture
        to the Company may be converted into foreign currency that may be freely
        transferred out of the PRC, and all such dividends and other
        distributions are not and, except as disclosed in the Registration
        Statement and the Prospectus, will not be subject to withholding or
        other taxes under the laws and regulations of the PRC and, except as
        disclosed in the Registration Statement and the Prospectus, are
        otherwise free and clear of any other tax, withholding or deduction
        under PRC law, in each case without the necessity of obtaining any
        governmental approval or authorization in the PRC, except such as have
        been obtained;

                (xvi) The Company's 1995 Stock Plan, 1997 Stock Plan and 2000
        Employee Stock Purchase Plan and Advanced Communications Devices
        Corporation's 1996 Stock Plan and 1997 Stock Plan and the sale, issuance
        and grant of any securities under any of the aforementioned plans to the
        date hereof, to the extent applicable to employees of any of the PRC
        Subsidiaries or the Joint Venture, do not violate any provisions of the
        foreign exchange laws and regulations of the PRC or any other applicable
        PRC laws and regulations;

                                       25

<PAGE>

                (xvii) Under the applicable PRC tax law, UTStarcom (China), Ltd.
        is entitled to reduced taxes at the rate of 7.5% until the end of 2002;
        UTStarcom (Hangzhou) Communication Co., Ltd. is entitled to reduced
        taxes at the rate of 10% until the end of 2002. At the beginning of
        2003, the tax rates of these entities will increase to 15%; to the best
        of our knowledge, we are not aware of any event or circumstance which
        may result in such rates being invalid or ineffective or capable of
        being revoked;

                (xviii) Insofar as matters of the law of the PRC are concerned,
        the Registration Statement and the filing of the Registration Statement
        with the Commission has been duly authorized by and on behalf of the
        Company, and the Registration Statement has been executed pursuant to
        such authorization by or on behalf of the Company;

                (xix) Although we do not assume any responsibility for the
        accuracy, completeness or fairness of the statements contained in the
        Registration Statement or the Prospectus, except for those referred to
        in the opinion in subsection (xii) of this opinion, nothing has come to
        our attention that led us to believe that, as of its effective date, the
        Registration Statement or any further amendment thereto made by the
        Company prior to the later date of the Closing Time and the last Date of
        Delivery (other than the financial statements, as to which we need
        express no opinion) contained an untrue statement of a material fact or
        omitted to state a material fact required to be stated therein or
        necessary to make the statements therein, insofar as they relate to
        matters of PRC laws and regulations and the provisions of the documents
        entered into by each of the Company, the PRC Subsidiaries and the Joint
        Venture in connection with the business conducted by each of them in the
        PRC, not misleading or that, as of its date, the Prospectus or any
        further amendment or supplement thereto made by the Company prior to the
        later date of the Closing Time and the last Date of Delivery (other than
        the financial statements and related schedules therein, as to which we
        need express no opinion) contained an untrue statement of a material
        fact or omitted to state a material fact necessary to make the
        statements therein, insofar as they relate to matters of PRC laws and
        regulations and the provisions of the documents entered into by each of
        the Company, the PRC Subsidiaries and the Joint Venture in connection
        with the business conducted by each of them in the PRC, in the light of
        the circumstances under which they were made, not misleading or that, as
        of the later date of the Closing Time and the last Date of Delivery, the
        Registration Statement, the Prospectus or any further amendment or
        supplement thereto made by the Company prior to such date (other than
        the financial statements and related schedules therein as to which we
        need express no opinion) contains an untrue statement of a material fact
        or omits to state a material fact necessary to make the statements
        therein, insofar as they relate to matters of PRC laws and regulations
        and the provisions of the documents entered into by each of the Company,
        the PRC Subsidiaries and the Joint Venture in connection with the
        business conducted by each of them in the PRC, in the light of the
        circumstances under which they were made, not misleading;

                (xx) Except as described in the Prospectus, insofar as matters
        of PRC laws and regulations are concerned, each of the Company, the PRC
        Subsidiaries and the Joint Venture owns, possesses, or otherwise has the
        right to use, and has made all necessary registration and applications
        with all governmental agencies to own, possess and use, the Intellectual
        Property necessary to carry on the business currently operated by it or

                                       26

<PAGE>

        presently employed by it and as described in the Prospectus, and to the
        best of our knowledge, has not received any notice of infringement or
        conflict with asserted rights of others with respect to any such
        intellectual property rights that, if determined adversely to the
        Company or any of the PRC Subsidiaries or the Joint Venture, would
        individually or in the aggregate have a Material Adverse Effect.

        (d) Opinion of Counsel for the Selling Stockholder. At Closing Time, the
Representatives shall have received the favorable opinion (a draft of which
opinion is attached as Exhibit C hereto), dated as of Closing Time, of Sullivan
& Cromwell, counsel for the Selling Stockholder, which shall be in form and
substance satisfactory to the Representatives and counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the other
Underwriters to the effect that:

                (i) No filing with, or consent, approval, authorization,
        license, order, registration, qualification or decree of, any court or
        governmental authority or agency, domestic or foreign (other than the
        issuance of the order of the Commission declaring the Registration
        Statement effective and such authorizations, approvals or consents as
        may be necessary under state securities laws or the National Association
        of Securities Dealers, Inc., as to which such counsel need express no
        opinion), is necessary or required to be obtained by the Selling
        Stockholder for the performance by the Selling Stockholder of its
        obligations under this Agreement or in the Power of Attorney and Custody
        Agreement, or in connection with the offer, sale or delivery of the
        Securities.

                (ii) The Custody Agreement has been duly executed and delivered
        by the Selling Stockholder and constitutes the valid and legally binding
        obligation of the Selling Stockholder, subject to bankruptcy,
        insolvency, fraudulent transfer, reorganization, moratorium and similar
        laws of general applicability relating to or affecting creditors' rights
        and to general equity principles; provided, however, that such counsel
                                          --------  -------
        need express no opinion with respect to the provisions thereof providing
        for indemnification, to the extent such indemnification is contrary to
        public policy.

                (iii) This Agreement has been duly authorized, executed and
        delivered by or on behalf of the Selling Stockholder.

                (iv) To such counsel's knowledge, the execution, delivery and
        performance of this Agreement and the Custody Agreement and the sale and
        delivery of the Securities and the consummation of the transactions
        contemplated in this Agreement and in the Registration Statement and
        compliance by the Selling Stockholder with the Selling Stockholder's
        obligations under this Agreement do not and will not result in any
        violation of the provisions of the certificate of incorporation or
        by-laws of the Selling Stockholder or any law, administrative
        regulation, judgment or order of any governmental agency or body or any
        administrative or court decree having jurisdiction over the Selling
        Stockholder or any of its properties.

                (v) Upon delivery of and payment for the Securities to be sold
        by the Selling Stockholder as contemplated in this Agreement, each of
        the Underwriters will be the registered owner of such Securities
        purchased by it from the Selling Stockholder, free of

                                       27

<PAGE>

        any adverse claim, assuming the Underwriters purchase such Securities
        for value, in good faith and without notice of any adverse claim, as
        such terms are defined in the Uniform Commercial Code in effect in the
        State of California.

        (e) Opinion of Counsel for the Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Davis Polk & Wardwell, counsel for the Underwriters, in form and
substance satisfactory to the Representatives, together with signed or
reproduced copies of such letter for each of the other Underwriters, and such
counsel shall have received or been permitted access to such papers and
information as they may reasonably request to enable them to give such opinion.

        (f) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company, its subsidiaries and the Joint Venture considered as one enterprise,
whether or not arising in ordinary course of business, and the Representatives
shall have received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Section 1(a) hereof
are true and correct in all material respects with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
in all material respects with all agreements and satisfied in all material
respects all conditions on its part to be performed or satisfied at or prior to
Closing Time and (iv) to the knowledge of such officers, based on due inquiry,
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted by the
Commission.

        (g) Certificate of the Selling Stockholder. At Closing Time, the
Representatives shall have received a certificate of the Selling Stockholder,
dated as of Closing Time, to the effect that (i) the representations and
warranties of the Selling Stockholder contained in Section 1(b) hereof are true
and correct in all respects with the same force and effect as though expressly
made at and as of Closing Time and (ii) the Selling Stockholder has complied in
all material respects with all agreements and all conditions on its part to be
performed under this Agreement at or prior to Closing Time.

        (h) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from PricewaterhouseCoopers
LLP a letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.

        (i) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from PricewaterhouseCoopers LLP a letter, dated as of
Closing Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (h) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.

                                       28

<PAGE>

        (j) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.

        (k) Lockup Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit D hereto from each of the Company's directors and officers and an
agreement substantially in the form of Exhibit E hereto from the Selling
Stockholder.

        (l) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company contained herein and the statements in any certificates furnished
by the Company or any subsidiary of the Company hereunder shall be true and
correct in all material respects as of each Date of Delivery and, at the
relevant Date of Delivery, the Representatives shall have received:

                (i) Officers' Certificate. A certificate, dated such Date of
        Delivery, of the President or a Vice President of the Company and of the
        chief financial or chief accounting officer of the Company confirming
        that the certificate delivered at the Closing Time pursuant to Section
        5(f) hereof remains true and correct as of such Date of Delivery;

                (ii) Opinion of Counsel for the Company. The favorable opinion
        of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel
        for the Company, dated such Date of Delivery, relating to the Option
        Securities to be purchased on such Date of Delivery and otherwise to the
        same effect as the opinion required by Section 5(b) hereof.

                (iii) Opinion of PRC Counsel for the Company. The favorable
        opinion of Jun He Law Offices, PRC counsel for the Company, dated such
        Date of Delivery, relating to the Option Securities to be purchased on
        such Date of Delivery and otherwise to the same effect as the opinion
        required by Section 5(c) hereof.

                (iv) Opinion of Counsel for the Underwriters. The favorable
        opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated
        such Date of Delivery, relating to the Option Securities to be proposed
        on such Date of Delivery and otherwise to the same effect as the opinion
        required Section 5(e) hereof.

                (v) Bring-down Comfort Letter. A letter from
        PricewaterhouseCoopers LLP, in form and substance satisfactory to the
        Representatives and dated such Date of Delivery, substantially in the
        same form and substance as the letter furnished to the Representatives
        pursuant to Section 5(h) hereof, except that the "specified date" in the
        letter furnished pursuant to this paragraph shall be a date not more
        than five days prior to such Date of Delivery.

        (m) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or

                                       29

<PAGE>

the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and the Selling Stockholder in connection with the issuance
and sale of the Securities as herein contemplated shall be satisfactory in form
and substance to the Representatives and counsel for the Underwriters.

        (n) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Company at
any time at or prior to Closing Time or such date of Delivery, as the case may
be, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.

        Section 6. Indemnification.
                   ---------------

        (a) Indemnification of the Underwriters by the Company. The Company
agrees to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:

                (i) against any and all loss, liability, claim, damage and
        expense whatsoever, as incurred, arising out of any untrue statement or
        alleged untrue statement of a material fact contained in the
        Registration Statement (or any amendment thereto), including the Rule
        430A Information, or the omission or alleged omission therefrom of a
        material fact required to be stated therein or necessary to make the
        statements therein not misleading or arising out of any untrue statement
        or alleged untrue statement of a material fact included in any
        preliminary prospectus or the Prospectus (or any amendment or supplement
        thereto), or the omission or alleged omission therefrom of a material
        fact necessary in order to make the statements therein, in the light of
        the circumstances under which they were made, not misleading;

                (ii) against any and all loss, liability, claim, damage and
        expense whatsoever, as incurred, to the extent of the aggregate amount
        paid in settlement of any litigation, or any investigation or proceeding
        by any governmental agency or body, commenced or threatened, or of any
        claim whatsoever based upon any such untrue statement or omission, or
        any such alleged untrue statement or omission; provided that (subject to
        Section 6(e) below) any such settlement is effected with the written
        consent of the Company; and

                (iii) against any and all expense whatsoever, as incurred
        (including the fees and disbursements of counsel chosen by Merrill
        Lynch), reasonably incurred in investigating, preparing or defending
        against any litigation, or any investigation or proceeding by any
        governmental agency or body, commenced or threatened, or any claim
        whatsoever based upon any such untrue statement or omission, to the
        extent that any such expense is not paid under (i) or (ii) above;

                                       30

<PAGE>

        provided, however, that the indemnity agreement contained in this
        --------  -------
        Section 6(a) shall not apply to any loss, liability, claim, damage or
        expense to the extent arising out of any untrue statement or omission or
        alleged untrue statement or omission made in reliance upon and in
        conformity with written information furnished to the Company by any
        Underwriter through the Representatives expressly for use in the
        Registration Statement (or any amendment thereto), the Prospectus or any
        preliminary prospectus (or any amendments or supplement thereto),
        including the Rule 430A Information.

        (b) Indemnification of the Underwriters by the Selling Stockholder. The
Selling Stockholder agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act as follows:

                (i) against any and all loss, liability, claim, damage and
        expense whatsoever, as incurred, arising out of any untrue statement or
        alleged untrue statement of a material fact contained in the
        Registration Statement (or any amendment thereto), including the Rule
        430A Information, or the omission or alleged omission therefrom of a
        material fact required to be stated therein or necessary to make the
        statements therein not misleading or arising out of any untrue statement
        or alleged untrue statement of a material fact included in any
        preliminary prospectus or the Prospectus (or any amendment or supplement
        thereto), or the omission or alleged omission therefrom of a material
        fact necessary in order to make the statements therein, in the light of
        the circumstances under which they were made, not misleading;

                (ii) against any and all loss, liability, claim, damage and
        expense whatsoever, as incurred, to the extent of the aggregate amount
        paid in settlement of any litigation, or any investigation or proceeding
        by any governmental agency or body, commenced or threatened, or of any
        claim whatsoever based upon any such untrue statement or omission, or
        any such alleged untrue statement or omission; provided that (subject to
        Section 6(e) below) any such settlement is effected with the written
        consent of the Selling Stockholder; and

                (iii) against any and all expense whatsoever, as incurred
        (including the fees and disbursements of counsel chosen by Merrill
        Lynch), reasonably incurred in investigating, preparing or defending
        against any litigation, or any investigation or proceeding by any
        governmental agency or body, commenced or threatened, or any claim
        whatsoever based upon any such untrue statement or omission, to the
        extent that any such expense is not paid under (i) or (ii) above;

        provided, however, that the indemnity agreement contained in this
        --------  -------
        Section 6(b) shall not apply to any loss, liability, claim, damage or
        expense to the extent arising out of any untrue statement or omission or
        alleged untrue statement or omission made in reliance upon and in
        conformity with written information furnished to the Company by any
        Underwriter through the Representatives expressly for use in the
        Registration Statement (or any amendment thereto), the Prospectus or any
        preliminary prospectus (or any amendments or supplement thereto),
        including the Rule 430A Information; and provided, further, that the
        liability under this subsection of the Selling Stockholder shall be
        limited to

                                       31

<PAGE>

        an amount equal to the aggregate net proceeds to the Selling Stockholder
        from the sale of Securities sold by the Selling Stockholder hereunder.

        Notwithstanding the foregoing, the Selling Stockholder shall not be
required to provide indemnification under this Section unless (1) the
Underwriters or other indemnified party shall have made a demand for payment to
the Company with respect to the loss, liability, claim, damage or expense and
(2) payment shall not have been received from the Company within 30 calendar
days after making such demand on the Company. The indemnified parties shall,
however, be relieved of their obligation to first demand payment from the
Company or to wait such 30 calendar days if (i) the Company files a petition for
relief under the United States Bankruptcy Code (the "Bankruptcy Code"), (ii) an
order for relief is entered against the Company in an involuntary case under the
Bankruptcy Code, (iii) the Company makes an assignment for the benefit of its
creditors, or (iv) any court orders or approves the appointment of a receiver or
custodian for the Company or a substantial portion of its assets.

        (c) Indemnification of the Company, Directors, Officers and the Selling
Stockholder. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act and the Selling
Stockholder and each person, if any, who controls the Selling Stockholder within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsections (a) and (b) of this Section, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions made in the Registration Statement (or any amendment
thereto), the Prospectus or any preliminary prospectus (or any amendments or
supplement thereto), including the Rule 430A Information, in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto), the Prospectus or any preliminary
prospectus (or any amendments or supplement thereto), including the Rule 430A
Information.

        (d) Actions Against Parties. Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to subsections (a) and
(b) above, counsel to the indemnified parties shall be selected by Merrill
Lynch, and, in the case of parties indemnified pursuant to Section 6(c) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written

                                       32

<PAGE>

consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.

        (e) Settlement Without Consent If Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Sections 6(a)(ii) and 6(b)(ii) above effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.

        (f) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Stockholder with respect to indemnification.

        Section 7. Contribution. If the indemnification provided for in Section
                   ------------
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Stockholder on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.

        The relative benefits received by the Company and the Selling
Stockholder on the one hand and the Underwriters on the other hand in connection
with the offering of the Securities pursuant to this Agreement shall be deemed
to be in the same respective proportions as the total net proceeds from the
offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholder and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, bear to the aggregate public offering price of the
Securities as set forth on such cover.

                                       33

<PAGE>

        The relative fault of the Company and the Selling Stockholder on the one
hand and the Underwriters on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Stockholder or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

        The Company, the Selling Stockholder and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

        Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

        No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

        For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or the
Selling Stockholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company or
the Selling Stockholder, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial Securities set forth opposite their respective names in
Schedule A hereto and not joint.

        Section 8. Representations, Warranties and Agreements to Survive
                   -----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Stockholder submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or an behalf of the
Company or the Selling Stockholder, and shall survive delivery of the Securities
to the Underwriters.

                                       34

<PAGE>

        Section 9. Termination of Agreement.
                   ------------------------

        (a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Stockholder, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus (exclusive of any supplement thereto), any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company, its subsidiaries and the Joint
Venture considered as one enterprise, whether or not arising in the ordinary
course of business, or (ii) if there has occurred any material adverse change in
the financial markets in the United States, China or in the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable or inadvisable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the Nasdaq National Market, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any governmental authority,
or a material disruption has occurred in commercial banking or securities
settlement or clearance services in the United States, (iv) if a banking
moratorium has been declared by Federal or New York or PRC authorities, (v) if a
change or development involving a prospective change in United States or PRC
taxation affecting the Company or the Securities or the transfer thereof or the
imposition of exchange controls by the United States or any change or
development involving a prospective change in the PRC exchange controls would
materially and adversely affect the financial markets or the market for the
Securities and other equity securities, or (vi) if the outbreak or escalation of
hostilities involving the United States or the PRC or the declaration by the
United States or the PRC of a national emergency or war makes it impracticable
or inadvisable to proceed with the public offering or the delivery of the
Securities being delivered at such Date of Delivery on the terms and in the
manner contemplated in this Agreement and the Prospectus, or (vii) if the
occurrence of any material adverse change in the existing financial, political
or economic conditions in the United States or the PRC or elsewhere which, in
the judgment of the Representatives would materially and adversely affect the
financial markets or the market for the Securities and other equity securities.

        (b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.

        Section 10. Default by One or More of the Underwriters. If one or more
                    ------------------------------------------
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if,

                                       35

<PAGE>

however, the Representatives shall not have completed such arrangements within
such 24-hour period, then:

        (a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or

        (b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to any
Date of Delivery which occurs after the Closing Time, the obligation of the
Underwriters to purchase and of the Company to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting Underwriter.

        No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

        In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either (i) the Representatives or (ii) the Company and the
Selling Stockholder together shall have the right to postpone Closing Time and
the Company shall have the right to postpone the relevant Date of Delivery, as
the case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10.

        Section 11. Default by the Selling Stockholder or the Company. (a) If
                    -------------------------------------------------
the Selling Stockholder shall fail at Closing Time to sell the number of
Securities that it is obligated to sell hereunder, then this Agreement shall
terminate without any liability on the part of any Section 11 nondefaulting
party; provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall
remain in full force and effect. No action taken pursuant to this Section 11(a)
shall relieve the Selling Stockholder from liability, if any, in respect of such
default.

        (b) If the Company shall fail at a Date of Delivery to sell the number
of Option Securities that it is obligated to sell hereunder, then this Agreement
shall terminate without any liability on the part of any nondefaulting party;
provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain
in full force and effect. No action taken pursuant to this Section 11(b) shall
relieve the Company from liability, if any, in respect of such default.

        Section 12. Notices. All notices and other communications hereunder
                    -------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Legal Department,
with a copy to the Representatives at 101 California Street, Suite 1420, San
Francisco, California 94111, attention of Legal Department; and notices to the
Company shall be

                                       36

<PAGE>

directed to it at UTStarcom, Inc., 1275 Harbor Bay Parkway, Suite 100, Alameda,
California 94502, attention of Hong Lu, with a copy to Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California 94304, attention of Carmen
Chang; and notices to the Selling Stockholder shall be directed to Sullivan &
Cromwell, 1870 Embarcadero Road, Palo Alto, California 94303, attention of John
Savva.

        Section 13. Parties. This Agreement shall each inure to the benefit of
                    -------
and be binding upon the Underwriters, the Company and the Selling Stockholder
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Stockholder and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Stockholder
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.

        Section 14. Governing Law And Time. THIS AGREEMENT SHALL BE GOVERNED BY
                    ----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

        Section 15. The Headings. The Article and Section headings herein and
                    ------------
the Table of Contents are for convenience only and shall not affect the
construction hereof.

                                       37

<PAGE>

        If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Selling Stockholder a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement between the Underwriters, the Company and the Selling
Stockholder in accordance with its terms.

                               Very truly yours,
                               UTSTARCOM, INC.

                               By:
                                   ------------------------------------------
                                   Name:   Hong Liang Lu
                                   Title:  President and Chief Executive Officer


                               SOFTBANK AMERICA INC.


                               By:
                                   ---------------------------------------------
                                   Name:
                                   Title:

                                       38

<PAGE>

CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER &
     SMITH INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
SALOMON SMITH BARNEY INC.
BANC OF AMERICA SECURITIES LLC
U.S. BANCORP PIPER JAFFRAY INC.
HSBC SECURITIES (USA) INC.


By:   MERRILL LYNCH, PIERCE, FENNER & SMITH
      INCORPORATED

By:
      ---------------------------------------
      Authorized Signatory

        For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.

                                       39

<PAGE>
                                   SCHEDULE A

                                                                      Number of
                                                                       Initial
Name of Underwriter                                                   Securities
- -------------------                                                   ----------
Securities Merrill Lynch, Pierce Fenner & Smith Incorporated ......
Credit Suisse First Boston Corporation ............................
Salomon Smith Barney Inc. .........................................
Banc of America Securities LLC ....................................
U.S. Bancorp Piper Jaffray Inc. ...................................
HSBC Securities (USA) Inc. ........................................






                                                                      ----------
         Total ....................................................   10,000,000
                                                                      ==========

                                    Sch A-1

<PAGE>

                                   SCHEDULE B


                                         Number of                 Maximum
                                          Initial                 Number of
                                      Securities to be        Option Securities
                                           Sold                   to Be Sold
                                      ----------------        -----------------

Selling Stockholder:




                                    Sch B-1

<PAGE>

                                   SCHEDULE C
                                 UTSTARCOM, INC.
                        10,000,000 Shares of Common Stock
                          (Par Value $.00125 Per Share)

        1. The public offering price per share for the Securities, determined as
provided in said Section 2, shall be $_____.

        2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $_____, being an amount equal to the public
offering price set forth above less $_____ per share; provided that the purchase
price per share for any Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities.



                                    Sch C-1

<PAGE>

                                   SCHEDULE D

           Joint Venture and Ownership Percentages Held by the Company


                                                           % Owned
         Joint Venture                                    by Company
         -------------                                    ----------

Guangdong UTStarcom Communications Co., Ltd. ..........       51%


                                    Sch D-1

<PAGE>

                                    EXHIBIT A

                      Form of Opinion of Company's Counsel




                                       A-1

<PAGE>

                                    EXHIBIT B

                    Form of Opinion of Company's PRC Counsel



                                       B-1

<PAGE>

                                    EXHIBIT C

                Form of Opinion of Selling Stockholder's Counsel



                                       C-1

<PAGE>

                                    EXHIBIT D

          Form of Lockup Agreement for Executive Officers and Directors

                           Dated as of _________, 2002


MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

        Re: Proposed Public Offering by UTStarcom, Inc.
            -------------------------------------------

Ladies and Gentlemen:

        The undersigned, a stockholder of UTStarcom, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and other
underwriters to be named therein propose to enter into a Purchase Agreement (the
"Purchase Agreement") with the Company and one or more selling stockholders to
be named therein providing for the public offering (the "Offering") of shares of
the Company's common stock, par value $0.0025 per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each underwriter to be named in the Purchase Agreement
that, during a period commencing on _________, 2002 and ending on the date 90
days after the date of the Purchase Agreement, the undersigned will not, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option to contact to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of the Common Stock, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise.
Notwithstanding the foregoing, such restrictions shall not apply to: (i) shares
of Common Stock disposed of by the undersigned as bona fide gifts, provided that
the donee thereof agrees in writing to be bound by the provisions hereof; (ii) a
pledge of shares of Common Stock by the undersigned for the purposes of securing
a loan or similar obligation from the Company to the holder; (iii) shares of
Common Stock distributed to partners, members or stockholders of the
undersigned, provided that each distributee agrees in writing to be bound by

                                       D-1

<PAGE>

the provisions hereof; and (iv) shares of Common Stock purchased by the
undersigned in the Offering or on the Nasdaq National Market after the date of
the Offering. Notwithstanding the foregoing, beginning two weeks following the
date of the Purchase Agreement, the undersigned may sell his or her shares of
Common Stock that are subject to a contract that was adopted prior to the date
hereof under Rule 10b5-1 under the Securities and Exchange Act of 1934 (the
"10b5-1 Plan"), a copy of which was previously provided to Merrill Lynch or its
counsel. In addition, beginning two weeks following the date of the Purchase
Agreement, the undersigned may sell his or her shares of Common Stock that
otherwise could have been sold pursuant to the 10b5-1 Plan, but for the
enumerated restrictions above, during the period beginning on ________, 2002,
and ending on the date that is two weeks following the Purchase Agreement Date.

        In furtherance of the foregoing, the undersigned hereby authorizes the
Company and its transfer agent and registrar to decline to make any transfer of
shares of Common Stock if such transfer would constitute a violation or breach
of this agreement.

        This agreement shall be binding on the undersigned and their respective
successors, heirs, personal representatives and assigns of the undersigned.

                                    Very truly yours,



                                    --------------------------------------------
                                    Name of stockholder or optionholder


                                    --------------------------------------------
                                    Signature


                                    --------------------------------------------
                                    Print Name


                                    --------------------------------------------
                                    Title


                                    --------------------------------------------
                                    Address


                                       D-2

<PAGE>

                                    EXHIBIT E

               Form of Lockup Agreement for SOFTBANK America Inc.
                                February __, 2002


MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

        Re: Proposed Public Offering by UTStarcom, Inc.
            -------------------------------------------

Ladies and Gentlemen:

        The undersigned, a stockholder of UTStarcom, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and other
underwriters to be named therein propose to enter into a Purchase Agreement (the
"Purchase Agreement") with the Company and one or more selling stockholders to
be named therein providing for the public offering (the "Offering") of shares of
the Company's common stock, par value $0.0025 per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each underwriter to be named in the Purchase Agreement
that, during a period of 180 days from the date of the Purchase Agreement, the
undersigned will not, without the prior written consent of Merrill Lynch,
directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option to contact to sell, grant
any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of the Company's Common Stock or any securities convertible
into or exchangeable or exercisable for Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock, whether now
owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition, or file any
registration statement under the Securities Act of 1933, as amended, with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise. Notwithstanding the foregoing, such
restrictions shall not apply to: (i) shares of Common Stock disposed of by the
undersigned as bona fide gifts, provided that the donee thereof agrees in
writing to be bound by the provisions hereof; (ii) a pledge of shares of Common
Stock by the undersigned for the purposes of securing a loan or similar
obligation from the Company to the holder; (iii) shares of Common Stock
distributed to partners, members or stockholders of the undersigned, provided
that each distributee agrees in writing to be bound by the provisions hereof;
(iv) shares of Common Stock distributed to subsidiaries of the undersigned,
provided that each distributee

                                       E-1

<PAGE>

agrees in writing to be bound by the provisions hereof; and (v) shares of Common
Stock purchased by the undersigned in the Offering or on the Nasdaq National
Market after the date of the Offering.

        In furtherance of the foregoing, the undersigned hereby authorizes the
Company and its transfer agent and registrar to decline to make any transfer of
shares of Common Stock if such transfer would constitute a violation or breach
of this agreement.

        This agreement shall be binding on the undersigned and their respective
successors, heirs, personal representatives and assigns of the undersigned.


                                    Very truly yours,



                                    SOFTBANK AMERICA INC.

                                    By:
                                        ----------------------------------------
                                    Name:
                                    Title:

                                    Address:
                                             -----------------------------------

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

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


                                       E-2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>dex101.txt
<DESCRIPTION>FORM OF INDEMNIFICATION
<TEXT>
<PAGE>
                                                                    Exhibit 10.1

                            INDEMNIFICATION AGREEMENT

     This INDEMNIFICATION AGREEMENT, dated as of February ___, 2002, is made by
and between SOFTBANK AMERICA INC., a Delaware corporation (the "Selling
                                                                -------
Stockholder"), and UTStarcom, Inc., a Delaware corporation (the "Company").
- -----------                                                      -------

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS, Selling Stockholder currently owns certain shares of common stock
of the Company (the "Shares");
                     ------

     WHEREAS, Selling Stockholder is permitted to sell the Shares pursuant to
Rule 144 of the Securities Act of 1933 (as amended) (the "Securities Act") or
                                                          --------------
pursuant to any other available exemption from the registration requirements of
the Securities Act;

     WHEREAS, in order to insure a controlled distribution of the Company's
shares, the Company has requested that the Selling Stockholder sell certain of
the Shares (the "Offered Shares") in an offering registered pursuant to the
                 --------------
provisions of the Securities Act (the "Offering");
                                       --------

     WHEREAS, in connection with the Offering, the Company has agreed to provide
certain indemnities to the Selling Stockholder in connection with statements
made in: (i) that certain Registration Statement, dated February 15, 2002, and
any amendments or supplements thereto (such documents collectively, the
"Registration Statement") filed by the Company in connection with the Offering;
 ----------------------
(ii) that certain Prospectus, dated February __, 2002 (the "Prospectus") being
                                                            ----------
used in connection with the Offering; (iii) any preliminary prospectus used in
connection with the Offering (the "Preliminary Prospectus") and (iv) any
                                   ----------------------
information provided pursuant to the provisions of Rule 430A of the rules and
regulations of the Securities and Exchange Commission under the Securities Act
in connection with the Offering (the "Rule 430A Information"; the Registration
                                      ---------------------
Statement, Prospectus, Preliminary Prospectus and Rule 430A Information,
collectively, the "Relevant Documents"), pursuant to the terms and conditions of
                   ------------------
this Agreement; and

     WHEREAS, the Selling Stockholder has agreed to provide an indemnity to the
Company in connection with certain information in the Relevant Documents
provided by the Selling Stockholder expressly for use therein, as provided
herein, pursuant to the terms and conditions of this Agreement;

         NOW THEREFORE, the parties hereto hereby agree as follows:

                                   ARTICLE I
                                INDEMNIFICATION

     1.01 Indemnification of the Selling Stockholder. The Company agrees to
          ------------------------------------------
indemnify and hold harmless the Selling Stockholder and each person, if any, who


<PAGE>

controls the Selling Stockholder within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act as follows:

          (i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact including in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

          (ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that any such settlement is effected with the
written consent of the Company; and

          (iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the Selling
Stockholder), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, to the extent that any such expense is not
paid under1.01 (i) or 1.01 (ii) above;

     provided, however, that the indemnity agreement contained in this Section
     --------  -------
1.01 shall not apply to any loss, liability, claim, damage or expense to the
extent arising out of any untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by the Selling
Stockholder expressly for use in the Registration Statement (or any amendment
thereto), the Prospectus or any preliminary prospectus (or any amendments or
supplement thereto).

     1.02 Indemnification of the Company. The Selling Stockholder agrees to
          ------------------------------
indemnify the and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act as follows:

          (i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact pertaining the Selling Stockholder or the Shares to
be offered and sold by the Selling Stockholder hereunder contained in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, or the omission or alleged omission therefrom of a material fact
pertaining to the Selling Stockholder or the Shares

                                      -2-

<PAGE>

to be offered and sold by the Selling Stockholder hereunder required to be
stated therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a material
fact pertaining to the Selling Stockholder or the Shares to be offered and sold
by the Selling Stockholder hereunder included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact pertaining to such Selling
Stockholder or the Shares to be offered and sold by the Selling Stockholder
hereunder necessary in order to make the statements herein, in the light of the
circumstances under which they were made, not misleading;

          (ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that any such settlement is effected with the
written consent of the Selling Stockholder;

          (iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Company), reasonably
incurred in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission , to the extent that any such expenses is not paid under 1.02 (i) or
1.02 (ii) above;

     provided, however, that the indemnity agreement contained in this Section
     --------  -------
1.02 shall apply only to any loss, liability, claim, damage or expense to the
extent arising out of any untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by the Selling
Stockholder expressly for use in the Registration Statement (or any amendment
thereto), the Prospectus or any preliminary prospectus (or any amendments or
supplement thereto).

     1.03 Contribution. As between the Company and the Selling Stockholder, if
          ------------
the indemnification provided for in this Article is for any reason unavailable
to or insufficient to hold harmless the Company or the Selling Stockholder, as
the case may be, in respect of any losses, liabilities, claims, damages or
expenses referred to herein, then the Company and the Selling Stockholder shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by the Selling Stockholder or the Company, as the case may
be, based on the relative fault of the Company on the one hand and the Selling
Stockholder on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Selling Stockholder on the other hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Selling Stockholder and the parties' relative

                                      -3-

<PAGE>

intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

     For the avoidance of doubt, the phrase "losses, liabilities, claims,
damages and expense", as used in this Agreement, shall include, without
limitation, any losses, liabilities, claims, damages or expense incurred with
respect to any indemnification or contribution obligation under Section 6 of the
Purchase Agreement, dated as of February ___, 2002, among the Company, the
Selling Stockholder and the Underwriters named therein (the "Purchase
                                                             --------
Agreement") and "expense" shall include, without limitation, any expense
- ---------
reimbursement obligation under Section 6 of the Purchase Agreement.

                                   ARTICLE II
                                 REPRESENTATIONS

     2.01 Authorization; Execution and Delivery. The Company represents that it
          -------------------------------------
is duly organized and validly existing under the laws of the jurisdiction of its
organization or incorporation. It has the corporate power to execute and deliver
this Agreement and to perform its obligations under this Agreement and has taken
all necessary action to authorize such execution, delivery and performance. Such
execution, delivery and performance do not violate or conflict with any law
applicable to it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it or any of
its assets.

     2.02 Authorization; Execution and Delivery. The Selling Stockholder
          -------------------------------------
represents that it is duly organized and validly existing under the laws of the
jurisdiction of its organization. It has the power to execute and deliver this
Agreement and to perform its obligations under this Agreement and has taken all
necessary action to authorize such execution, delivery and performance. Such
execution, delivery and performance do not violate or conflict with any law
applicable to it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it or any of
its assets.

                                   ARTICLE III
                                  MISCELLANEOUS

     3.01 Amendments. The terms of this Indemnification Agreement shall not be
          ----------
altered, modified, amended, supplemented or terminated in any manner whatsoever,
except by written instrument signed by each of the parties hereto.

     3.01 Successors and Assigns. This Indemnification Agreement shall be
          ----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Neither party may assign this Indemnification Agreement
or any of such party's rights or obligations hereunder without the prior written
consent of the other party, and any purported assignment without such consent
shall be void, except that the Selling

                                      -4-

<PAGE>

Stockholder may make such an assignment to any of its affiliates at any time
without consent upon notice in writing of such assignment to the Company.

     3.03 Governing Law. This Agreement shall be governed by and construed in
          ------------
accordance with the laws of the State of New York.

     3.04 Counterparts. This Indemnification Agreement may be executed in any
          ------------
number of counterparts, all of which taken together shall constitute one and the
same instrument and either of the parties hereto may execute this
Indemnification Agreement by signing any such counterpart.

                                      -5-

<PAGE>

     IN WITNESS WHEREOF, the undersigned have duly executed this Indemnity
Agreement by their respective officers duly authorized thereunto as of the date
first above written.

                                            UTSTARCOM, INC.


                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:


                                            SOFTBANK AMERICA INC.


                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:


                                      -6-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>5
<FILENAME>dex231.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP
<TEXT>
<PAGE>

                                                                   EXHIBIT 23.1

                      CONSENT OF INDEPENDENT ACCOUNTANTS


      We hereby consent to the incorporation by reference in this Amendment No.
2 to Registration Statement on Form S-3 (No. 333-82458) of our reports dated
January 14, 2002 relating to the consolidated financial statements and
financial statement schedules, which appear in UTStarcom, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 2001. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.



/s/  PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

San Francisco, California

February 26, 2002


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
