Jing Ou Yang – Director, IR Jack Lu – President and CEO Jin Jiang – CFO

Jun Zhang – Wedge Partners Jon Gruber – Gruber & McBaine Lily Wu – TGRA Capital

Thank you for standing by for UTStarcom’s Third Quarter 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ms. Jing Ou Yang, Investor Relations Director for UTStarcom. You may begin.

Hello everyone. Welcome to UTStarcom’s third quarter 2011 earnings conference call. We distributed our earnings press release earlier today and you can find a copy on newswire services or on our website at www.utstar.com. In addition we have posted a presentation on our website which you can download and use to follow along with today’s call. On our call today we have Mr. Jack Lu, our President and CEO; and Ms. Jin Jiang, UTStarcom CFO. Before we get started I will read the company’s advisory and forward-looking statements. This call will include forward-looking statements on topics that include, but may not be limited to the company’s restructuring initiatives, IPTV revenues, profit margins and projected business model. Forward-looking statements are generally indicated by such words as will, expect, estimate, goals, plans or similar words. These statements are forward-looking in nature and subject to risks and uncertainties that may cause actual results to differ materially. This includes risks and uncertainties regarding the ability of the company to realize anticipated results of operational improvements, the company’s ability to successfully launch Internet TV platform, continue to integrate recent acquisitions, successfully operate new service business, execute on its business plan and manage regulatory matters, as well as risk factors identified in its latest Annual Report on Form 10-K, 10 K/A, quarterly reports on Form 10-Q and current reports on Form 6-K as filed with the Securities and Exchange Commission. The company assures no obligation to update any forward-looking statements. I will not turn the call over to our President and CEO Mr. Jack Lu.

Thank you, Jing and hello to everybody on the call. As Jing mentioned you can follow along on today’s call by downloading the presentation from our website at www.utstar.com also unless otherwise stated all figures mentioned during this conference are in U.S. dollars. Let’s start with slide four and then talk briefly about our third quarter highlights. Net income attributable to UTStarcom’s shareholders was $8 million, or basic earnings per share of $0.05 in the third quarter of 2011. Total revenue increased 35% year-over-year to $83.3 million in the third quarter of 2011 from $61.4 million for the same period in year 2010. Gross margin was 38.4% in the third quarter of 2011compared to 19.7% in the third quarter of 2010. 37.6% in the second quarter of 2011 and 31.1% in the first quarter of 2011. Operating income was $14.2 million in the third quarter of 2011. Cash, cash equivalents and short-term investments were $305.9 million as of September 30, 2011. The third quarter was our second consecutive profitable growth. Our strong bottom line supplements was driven mainly by improved gross profit of margin and the steadily decreasing operating expenses. Our main priority going forward will be achieving sustainable long-term profitability. We’re pleased to see that some of our restructuring and the reorganization efforts have gained attraction. Management have targeted the key growth driver for our company to achieve sustained profitability namely a move away from being entirely equivalent dependent to a more blended business model that include higher value and thus higher-margin services. Of course, this type of shift was not occurred overnight, but we hope investors maintain a long-term perspective as we reinvest resources in areas that we believe will drive the growth of our business. Moving onto slide number five, we did missed profit margin improvement in the third quarter driven mainly by the increase the sales of PTN product in Japan, which generally had higher gross margins. Our gross margin also improved in China as a result of our strong competitive advantage in the cable market. On slide six, regarding some of our recent business highlights. We announced in the third quarter the completion and rollout of our end-to-end Internet TV solution for our cable TV network customers in China. This contract was our first successful Internet TV bill and we expect to win more of this type of contract in the future, which have potential to open up additional service related revenues. In the third quarter we also won new sizable EPON contracts from cable operators in Hebei and Sichuan province and Ningxia Electric Power Company in China. These contracts reflect our ability to leverage our existing technology that we have traditionally sold to telecom operators to create sales to cable operators and the power grid companies in China. We recently won the IPTV integrated broadcasting control platform contract in Tianjin, which extends our market leading position. We will continue to pursue market opportunities related to China’s cable network coverage and second round of trail series will be announced towards the end of this year or early next year. In October, we won MSTP and the PTN contracts from Chunghwa Telecom, the largest integrated telecom operator in Taiwan. Our MSTP and PTN product will enhance operational capacity of the client better support its commercial services. Our success and the height of the more perfection in Japan with regard to our PTN products has helped us sell these products to other customers in Asia Pacific market. And finally just a few days ago, we entered into a strategic relationship agreement with one of the largest digital TV content provider in China, Wasu Digital TV Media Group. Through our partnership with Wasu, we will jointly inlet in upgrading cable network from analog to by directional digital, which we believe will help improve our increment sales. In addition, our partnership with Wasu will allow us to carry Wasu’s huge digital TV content of our IPTV and iDTV solutions presenting an enhanced and more attractive user experience. It is a meaning test was to exclude our combined strategy and strive to grow our OSS business. We plan to provide more detailed information of these strategic agreements in the near future. Moving to slide seven, this quarter, we introduced a series of new and improved product includes DOCSIS-EOC solution, PTN 735 and that 3005 RollingStream Server and the 6098 high-definition set-top box and the several Wi-Fi products at the Beijing Telecom Expo late of September. This new and improved product will play a key role in our growth as we target China’s telecom and the cable industry in parallel providing enhanced solutions and will help modernize communications network and improve subscriber experience. Turning to slide number eight and talking briefly about our iTV.cn subsidiary. After the long commercial filed last quarter, this quarter we have successfully launched our Internet TV operations and services in North America while our iTV.cn subsidiary. The Internet TV platform will serve a growing demand for the Chinese language television content from overseas Chinese speaking population. Besides high quality HD streaming, our platform has the capacity to integrate the multi-screen viewing, time and location shifting, multiple language programming, and additional value added services like distance-learning, gaming and e-commerce. We also signed a contract to provide Internet TV operational services to our major telecom operator in Southeast Asia to serve the local audience. iTV.cn revenues will be generated through advertising, subscription and software license fees. We also believe the launch of our iTV.cn platform will open up additional revenue opportunities related to operational support services. Although iTV.cn have achieved an operation milestone this year and is still at an early stage of development. And it will take time to ramp up. We plan to continue allocating the capital and resources required to capture potential growth opportunity. Now I’d like to hand the call over to our CFO, Jin Jiang, to share details on our financial performance in the third quarter.

Thank you very much Jack. Hello everyone, as Jack mentioned earlier on the call we have seen an imprudent in gross margin the third quarter both year-over-year and sequentially quarter-to-quarter. We will continue to be disciplined in managing our costs while still investing in the business in order to achieve sustainable profitability. Please turn to slide 9. In the third quarter, we recorded 83.3 million in revenue, this was a 35.7% or $21.9 million increase compared to $61.4 million in the third quarter of 2010. Significant items included the following, increased sales of PTN products in Japan and some products in India and Japan, rolling stream infrastructure products in India and Thailand, and EPON and set-top boxes in China. For the first nine months of 2011 revenue was $237.1 million, an increase of 10.1% or $21.7 million compared to $215.4 million in the first nine months of 2010. On slide 10, let’s look at the booking trend for the segment sales and the equipment based services business. Our book to-bill ratio in the third quarter was 0.98 without the PAS deferred revenue and 0.7 with the PAS deferred revenue. Our actual booking amount in the third quarter of 2011 was $58 million which is a positive trend as you can see from the chart. On slide 11, you can see that gross profit margins was 38.4% for the third quarter of 2011, compared to 19.7% in the third quarter of 2010. Gross profit margin for the first nine months of 2011 was 36.2%, an improvement from 28.9% in the corresponding period of 2010. As we mentioned earlier the improvements in gross margin was primarily the result of increased sales of TTM products with higher gross margins as well as improved margins in the China market. In addition gross profit in the third quarter of 2011 was positively impacted by $1.9 million of onetime indemnification from our customers due to their cancelation of a purchase order in October of 2010. Slide 12, from the chart you can see our continued progress in our restructuring and cost cutting. Q3 OpEx was $17.8 million, a decrease of 49.8% year-over-year and 33.2% sequentially. Q1 2010 OpEx was $46 million, Q3 2011 OpEx showed a reduction of 61.3%. OpEx as a percentage of sales which is represented by the red line on slide 12, is down to about 21.3%, an improvement compared to the last quarter’s 27.1%. This demonstrates the leverage we have accomplished as a result of our ongoing cost cutting efforts. Also please note that we had a onetime $4.2 million net gain on divestitures in the third quarter of 2011. That was related to a contingent gain realized upon transfer and release of obligations in connection with the sale of China PDSN assets back in 2010. We have guided in the past of achieving lower than $100 million in OpEx for the full year of 2011 and we are confident of reaching those targets. Moving to slide 13, you can see our operating and net income trends over the past few quarters. Operating income for the quarter was $14.2 million while net income attributable to UTStarcom was $8 million. Earnings per share for the third quarter and first nine months of 2011 amounted to $0.05 and $0.06 respectively. The weighted average number of shares for these calculations were $155.5 million for Q3 2011. On slide 14, let’s take a look at our segmented financial results. It’s probably worth reminding everyone that the two main reporting segments are Equipment Sales and Service Sales. The Equipment Sales segment tracks our equipment sales including network infrastructure and application products. The service sales segment is split into services and support. We provide to customers related to the equipment they purchase and secondly our new operational support services or OSS that we provide through long-term revenue sharing arrangements with the cable and telecom operators, and our Internet TV platform established by our iTV.cn subsidiaries. In the third quarter of 2011, the equipment sales segment generated $75.3 million in revenue compared to $52 million in revenues in the corresponding period of 2010. For the first nine months of 2011, equipment sales segment generated $209.4 million in revenue compared to a $183.8 million in revenue in the corresponding period of 2010. We want to remind investors that we amortize the deferred revenue related to PAS through the end of 2011 at a rate of approximately $23 million per quarter. Gross margin associated with the PAS deferred revenue is approximately 35%. PAS revenue is recorded under the equipment sales segment. Our equipment based service sales segment generated $7.7 million in the third quarter of 2011. This compares to $9.4 million in Q3 of 2010. First nine months of 2011, service sales were $27.2 million compared to first nine months 2010 service sales of $31.6 million. The decrease was primarily due to a lower renewal rate of PAS service contract driven by the anticipated phase-out of PHS in China on December 31, 2011 while services fixed costs remain relatively constant. Total OSS revenue for the third quarter 2011 and first nine months 2011 was $0.3 million and $0.5 million respectively. As we have mentioned on previous calls, the OSS business will play an important part in our company’s future growth strategy. As such we’re being very prudent in our due diligence and valuation process of potential acquisition targets and revenue-sharing partners. Now let us turn to slide 15 for the balance sheet and overview of our cash by region and currency of cash deposits. We ended the quarter with a balance of $305.9 million in cash, cash equivalents and short-term investments and zero debts. The two pie charts on this slide provide details of our cash deposits. As you can see, 43% of our total cash is held in China and the remaining 57% is held outside of China. 40% of our total cash is deposited in RMB, 32% in U.S. dollars and 20% in Japanese yen. Finally on slide 16, we like to talk about our cash flow. In the third quarter, we have quarterly operational cash flow of negative $12.1 million, compared to operational cash flow of negative $12.4 million in the same period last year. In the second and first quarter of 2011, we reported positive cash flow of $12.1 million and negative cash flow of nearly $39.4 million respectively. The positive cash flow in Q2 was primarily due to us being able to catch up on delayed customer payments from Q1. Collection in Q3 went back to normal levels. We will continue to focus on improving operational processes to drive us towards operational cash flow breakeven which we anticipate will take some time. We announced a $20 million corporate share repurchase program in August and started the program in September. As of today, we have repurchased $4 million worth of the company’s shares. In the third quarter, the company we purchased $1.5 million worth of the company’s shares. At the same time, our management team has collectively and with their own personal funds executed 80% of the $0.5 million management share repurchase program that was also announced in August. This ends my portion of the presentation. I will now hand the call back over to Jack.

Thank you, Jim. In closing, we will like to turn your attention to our 2011 outlook. Firstly, our total revenue OpEx and annual break even outlook remains unchanged. We expect our total revenues for full year 2011 to be in the same range of $300 million to $320 million and our annualized operating expenses less than $100 million. Secondly, as Jim mentioned earlier, our OSS business will play an important role in our company’s future growth and the profitability. We’ve been very particular in the deliveries in identifying acquisition targets and the revenue sharing partners. Our goal is to find the most suitable targets at the right valuation and as such we had a very rigorous intelligence process. We hope Director will be patient regarding this new business line as we push to provide increased value to our shareholders. Now, I’d like to take any questions you may have. Thank you all for listening. Operator, please open the line for Q&A

Thank you. Ladies and gentlemen we will be conducting a question-and-answer session. (Operator Instructions). Our first question is from Mr. Jun Zhang of Wedge Partners. Please go ahead. Jun Zhang – Wedge Partners: Hello.

Mr. Zhang, are you there? Mr. Zhang have you placed your phone on mute? My apologies, it appears as though Mr. Zhang, may not be hearing us. Jun Zhang – Wedge Partners: Hello.

Mr. Zhang, are you there? Jun Zhang – Wedge Partners: Yes.

Please go ahead. Jun Zhang – Wedge Partners: Sorry, I muted the phone. Hey, Jack and Jing.

Please go ahead. Jun Zhang – Wedge Partners: Hey, Jack and Jing.

Hi. Jun Zhang – Wedge Partners: Congrats on the third quarter. I have two questions, one is I would like Jack to talk about the cable spending in China. I just saw you announce a great deal with Wasu Digital. So I think may be Jack could talk about the outlook for the business from cable side and the mix between the cable and telecom business going forward. Thanks.

So, while people still keep a very high interest on China’s triple convergence network – convergence. So we still keep the preliminary market analysis that we have from the third party analysis. So the total spending related to three network convergence in the next three years will be reach as high as RMB688 billion, including about RMB250 billion per agreement in a network building and also RMB440 billion related to active media user demand. So both factors are actually of our targeted market. So now we are fully engaged in agreement and network build up and while increasingly get involved in the active media user demand as well. According to our information and also I just mentioned, the Chinese government is going to announce the second – bunch of trial cities by the end of this year or sometime early next year. That might answer your question. Jun Zhang – Wedge Partners: Yes, thanks. The other question, talk about – you mentioned earlier about – the cash auditing and – do you have any updates on that? And also could you talk a little bit about the outlook for the cash burn in the – in the remaining of this year? And what’s your plan for the next year? Thanks.

Okay. Let me address your first question regarding the cash clarification process. Currently, the audit committee is carrying out an independent cash confirmation procedure and we will be able to report the outcome once it is complete. And I think it will be fairly soon, you will be seeing a report. Jun Zhang – Wedge Partners: Okay. Thanks.

Okay. And then, to answer your second question, I think you’re asking about the Q4 cash flow forecast, right. Jun Zhang – Wedge Partners: Yeah, right.

As I have mentioned, I think it is going to be our continuing effort to improve our cash flow performance and we have a few initiatives that we’re looking at to improve that performance. And Q3 result is a very normalized level for the company and we anticipate Q4 will pretty be – pretty close to Q3 levels. Jun Zhang – Wedge Partners: Okay. That’s great. Thanks. Thanks a lot. That’s all my question. Congrats again on the good great quarter. Thank You.

Thank You.

Thank You.

(Operators Instruction). Thank you. There are no further questions at this time. Oh! I apologize; someone just came into the question queue. One moment please. The next question is from Jon Gruber with Gruber & McBaine. Please go ahead. Jon Gruber – Gruber & McBaine: Good morning. Question on outlook for 2012, what is the revenue outlook for 2012 given that we have to overcome the 96 million that goes away in ‘11. So how do you see 2012 revenue at this juncture?

Hi Jon. At this moment we’re really not ready to give out the outlook for next year. We will share with you as our visibility towards 2012 in more beginning of next year. Looking forward towards 2012, we are anticipating a healthy growth of our business, primarily driven by a steady pipeline of PTN products and also the opportunity that we mentioned today in the China domestic cable market. Jon Gruber – Gruber & McBaine: I mean, do you see, what’s the – earlier, you thought was, you possibly could have flat revenue which would entail a very healthy growth in the base business because of the 96 million dropping off, I mean, is that – that doesn’t seem real possible now, is it – is that possible?

I think we will – currently the company is going through a very rigorous budgeting and forecasting process. And I think we will – once we have more visibility, we will share with you probably in the beginning of next year. Jack Lu Maybe I can just add more. So, although we don’t have the accurate and the final budgeting and forecasted result, but basically we will pursue the growth of real business and the real revenue that is out of the addressed business (inaudible) in the part from organic growth of our equipment sales and there were also some parts from our OSS and potentially also M&A for our OSS portion, but we really don’t have the exact number at this moment, but we still confident that the health grows from our current business is possible. Jon Gruber – Gruber & McBaine: Thank you.

Our next question is from Lily Wu with TGRA Capital. Go ahead please. Lily Wu – TGRA Capital: Yes, hi. I was wondering if you could give us some color on services revenue – the equipment services was a decrease, I guess for this quarter due to the phase-out of PHS and operational support services is still relatively small. Was it fair to assume that services should be a growth driver in the future? And how do you envision that happening?

Our service revenue mainly consists of few portions. One is our Equipment Related Services, and the other one is our new Operational Support Services. And we are anticipating our Operational Support Services to generate a higher profit margins compared to our equipment service relate – Equipment Related Services. Jack Lu And as you mentioned the PHS along with the PHUA service stayed out, the Equipment Related Services is going down that is foreseeable. And for the OSS portion, we will achieve that from a combination of organic development from internal just like our iTV.cn and our revenue partnership with some local operators – cable operators and some highly selective M&A that aligned with our overall strategy. So that is our direction to arrive at. Lily Wu – TGRA Capital: Okay.

But, sorry, but OSS as you know it is still in early stage but we have to keep our commitment to invest and in that both capital and resources to make it happen. Lily Wu – TGRA Capital: Okay. So we can – what’s the timeframe for OSS in terms of, if we look at organic growth or M&A opportunities. Is that something that will be meaningful in 2012 or still at a very low level?

I don’t think it is right time to give a very accurate forecast, but you can see we just – for example we just launched our Internet TV services in U.S. And we are engaged in Internet TV service authorization in Southeast Asian countries. Sorry, I can’t just due to competition reason, we are not allowed to disclose the operator’s name. But along with, we first were agreed to pursue healthy and rapid growing of subscriber numbers, and then we can see the income and revenue from subscription and also advertising income. So that takes some time. For me, I think we need to see at least one or two quarters, and gradually we’re going to build up the revenue growing and also subscriber growing models at that time. Lily Wu – TGRA Capital: Okay, great. Thanks. We look forward to that.

Thank you.

(Operator Instructions) Thank you. There are no further questions at this time. I will turn the conference back to management for closing comments.

Thank you for joining us on our third quarter 2011 earnings conference call. We look forward to updating you on our fourth quarter 2011 result in a few months time. Feel free to get in touch with us any time if you have further questions concerns or comments. Thank you everyone.

The conference is now concluded. Thank you for your participation and you may now disconnect your lines.