UTStarcom (NASDAQ: UTSI) announced that it has signed a contract valued at approximately $20 million with China Netcom Corporation (CNC) to expand CNC's existing IP-based PAS (Personal Access System) network in seven cities in Liaoning Province in northeast China.

"Subscriber growth continues to drive operating spending on PAS network expansion and optimization in Liaoning Province," said Simon Le, senior vice president of sales for UTStarcom China. "In 2000, China Netcom launched PAS

service in three cities in Liaoning Province. Four years later, more than 2.6 million people subscribe for PAS service in 14 cities throughout the province. UTStarcom continues to be the leading PAS equipment vendor in the province with better than 50 percent market share in both infrastructure and handsets."

As the PAS market in China matures, operators are focusing their spending on optimizing and expanding existing networks rather than investing in new systems. UTStarcom expects to see increased gross margins on PAS handsets next year through the introduction of the company's internally designed power amplifiers this year and the integration of RF/baseband ASIC (Application Specific Integrated Circuit) chipsets into PAS handsets in the first half of 2005. UTStarcom believes that the combination of these two enhancements should result in significant cost reductions and margin improvements on the company's PAS handsets over the course of 2005.

UTStarcom's PAS solutions offer subscribers citywide wireless voice and data services at affordable price points. Using UTStarcom's IP next-generation softswitching technology, the PAS solution is designed to enable operators to extend their fixed-line networks with feature-rich wireless services, rapidly expand networks to meet increased subscriber demand, and seamlessly integrate broadband and future 3G technologies into their service portfolios.

UTStarcom's PAS and iPAS (IP-Based Personal Access System) services offer service providers and subscribers unique and attractive advantages over competing wireless services. For operators, PAS is designed to provide a

two-to-three year return on investment (ROI), increased average revenue per user (ARPU), and the ability to support new applications and diversified value-added services. For subscribers, PAS is designed to provide affordable

mobile telecommunications service with an array of features. Besides high-quality voice service, UTStarcom PAS users enjoy short messaging service (SMS), C-MODE based web browsing, 64Kbps wireless Internet access, and

location-based services.

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