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UTStarcom: From Bell Labs to Beijing Growth Story

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  1. The UTStarcom Story Products Future Growth Numbers Valuation Agenda Hi, I’m Jared’s grandmother, and I will be guiding you through this amazing presentation of UTStarcom. First up… the UTStarcom story! Enjoy!

  2. The UTStarcom Story… “From Bell Labs to Beijing” 1995: Merger of Unitech Telecom and Starcom 1999: Softbank acquires 21% stake 2000: Goes Public on NASDAQ 2003: Acquired CommWorks CURRENTLY Based in California but enjoys local status in China

  3. Pimps of the Nation…. Softbank CEO Director Yahoo Japan Unitech Telecom CEO Hong Lu - CEO Masayoshi Son - Chairman StarCom Founder Ying Wu – Ex. VP

  4. China Today… Revolution • 1.3 billion people • 7% Expected GDP • Increased infrastructure spending • Opening markets: WTO

  5. The UTStarcom Story Products Future Growth Numbers Valuation Agenda I know it is a long presentation just bear with them. Next… let’s look at some products! Enjoy!

  6. What The Hell They Do! 1. Wireless Network Solutions • PAS / iPAS Infrastructure • 3G • Handsets 2. Broadband Network Solutions • DSL Infrastructure 3. Architecture Development

  7. Core Business PAS (Personal Access System) Networks

  8. PAS: Citywide Wireless Network • Fast growing standard in the developing world • 50% of fixed line additions in 2003 were PAS • UTSI has 60% PAS market share - 70% by 2007 • Low Cost (5x cheaper than CDMA / GSM • 90% of population addressed

  9. Why does this work? • Average Annual Chinese Family Disposable Income $2000 • Immobile Population – 1 car for every 100 people • Compatible with high end services (VoIP, web browsing) and 3G

  10. PAS vs. GSM

  11. PAS Handsets • Cash Cow for UTSI • Unique chipsets • Bundled with PAS infrastructure • Largest producer in China ( economies of scale) • Growth and margins are slowing as industry matures

  12. 3G: Third Generation Technology High Speed Internet Access for Mobile Devices • Contracts awarded mid 2005 • Beijing clinical trials underway • China Telecom and Netcom are in line for contracts • Chinese government 40% contracts to local suppliers • Economically feasible in developing markets?

  13. Wireline: DSLAM Equipment China: Embryonic Stage of Data Networking • 45% DSLAM’s are IP based this year up from 20% last year • Lots of Add on’s – WIFI, VoIP, PAS • 20-40% cheaper to build • 70% market share in China • “Greenfields”

  14. It All Comes Together… Maybe?

  15. The UTStarcom Story Products Future Growth Numbers Valuation Agenda Moving right along now! The growth prospects for this firm are beautiful, just like me!

  16. Growth Prospects: China • Only recently entered PAS market in three major cities • 45 million residents, $8000 GDP/Capita • 9 million additional subscribers • Beijing already projects 2 million net additions by 2005 Beijing Shanghai Guangzhou

  17. The Energizer Bunny… In China?

  18. Geographic Revenue Breakdown • 1. China & Japan • 95% of revenue • 2. India • Projected 10% of sales by 2006 • 3. United States • Entered market after CommWorks buyout in ’03 • Latin America • Honduras contract will lead to further expansion

  19. Latin America The Future of UTStarcom • Key contract win in Honduras ($100 million) • Building relationships in other Latin countries • Similar backbone to pre-expansion China • 10% of revenues by 2006 ≈ 400 million+ PAS infrastructure is the most effective, cheapest solution “Many Latin America countries remind me of China ten years ago” - UTStarcom CEO Hong Lu Honduran President Maduro

  20. 2004 News Feb 19th: $18.8 million PAS expansion with China Telecom in Gui Zhou Feb 10th: $32 million PAS Extension with Henan China Comm. Feb 10th: Commitment to rollout 110,000 DSL lines with China Netcom Feb 4th: $40 million PAS deployment in Shandong Province with China Netcom Jan 22nd: Backlog reaches $1.3 billion for the first time (17% outside China) Jan 13th: $200 million PAS rollout with China Telecom Jan 7th: Sells $475 million in equity to Banc of America Dec 9th: Honduras based Multidata signs $100 million PAS infrastructure deal

  21. The UTStarcom Story Products Future Growth Numbers Valuation Agenda Oh man, I love UTStarcom! And it’s a good all around play. We can have our cake and eat it too!

  22. Tale of the Tape…

  23. These Don’t Lie

  24. Comps Baby

  25. The UTStarcom Story Products Future Growth Numbers Valuation Agenda I know this thing is undervalued. The UVA kids must definitely agree!

  26. Mess with the Master?

  27. Daily Chart

  28. The Irony…. Yet UTSI is still undervalued! Concern #1: Increased Inventory ( $1 billion backlog) Answer: Long revenue recognition cycle / 72% is already installed Concern #2: Banc of America offering has diluted stock Answer: What do we care, we are investing after the fact Concern #3: You are investing in sub-par technology Answer: PAS is not going away – demand dictates not performance Concern #4: Investing in Chinese companies is risky and dangerous Answer: Maybe so, but there is no lack of transparency here. Its all risky.

  29. Dave Chapelle Says: I’m… rich bitch! GO STARCOM! Recommendation Short Term: Strong Buy Long Term: Strong Buy

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