Sean Pattwell - FTI Consulting William Wong - Chief Executive Officer Min Xu - Chief Financial Officer

Gregozeski - Greenridge Global Tony Tian - Merriman Capital Zhang Jun - Rosenblatt Carter Driscoll - MLV

Ladies and gentlemen, thank you for standing by for UTStarcom’s Fourth Quarter and Full Year 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. If you have any objections, you may disconnect at any time. It is now my pleasure to introduce the host for today’s call, Mr. Sean Pattwell of FTI Consulting. Mr. Pattwell, you may begin.

Hello everyone. And welcome to UTStarcom’s fourth quarter and full year 2014 earnings conference call. Earlier today, we distributed our earnings press release and you can find a copy on our website at www.utstar.com. In addition, we have posted a slideshow presentation on our website, which you can download and use to follow along with today’s call. On today’s call, we have Mr. William Wong, UTStarcom’s Chief Executive Officer and Mr. Min Xu, UTStarcom’s Chief Financial Officer. Before we get started, I will read the company’s advisory on forward-looking statements. This call will include forward-looking statements relating to the company’s business, strategic initiatives and the performance for the full year period of 2014. These statements are forward-looking in nature and subject to risks and uncertainties that may cause actual results to differ materially and adversely from the company’s current expectations. This includes risks and uncertainties related to among other things changes in the financial condition and cash positions of the company, changes in the composition of the company’s management and their effect on the company, the company’s ability to realize anticipated results of operational improvements and benefits of the divestiture transaction, the ability to successfully identify and acquire appropriate technologies and businesses for inorganic growth and to integrate such acquisitions, the ability to internally innovate and develop new products, assumptions the company makes regarding the growth of the market and the success of the company’s offerings in the market, and the company’s ability to execute its business plans and manage regulatory matters. The risks and uncertainties also include the risk factors identified in the Company’s latest Annual Report on Form 20-F and current reports on Form 6-K as filed with the Securities and Exchange Commission. The Company is in a period of strategic transition and the conduct of its business is exposed to additional risks as a result. All forward-looking statements included in the conference call are based upon information available to the company as of the date of this call, which may change; and the company assumes no obligation to update any such forward-looking statements. I will now hand the call over to UTStarcom’s Chief Executive Officer, Mr. William Wong.

Thank you, Sean, and hello everyone. As Sean mentioned, you can follow along with today’s call by downloading the presentation from our website at www.utstar.com. Also unless otherwise stated all figures mentioned during the call are in U.S. dollars. I will first take you through an overview of our financial and operating highlights for the fourth quarter and full year 2014, and then I will turn the call over to our CFO, Min Xu, who will share with you the details of our financial performance. Please turn to slide five. While Min will walk you through the full detail in just a bit, let me provide a top line summary of our overall financial results. First, we demonstrated solid top line performance and have consistently exceeded expectation for the past several quarters. For the fourth quarter specifically, we surpassed a $25 million to $30 million guidance that we provided reaching $32.9 million in revenue and we achieved $129.4 million in revenue for the full year. Importantly, we remained resolute in our commitment to cost control and we further decreased operating expenses by 32.3% for the full year. This highlights our discipline in ensuring the business is efficiently [ph] run and has allowed us to reinvest certain funds in areas that would drive future growth. Also, we maintained a strong balance sheet ending the year with $80.1 million in cash, cash equivalents and short term investments and zero debt. We believe that this metrics prove we perform relatively well throughout in 2014 in what continues to be a time of transition. This is attributed to the strength of our core broadband business as well as our aggressive business transformation that we have been executing, however, it is worth noting that while we did exit revenue expectation in the past three quarters a delay in the deployment of our higher margin product line meant that we are experiencing a shift of expected new and higher margin revenue from 2014 into the second half of 2015. We are confident that this is a mainly a shift in timing and that we will begin to realize the more profitable revenue in second half 2015. Now, let me walk you through some of the key operational highlights from the full year. Please turn to slide six. First, let’s discuss our efforts and successes related to evolving our product mix. In line with our efforts to enhance our overall margins we have focused on strengthening our product mix, while there has been a bit of a delay as I mentioned, during the year we did successfully transition a number of our customers to higher margin and more sophisticated products. A great deal of time and energy was spent deepening customer relationship and communicating to the market the attribute of these higher margin products. A number of our customers have already adopted our higher margin products like our TN765 and we’re expecting more uptick in the coming months of 2015. It is also great to receive market feedback that our TN765 is right at a sweet spot of the market window. Second, let me touch on our ability to successfully expand relationships. A key part of our strategy has been to grow existing relationships and during the year we successfully strengthened our relationship with existing customers such as Chunghwa Telecom, the leading integrated telecommunications service provider in Taiwan. With an expanded mandate, we have been working with them to support their further network expansion and deployment needs. We have also one expansion contracts with Oi in Brazil. Third, we made extraordinary strides on our geographic diversification. As stated in Q3, we have identified India, North America and Japan as the three key regions for sales development. During 2014, we significantly increased our international presence and I would like to share some of the key milestones today. In India, we see enormous potential and demand for our products and we continue to grow our market share. India is a strategic growth market for UTStarcom and one in which the company has an established and growing leadership position given in approximately 35% market share in a country’s broadband infrastructure market. We believe that our innovative technological solutions are ideally placed to support ambitious government programs including the Smart City initiative, national optical fibre network. We believe that we have the breadth and the depth of product offerings to support these initiatives and to support India’s digital transformation. We have invested in growing our team in India and we were pleased to announce the appointment of Mr. Shalin Shah as Co-General Manager of UTStarcom India during 2014. Mr. Shah with his broad international experience brings a combination of strategic, financial and operational perspectives to our operation in India. UTStarcom’s customers in India include leading telecom service providers such as AirTel, the country’s largest mobile service provider and Tata Communications. BSNL has itself been a customer of UTStarcom for years, specifically using its servers which are broadband access, optical transmission gear and other products to support the roll [ph] out of its multi play broadband internet services. UTStarcom supplied and maintained more than 3 million ports for multi play. In November 2014, the company sponsored and participated in the Next Generation Packet Transport Networks 2014 Conference in New Delhi and Mumbai. The company presented its advanced broadband and optical network infrastructure technologies to the Indian market and announced its plans to support government initiatives including Smart Cities, NOFN and Wi-Fi deployments and the aggressive strategy on its carrier Wi-Fi solution. With all of these efforts, we are already seeing strong traction with our India business. As we speak, we are in final phase of bookings sizeable new orders that would also bring good profits to the company. North America is another key market for us and in June 2014, UTStarcom’s opened a new larger Silicon Valley office to enhance its advance network architecture development, local support as well as sales and marketing efforts with telecommunications carriers and cable service providers in the United States a key growth market for the company. Towards the end of the year, we appointed Mr. Aman Sehgal as Regional Head of Sales and Business Development of North America. Mr. Sehgal is responsible for building and expanding our relationship with customers and key business partners and implementing our sales and growth strategy in North America. In October, our NetRing TN705 successfully passed North America Network Equipment Building Systems, NEBS certification, which is a major test of quality that is exact extremely valuable for any organization supplying or purchasing network equipment in North America. The NEBS certified TN705 proves that it is easy to install, operates reliably, and efficiently occupies building space. Throughout 2014, we also participated in many trade events in the U.S. to enhance our market presence. Optical Fiber Conference, CableLabs Summer Conference, big telecom event and Wi-Fi Offload Summit 2014. This is a key market for us and we expect to achieve our goals in 2015 in terms of business development and expansion. Turning to Japan, we continue to increase our presence in [Indiscernible] our long standing customer relationships. We have grown our partnership with Softbank and have successfully deployed our high end packet optical transport technology to TN765 with the Tier 1 carrier. We’re also very proud to have completed the approval of concept task of our software defined network technology with Softbank. As such, we see increased demand for our TN765 product and we continue to explore new and existing relationship in this market. In Q4, 2014 we have successfully designed in our packet optical transport product into another operator in Japan. This is a good first half of our customer expansion effort in Japan and we are continuing our sales effort in Japan to penetrate a market into more customers. While we are very focused on the major markets I have just mentioned; we are also experiencing strong demand for our products in diverse geographies all around the world. With successful customary wins in South East Asia and Latin America. To support our global strategy we will see partnerships that can help us enter new growth markets through value added channels. These partnerships will help us establish a strong global foothold and market access in the U.S. as well as new Asia Pacific markets. We expect to announce new design wins with Asia Pac customers shortly in carrier-grade Wi-Fi area. With an increased global presence and with the right people on the ground, we are demonstrating to the market that we are the partner of choice to support network service providers as they enhance their core infrastructure. 2014 was certainly a banner year in this respect. Our global sales network is larger and stronger than ever before and this sets us up well for 2015. Let me now take a moment to provide an update on the two major parts of our business, our broadband business and our investments in new media. Starting with broadband, as you will see on slide eight, broadband continues to be an engine of growth for the company. And we are making great advances in three key product categories. Our flagship TN765 which we launched in 2014 to carry internet based packet optical transport product with a 100 gig services support continues to draw wide spread interest from Tier 1 network service providers. The demand for this product as well as our carrier-grade Wi-Fi Solution the MSG10K to global telecommunications and cable operators will see our shift in product mix in the future. As mentioned previously, we expect production and shipment to reach critical mass in 2015 which will ultimately lead to higher margin for the coming year. Our field trial of the TN765 packet optical transport product continued through the end of the year into Q1 2015 as we anticipate increased market demand from service providers moving towards 100 gig in 2015. Throughout the year we also continued to lead the market in the Wi-Fi data offloading from 3G, 4G wireless networks. To this end, we introduced our new products including our carrier-grade Wi-Fi data offloading technology which is a product category that is rapidly gaining momentum amongst the wireless operators around the world. At the same time, cable service operators in the U.S. have also embarked on large scale Wi-Fi deployment. We see enormous growth potential with this product category. We also started the shipment of multi-service access network, MSAN equipment to support BSNL in the third quarter, a leading telecommunications service provider in India as it works to upgrade its network to offer a next-generation multimedia service to its customers. Leading the way in research and development, we successfully completed our proof of concept task of our software defined open packet optical network technology with Softbank in Japan. We continue to be pioneers in this segment and we’re actively investing in extending our trademarked SOO technology to our broadband access product lines and will introduce higher networking layer services with an aim to help operators achieve greater operational efficiency as well as CapEx savings. Besides SDN offerings, we have begun development of a whole slew of new products that will be introduced in the subsequent quarters in 2015. There are different products that will bring tremendous value to Indian market, smaller regional operators in U.S. as well as metro network aggregation products for Tier 1 operators. Now moving to our strategic investments in new media, please turn to slide nine and I’ll share an update on our strategic investments. UiTV, formerly known as iTV Media and aioTV as the single largest investor in both companies we continue to benefit from their continued growth and we therefore continue to actively support the development of their businesses. In addition to this, we are exploring ways to package their media services and technology with our broadband products. A couple of quick updates. Thailand continues to be an important growth market for UiTV. Besides operating TV services for TOT as well as build and operate a smart TV and mobile TV services for Samsung in Thailand, most recently UiTV has signed an MOU with the second largest telecommunication provider in Thailand to provide similar IP based TV services as it did for TOT. Besides Thailand, UiTV is currently pursuing technology platform licensing opportunities in China, India and the United States. UiTV expects to sign technology platform licensing contract during the first half of 2015. Besides business expansion, UiTV has also launched several key advanced features in its technology platform including 4K video support as well as network based DVR. These are all very appealing features demanded by TV service operators. With respect to aioTV, in the fourth quarter aioTV signed a key agreement with a strategic operator in the U.S. that will launch the vast Hispanic streaming service that blends license in [ph] India, VOD and Internet content into a unified experience. In 2014, aioTV was awarded key patents that are core enablers in the entertainment industry as the shift to streaming video services is gaining momentum across the globe. 2014 marks the strategic milestone for aioTV as they deployed with strategic operators in the U.S. and Latin America. The company has enabled operators deploy virtualized video services at a fraction of the cost, time and resources over traditional facilities based approaches. Turning now to slide 11, I would now like to share a recap of our gross strategy with you. First, we continue to see broadband as a key driver of our business globally in terms of achieving growth and we will continue to build this out in 2015. We have invested in our team to ensure that we have the right people in the ground in each of our key markets to execute our strategy. This has greatly helped us with solidifying and better executing our go-to-market strategy in its region. Also, we believe in the importance of the role that R&D plays in our business strategy and are focused on developing new innovative technologies and products to help both telecom and cable service providers and we remain committed to our simple network, simple operation design philosophy. We expect to have some key innovative products in 2015 as a result of this process. Second, alongside following the broadband business we will continue to maximize our investment return in aioTV and UiTV. We’re continuing to actively support each of these two strategic investments to help them realize their full potential which will in turn allow us to generate a solid return on our investments. Both assets are maturing and evolving. As we speak, both companies are seeking additional capital investment or strategic alternatives. The confirmation of any of these events may result in a change in the evaluation of the companies. Both companies also offer complimentary insights and new media products that allow us to package a broader offering to the market Third, we remained absolute in our commitment to continue the improvement in operational efficiency. We're constantly looking for ways to make our business operate more efficiently. We need to have a nimble global business as we expand into new markets. We have significantly reduced our operating expenses over the last several years and have leveraged this savings to invest in our future growth and development. Cost control has allowed us this luxury and it will therefore continue to be central to how we operate the business and execute our growth plans. More importantly, do in Q4, we have reorganized our R&D team into business innovation groups that have their goals well aligned with sales and product management. This has resulted in a much more efficient and productive organization that will deliver the innovated products to hit our market windows. Update on shareholder value initiative. We are committed to enhancing shareholder value. Please turn to slide 14. In the fourth quarter, we announced the Board of Directors decision to initiate a share repurchase program of up $40 million of the outstanding shares over the next 24 months. Following the initiation of the program, the company has repurchased approximately 615,000 shares. This share repurchase program reflects the Board's confidence in our company and our determination to deliver enhanced value to our shareholders. We believe that the buyback also represents an effective use of our cash and we look forward to delivering enhance value to our shareholders in the future. With that, let me turn the call to Min, who will walk through the financials for the fourth quarter and full year in more detail. We'll then provide our outlook for the near term period and also turn the call over to your questions.

Thank you, William and hello everyone. I will now take a few minutes to discuss our fourth quarter and full year 2014 financial results. Please turn to slide 16. Before we walk through the specific numbers, I would like to highlight a few key items for the fourth quarter. Fourth quarter revenue exceeded our guidance, upside came from legacy IPTV revenue recognition of $4.2 million. Gross margin during the quarter decline sequentially largely due to the zero margin legacy IPTV revenue recognition and unfavorable product mix. Our balance sheet remains strong with cash, cash equivalent and short-term investment of $80.1 million and also zero debt. Please turn slide 17 for a revenue review. In the fourth quarter total revenue was $32.9 million, exceeding our initial expectations of $25 million to $30 million and slightly above the previous quarter revenue of $32.3 million. Full year 2014 revenue was $129.4 million compared to $164.4 million in 2013. Please turn to slide 18 and 19 for gross profit and gross margin. In fourth quarter, gross profit was $3.4 million, compared to $7.2 million in the prior year period. Gross margin was 10.3% compared to 18.7% in the prior year period of 2013. On Q3 earnings call, we mentioned that, large size order with high margin was pulled in from Q4 to Q3 which helped Q3 margin and hurt our Q4 margin. In addition, the $4.2 million legacy IPTV revenue recognition carried zero margin. Full year 2014 gross profit was $22.1 million, compared to $40.2 million in 2013. Gross profit was 17.1% compared to 24.5% in 2013. The year-over-year decrease in gross profit and gross margin were primarily caused by decreased the sales of high margin optical transport products due to the product generations gap. Please turn to slide 20 for operating expenses. In fourth quarter operating expenses were $9.5 million, a significant decrease of 40% year-over-year compared to $15.7 million in 2013. In 2014, operating expenses were $36.2 million, a significant decrease of 32% year-over-year compared to $53.3 million in 2013. We continue to balance our effort to streamline our business and investing in our future growth. Please turn to slide 21 and 22 for operating loss and net loss. In the fourth quarter operating loss was $6.1 million, compared to operating loss of $8.6 million in the prior year period. In 2014, operating loss was $14.1 million, compared to operating loss of $13.2 million in 2013. In the fourth quarter net loss was $14.2 million compared to net loss of $16.1 million in the prior year period. Fourth quarter net loss included UiTV pickup of $4.4 million and UiTV convertible bond impairment of $2.4 million. In 2014, the net loss was $30.3 million, compared to a net loss of $22.7 million in 2013. 2014 net loss included UiTV loss pickup of $8.9 million as well as asset and investment impairment of $3.9 million. Please turn to slide 23 for balance sheet and cash flow. We ended fourth quarter with $80.1 million in cash, cash equivalent and short-term investments and we had no debt. In the fourth quarter, cash used by operating activities was $9.6 million, cash used in investing activities was $0.6 million, cash used in financing activities was $0.4 million, which was related to our share repurchases program. This concludes my financial review. Now I would like turn the call back to William to discuss our outlook for the coming quarters. William?

Thank you, Min. Now please turn to slide 25. I'll state a few final words and then we can move on to your questions. We're nearing the end of our transition and transformation. While the transition will continue to a degree into 2015, this past year has been remarkable in terms of geographic growth, product introductions and the achievement of greater efficiencies and cost savings. We are optimistic for what the future holds and we remain committed to developing innovative products and solutions that disrupt the market and leverage the opportunities presented by a dynamic and growing global industry. Turning to our specific outlook, we continue to be committed to broadband as a driver of our business and timely revenue contributor are going forward. As mentioned last quarter, new higher quality and higher margin products are still in early stages of the product lifecycle and given a relative decline in carrier capital expenditures last year, including with our core customers. The uptick of this higher-end products have shifted from 2014 into the second half of 2015. We do believe that this share will therefore benefit 2015 results. In terms of revenue, we currently expect to generate total revenues in the range of $25 million to $30 million in the first quarter of 2015 and anticipate double-digit growth in non-GAAP revenue for the full year. At the same time, we'll need to continue to work to mitigate pressures on gross margin that exist due to the headwinds from the depreciation of the Japanese Yen versus U.S. dollar. Further we will maintain a tight focus of financial controls that we have since restructuring efforts began two years ago. With all of this said, we believe we will deliver incremental improvements in non-GAAP operating income compared to 2014. With that, Min and I would like to take your questions. Operator, please open the line for Q&A.

Thank you, Mr. Wong. We will now begin the question and answer session. [Operator Instructions]. Your first question comes from the line of William Gregozeski from Greenridge Global. Your line is open. Please go ahead.

Hi, guys. Congratulations on another good quarter. Just a couple of quick questions. In regards to the U.S. markets do you have any sense for what you might see? Does the product demand for this year, I mean, is it going to be for Wi-Fi offloading [ph] you've talked about from past for selling to Sprint for their network or what are you seeing for the U.S, or what are you looking for this year?

For the U.S. market, Bill, actually we're going after three areas. First of all, of course is as we have said before, trying to leverage our expertise and presence with the Softbank and get into the Sprint account. Secondly, it's going after the 30 operators in the U.S. base and to that extent as I've said earlier, we have under development of wholesale of new products and a few of which are actually targeted at the smaller operators and provide them with very good access solutions. So, thirdly and coming back to what you mentioned about Wi-Fi, its what we have been humming in with the MSOs in the U.S. since they have been in a very large scale deployments, so right now we are very actively engaged with the MSOs in the U.S. to try to bring to them what we do best in essence giving a very good user experience for Wi-Fi better access. So, we expect all of these free funds to start bringing in certain revenue within this year.

Okay. I do not notice any mentioning of Korea in your prepared remarks. Is there any update you can give on the work you're doing there?

Well, we continue to partners with DASAN Networks across the global actually. Right now, as we hear from us before we have brought their product, the GPON product into Japan. Right now, we are also doing similar things to bring their product into India, which is a very good compliment to what we have, packet optical, transport products together with our Wi-Fi and also their GPON product is a perfect fit for supporting a number of this government initiatives in India. And there is a few other countries in Asia-Pac that we are also collaborating with them to penetrate those new markets.

Okay. And lastly, for UiTV and aioTV, in the past you've talked about them looking to monetize, sell the company or whatever, but I noticed in the slide about that they were looking for capital as well, is this something new where they might prefer just to continue going at it alone?

Well, we have always been monitoring and looking at what is the best way to optimize the ultimate investment returns. So, there is different stages that we're looking at whether it make sense if the right strategic alternative opportunities came about then certainly we would go evaluate and look at those. At the same time, in areas where we see like additional investment can further enhanced the valuation of the company than we would certainly be very willing to do so as well. So, both companies are exploring different possibilities as we speak. So, which is either additional capital investment or strategic initiatives and both of them are heavily engage in those funds.

Okay. All right. Thank you.

Your next question comes from the Tony Tian from Merriman Capital. Your line is open. Please go ahead.

%:

Yes. Your understanding is correct. So, previously the loss has been credit against the preferred stock investment. Now the book value for the preferred stock investment has drop to zero, so now we're picking up 100% of the loss going forward.

So, the net loss at UiTV Media [Indiscernible] it’s the ballpark number of $4 million to $5 million per quarter?

That's right.

Okay. The next question is regarding your share buybacks, I know you've disclosed you’ll spend $1.7 million buying back shares since you're now seeing November. I'm just curious what's the logic you continue your spending your -- which I think is very important for you to continue transform that business into your cash position. I know, as the company is still losing money and still it’s trying to expand in new market like the U.S. market. At the same time you are waiting for the market to turn and the new higher margin product to take up, I just don't see spending cash versus buying back shares to give – I don't know, its either way you're trying to give the investors more confidence either you're returning the buying back shares, returning cash to investors or you can keep your cash positions steady and at the same time transform the business. I'm just trying to understand which way is a better way of giving investors more confidence going forward?

I totally understand you concern. And I think you touched upon pretty much every point. So when we launched the share repurchase program, we did mention that first of all, we want to enhance shareholder value by returning cash to investors who want to receive cash and sell this stock. And again – then second point is that we want to demonstrate that we are very confident on the Company's future and we're very confident on the gross potential of our stock, so, we are willing to invest in our stock. And third, we are very confident on our future cash flow and we believe our future cash flow will be more than enough to support share buyback program. At the same time, support our gross initiatives. So, temporary you may see cash position fluctuate. You may see working capital fluctuate. One thing I want to point out that one of reason we're seeing lower cash balance, this quarter is actually, we're investing in more working capital into supporting our Taiwan sales. So, whenever you want to grow your sales, you have to invest your cash to support future growth. So, to summarize, we are very confident that we have enough cash inflow to support both cash buyback program and future growth and the temporary decline in cash balance is not going to change the current situation and our thinking.

My last question regarding your 2015 outlook, can you provide some colors on your gross margins for the year?

So, we haven't provide any guidance on that, so one of the reason is as you can see that gross margin can be very volatile depending on couple of things, one, product mix, second, business kind of business condition, the customer spending environment, and third, our cost control. And so, we have always been saying our high end product can achieve margin north of 50%. And if we can accelerate adoption of our higher margin products and improve product to mix, we can easily expand our margin. And previously, we have been able to maintain a margin that roughly 20% were targeting to improve that to 25%. But again, it depends on the timing of the higher margin product adoption and also Japanese yen, depreciation. We did a lot of uncertainties and however we are working very hard to expand our margin. We're trying to for example, price our sales and U.S dollar to avoid the pressure on Japanese yen and we're finding ways to expand our margin.

Just to add to that, for example, in the past, in India we have been always suffering very low margin return in our offerings. As I said earlier, we are in a final phase of booking some new orders, new sizeable orders and at the same time they would also represent and they would also demonstrate our ability to actually increase the gross margin of the offerings. So, to repeat what Min has said, we're looking in all angles to drive up the gross margin for the year.

That's all I have. Thank you, William and Min.

Thank you, Tony.

Your next question comes from the line of Zhang Jun from Rosenblatt. Your line is open. Please go ahead.

Hi, William and Min. Thanks for taking my question. First I have two questions, the first one, could you give us more color about your new product top line this year and how that's kind of contribute to the revenue and margin growth this year? And my second question is, I know you mentioned on a conference call that the TV part of business you've invested before will get some license from U.S market or China. Could you talk little bit more about that? What's kind of business model you're going to do in China and how that's kind of benefit the UTSI? Thanks.

On your first question regarding the new product, actually a number of this product has been in under developments in early part of 2014 and so forth, one of which we have said many time before SDN that right now we're actually in deployment already in Japan for the first bandwidth and demand services. In addition, we will be launching a series of product in the area where we call the SUPT [ph] Software Defined Universal Packet Transform Platform. So, this platform solutions including both hardware and a combination of SDN that we bring to countries like India to help them to deploy the entire metro network. And addition to that we said also earlier we're in under development of certain product say herein, they need a virtual broadband gateways and these are targeted for the 30 operators in the U.S., so all of these products will be launch within the subsequent quarters in this year, and we expect to generate to begin generate some revenue within this year and then getting into high volume shipment next year. So, to answer your second question regarding the TV platform licensing that UiTV is doing. In the past UiTV has very much focusing into running a TV service operation, focusing their effort very much into Thailand supporting the TOT partnership. That has in along its way resulted in building a very complete set of technology. And as we see across the board along the entire industry, those technology platforms are actually bring a lot of value, because a lot TV services operators are very much looking to have their hands around those technology so that they can deploy new services or complementary services to what they have. So, that is why right now there is also additional branch on to UiTV strategy. So, one side of the company will continue to provide and operate TV Services for operators, at a same time they would also negotiate content agreement with Hollywood studios and so forth. So, that continues as what they are doing before. The second ARM that they have now build out, it’s a technology portion which they would begin doing a lot of licensing of those technologies to operators. And I think in not too distinct future maybe within a quarter or so you would see them announcing signing licensing contracts with some operators and those are very large scale potential and the business model would be would be tie pretty much to on a per subscriber basis offering their technologies. So, that would in the long term be very, very lucrative and that's what we're looking to do.

Okay. Thanks. That's all my question. Thanks a lot.

Thank you, Zhang.

Your next question comes from the line of Carter Driscoll from MLV. Your line is open. Please go ahead.

Good morning, gentlemen. I wanted to get your thoughts on obviously the U.S. is marketing, targeting very aggressively and get your initial thoughts on what just happened with the FCC and regards to net neutrality and what you think the impact potentially could be on infrastructure investments on the areas that you're targeting for growth in the United States and I have couple of follow-up?

Thanks Carter for the question. We welcome any initiatives actually that opens up the market to create more competitive landscape so that more players can come into the play, because for us as an infrastructure provider that would mean a lot more opportunities and also new and upcoming players would also appreciate lot of the new and innovative technologies that we would offer to the market. At the same time, we do see a lot of – I would a strong push towards the Wi-Fi area which not just in the U.S. but all over the world. People are looking at adopting Wi-Fi technology in combination of the cellular expansion and also in new and immerging spaces of markets. Wi-Fi are being deployed in parallel to the cellular infrastructure. So, we do feel that we're in a very good position because of the large scale deployment. As we've said before that we have done for Softbank in Japan Right now we are taking that technology all over the space to provide that same offering that can helped operators to bring online wireless services to customers much, much faster and than also in a much more cost effective manner.

My next question is, getting back to the partnerships with UiTV and aioTV, if they would to get outside capital or pursue a strategic alternative, which of those two new things would have the potential to either enhance or even potentially to track from your relationship with them if at all?

Well right now we you know are looking at those investments and like we have said in the past you know we certainly look for ways to monetize this investments, okay so if there is a good strategic alternatives you know coming by of the right evaluation of course we would be very interested to entertain and evaluate those propositions but also as we said if there is a strategic investment that can come online and that could strengthen and also further enhance the valuation of certain fees for the company, we would also be very open to do that, because in both these companies you know we’re not per se in the media industry, but we came across some very strong strategic investors in the media space who would be able to not only bring in money but smart money that not only bring in higher valuation but also a lot of business potentials and collaboration with either aioTV or UiTV that we would be very happy to do so because those strategic investors you know possibly might in the end you know ended up buying the company or you know helped to further increase the value of the company in a much broader manner. So we are actually open, okay to both alternatives.

Absolutely, now I understand. Maybe shifting gears a little bit back to the SDN it’s nice to see that if I heard it correctly that you have a second carrier probably [ph] in Japan, can you talk about the length, your expectation the length of the trial period and then your expectations of when you could see other geographies potentially your other carriers obviously located within different geographies in Japan, potentially beginning to try the SDN offering?

Well we expect to have another six months of trial deployment and as such point we would begin the deployment into the rest of the cities in Japan. And besides that at present, we do feel the environment in Japan is changing, okay a lot of the operators in the past who are very much into supporting the local technology providers in Japan, they are now coming under very strong pressure from competition amongst themselves such that they are now opening up themselves to whoever is offering the best and most cost effective solution. As such, that’s why we are even though we have managed to sign up the second operator right now we are accelerating our effort and looking to win additional operator design wins in Japan as well.

And my, I guess my last question is obviously the currency impacts have a negative effect translation and you talked about maybe potentially pricing in U.S. dollars to mitigate some of that impact in advance of being able to do so could you kind of quantify in a generic maybe sense what the financial impact is in the translation on a quarterly basis you know lets say revenue and ETS and then are there any hedging policies that you would look to implement if you are not successful in being able to get some of your products you know that some of your customers did to buy into pricing in U.S. dollars, just trying to get a sense of how you could mitigate the Forex [ph] the foreign exchange exposure on a active basis effects the way you do it.

So like we mentioned in the last quarter we did look into two ways to mitigate the pressure, but at this point we do not believe doing you know currency hedging is the right strategy and we will keep monitoring the situation and we will put on hedge in program if necessary. But at this stage we believe you know it’s probably better just to stay where we are right now and just to probably do some convert our sales currency to U.S. dollar or you know using other ways to mitigate the pressure.

And just maybe at high level what -- if that involves 10% would have X amount of impact on translation to do kind of put brackets around that?

So I would say we did do an analysis last quarter and we have an update on that this quarter but from last quarter’s situation a 10% depreciation will probably hit our corporate margin by half a point to 1 point.

Perfect. Appreciate that. That’s all I had gentlemen, appreciate it.

All right. Thank you.

Thank you, Carter.

Thank you. There are no further questions at this time. I will now turn the conference back to management for closing comments. Mr. Xu Min, please go ahead.

Thank you. Thank you everyone for participating in today’s call. We appreciate your support, please feel free to contact -- contact us if you have any further questions. We look forward to share our business update next quarter. Have a nice day.

That does conclude our conference for today. Thank you for participating. You may all disconnect.