UTStarcom, Inc. CEO Discusses Q1 2011 Results - Earnings Call Transcript

UTStarcom, Inc. ( UTSI)

Q1 2011 Earnings Call

May 06, 2011, 08:00 a.m. ET

Executives

Jing Ou Yang - Director, IR

Jack Lu - President and CEO

Edmond Cheng - SVP and CFO

Analysts

Mike Barone - Sidus Investment

Jun Zhang - Wedge Partners

Ke Chen - Shah Capital Management

Presentation

Operator

Thanks for standing by for UTStarcom’s First 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 for UTStarcom. You may begin.

Jing Ou Yang

Hello everyone. Welcome to the UTStarcom’s first 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 today’s call we have Mr. Jack Lu, our President and CEO; and Mr. Edmond Cheng, our 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 including risks and uncertainties regarding the ability of the company into real life, anticipated results of operational improvements, the company’s ability to successfully launch internet TV platform, continued inter release and acquisitions, successfully operate new services business, execute our business plans and the managed regulator matters, as well as risk factors identified in latest annual report on Form 10-K, 10-Ka, quarterly reports on Form 10-Q and current reports on Form-8K as filed with the Securities and Exchange Commission. The company assures no obligation to update any forward-looking statements.

I’d now turn the call over to our President and CEO, Mr. Jack Lu.

Jack Lu

Thank you, Jing. And hello everyone on the call. As Jing mentioned we can follow along on today’s call by downloading the presentation from our website at www.UTStar.com.

Let me start with Slide 4, which covers our operational achievements in the first quarter. This quarter we won new EPON/EOC from cable operators in Hunan, Zhejiang and Jiangsu province in China. This contracts are important to us actually (inaudible) technology that will have a traditionally sold to the telecom operators sales to the cable operators in China. We also received an award from the China’s Ministry of Science and Technology for our innovative Three Network Convergence solutions at a major China cable industry trade show. At this show we were able to benefit in the IPTV solutions to a number of Provincial cables operators and I’m happy that many of these lead are showing early progress now.

Meanwhile, we continue to make progress to improve the company’s capital structure. As a result our operating expense decreased 34% compared to the same period last year. And we expect further improvements next quarter.

In the first quarter we moved our Beijing headquarters into a [less expensive] more appropriately sized the facility. We also entered into a new lease agreements for our on view and operational facilities in Hangzhou. And we are in the process of moving into the new facility now. These moves give us a dramatic reduction in rental costs at both locations.

Now please move to Slide 5, where I will discuss our business in Japan and India. In our last earnings call took place on a day off and that’s taking earthquake and tsunami at the stock in Japan. Our hearts and prayers have been with the people there and we are praying for that (inaudible) our team was last heard. At this point we do not anticipate any negative impact our business due to the earthquake there.

On a happier note, we saw a significant increase in orders of our PTN product followed the successful completion of the previously disclosed field trial in 2010. In India, I’m pleased with better progress in establishing a JV integrate local partners. This was essentially (inaudible) with joint venture, it will help us to improve our position in this market. I will share more with you when we are able to secure a facility agreement.

Turning to Slide 6. I wanted to discuss the market dynamics in China which are primarily growth drivers in our three prone strategy. As a reminder the new strategy are returned to China targeting telecom and the cable operators in parallel and providing both increment and services to our customers.

According to (inaudible) the Chinese market for IPTV showed that 5 million more digital cable TV household including the two-way digital migration during the first quarter of 2011. This brings the total of two-way digital cable TV household in China to 50 million.

In the Chinese IPTV market, during the first quarter of 2011, there were appraisal of 6.85 million IPTV subscribers. At the end of year 2011, total IPTV subscribers are expected to be 9 to 10 million with the growth rate of 1 to 2 million new subscribers this quarter. Finally, in the internet-enabled the TV market there were 7 million Internet TVs sold in China in the first quarter of 2011. And more than 15 million Internet TVs will be sold in the year 2011.

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