2. Established in 1995
Starcom was strong in Marketing and Unitech in
finance and management
The new entity crafted was called UTStarcom
By the end of 1995, UTStarcom had revenues of $10
Million
Began to be publically traded on March 3, 2000 at
$18.00 per share.
Current closing price till September 20,2012 was
$1.10
3. Design, manufacture and sell telecommunications
equipment, products and services associated with
their operation.
Were in the development of wireline, wireless, optical
and access switching solutions.
4. Conducts business globally in China, Japan, India, the
central and Latin American region, North America, the
European, Middle Eastern and African region and South
Eastern and Northern Asia.
Objective is to be the leading global provider of Internet
Protocol networking products and services.
5. Last year 86% ($1.7 billion) of their revenue came from
China.
Introducing new line of technology called 3G which
allows people to talk to a friend, watch a video clip, or
surf the Internet.
6. In 1988, Teledensity in China was as low as 1.5%
By 2000, planned to increase teledensity to 10% in rural
and 40% in urban areas
In 1991 the tremendous business opportunity
Rapid expansion of China’s Telecom Infrastructure
increased the demand for Telecom products
Many entered Chinese markets through JV’s
◦ Eg: Beijing International Switching Equipment
Company (BISC)
7. CONTD….
Competitors like Siemens, Lucent Technologies
20% afford, 30% couldn’t afford, while 50% middle
class.
Lu built a facility in Chinese City Hangzhou
Also Wu setup Starcom with R&D facilities in New
Jersey, to design and develop Telecom Software
8. (a) (In million) (b) (In Yuan)
YEAR SUBSCIBERS CHARGES PAS GSM
2000 1.5 Call Charge 0.11 0.4
2001 5.5 Incoming Charge No Yes
2002 13.0 Monthly Leasing Fee 20 40
2003 35.0 Average Handset Price 750 1500
2004 75.0
YEAR REVENUES
1994 4
1995 10
1996 36
1997 76
1998 105
1999 189
2000 370
2001 627
(c)
2002 982
2003 1965
2004 2703
9. Lu & Wu realized, to identify a niche market
Found that 50% of China’s Population was
◦ Middle class urban population
◦ Highly price conscious
◦ Lived and worked within a small area
◦ Rarely travelled far
Realized that a low priced telecom service that allowed
mobility within limited area presented huge business
potential
10. CONTD….
Technology was known as Wireless in Local Loop
PAS System
Expenditure involved in installing PAS was low
◦ Switches and billing system already used by fixed lines
◦ Cheaper than conventional mobile technologies
PAS became a major success
◦ Cost one third of regular mobile service
◦ Other benefits for subscribers
11. Company’s revenues grew from $10 Million in 1995 to
$2.7 Billion in 2003
◦ Single product (PAS) and single market (China) strategy
◦ Company’s culture
Strategy was critical
◦ Prevented the company from pursuing wrong strategies
◦ Enabled it to effectively manage growth
12. CONTD….
Lack of management expertise created bottlenecks
Pursued a strategy of hiring experienced professionals from
reputed companies
China mobile and China Unicom tried to prevent the
growth of PAS by lobbying with MII
Management’s commitment to long term growth helped
company to maintain its focus
13. Emergence of 3G network was a threat.
UTStarcom was forced to reconsider one product one
market strategy.
Decided to diversify the geographies it served.
UTStarcom also diversified its product mix.
Another Business was manufacturing of GSM mobile
handsets.
14. Acquired Commworks, which was a major player
in CDMA Soft switches and VoIP technologies,
emerging in developed markets.
Acquired Telos Technologies, that allowed
company to expand its portfolio of IP-based
wireless products.
Acquired Audiovox’s handset division in
November 2004.
15. While the company's international revenue has
increased, there has been a maturation of the PAS
market in China.
UTStarcom has faced a challenging market
environment in the region.
UTStarcom derived nearly 90 percent of its revenue
from China, a reliance that raised the eyebrows of
sceptics.
16. Audiovox’s handset division’s purchase in cash affected
the cash flow position of the firm.
Fall in profit margins in second quarter of 2004 from 28%
to 25.4% due to supply chain problems outside China.
Accounting problems when it discovered sale worth $1.96
million did not qualify as a sale but was recognized as
revenues.
Fall in share prices from $25 to $15.45.
17. Slowing of Chinese economy.
Revenue from Chinese market fell from 86% to 79%.
Slowing of growth rate 26% as compared to previous 104%
Decrease in PAS service subscribers.
Reduction of investment in PAS by China Telecom and
China Netcom.
