UTStarcom (NASDAQ: UTSI), a provider of IP access networking and services, today announced it has signed a contract valued at approximately $37 million with China Netcom Corporation (CNC) to expand its IP-based PAS (Personal Access System) (iPAS) network in 11 cities in China's Hebei Province.

Even with subscriber totals doubling within the province to more than 2.3 million subscribers to date, the market demand for PAS in the Hebei Province is still strong. Currently, the penetration rate for PAS is only about 3% in the province, which has a total population of approximately 68 million residents.

Over the last several quarters, there has been a maturation of the PAS market in China as operators are spending less on new network construction and are currently focused on optimizing and expanding their existing networks. UTStarcom's PAS customers in China are pleased with the success of the service to date, and the company anticipates PAS revenues to be approximately $1.5 billion in 2005.

Although some short-term volatility associated with the flattening of the PAS market may arise, UTStarcom expects to see increased gross margins on PAS handsets with the introduction of new ASICs (Application Specific Integrated Circuits) chipsets in January 2005.