UTStarcom is currently planning to set up terminal handset business in the Chinese market through a GSM (Global System Communications)-enabled mobile phone, slated for launch in January 2005. As UTStarcom has long focused on wireless communications equipment and PAS (Personal Access System) phones as well as services, this new plan marks a major strategic move into the mainstream mobile phone territory in China.

To pave the way for the future business, UTStarcom will first rent a manufacture license from local vendor CECT. Application has also been made for a license to produce and sell handset in the Chinese market as the Chinese authorities are beginning to liberalize licensing regulations.

It is believed that UTStarcom is setting sights on the handset market as PAS services, known as Xiaolingtong locally, are gradually falling out of favor among Chinese subscribers. UTStarcom further attributed the slow-down to the cut China Telecom and China Netcom conducted on capital expenditure on PAS services.

Additionally, the company has found its market share increasingly eroded by competitors such as Huawei and ZTE. Entry into the mobile phone market is anticipated to serve as another growth driver for UTStarcom.