UTStarcom expands 3G CDMA portfolio with acquisition of Telos

April 26, 2004

UTStarcom, a provider of IP access networking and services, announced an agreement to acquire substantially all of the assets of Vancouver-based TELOS Technology, a provider of distributed mobile switching solutions for voice and data communication networks to the fast-growing rural, enterprise, and emerging wireless markets. The assets acquired will include TELOS' complete product family, including the Sonata SE Softswitch, Sonata FS Feature Server, and Sonata OMC Operations Maintenance Center.

"Acquiring TELOS accelerates and expands our global CDMA strategy, complements our existing IP-based wireless product portfolio, and provides UTStarcom with access to new market segments-such as enterprise and rural- beyond our extremely successful PAS business," said Hong Lu, president and chief executive officer of UTStarcom. "Additionally, TELOS builds upon our relationships with the top worldwide service providers and provides a team of experts who can focus exclusively on CDMA softswitch technology while our China team centers its efforts on UTStarcom's Wideband CDMA (WCDMA) mSwitch softswitch solution."

"TELOS is excited to be a part of the UTStarcom team," said Jack Mar, founder, chief executive officer and president of TELOS. "This transaction represents an excellent opportunity to blend our IP-based CDMA network solution and accelerate UTStarcom's Global Wireless Strategy."

TELOS' all-IP CDMA softswitch solutions extend UTStarcom's Global Wireless Strategy, announced last month, with market-proven products that complement UTStarcom's existing CDMA radio access network (RAN), CDMA Packet Data Serving Node (PDSN), IP-based Personal Access Systems (iPAS), and 3G portfolio. With the TELOS acquisition, UTStarcom can now offer tier-one global operators a full range of feature-rich, cost-competitive CDMA solutions.

The transaction includes an initial cash consideration of $29 million, and is subject to an additional payment of up to $19 million based upon the achievement of certain revenue milestones. This transaction is subject to satisfaction of certain customary conditions and is anticipated to close in the second quarter 2004. TELOS CEO Jack Mar will serve as president of UTStarcom's CDMA Division and corporate vice president. The UTStarcom CDMA business division will be headquartered at TELOS' existing facility in Richmond, British Columbia.

TELOS softswitch grows UTStarcom's CDMA infrastructure portfolio

The TELOS acquisition will allow UTStarcom to diversify its 3G wireless offerings and actively pursue high-growth CDMA markets. This acquisition quickly follows UTStarcom's March 2004 announcement to acquire CDMA pioneer Hyundai Syscomm for its 3G CDMA radio access network portfolio, RF expertise, and intellectual property portfolio.

The TELOS CDMA2000 softswitch can interface with Hyundai Syscomm's IP base station and will enable UTStarcom to offer its customers the best possible system based on available spectrum, existing infrastructure, and roaming requirements. The acquisition also gives UTStarcom the opportunity to deliver hybrid CDMA/PAS solutions where economics and demographics require, and enter markets where PAS spectrum and licensing is not available. TELOS' product portfolio brings U.S. standards and existing CDMA interfaces to UTStarcom's CDMA product offerings, while the company's existing mSwitch platform supports international standards and WCDMA for worldwide markets. Open, IP-based platforms will allow UTStarcom to provide carriers with one common IP core with support for multiple networks and 3G standards.