UTStarcom acquires 75% in Stage Smart for $30 mn

MUMBAI: UTStarcom is acquiring a 75 per cent interest in Stage Smart for $ 30 million, a deal that will enable it to provide technology and service platforms to state-owned media company Cristar.

UTStarcom will pay $20 million in cash and $10 million in shares.

In exchange for this two part consideration UTStarcom will own a majority of the outstanding ordinary shares and all of the preferred stock of Stage Smart, which gives it control of the entity. 
Cristar director Jiaqiang Zheng said, "This strategic partnership provides Cristar an excellent technology and service platform and the opportunity to bring our first class content to users in China, a portion of the 80 million overseas Chinese, as well as China watchers around the world."

Although the investment is expected to dilute UTStarcom‘s earnings for the initial one or two years of operation (while the subscriber base and advertizing fees are ramped up), it is expected to be accretive to earnings thereafter.

UTStarcom president and CEO Jack Lu said, "This is a significant step in our evolving business model and a great example of how we intend to leverage our core IPTV technology to create new revenue streams for UTStarcom. It also shows how we will take advantage of the significant opportunities that are being created as China pushes "Three Network Convergence". We expect these new revenues to be both more predictable and of higher margins than those generated by pure equipment sales." 
UTStarcom is also making three critical shifts in its business strategy:

The first is a "return to China". With the move of the operational headquarters to Beijing, the company will be able to increase focus on the Chinese and Asian markets that drive its business.

The second is "the pursuit of telecom and cable network customers in parallel." As UTStarcom‘s core-IP technology can be applied across different kinds of networks, the company can pursue opportunities with operators of other networks.

The third and final shift is "equipment and services." Because of three network convergence in China and UTStarcom‘s expertise in building and operating the technology & service platforms for IPTV and Internet TV, UTStarcom will see new opportunities to sell more end-to-end solutions to service providers in this space.

"Since assuming my new role, I have been working to articulate a concise description of UTStarcom‘s business model. Because this strategic partnership reflects each of the three shifts we are seeing in our business strategy, it was an excellent catalyst to share more about the future of our business. I look forward to elaborating on this during our upcoming third-quarter earnings call," Lu said.

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