Lawrence Joseph, Et Al. V. Utstarcom, Inc., Et Al. 04-CV-4908-First Amended Consolidated Complaint for Violation of the Federal

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1 LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 2 KIMBERLY C. EPSTEIN (169012) SYLVIA SUM (207511) 3 100 Pine Street, Suite 2600 San Francisco, CA 94111 4 Telephone: 415/288-4545 415/288-4534 (fax) 5 – and – WILLIAM S. LERACH (68581) 6 DARREN J. ROBBINS (168593) 401 B Street, Suite 1600 7 San Diego, CA 92101 Telephone: 619/231-1058 8 619/231-7423 (fax) 9 Lead Counsel for Plaintiffs

10 UNITED STATES DISTRICT COURT 11 NORTHERN DISTRICT OF CALIFORNIA 12 LAWRENCE JOSEPH, et al., On Behalf of ) Master File No. C-04-4908-JW(PVT) Themselves and All Others Similarly Situated, ) 13 ) CLASS ACTION Plaintiffs, ) 14 ) FIRST AMENDED CONSOLIDATED vs. ) COMPLAINT FOR VIOLATION OF THE 15 ) FEDERAL SECURITIES LAWS UTSTARCOM, INC., HONG LIANG LU, ) 16 MICHAEL J. SOPHIE, HOWARD KWOCK, ) GERALD S. SOLOWAY, SHAO-NING J. ) 17 CHOU, BILL HUANG, THOMAS J. TOY, ) YING WU, BANC OF AMERICA ) 18 SECURITIES LLC, SOFTBANK CORP., ) SOFTBANK HOLDINGS INC. and ) 19 SOFTBANK AMERICA INC., ) ) 20 Defendants. ) ) 21 In re UTSTARCOM, INC. SECURITIES ) LITIGATION ) 22 ) ) 23 This Document Relates To: ) ) 24 ALL ACTIONS. ) ) DEMAND FOR JURY TRIAL 25

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1 INTRODUCTION 2 1. This is a securities fraud class action on behalf of all persons who purchased the 3 publicly traded securities of UTStarcom, Inc. (“UTStarcom” or the “Company”) between 4 February 21, 2003 and September 20, 2004 (the “Class Period”), against UTStarcom, certain of its 5 officers and directors, SOFTBANK Corp., SOFTBANK America, Inc. and SOFTBANK Holdings, 6 Inc. (collectively, “SOFTBANK”) and Banc of America Securities LLC (“Banc of America”) for 7 violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 (the “1934 Act”) and Rule 8 10b-5 promulgated thereunder, 17 C.F.R. §240.10b-5.

9 SUMMARY OF THE ACTION 10 2. Founded in 1991 by Taiwanese immigrant Hong Liang Lu (“Lu”), UTStarcom 11 designs, manufactures and markets wireless and wire-line telecommunications equipment and 12 products to developing nations with low teledensity. Throughout the Class Period, 80%-90% of the 13 Company’s revenues were derived from sales of a single wireless telecommunications product to 14 two government-dominated fixed-line service providers in mainland China – China Telecom and 15 China Netcom. 16 3. UTStarcom first introduced this product, marketed as the Personal Access System 17 (“PAS”), which uses Personal Handy Phone (“PHS”) technology, to China in 1997. By 1999, the 18 Company’s sales had quadrupled due almost entirely to highly profitable PAS infrastructure sales to 19 China. UTStarcom was taken public in a March 2000 initial public stock offering (“IPO”) with Banc 20 of America serving as one of the lead underwriters. 21 4. PHS operates like a city-wide cordless telephone network. Reception inside dense 22 buildings and in fast-moving trains or cars is limited. But China Telecom and China Netcom did not 23 select the PAS system for its mobility nor because it provided service quality that even approached 24 that of mobile service. Rather, PAS was selected by China Telecom and China Netcom because the 25 Chinese government prohibited China Telecom and China Netcom from operating true mobile phone 26 networks. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 1 -

1 5. Following the division of China’s former single state-run telecommunications 2 company into four primary companies between 1999 and 2001, China Telecom and China Netcom 3 provided China’s wire-line telephone services while China Mobile and China Unicom provided the 4 country’s mobile telephone services. The Chinese government retained a majority ownership 5 interest in each of these four publicly traded companies and both through this ownership and the 6 government’s regulatory authority, exercised dominion over their operations. The PAS system

7 allowed China Telecom and China Netcom to sell mobile-like services in the face of strictly 8 enforced regulatory prohibitions against their offering actual mobile service. 9 6. It was also cheaper for China Telecom and China Netcom to deploy PAS networks, 10 which operate as an extension of the fixed-line phone systems China Telecom and China Netcom 11 already had in place, rather than requiring them to route expensive so-called “last mile” wiring.

12 China Telecom and China Netcom offered these limited range mobile-like services at rates 13 approximately three times cheaper than the cellular service China Mobile and China Unicom were 14 selling and could target China’s mainstream consumers who could not afford true mobile service. 15 7. China Telecom’s and China Netcom’s roll out of PAS en masse led to an outcry in 16 May 2000 by China Mobile and China Unicom whose competitive advantages in the mobile arena 17 were being challenged. Chinese regulators circulated an internal memo – apparently at the behest of 18 China Mobile and China Unicom – halting the rollout of new PHS networks pending the

19 government’s “review” of the technology. When the memo became public, UTStarcom’s share 20 price fell almost 50% overnight. Although the ban was reversed in June 2000, regulators prohibited 21 future PHS deployments in cities of more than two million people. The PAS networks could 22 continue to operate, but only to the extent they made telephone service possible for China’s vast 23 unwired countryside while a more advanced telecommunications network was developed. The 24 Chinese government has never officially licensed, publicly endorsed nor openly supported the PAS 25 system. Defendants concealed throughout the Class Period their knowledge that the limited-use PAS 26 system was nothing but a transitory product to be used pending the deployment of third generation 27 (“3G”) mobile telephone service in China. As such, defendants’ public statements throughout the 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 2 -

1 Class Period that the PAS networks they were selling China Telecom and China Netcom would be 2 upgraded and expanded as capacity use of their networks exceeded 60%-70% – purportedly leading 3 to additional infrastructure sales – were false and misleading as defendants knew China Telecom and 4 China Netcom were shifting their capital expenditures to 3G in anticipation of its rollout. 5 Defendants’ insistence that PAS and 3G would coexist and serve different socio-economic groups 6 following the rollout of 3G was also false and misleading. 7 8. It was well known internally at UTStarcom before the start of the Class Period that 8 the political, regulatory and economic factors that made PAS sales profitable in China were a 9 historical anomally, would not continue in China and could not be replicated elsewhere. As a result, 10 defendants’ statements during the Class Period that UTStarcom would continue to achieve margins 11 of 30% to 35% throughout FY 2003 and into FY 2005 were false and misleading. Defendants knew 12 they were false and misleading because at the same time these statements were being made, 13 defendants were assisting the Chinese government in developing its own 3G transmission standard 14 and related technology (the Time Division Synchronous Code Division Multiple Access (“TD- 15 SCDMA”) Standard) which defendants knew would have a dramatic adverse effect on China 16 Telecom’s and China Netcom’s willingness to continue capital expenditures on additional PAS

17 infrastructure. In fact, defendants knew PAS was being phased out to make way for 3G to be rolled 18 out in China because they knew TD-SCDMA operates on the same radio frequencies as PAS 19 (creating interference between the two systems) and that the Chinese would not compromise the 20 development of TD-SCDMA in order to preserve the PAS system. 21 9. Helping to further obfuscate the Company’s serious profit erosion during the Class 22 Period, unlike sales of lower margin handsets, purported sales of higher margin PAS infrastructure 23 were not immediately booked as revenue by UTStarcom. Instead, PAS infrastructure deployed 24 pursuant to contracts of sale were held as “inventory at customer site subject to contract” or 25 “deferred costs” on UTStarcom’s Balance Sheet until “final acceptance” was achieved, which, 26 according to defendants took 6-12 months. Interim payments were held as “customer advances” or 27 “deferred revenues” on the Balance Sheet and could not be moved to the Income Statement until 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 3 -

1 “final acceptance” was achieved. Defendants repeatedly assured investors throughout the Class 2 Period that this practice was an advantage to UTStarcom and provided “high visibility” into its 3 future financial performance – including the aggressive gross margin projections they were making – 4 because the Company’s customers “never” rejected the PAS equipment and “final acceptance” was 5 nearly guaranteed. 6 10. Defendants also assured investors the Chinese were quite satisfied with their PAS 7 networks, demonstrated by their repeat orders. When defendants made profit margin estimates three 8 to four quarters out, investors were well justified in believing that those estimates were supported by 9 verifiable sales contracts with pre-negotiated prices and profits, and that much of the inventory on 10 the Company’s books was already at customers’ sites simply awaiting final approval. Defendants 11 emphasized that this long sales pipeline provided high “visibility” not otherwise available in the 12 industry. 13 11. But defendants were concealing that the “contracts” they were announcing were 14 illusory because the Chinese government retained significant power to rewrite the terms. Moreover, 15 it would be revealed after the end of the Class Period that the value of certain “contracts” 16 UTStarcom entered into in 2003 was overstated by millions of dollars and would have to be written 17 down because the subscribers could not afford the services and that this was known to UTStarcom in 18 2003. And SOFTBANK, a controlling shareholder of UTStarcom, which owned as much as 14% of 19 UTStarcom’s equity, was then in the midst of a serious cash crisis. Moreover, SOFTBANK had 20 entered into a partnership with China Netcom in March 2003 to purchase the assets of Asia Global 21 Crossing, which allowed China Netcom and SOFTBANK to work together to overstate the value of 22 China Netcom’s contracts with UTStarcom so as to allow SOFTBANK (UTStarcom’s largest 23 shareholder) to strengthen its balance sheet so as to assist SOFTBANK in obtaining an investment- 24 grade credit rating with appreciation in UTStarcom’s stock price. 25 12. Defendants were well aware that China Telecom and China Netcom were 26 experiencing costly malfunctions of UTStarcom’s PAS infrastructure. As a result, new networks 27 were not coming on line when delivered and China Telecom and China Netcom were missing their 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 4 -

1 new subscriber targets. UTStarcom was also exceeding its own cost estimates because deployment 2 budgets were significantly understated, providing for minimal set-up costs, notwithstanding the fact 3 that UTStarcom’s systems required substantial additional expenditures to make them operational. 4 UTStarcom’s quality control was deficient, so the systems experienced repeated breakdowns, 5 especially the switching stations. As a result, UTStarcom expended substantial additional funds 6 flying technicians around China to make additional unbudgeted repairs. In the event a system was 7 deployed outside of China, a Chinese UTStarcom engineer had to be flown in to fix it because all 8 product literature and guides were in Chinese. Notably, UTStarcom’s contracts provided that a final 9 20% payment would be tendered upon final acceptance, yet throughout the Class Period defendants 10 were required to repeatedly waive the final 20% payment because of these failures in order to 11 achieve final acceptance. 12 13. Defendants repeatedly misled investors into believing UTStarcom would post strong 13 margins of 30%-35% for FY 2003 and 2004 in order to facilitate the issuance and sale of almost 14 $900 million of UTStarcom securities during the Class Period. Those margin estimates were false. 15 In fact, defendants were well aware that after posting stable gross margins of 36% in fiscal 2001 and 16 35% in fiscal 2002 (with high margin infrastructure sales off-setting low margin hand set sales), 17 UTStarcom faced a dramatic deterioration of its operating performance and gross margins as the 18 Class Period commenced because of cost overruns and declining PAS infrastructure sales. This 19 declining trend began to be visible to investors only on July 27, 2004, when the Company announced 20 gross margins 15%-20% below the level defendants had publicly stated UTStarcom’s margins would 21 be as late as March 2004. Defendants’ false and misleading statements had the desired effect of 22 causing the price of UTStarcom securities to trade at artificially inflated levels, reaching a Class 23 Period high of $45.36 on August 21, 2003. Taking advantage of the artificial inflation in the price of 24 UTStarcom securities, UTStarcom’s insiders raised $875 million via the sale of UTStarcom debt and 25 equity securities at artificially inflated prices and pocketed another $58 million for themselves by 26 dumping their own UTStarcom stock at inflated prices. The defendants’ insider trading took place at 27 prices as high as $45 per share, or 300% higher than the price to which UTStarcom’s stock fell at the 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 5 -

1 end of the Class Period. The $875 million raised by UTStarcom and Banc of America included a 2 March 2003 private placement of $402.5 million worth of 0.875% convertible notes and a January 3 2004 sale by UTStarcom of 12.1 million shares of its common stock to Banc of America which Banc 4 of America immediately sold to the investing public. 5 14. In the fall of 2003, in connection with the registration of the convertible notes and the 6 stock issuance, defendants, including Banc of America, undertook a series of “road shows” to 7 convince the investment community of UTStarcom’s long-term viability to make the offerings in 8 order to ensure the success of the placement of these securities. During the road shows, defendants 9 repeatedly assured the investors that there was “high visibility” into the Company’s financial 10 prospects due to the long sales pipeline. Defendants illustrated the purported “high visibility” by 11 publishing slides emphasizing the already booked “deferred revenues” and “advances from 12 customers” on UTStarcom’s Balance Sheet which they promised would be moved to the Company’s 13 Income Statement and recognized as revenue as soon as final acceptance was received – repeatedly 14 ensuring that the Company had a “history of no inventory being returned.” 15 15. The following two slides used by defendants in the road shows purportedly depicting 16 UTStarcom’s sales pipeline were used to support defendants’ false representations that high demand 17 for and actual sales of PAS infrastructure were supporting the high margin estimates for FY 2004 18 defendants were making to investors. The first slide portrays the Company’s “Revenue Recognition 19 Cycle,” directing investors to focus on deployments and the build-up of inventory and “Cash from 20 customers/Deferred Revenue” on the Balance Sheet to ascertain the growth of PAS infrastructure 21 deployments sitting at customers’ sites merely awaiting approval. The second slide shows “Deferred 22 Revenue” and inventory growing over 330% and 250% respectively, between December 31, 2002 23 and June 30, 2003: 24 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 6 -

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1 16. In a November 3, 2003 public statement about UTStarcom’s inventory, CFO Michael 2 Sophie confirmed:

3 Now, even though the inventory has grown, what I want to point to is the deferred revenue line. That’s cash that we received from customers before we’ve 4 been able to recognize revenue. So, the customers are actually funding this inventory growth. We’re getting advanced payments from the customers, but because there’s a 5 final acceptance clause, we can’t recognize the revenue.

6 So, I want to point out that the company is very focused on collecting cash from the customers, and you can see that the deferred revenues have grown from, 7 you know, $164 million at the beginning of the year to about $545 million here at, you know, Q2 and Q3. 8 So, a lot of this growth that you saw in the inventory has actually been 9 funded by the customers giving us the cash to pay for that inventory. 10 17. Suddenly, on July 27, 2004, it was revealed that UTStarcom’s Q2 04 financial results

11 (for the quarter ending June 30, 2004) would fall materially short of the EPS and margin guidance 12 disseminated by defendants and that the Company had pervasive internal control deficiencies. After 13 the close of trading on July 27, 2004, the Company held a conference with investors admitting: 14 • UTStarcom’s new PAS subscriber growth had declined significantly, with the 15 Company having added one-third less new PAS subscribers during the Q2 04 than it 16 had guided investors to believe it was on track to add during the April 27, 2004 conference call – translating to lower capacity usage by China Telecom and China 17 Netcom and negating their need to purchase additional PAS infrastructure from UTStarcom going forward;1 18 • Despite the fact that utilization of PAS network capacity exceeded 70% in some 19 locations, China Telecom and China Netcom had still not added additional capacity 20 through expansions or upgrades as Lu and Sophie had promised they would. 21 • The Company was downgrading its FY 2004 GAAP EPS expectations by approximately 10% from $1.85 per share (announced April 27, 2004) to $1.65-$1.70 22 per share – though the Company could only achieve FY 2004 GAAP EPS of one- third that amount. 23 • The Company had significant internal control problems. 24

25 1 This significant decline would continue in Q3 04 and Q4 04, with defendants explaining at an 26 impromptu January 8, 2005 conference: “To give you some specific metrics here, sum PAS subscriber added were approximately 12.1 million in the second half of 2004. This represents a 27 decline of over 30 percent from a total subscriber adds of 17.5 million in the first half of 2004.” 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 8 -

1 18. These revelations cast tremendous doubt on the believability of defendants’ promises 2 that there was still strong growth in PAS infrastructure deployments and it was simply just a matter 3 of time before customers would begin paying for them. In response to these revelations, 4 UTStarcom’s stock plummeted 29% in a single trading session, from $25.25 to $17.85 per share, as 5 detailed below: 6 7 8 9 10 11 12 13 14 15 16 17 18 19. Defendants tried to soften the blow by telling the market that higher margin, non- 19 China revenues for 2004 would increase dramatically from $284 million in the prior year to $600 20 million, $290 million of which was to come from sale of iAN-8000 equipment to Japan Telecom, 21 which had recently been bought by UTStarcom’s largest sharholder, SOFTBANK. However, 22 defendants knew recognition of the Japan Telecom contract in 2004 was extremely doubtful at the 23 time it was suddenly booked in May 2004, which booking occurred contemporaneous with 24 defendants Lu’s and Sophie’s realization that UTStarcom would not be able to make its Q2 04 25 numbers. In fact, the iAN-8000 equipment was shipped to Japan Telecom in September 2004, 26 despite significant hardware and software quality issues that necessarily precluded its acceptance by 27 Japan Telecom during FY 2004. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 9 -

1 20. It was apparent to defendants Lu and Sophie throughout 2004 that PAS sales to China 2 would no longer provide any meaningful growth opportunities, so defendants repeatedly assured the 3 market that UTStarcom would replicate its historically high margin sales to China by increasing 4 international PAS infrastructure sales. However, defendants knew this was not possible as their 5 attempts to deploy PAS in places like Vietnam, South America and even the United States were 6 failing as customers consistently rejected UTStarcom’s low quality systems. 7 21. On August 10, 2004, UTStarcom announced that it had to delay the filing of its Q2 04 8 Form 10-Q because of its inability to properly record and recognize revenue for the quarter due to 9 significant internal control deficiencies. The Company’s stock plunged by 14.37% from $17.95 to 10 $15.37 per share in response to these revelations. On August 16, 2004, defendants announced the 11 belated filing of UTStarcom’s Q2 04 Form 10-Q and admitted that they were uncertain whether 12 UTStarcom would be at all able to comply with the requirements of §404 of the Sarbanes-Oxley Act 13 by year-end. 14 22. On September 20, 2004, the end of the Class Period, defendants finally conceded that 15 the PAS market in China had deteriorated and that UTStarcom would not be able to recognize any 16 revenues on the $290 million contract with Japan Telecom in 2004. UTStarcom’s stock price 17 dropped another 9.86% from $15.21 to $13.71. 18 23. In addition to issuing false and misleading earnings and margin estimates throughout 19 the Class Period purportedly based upon sales then in the Company’s sales pipeline, defendants Lu 20 and Sophie falsely certified under §404 of the Sarbanes-Oxley Act of 2002 (“SOX”) each quarter 21 that they had “[e]valuated the effectiveness of . . . disclosure controls and procedures” and disclosed 22 all “significant deficiencies in the design or operation of internal controls” over financial reporting 23 which were reasonably likely to “adversely affect the [Company’s] ability to record, process, 24 summarize and report financial data.” Each of these so-called SOX certifications was false and 25 misleading when made. As defendants would later reveal in connection with a restatement of 26 UTStarcom’s previously reported financial results, UTStarcom and its executives had no reasonable 27 basis upon which to certify such statements. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 10 -

1 24. Defendants have now revealed – after UTStarcom raised more than $875 million via 2 the sale of securities and UTStarcom senior executives sold an additional $58 million worth of 3 their own UTStarcom stock at inflated prices – that UTStarcom in fact suffered numerous, 4 pervasive internal control weaknesses, including: 5 (a) Ineffective controls over the financial reporting process due to an insufficient 6 compliment of personnel with an adequate level of accounting knowledge experience and training; 7 (b) Inadequate controls over revenue and deferred revenue accounts and the 8 associated costs of sales; 9 (c) Inadequate controls over inventory-deferred costs and the calculation of the 10 inventory reserve; 11 (d) Inadequate controls for accounting for good will; 12 (e) Inadequate accounting controls for currency translation adjustments; 13 (f) Inadequate controls for accruing expenses primarily in China and Japan 14 (where the bulk of UTStarcom’s business was located); 15 (g) Inadequate controls over the financial reporting process to ensure the accurate 16 preparation in review of its financial statements; 17 (h) Inadequate controls with respect to calculating the tax provision and related 18 balance sheet accounts; 19 (i) Inadequate segregation of duties; 20 (j) Inadequate identification and accounting for related-party transactions and 21 related-party relationships; 22 (k) Inadequate monitoring of the accounting function for operations outside the 23 United States; and 24 (l) An overall poor control environment. 25 25. UTStarcom was ultimately forced to restate its financial statements for 2003 and the 26 first three quarters of 2004, admitting that its financial statements were false in several material 27 regards, including its tax provision, related-party transactions, the non-consolidation of so-called 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 11 -

1 “variable interest entities,” impairment of equipment and incentive payments received for exports, 2 and value added taxes in China. These internal control weaknesses rendered UTStarcom’s financial 3 statements false and masked the deterioration of its profitability, among other things, failing to 4 adequately reserve for uncollectible receivables. It is noteworthy that after the Class Period ended in 5 2004, the Company’s provision for doubtful accounts receivable was 400% greater than 2003. 6 UTStarcom’s exposure to receivables collection issues was also distorted by its classification of 7 certain receivables as other current assets or even cash. On April 13, 2005, UTStarcom filed its 8 restated FY 2003 financial statements and acknowledged these significant internal control 9 deficiencies. 10 26. Company insiders have also privately revealed that UTStarcom and several of its 11 executives are currently under investigation by the SEC concerning, among other things, 12 UTStarcom’s deal with Japan Telecom and its accounting improprieties, including its complete lack 13 of internal controls and numerous revenue recognition “issues.” At least 15 employees have been

14 deposed by the SEC, including several officers and executives. UTStarcom continues to conceal all 15 information regarding the ongoing SEC investigation. 16 27. Throughout the Class Period as UTStarcom and Bank of America sold $875 million 17 in securities and the individual defendants sold $58 million worth of the Company’s stock at inflated 18 prices, each of the defendants was aware of the following true facts based upon their access to and/or 19 review of internal UTStarcom data, including: 20 (a) That, because PAS was viewed as an interim solution by the Chinese 21 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 22 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 23 UTStarcom in China; 24 (b) That one-half of China Telecom’s and China Netcom’s 2004 capital budgets, 25 as set in 2003, were dedicated to 3G development; 26 (c) That the Chinese government was taking steps to protect the development of 27 its nascent mobile industries, including permitting China Mobile and China Unicom to offer mobile 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 12 -

1 rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new subscriber 2 growth; 3 (d) That the roll out of TD-SCDMA technology would limit the ability to use 4 existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory decreases in 5 PAS infrastructure purchases by China Telecom and China Netcom; 6 (e) That the Company’s high margin PAS infrastructure sales had eroded in 7 China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 8 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 9 products and because the systems had to be installed and repaired by Chinese speaking engineers; 10 (f) That because UTStarcom’s historical PAS success in China was dependent 11 upon China’s unique market and pricing controls, the Company would be unable to generate enough 12 higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross margins; 13 (g) That the Company lacked the infrastructure to balance supply with demand in 14 its supply-chain and had little or no ability to track or forecast costs and expenses, causing broken 15 commitments to suppliers, excessive cost overruns and missed margin projections; 16 (h) That UTStarcom’s PAS infrastructure deployments were under-budgeted 17 because they were defective and required significant additional expenditures to make them 18 operational, causing excessive cost overruns and missed margin projections; 19 (i) That because a significant portion of the PAS infrastructure placed into 20 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 21 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 22 (j) That China’s Ministry of Information Industry had confirmed that it would 23 take steps to ensure that China would have 3G networks up and running in time for the 2008 Beijing 24 Olympics, which defendants knew would necessarily result in dramatic declines in PAS-related 25 capital expenditures by China Telecom and China Netcom in 2004 and 2005; 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 13 -

1 (k) That defendants had no reasonable basis to believe and did not in fact believe 2 UTStarcom’s FY 2004 revenue and EPS estimates when made on July 28, 2004, including 2H 04 3 revenue and EPS estimates based upon $290 million of fixed-line revenue from Japan Telecom; 4 (l) That China Netcom was not stretching out its payables as reported by 5 defendants on July 28, 2004 in anticipation of China Netcom’s own IPO in late 2004, but rather had 6 advised UTStarcom that it was dramatically reducing its investment in PAS; 7 (m) That the Chinese government, through China Telecom and China Netcom, 8 retained the power to unilaterally alter terms in contracts with UTStarcom; 9 (n) That the contract of sale to entities in Beijing announced in 2003 should have 10 been written down as impaired in 2003 based on defendants’ knowledge then of the customers’ 11 inability to pay; 12 (o) That the Company lacked effective internal controls in its financial reporting 13 process which affected virtually every aspect of UTStarcom’s accounting, including deferred 14 revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves and 15 accrued expenses, all of which were required to competently analyze and/or estimate UTStarcom’s 16 future financial and operational performance; and 17 (p) That as a result of (a)-(o) above, defendants had no reasonable basis to 18 believe, and did not in fact believe, their FY 2003 34%-35% margin projections, repeated as late as 19 October 2003, or their FY 2004 margin projections of 30%-32%, confirmed as late as March 2004. 20 28. On May 5, 2005, in connection with the release of UTStarcom’s Q1 05 financial 21 results, defendants finally conceded that:

22 • The Company has been “seeing much faster dropoff in PAS spending as carriers reserve budgets in anticipation of 3G rollout in China.” 23 • UTStarcom’s international business was growing, but revenues were “lumpy” quarter 24 to quarter, making them an unreliable replacement for the PAS sales it lost in China.

25 • The Company was laying off 1,400 workers globally and would undertake a $20-$25 million restructuring to pull assets and people out of the declining China 26 market.

27 • UTStarcom had only 40-43 million PAS subscribers in China despite its Class Period promises that the Company was on track to exceed 50 million subscribers by the end 28 of FY 2004. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 14 -

1 • China Telecom had unilaterally changed its procurement process in 2004 to require a six-month delay after final acceptance was achieved before they would make 2 payments on PAS infrastructure purchases.

3 • Because UTStarcom’s Chinese customers absorbed significant PAS infrastructure “capacity build up” in FY 2004, those customers had purchased far less PAS 4 infrastructure product in Q1 05.

5 JURISDICTION AND VENUE 6 29. The claims asserted arise under §§10(b) and 20(a) of the Securities Exchange Act of 7 1934 (“1934 Act”) (15 U.S.C. §§78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder, 8 17 C.F.R. §240.10b-5. 9 30. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. 10 §§1331 and 1337, and §27 of the 1934 Act (15 U.S.C. §78aa). 11 31. Venue is proper pursuant to §27 of the 1934 Act. Defendant UTStarcom has its 12 principal place of business at 1275 Harbor Bay Parkway, Suite 100, Alameda, California, and 13 UTStarcom and/or the Individual Defendants conduct business in this District and the wrongful 14 conduct took place here.

15 PARTIES AND OTHER ENTITIES 16 Lead Plaintiffs 17 32. On March 15, 2005, the Court appointed Locals 302 and 612 of the International 18 Union of Operating Engineers-Employers Construction Industry Retirement Trust (the “Trust”) and 19 Erwin DeBruycker as lead plaintiffs: 20 (a) The Trust is a pension fund that is responsible for investing billions of dollars 21 in assets for the benefit of its participants. The Trust suffered significant losses in connection with 22 its transactions in UTStarcom securities during the Class Period, as reflected in its certification 23 previously filed with the Court on January 14, 2005 and incorporated by reference herein. 24 (b) Mr. DeBruycker is a sophisticated investor. He has substantial experience in 25 the telecommunications industry. Mr. DeBruycker suffered significant losses in connection with his 26 transactions in UTStarcom securities during the Class Period, as reflected in his certification 27 previously filed with the Court on January 14, 2005 and incorporated by reference herein. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 15 -

1 UTStarcom 2 33. Defendant UTStarcom designs, manufactures and sells telecommunications 3 equipment and products and provides services associated with their operation. UTStarcom was 4 founded in 1991 by two engineers and a handful of former Lucent employees. The Company is 5 headquartered in Alameda, California, and listed on the NASDAQ. Yet at the start of the Class 6 Period, almost all of the Company’s revenues had originated from sales in China where the majority 7 of its manufacturing facilities and employees were based. In fact, by October 2003, 80% of 8 UTStarcom’s 5,000 employees were based in China.

9 Individual Defendants 10 34. Defendant Hong Liang Lu (“Lu”) was, throughout the Class Period, Chief Executive 11 Officer (“CEO”), President and a director of UTStarcom. Lu, who was born in Taiwan and educated 12 at the University of California, Berkeley, founded Unitech Telecom, Inc. in 1991 which merged with 13 Starcom Network Systems in 1995 to form UTStarcom. Throughout the Class Period, Lu 14 participated in the quarterly conference calls, assisted in the preparation of the false releases, 15 financial statements and repeated the contents therein to the market. Lu signed the false and 16 misleading Forms 10-Q for Q1 03 through Q2 04, the Forms 10-K for FY 2002 and FY 2003, and 17 the Registration Statements filed in connection with the Class Period securities offerings, which 18 contained false and misleading statements as detailed herein. Lu also certified the veracity of 19 UTStarcom’s financial statements under SOX and falsely stated that he had reviewed the design and 20 operation of UTStarcom’s internal controls throughout the Class Period and that all material 21 weaknesses in the Company’s internal controls were disclosed. UTStarcom has since admitted these 22 certifications were false. During the Class Period, Lu sold 215,000 shares of UTStarcom stock at 23 inflated prices, for proceeds of over $8.1 million. 24 35. Defendant Mike J. Sophie (“Sophie”) was, throughout the Class Period, Chief 25 Financial Officer (“CFO”) and Vice President of Finance of UTStarcom. Throughout the Class 26 Period, Sophie participated in the quarterly conference calls, assisted in the preparation of the false 27 releases, financial statements and repeated the contents therein to the market. Sophie signed the 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 16 -

1 false and misleading Forms 10-Q for Q2 03, Q3 03, Q1 04, and Q2 04 and the Forms 10-K for FY 2 02 and FY 03, which contained false and misleading statements. Sophie also certified the veracity of 3 UTStarcom’s financial statements under SOX, and falsely stated that he had reviewed the design and 4 operation of UTStarcom’s internal controls throughout the Class Period and that all material 5 weaknesses in the Company’s internal controls were disclosed. UTStarcom has since admitted these 6 certifications, signed in connection with the Company’s financial statements issued throughout the 7 Class Period, were false. During the Class Period, Sophie sold 228,322 shares of UTStarcom stock, 8 for proceeds of over $7.1 million. 9 36. Defendant Howard Kwock (“Kwock”) was, throughout the Class Period, Vice 10 President of Engineering of UTStarcom. Throughout the Class Period, Kwock assisted in the 11 preparation of the false statements issued to the market and promoted the Company and its PAS 12 system, causing the Company’s stock to trade at inflated prices. For instance, on April 7, 2003, 13 UTStarcom issued a release announcing a new supply relationship with Performance Technologies 14 Inc. quoting Kwock as stating that UTStarcom was “very pleased with the performance and 15 reliability of the company’s products,” referring to Performance Technologies products being used in 16 PAS systems in China, stating that working with Performance Technologies was permitting the 17 Company to “deliver highly reliable products to our customers with a quick turn around.” In reality, 18 Performance Technologies would, after the end of the Class Period, confirm that UTStarcom’s 19 defective internal controls, including those relating to its supply-chain operations, were in fact 20 preventing Performance Technologies from “bring[ing] value to [UTStarcom’s] offering.” In fact, 21 on May 20, 2005, Performance Technologies would tell the Rochester Business Journal that 22 “UTStarcom continues to be a conundrum . . . . We express from time to time frustrations about the 23 visibility and information from that organization, and that hasn't changed, despite pounding on the 24 table, despite looking at a variety of different locations and trying to assess information. It’s 25 virtually impossible to get any kind of credible information out of UTStarcom as it relates to our 26 business, and we understand that other suppliers have the same difficulty . . . .” During the Class 27 Period, Kwock sold 20,000 shares of UTStarcom stock at inflated prices, for proceeds of $666,400. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 17 -

1 37. Defendant Shao-Ning J. Chou (“Chou”) was, throughout the Class Period, Executive 2 Vice President of UTStarcom and Chief Operating Officer for UTStarcom China Co., Ltd., 3 UTStarcom’s Chinese subsidiary. Chou was appointed Senior Vice President in September 2001, 4 and President of UTStarcom China Co., Ltd., UTStarcom’s Chinese subsidiary, in February 2004. 5 Throughout the Class Period, Chou assisted in the preparation of the false statements issued to the 6 market and promoted the Company and its PAS system, causing the Company’s stock to trade at 7 inflated prices. For instance, on February 4, 2004, the Company issued a press release entitled 8 “Consistent Demand for ‘Little Smart’ Services Results in Sixth Expansion Of PAS Network in 9 China Since 1999,” which quoted Chou stating “Market demand for PAS and UTStarcom’s ‘Little 10 Smart’ service in Shandong continues to grow each month . . . .” During the Class Period, Chou sold 11 220,000 shares of UTStarcom stock, for proceeds of over $6.6 million. 12 38. Defendant Gerald S. Soloway (“Soloway”) was, throughout the Class Period, Senior 13 Vice President of Engineering. Throughout the Class Period, Soloway assisted in the preparation of 14 the false statements issued to the market and promoted the Company and its PAS system, causing the 15 Company’s stock to trade at inflated prices. For instance, on November 12, 2003, the Company 16 would issue a press release quoting Soloway as stating that “UTStarcom is committed to achieving 17 and sustaining business and product excellence by using sound quality principles throughout the 18 company,” when in fact the Company was experiencing significant quality control problems with its 19 PAS system deployments in China. During the Class Period, Soloway sold 223,781 shares of 20 UTStarcom stock at inflated prices, for proceeds of over $8.3 million. 21 39. Defendant William (Bill) Huang (“Huang”) was, throughout the Class Period, Chief 22 Technology Officer and Senior Vice President of UTStarcom. Throughout the Class Period, Huang 23 assisted in the preparation of the false statements issued to the market and promoted the Company 24 and its PAS system, causing the Company’s stock to trade at inflated prices. For instance, on June 25 22, 2004, the Company issued a press release concerning the Company’s upcoming demonstration of 26 a non-PAS product at SUPERCOMM in Chicago which quoted Huang as stating, “UTStarcom is 27 committed to meeting the needs of its carrier customers by helping them deliver revenue-generating 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 18 -

1 services cost effectively.” During the Class Period, Huang sold 48,000 shares of UTStarcom stock 2 at inflated prices, for proceeds of over $1.5 million. 3 40. Defendant Thomas J. Toy (“Toy”) was, throughout the Class Period, a director of 4 UTStarcom. Throughout the Class Period, Toy assisted in the preparation of the false statements and 5 repeated their contents to the market. Toy signed the false and misleading Registration Statements 6 filed in connection with the Class Period securities offerings and the Forms 10-K for FY 02 and FY 7 03, which contained false and misleading statements. During the Class Period, Toy sold 70,000 8 shares of UTStarcom stock at inflated prices, for proceeds of over $2.7 million. 9 41. Defendant Ying Wu (“Wu”) is a co-founder of the Company and was, throughout the 10 Class Period, Executive Vice-President and Vice Chairman of the Board of Directors of UTStarcom. 11 Wu was also Chairman and Chief Executive Officer, and, until February 2004, President of 12 UTStarcom China Co., Ltd., UTStarcom’s Chinese subsidiary. Wu was also the founder and 13 President of Starcom. Throughout the Class Period, Wu assisted in the preparation of the false 14 financial statements and repeated the contents therein to the market. Wu signed the false and 15 misleading Registration Statements filed in connection with the securities offered during the Class 16 Period and the Forms 10-K for FY 02 and FY 03. During the Class Period, Wu sold 595,000 shares 17 of UTStarcom stock at inflated prices, for proceeds of over $22.8 million. 18 42. The defendants listed in ¶¶34-41 are the “Individual Defendants.” They are liable for 19 the false statements pleaded herein either directly as they made the statements or indirectly as the 20 statements were “group-published” information.

21 Banc of America 22 43. Defendant Banc of America Securities LLC (“Banc of America”) is an investment

23 banking firm which specializes, inter alia, in underwriting public offerings of securities and making 24 markets in the securities it underwrites. Banc of America maintained a very close association with 25 UTStarcom and control over the trading of its shares, during the Class Period by among other things 26 serving as its lead investment banker, lead marketmaker, and providing very favorable research 27 coverage. Meanwhile, Banc of America and its analyst, Tim Long, had constant access to internal 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 19 -

1 UTStarcom data via Lu, Sophie and Son throughout the Class Period, including the adverse facts

2 concealed by defendants. Banc of America agreed to participate in the wrongdoing alleged herein, 3 including making and/or soliciting false and misleading statements concerning UTStarcom together 4 with assisting the Company’s sale of its securities at inflated prices during the Class Period in order 5 to: (i) obtain at least $43 million in underwriting fees in connection with the Company’s 6 $402.5 million March 2003 private placement of convertible notes and the $475 million 7 8 January 2004 Offering; (ii) ensure that Banc of America would participate in all future offerings

9 given its complicit and aggressive tactics to market the Company’s securities; and (iii) obtain

10 millions of additional dollars in fees by serving as the primary institutional marketmaker in 11 UTStarcom securities. 12 (a) Underwriting Fees. Banc of America served as: (i) a lead underwriter in the 13 Company’s March 2000 IPO of 11.5 million shares for which Banc of America received over 14 15 $3.7 million in underwriting fees; (ii) a lead underwriter in the Company’s June 2001 offering of an 16 additional nine million shares, including three million shares sold by UTStarcom’s insiders, for

17 which Banc of America received over $2.7 million in underwriting fees; (iii) a lead underwriter in

18 SOFTBANK’s March 2002 secondary offering of an additional ten million shares of UTStarcom, for 19 which it received approximately $847,000 in underwriting fees; (iv) a lead underwriter of the 20 Company’s March 2003 private placement of convertible securities for which it received 21 approximately $18.3 million in underwriting fees (one-third of the $54.9 million underwriting fee); 22 23 and (v) as a lead underwriter in the Company’s January 2004 12.1 million share follow-on offering 24 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 20 -

1 of its shares, where it originally negotiated to receive more than $25 million in exchange for doing

2 the offering.2 3 (b) Banc of America’s Provision of Analyst Coverage. To ensure that the 4 Company would select Banc of America as a lead underwriter in its IPO and follow-on offerings, 5 Banc of America assured the Company that it would use several price enhancement mechanisms to 6 further market the Company’s shares, post offering. These mechanisms included issuing positive 7 8 research reports with aggressive high price targets and price support through open market purchases.

9 For example, within days of the Company’s IPO, Banc of America immediately issued a “booster

10 shot” in the form of an aggressive recommendation to purchase the Company’s shares with a “price 11 target” of $150 per share. This price target was approximately 50% higher than those of any other 12 firm. In so doing, Banc of America sought to capitalize on its allegiance to the Company which was 13 being expressed through the issuance of its aggressive, if not absurd, price targets and in exchange, 14 15 Banc of America was assured of receiving a material portion of all of the Company’s future 16 investment banking business which it did.3 Banc of America continued to provide very favorable,

17 albeit false, research coverage of UTStarcom during the Class Period. For instance, in the fall of

18 2003, Banc of America purportedly “initiated coverage” with a “buy” recommendation, immediately 19 on the heels of registering the $402.5 million in convertible notes and right before conducting the 20 January 2004 Offering, as detailed herein at ¶148. This report, purportedly the work of analysts with 21 the Company’s primary investment banking firm – and issued with the benefit that insight would 22 23 purportedly bring to bear – sent the Company’s shares up 16% in the ensuing days on very high

24 2 Banc of America’s sale of UTStarcom shares in the Company’s 2000 IPO, June 2001 25 offering and SOFTBANK’s March 2002 offering predate the Class Period. 26 3 Banc of America reports dated March 28, 2000 and April 19, 2000 contain “price targets of $150” per share as compared to reports of the Company IPO underwriters USB Piper Jaffray ($105) 27 and Merrill Lynch ($100), the other published reports know to be in existence at this time. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 21 -

1 trading volume.4 Banc of America’s “buy” recommendation issued on October 2, 2003 purported to

2 be the opinion of well trained analysts and not influenced by the fact a “buy” recommendation was 3 mandated or being used as currency for future investment banking services. But as a result of Banc 4 of America’s close association with UTStarcom during the Class Period, arising out of, among other 5 things, its serving as a lead marketmaker and lead underwriter, Banc of America and its lead analyst 6 Tim Long continued to have constant access to internal UTStarcom information via Lu, Sophie and 7 8 Son and access to the facts they were concealing as alleged herein. Despite the negative and adverse

9 internal documents and reports of the Company’s actual business performance Banc of America was

10 receiving in connection with the almost continuous interaction with UTStarcom and SOFTBANK 11 representatives, Banc of America deliberately disregarded that its positive reports were false when 12 made and were helping to inflate the price of UTStarcom’s securities during the Class Period. 13 (c) Banc of America’s MarketMaking Activities. In its role as a marketmaker 14 15 in UTStarcom’s stock during the Class Period, Banc of America was engaged in purchasing and 16 selling UTStarcom’s stock on a daily basis. In fact, Banc of America became a leading marketmaker

17 in the Company’s stock where it earned fees every time shares were purchased and sold. Increased

18 stock purchases often translated into increased share prices. In fact, Banc of America made millions 19 of dollars in 2003 and 2004 by participating in buying or selling at least 37 million shares of 20 UTStarcom stock, including shares Banc of America purchased as Banc of America, Lu, Sophie and 21 Son were trying to prevent the decline in UTStarcom’s share price. At key times, when defendants 22 23 were trying to prevent declines in UTStarcom’s share price, Banc of America’s marketmaking 24 transactions accounted for as much as 25% of all block trades in UTStarcom shares.

25 26 4 Banc of America also consistently proffered purported “questions” to Lu and Sophie during the Company’s earnings conference calls – which were actually statements designed to prompt 27 positive “responses” from Lu and Sophie, such as those detailed herein at ¶¶154, 171 and 181. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 22 -

1 (d) The March 2003 Private Placement. Banc of America insisted that the

2 March 2003 note offering be structured as a “private placement” and not a public offering, as a 3 public offering would have required the defendants to use both a prospectus and registration 4 statement to sell the convertible notes. But, an underwriter like Banc of America who consummates 5 an offering using a prospectus and registration statement subjects itself to strict liability should a 6 material misstatement or omission be made in one or both documents. Given Banc of America’s 7 8 knowledge of UTStarcom’s defective internal controls, declining PAS infrastructure sales, defective

9 products, and deteriorating business model, Banc of America refused to assume such liability

10 knowing it would be buying a lawsuit. Instead, by privately placing the notes first and then causing 11 UTStarcom to register them after they had been sold, Banc of America attempted to evade legal 12 exposure for its involvement in the sale of $400 million worth of bogus UTStarcom securities by not 13 being listed as an underwriter in the prospectus issued on September 16, 2003. 14 15 (e) The January 2004 Offering. In January 2004, UTStarcom was planning to 16 conduct a fourth equity offering in order to raise approximately $475 million. The Company was 17 badly in need of hundreds of millions of dollars to help fund UTStarcom’s operations as its PAS 18 infrastructure revenues were quickly diminishing. Thus, defendants sought to quickly consummate a 19 large stock offering before the truth about UTStarcom’s financial condition reached the market. In 20 truth, the Company was seeking to capitalize on its “purported” record financial results for fiscal 21 2003 and record projections going forward. Due to the size of the January 2004 Offering, the 22 Company was negotiating with four banks, including Banc of America, to manage its $475 million 23 offering; however, due to their lack of familiarity with the Company’s internal issues (excluding 24 Banc of America), these firms wished to perform their legally required “due diligence.” Objective 25 due diligence would not only delay the offering, which infuriated the defendants, but also subject the 26 Company to risk as one or even all three of these other banks would have discovered and revealed 27 the Company’s multiple internal control deficiencies, resulting financial report misstatements, and 28 general dismal business prospects as its PAS infrastructure sales evaporated. But because it could FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 23 -

1 extract numerous benefits, Banc of America agreed to do the offering without requiring UTStarcom 2 to allow its accountants to provide the strenuous due diligence which would typically be required. In 3 a highly unusual move, once again attempting to limit exposure to liability under the securities laws, 4 the Company and Banc of America decided that they would restructure the proposed offering from 5 the traditional “firm offering” to a “bought deal.” In a “bought deal” offering, Banc of America as 6 the underwriter would purchase the stock directly from UTStarcom at a discount to what it intended 7 to sell the shares to the market at. Pursuant to the terms of the “bought” offering, Banc of America 8 purchased 12.1 million shares from the Company at $39.25 per share on January 8, 2004. Banc of 9 America hoped that since it already dominated the Company’s institutional marketmaking and had 10 historically been able use its influential analyst reports to increase the Company’s share price, it 11 could take delivery of the Company’s shares and “trade out” of them – at inflated prices – garnering 12 for itself a profit well above the typical commission of 5%-7%. In order to achieve this inflated 13 windfall, Banc of America directed UTStarcom to pre-issue its positive Q4 03 financial results on 14 the evening of January 8, 2004 – four minutes after the 12.1 million share offering was announced – 15 despite the fact that the Q4 03 earnings release was originally scheduled to be released 16 January 22, 2004. Banc of America had the power to redirect the timing of the release of the 17 Company’s own financial results, and sought to use this power to profit therefrom by using the 18 timing of the earnings release and the concomitant volume as a tool to trade out of its 12.1 million 19 share position at a profit. However, Banc of America miscalculated the market’s reaction to the 20 Company’s “bought offering.” Minutes after purchasing 12.1 million UTStarcom shares with the 21 expectation of reaping millions of dollars in capital gains, Banc of America found itself trying to 22 dump the shares as UTStarcom’s stock price plummeted over $7 per share that night as infuriated 23 investors learned that the Company’s previous promises that it would not be again tapping the equity

24 markets had been fabricated. On the morning of January 9, 2004, at the insistence of Banc of 25 America, which was then trying to arrest the decline Company’s plummeting stock price, 26 defendants raised UTStarcom’s 2004 guidance, reaffirming the Company’s 30%-32% margin 27 guidance. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 24 -

1 SOFTBANK 2 44. (a) Defendant SOFTBANK America Inc., a Delaware corporation, is a wholly 3 owned subsidiary of defendant SOFTBANK Holdings Inc., a Delaware corporation, a wholly owned 4 subsidiary of defendant SOFTBANK Corp., a Japanese corporation (collectively, “SOFTBANK”). 5 (b) Defendant SOFTBANK is the Company’s third largest customer and its 6 largest stockholder. SOFTBANK owned 60% of the Company’s common stock at the time of its 7 2000 IPO and had three directors on its Board. SOFTBANK’s control over UTStarcom was so 8 substantial that it was properly conceded in the Company’s IPO prospectus. As of December 31, 9 2004 and 2003, SOFTBANK beneficially owned approximately 12.8% and 14.1% respectively, of 10 the Company’s outstanding stock. Non-party Masayoshi Son is the president, CEO and chairman of 11 SOFTBANK and certain of its affiliates and co-founded and served as the Company’s Chairman 12 until 2003, when the Company completed the $402.5 million private placement in large part to 13 provide needed liquidity to SOFTBANK, which was then significantly overextended and badly in 14 need of cash. On April 5, 2003, UTStarcom repurchased 8 million shares of the its own common 15 stock beneficially owned by SOFTBANK at a purchase price of $17.385 per share, for total 16 proceeds of $139.6 million, all of which was raised in the public market by Banc of America at 17 SOFTBANK’s request. Softbank Group (“SBBC”) is a parent company to several of the Company’s 18 key service provider customers in Japan, including Yahoo! BB and Japan Telecom. UTStarcom 19 recognized revenue of $143.7 million, $184.4 million, and $123.0 million during the fiscal years 20 ended December 31, 2004, 2003, and 2002, respectively, from sales of telecommunications 21 equipment to SOFTBANK affiliates. This represented 14% of the Company’s sales in FY 2004 22 alone. 23 (c) Following the Company’s 2000 IPO, UTStarcom invested $10 million in 24 Softbank China, an investment fund established by SOFTBANK focused on investments in Internet 25 companies in China. This investment constitutes 10% of the funding for Softbank China, with 26 SOFTBANK contributing the remaining 90%. During the first quarter of fiscal 2002, the Company 27 invested $2 million in Restructuring Fund No. 1, a venture capital investment limited partnership 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 25 -

1 established by an affiliate of SOFTBANK which focuses on leveraged buyout investments in 2 companies in Asia undergoing restructuring or bankruptcy proceedings. On July 17, 2003, the 3 Company entered into a $10.1 million Mezzanine Loan Agreement and modem rental and service 4 agreements with other SOFTBANK affiliates. On July 28, 2004, the Company announced financial 5 projections based upon several agreements it had entered into with Japan Telecom Co., Ltd (“Japan 6 Telecom”), a wholly owned subsidiary of SOFTBANK, related to the sale of telecommunication 7 equipment and promotional services, including iAN-8000, in Japan. The value of these agreements 8 was overstated and the decision to enter into them and to include them in the Company’s guidance 9 for Q3 04 to Q4 04 was driven by defendants’ desire to prolong disclosure of UTStarcom’s then 10 rapidly deteriorating financial position. 11 45. Masayoshi Son (“Son”) served as a director of UTStarcom from October 1995 until

12 his resignation on about July 28, 2004. Son previously served as the Chairman of the Board of 13 UTStarcom between October 1995 and March 2003 when the March 2003 private placement was 14 conducted. Son also serves as president and CEO and as a director of SOFTBANK Corp., as 15 chairman of the board of directors and as CEO of SOFTBANK Holdings, Inc. and as chairman of the 16 board of directors of SOFTBANK America, Inc. Son also serves as a director of BB Marketing 17 18 Corporation, Yahoo Japan Corporation and YAMADA BroadBand Corp. Son signed the false and

19 misleading Forms 10-K for FY 02 and FY 03 and the false and misleading Registration Statements. 20 21 22 23 24 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 26 -

1 BACKGROUND 2 A. Restructuring of China’s Telecommunications Industry 3 46. China is a developing nation with a population of 1.28 billion people. It covers an 4 area of 9.6 million square kilometers. Despite a population density of 133 people per square 5 kilometer, nearly one-third of China is sparsely populated. For this reason, universal 6 telecommunications access for remote and less populated areas has been a challenge for both the 7 Chinese government and telecommunications operators in China. 8 47. An open-door policy in China has attracted substantial foreign direct investment in 9 most industries except for telecommunications and several other politically sensitive sectors. China 10 enjoyed double digit economic growth rates throughout the 1980s and 1990s. In 1998, China was 11 removed from the World Bank’s low-income classification and placed into the lower-middle-level- 12 income category. 13 48. Through the late 1990s, all public telecommunications networks and businesses in 14 China were owned and operated by China’s Ministry of Posts and Telecommunications (“MPT”). 15 Much of China’s vast countryside had not been hard-wired and it was prohibitively expensive for the 16 Chinese government to do so. Thus, China became one of the world’s largest mobile 17 communications markets. 18 49. The Chinese government believed that competition would help its state-owned 19 telecommunications industry improve its service and reduce cost. It was hoped that after several 20 years of semi-competitive conditions in the domestic market, the country’s nascent 21 telecommunications industry would be ready to face competition when China finally opened its 22 telecommunications market to the outside world through entry into the World Trade Organization 23 (“WTO”). But competition without true privatization was the path adopted by the Chinese 24 government within the constraints of its traditional centrally planned economic system and Marxist 25 ideological origins. 26 50. By November 1999, China had reached an agreement with the U.S. about China’s 27 entering into the WTO. This agreement was widely viewed as presenting a tremendously rich set of 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 27 -

1 opportunities for foreign investors. However, it also posed a serious threat to China’s state-owned 2 domestic telecommunications companies that had, until then, been protected by government policies 3 and shielded from direct foreign competition. 4 51. Under the WTO, China’s non-tariff barriers to entry into its market would be 5 forbidden. Although the Chinese government would be neutral on the technologies chosen by

6 companies, the Chinese government would retain the right to formulate national 7 telecommunications transmission standards rather than permitting the market to dictate them. 8 52. China was expected to deregulate its telecommunications market, remove remaining 9 barriers to competition, and continue to build its telecommunications networks in connection with its 10 entry into the WTO in December 2001. China agreed to establish an independent, impartial 11 regulatory authority and pro-competitive regulatory framework. In March 1998, the MII (“MII”) 12 was formed to assume the regulatory responsibilities of the former MPT and to lead the divestiture 13 of China’s state-owned telecommunications company, old China Telecom. Seeking to take 14 advantage of the ingenuity and investment only a free-market system could provide, while limiting 15 the country’s exposure to “excessive competition” and “excessive investment,” between 1998 and 16 2001 the Chinese government began splitting off old China Telecom’s divisions into four separate 17 companies. China would maintain significant control over its telecommunications carriers through 18 its continued majority ownership of these companies and rigorous licensing system. 19 53. In 1999 China’s state-owned telecommunications networks and businesses were 20 separated along their four business lines into four state-owned companies: 21 (a) “China Unicom” assumed China’s paging operations; 22 (b) “China Mobile” assumed China’s mobile communications businesses; 23 (c) “China Satcom” assumed China’s satellite communications businesses; and 24 (d) “China Telecommunications Corporation” (the “CTC”) assumed all of 25 China’s fixed-line telecommunications businesses previously operated by each of China’s provinces, 26 certain municipalities and territories under the supervision of the Directorate General of 27 Telecommunications. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 28 -

1 54. In May 2002, the CTC’s fixed-line assets were again divided into two separate 2 entities: 3 (a) New “China Telecom,” which retained the principal fixed-line networks 4 located in the 21 southern and western provinces and municipalities of China and assets constituting 5 70% of the bandwidth of China’s nationwide inter-provincial fiber-optic network; and 6 (b) “China Netcom,” which was established with the principal fixed-line networks 7 of China’s 10 northern provinces, municipalities and autonomous regions (including the 8 Municipality of Beijing) and assets constituting 30% of the bandwidth of China’s nationwide inter- 9 provincial fiber-optic network. 10 55. Under the 2001 restructuring plan, only China Telecom and China Netcom, 11 respectively the country’s largest and second largest fixed-line operators, were permitted to provide 12 nationwide fixed-line telecommunications services in China. However, neither China Telecom nor 13 China Netcom was permitted to own or operate mobile telecommunications systems, which are 14 operated by China Mobile and China Unicom. 15 56. Despite the fact that all four of China’s majority state-owned telecommunications 16 companies have publicly traded stock, the Chinese government retains an ownership interest of 17 approximately 75% in each company and wields significant control as a result thereof.5

18 B. China’s Immense Mobile Market 19 57. In 1987, analog mobile phone service was first introduced in Guangzhou and 20 Shanghai, marking the beginning of mobile communications in China. In 1994, the digital mobile 21 phone network was introduced to the Chinese mobile communications market. 22 58. Due to the considerable market potential for mobile service in China arising out of the 23 high expense of hard-wiring China’s vast countryside, China’s mobile subscriber pool underwent 24

25 5 The control wielded by the Chinese government over these entities cannot be overstated. For 26 example, in November 2004, China’s State-owned Assets Supervision and Administration Commission shocked investors by unilaterally swapping around the chief executives of the big four 27 telecom carriers without providing any explanation to or consent from its public investors. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 29 -

1 soaring growth. By July 1997, China’s mobile subscribers totaled 10 million, making China’s 2 mobile communications network the third largest in the world, just behind that of the U.S. and Japan. 3 By August 1998, the number of subscribers in China reached 20 million, turning China’s national 4 Global System of Mobile communications (“GSM”) network (a so-called “2G” network) into the 5 biggest one in the world. 6 59. By the end of June 2000, China Mobile had an 82% market share and it was the 7 largest GSM network in the world. By October 2001, the number of fixed-line subscribers in China 8 had reached 174 million and the number of cell phone users stood at 136 million.

9 C. China’s Personal Handy Phone System and UTStarcom’s Personal Access System Are Rolled Out 10 60. In an effort to prevent multiple companies from erecting redundant 11 telecommunications systems, the Chinese government designated China Telecom and China Netcom 12 as the country’s only wire-line providers and China Mobile and China Unicom as its only mobile 13 providers. 14 61. With so much of the Chinese countryside unwired, China Telecom and China Netcom 15 competed directly with China Mobile and China Unicom for customers, but were at a disadvantage 16 because it was very costly to install new fixed-line services. Mobile user rates were significantly 17 higher than wire-line rates and China Telecom and China Netcom grew envious of the immense 18 profits the mobile providers were reaping. 19 62. UTStarcom offered a solution for China Telecom and China Netcom – PHS. PHS is 20 wireless access telephone technology that evolved from analog cordless telephone technology 21 developed in Japan (though it was never accepted there). PHS services are wireless telephone 22 services that have features similar to traditional mobile telephone services. For example, both offer 23 voice services over handsets as well as short messaging functions. But, in essence, PHS is only a 24 glorified cordless phone. It lacks nationwide roaming capabilities and has a relatively short range of 25 about 1.5 km per cell, so it can be used only within a given city or region. China Telecom and China 26 Netcom were able to skirt the regulatory restrictions prohibiting them from providing mobile 27 services by convincing MII that PHS was just a cheap, temporary extension of the fixed-line 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 30 -

1 network, rather than a true mobile service, and that permitting the wire-line carries to provide low- 2 cost PHS access to millions of customers living in areas not hard-wired for traditional service would 3 finally provide China’s lower echelons with access to basic telephone services. 4 63. In 1996, Chinese regulators authorized old China Telecom’s first wireless local loop 5 (“WLL”) under the name Shi Hua Tong. That system continued to operate in Shenzhen, with 6 approximately 62,000 to 72,000 subscribers as of April 2003. UTStarcom began selling PAS 7 infrastructure to China Telecom and China Netcom in 1997. By October 1999, UTStarcom had 8 installed more than 850,000 lines of its PAS network in China. By the beginning of the Class 9 Period, China was the biggest market for PHS, and UTStarcom’s PAS comprised 60% of the PHS 10 deployed by China Telecom and China Netcom. 11 64. In China, as in other developing economies where mobile is often a first phone, PHS 12 offered a rival to mobile service. Designed to serve the needs of China’s low and middle income 13 consumers, China Telecom’s and China Netcom’s rates for PHS services were significantly lower 14 than those for traditional fixed-line services. 15 65. PAS could connect to ordinary end-office switches, which meant that already 16 available but unused switched capacity could be utilized without having to make the significant 17 financial investment in laying last-mile hard-wiring. Moreover, both handset and airtime costs were 18 a third to a quarter of those charged to mobile users since PAS did not require modification or 19 hardware adaptation of the fixed-line networks, as true wireless systems did. As a result, PAS 20 networks were soon being rolled out en masse as an extension to existing fixed-line networks. 21 66. However, in May 2000, the MII circulated an internal memo – apparently at the 22 behest of China Mobile and China Unicom – halting the rollout of new PHS (including PAS) 23 networks, pending a “review” of the technology. When the memo became public, UTStarcom’s 24 share price fell almost 50% overnight. Although the ban was reversed in June 2000, the MII also 25 prohibited future PHS installations from cities of more than two million people. 26 67. China Telecom and China Netcom had successfully brought PHS in from a regulatory 27 gray area to become a service authorized for second tier cities. In November 2002, China Telecom 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 31 -

1 built out PAS networks in two of its “top-tier” cities, Chongqing and Guangzhou. The MII did not 2 block these, or China Netcom’s PAS operation in Beijing, which began in February 2003. But by 3 February 2003, insiders in the Chinese telecommunications industry knew the Chinese government 4 only considered PHS a transitory product which would pave the way for the launch of “3G” mobile 5 phone service in China. 6 D. China Prepares to Launch Third Generation (“3G”) Mobile Service and Promotion of Its Own Homegrown 3G Standard 7 68. By the time the division of the CTC into new China Telecom and China Netcom was 8 announced in January 2002, China’s entry into the 3G mobile market was becoming a matter of 9 significant importance. Under China’s WTO accords, the MII was supposed to stay neutral as to the 10 technologies adopted but was permitted to determine which 3G transmission standards were adopted 11 through its ability to only license 3G transmission standards. 12 69. Fixated on becoming a technology designer and producer, rather than merely an 13 international consumer, China sought to develop and market its own 3G transmission standard rather 14 than relying on western technologies. On June 29, 1998, the last day set by the International 15 Telecommunication Union (the “ITU”) for the submission of IMT-2000 standards for 3G standards 16 from individual member countries, China faxed its own proposal to Geneva. Signed by the Minister 17 and two Vice-Ministers of the MII, this proposal proposed a new TD-SCDMA standard. By its 18 deadline, the ITU had received a total of 16 proposals from North America, Europe, Japan and 19 China. 20 70. After much discussion and debate, TD-SCDMA, together with SC-TDMA 21 (UMC-136), MC-TDMA (EP-DECT), MC-CDMA (CDMA2000), and DS-CDMA (WCDMA), 22 were accepted as radio interface standards by the ITU on November 5, 1999. In May 2000, at the 23 World Radio Conference (“WRC”) of the ITU, TD-SCDMA was accepted as one of only three 24 3G transmission standards, together with CDMA2000 and W-CDMA (wideband CDMA). On 25 March 16, 2001, TD-SCDMA made another breakthrough: at the 11th plenary session of 3GPP 26 (Third Generation Partnership Project), all technical schemes of the TD-SCDMA 3G standard were 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 32 -

1 accepted by 3GPP and were included in 3GPP’s 4th Release. This signified that TD-SCDMA had 2 not only been accepted by the ITU, but also by an industry alliance of operators and vendors. 3 71. TD-SCDMA acceptance marked a milestone for the Chinese telecommunications 4 industry, as it was the very first telecommunication standard proposed by China to be internationally 5 accepted. The long-time efforts of the Chinese government and the industry had finally paid off.

6 However, because TD-SCDMA worked on the same radio transmission frequencies as PAS, 7 unbeknownst to UTStarcom’s investors, when it adopted TD-SCDMA, the Chinese government 8 would lock PAS products out of the Chinese telecommunications market, or severely restrict its 9 use. 10 72. By July 2002, as reported by Wireless Asia, certain companies with vested interests in 11 technologies that used other 3G standards feared MII would mandate TD-SCDMA as the Chinese 12 3G transmission standard – not because their products interfered with TD-SCDMA, but because the 13 Chinese government would not support other 3G transmission standards. Muzi News reported in 14 December 2002 that China’s outgoing top telecommunications officials had stated the country would 15 permit market forces to determine whether Chinese carriers chose Europe’s WCDMA (wideband 16 CDMA) transmission standard, Qualcomm’s CDMA2000 (Code Division Multiple Access) 17 transmission standard, or China’s home-grown TD-SCDMA standard, attempting to ease investor 18 concerns that Beijing would prefer its home-grown standard to the exclusion of other technologies. 19 73. However, UTStarcom’s insiders knew that even if other transmission standards were 20 ultimately adopted in addition to TD-SCDMA, the government would in fact favor TD-SCDMA, 21 significantly undercutting the profitability of PAS. MII was providing significant financial backing 22 for TD-SCDMA development and it was in the country’s national interest to favor its own 23 3G transmission standard. MII’s support for TD-SCDMA has been evidenced by the Chinese 24 government’s repeated delays of its launch of 3G (even to this day) in order to permit further 25 research and development of TD-SCDMA to enable it to compete with the more mature European 26 and U.S. technologies upon launch. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 33 -

1 74. In April 2004, Chen Jinqiao, director of China’s Institute of Telecommunications 2 Policy, said that when 3G is eventually rolled out, China will likely only award three 3G licenses. 3 Chen expected two licenses to go to mobile operators China Mobile and China Unicom, with the 4 third going either to China Telecom or China Netcom. Chen also stated that whichever fixed-line 5 operator (China Telecom or China Netcom) is awarded the license, it will be required to build a 6 3G network based on the TD-SCDMA standard. 7 75. Insiders at UTStarcom also knew throughout the Class Period that the Chinese 8 government was favoring TD-SCDMA and that it would necessarily mean a decline in PAS 9 profitability. Pursuant to a Joint Development Agreement entered into between UTStarcom and 10 Datang Mobile Communications, Inc. (“Datang”) in November 2002, the two companies would 11 jointly develop TD–SCDMA system products. In February 2004, the MII commenced its second 12 round of field testing of 3G field trials. All six of China’s telecom operators (including the smaller 13 China Satcom and China Railcom) participated in TD-SCDMA field trials. UTStarcom participated 14 in those trials and its own new 3G products were field tested by China Netcom. In late March 2004, 15 UTStarcom struck a royalty licensing deal with Qualcomm, giving UTStarcom a patent license to 16 develop, manufacture and sell subscriber and infrastructure equipment for use in TD-SCDMA 17 systems. 18 76. TD-SCDMA in use in China was designed to ensure a smooth transition from the 2G 19 GSM system to its future 3G systems. The TD-SCDMA is designed as a dual band and dual mode 20 system. When 3G base stations are available, they can be installed in the same place as the GSM 21 base station. In its coverage area, therefore, TD-SCDMA can support both GSM and 3G services.

22 UTSTARCOM’S EFFORT TO CONCEAL THE DEMISE IN PAS’S PROFITABILITY FROM INVESTORS 23 A. PAS Is a Transitory Product 24 77. Other than requiring that PHS systems not offer roaming service (seen as an 25 encroachment on the mobile market), MII had taken a virtual hands-off policy as to PHS technology 26 and permitted it to operate without issuing formal licenses. However, insiders at UTStarcom knew 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 34 -

1 that PAS would be phased out upon the launch of 3G because PAS was seen as a mere transitory 2 product by the Chinese government. 3 B. China Mobile’s and China Unicom’s Hostility to PAS and Ability to Price It Out of the Market 4 78. By the end of 2002, there were 7.5 million PAS subscribers on UTStarcom’s systems 5 throughout China, a net increase of 137% year-over-year. UTStarcom’s installed and under 6 construction PAS/iPAS system capacity in China reached 22.2 million lines at the end of 2002, an 7 increase of 236% over the capacity of 6.6 million lines at the end of 2001. China Telecom’s PHS 8 subscribers increased from 7.24 million as of December 31, 2002 to 18.35 million as of 9 December 31, 2003, or 300%, and China Netcom’s PHS subscribers increased from 1.4 million as of 10 December 31, 2002 to 15.1 million as of December 31, 2004, or 1100%. 11 79. According to the Company’s Form 10-K for the fiscal year ending December 31, 12 2002, historically, substantially all of its sales had been to service providers in China. In fact, 85% 13 of the Company’s 2002 sales were to China. Of the sales to China, 62% were for sales of PAS 14 infrastructure products and 38% were for sales of PHS handsets. Thus, UTStarcom was highly 15 dependent upon China and PAS for revenues and profits. 16 80. However, by March 2003, at the start of the Class Period, China’s two mobile 17 providers had grown very concerned about the growth of UTStarcom’s PAS infrastructure in China, 18 as they feared it gave the fixed-line providers a head start for when they would eventually issued 3G 19 licenses. As reported by Wireless Asia in April 2003, the worst-case scenario for the two mobile 20 providers would be to see their fixed-line rivals build up an installed base of 20 or 30 million 21 wireless subscribers, along with base station sites and handset distribution networks around the 22 country. The mobile providers also complained that China Telecom and China Netcom were 23 improperly stealing would-be mobile customers away from them by undercutting mobile rates only 24 through improper subsidization tactics. 25 81. Tensions were boiling over. In August 2000, China Mobile refused to allow its 26 Lanzhou customers to place calls to numbers used by China Telecom’s newly-installed PAS system, 27 in breach of their interconnect agreement. In retribution, China Telecom suspended call traffic to 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 35 -

1 Lanzhou’s 260,000 mobile phones (serviced by China Mobile) for some 27 hours, much to the 2 consternation of Lanzhou’s mobile phone users. 3 82. Another spat between China’s two mobile providers and its two fixed-line providers 4 commenced in January 2003 when Guangdong Telecom (a China Telecom company) launched its 5 call-forwarding service in the major Guangdong cities of Guangzhou, Shenzhen, and Dongguan. 6 The move sent China Mobile’s stock price to a four-year low. Both mobile providers filed 7 complaints with the MII. Days later, China Telecom stopped marketing the service, but continued to 8 sign up new users. Unlike call-forwarding in most other countries, Guangdong’s system required a 9 separate device that was plugged into the customer’s home phone, and could only reach that 10 customer’s wireless phone within a limited radius – technically falling under the definition of a 11 “limited mobility” service. 12 83. Under the current structure, telecommunications businesses may only be operated in 13 China as licensed by the MII and the MII dictates almost all pricing. In order to support the smaller 14 of the two mobile providers, MII permits China Unicom to set its rates at price levels up to

15 10% above or below the government’s fixed rates. The risk that China Unicom’s preferential 16 pricing treatment presented to the profitability of UTStarcom’s PAS sales was concealed from 17 U.S. investors during the Class Period. Specifically, it was never disclosed that because China 18 Unicom was permitted to sell mobile services for 10% less than the government-set rate for mobile 19 services, many consumers who would have otherwise compromised and accepted PHS’s geographic 20 limitations in exchange for cheaper rates would switch over to mobile service if mobile and PHS 21 were comparably priced. 22 84. It was well known within the Chinese telecommunications industry that if the mobile 23 providers were to reduce their charges for mobile telecommunications services to rates comparable 24 to PHS, and the fixed-line providers did not lower their PAS rates in tandem, the fixed-line 25 providers’ existing and potential PAS customers would abandon PAS to take advantage of the less 26 geographically-restricted service, quality and other advantages of true mobile technology. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 36 -

1 C. PAS Conflicted with TD-SCDMA and Its Profitability Would Dissipate When 3G Arrived 2 85. The MII retained control over the administration and allocation of 3 telecommunications resources in China, including spectrum frequencies and telecommunications 4 network numbers. The use of these resources by telecommunications operators was subject to the 5 approval of the MII or the relevant provincial telecommunications administrations or provincial 6 radio administrations and the payment of a telecommunications resources usage fee. 7 86. Pursuant to MII directives, the PHS system in China operates in the 1880-1930 MHz 8 range. According to the World Radio Conference in Istanbul, spectrums in 800/900 MHz and 9 1700/1800 MHz bands were allocated for implementing 3G services globally. However, defendants 10 knew but concealed from U.S. investors that the Chinese government’s selection of the TD-SCDMA 11 technology meant that the use of the existing PHS spectrum would be restricted by the Chinese 12 government because use of PHS interferes with TD-SCDMA. 13 UTSTARCOM’S INADEQUATE INTERNAL CONTROLS 14 87. Section 13(b)(2) of the 1934 Act requires, in pertinent part, that every reporting 15 16 Company: 17 (A) make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the 18 issuer; 19 (B) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that . . . transactions are recorded as necessary . . . to 20 permit preparation of financial statements in conformity with [GAAP]. 21 15 U.S.C. §78m(b)(2). 22 88. These provisions require an issuer to employ and supervise reliable personnel, to 23 maintain reasonable assurances that transactions are executed as authorized, to properly record 24 transactions on an issuer’s books and, at reasonable intervals, to compare accounting records with 25 physical assets. 26 89. The Sarbanes-Oxley Act of 2002 (“SOX”) became effective in July 2002. SOX §302

27 places responsibility for creating and filing accurate financial reports upon CEOs and CFOs of 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 37 -

1 public corporations by requiring that they certify that they have evaluated the Company’s internal

2 control structure to ensure all material information would reach them and be reported to investors 3 through financial statements that accurately reflected the Company’s financial performance. Section 4 404 of SOX requires companies to provide a detailed assessment of their internal controls to 5 shareholders in financial reports. Companies with revenues of more than $70 million for 2004 were 6 required to file their SOX §404 reports with the SEC 75 days after the end of their fiscal year. 7 8 Defendants Lu and Sophie repeatedly filed SOX §302 certifications throughout the Class Period

9 falsely attesting to the adequacy of UTStarcom’s internal controls, when in reality the Company’s

10 internal controls were acutely defective. 11 90. Meanwhile, throughout the Class Period defendants had caused UTStarcom to violate 12 provisions of SOX and §13(b)(2)(a) of the 1934 Act by failing to maintain accurate records 13 necessary to accurately present its sales pipeline or to reliably forecast future revenues, expenses and 14 15 profit margins. Based upon their access to and/or review of the Company’s accounting and internal 16 controls concerning its sales pipeline and related matters, each of the defendants were aware that

17 they were insufficient to: (i) properly document, track or verify orders made, shipped or nearing

18 purported “final acceptance”; (ii) accurately report the terms of the purported sales of PAS 19 infrastructure the Company was announcing; (iii) keep its commitments to suppliers; (iv) calculate 20 costs of goods being sold and shipped; or (v) to accurately forecast expected margins. The 21 defendants also knew that the investment community was intensely watching the reported 22 23 outstanding “backlog,” “deferred revenues,” “customer advances,” “deferred costs,” “inventory at 24 customer site” and “inventory at customer site subject to contract,” thus defendants were providing

25 them with the purported “visibility” emphasized by defendants on sales of the Company’s 26 historically most important revenue and earnings provider, PAS infrastructure. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 38 -

1 91. In fact, despite knowing the true state of the Company’s unreliable recordkeeping and

2 defective internal controls relating to the Company’s supply chain, compliance with costs and 3 expense budgets, and PAS infrastructure sales, defendants regularly filed financial statements and 4 issued releases throughout the Class Period that concealed the deficiencies in UTStarcom’s internal 5 accounting controls. 6 92. As described herein at ¶¶23-24, 118-119, the market would later be shocked to learn 7 8 in connection with UTStarcom’s earnings restatement that while the market was intensely focused

9 on the Company’s reported financial results, its internal control system, which defendants Lu and

10 Sophie had purportedly designed and evaluated “to ensure that material information relating to the 11 Company would be made known” to them and the market, was so defective that defendants lacked 12 any reasonable basis during the Class Period to make any estimate of future performance. In fact, it 13 took defendants ten pages in the Company’s restated 2003 Form 10-K to spell out the deficiencies in 14 15 the internal controls and the resulting Class Period financial misstatements. 16 FALSE AND MISLEADING STATEMENTS IN UTSTARCOM’S STOCK AND NOTES REGISTRATION STATEMENTS 17 A. Notes Registration Statement 18 93. On or about March 12, 2003, UTStarcom issued $402.5 million of convertible notes 19 in a private placement managed by Banc of America which had been priced on March 7, 2003. 20 After underwriting and other costs were deducted, UTStarcom received $347.6 million in net 21 22 proceeds. Banc of America received a substantial portion of the $54.9 million in underwriting fees

23 and costs. The private placement terms required the Company to register the convertible notes (and

24 the stock they were convertible into) for resale within 120 days. 25 94. On September 3, 2003, UTStarcom filed an Amendment No. 1 to Form S-3 26 Registration Statement under the Securities Act of 1933 (“1933 Act”) registering the $402.5 million 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 39 -

1 in convertible bonds issued in March 2003 (the “Notes Registration Statement”). The Notes

2 Registration Statement incorporated by reference: 3 (a) The Company’s Annual Report on Form 10-K for the fiscal year ended 4 December 31, 2002, filed February 21, 2003, including the information incorporated by reference 5 from its definitive proxy statement relating to its 2003 annual meeting of stockholders; 6 (b) The Company’s quarterly reports on Form 10-Q for the fiscal quarter ended 7 March 31, 2003, filed May 12, 2003, and the fiscal quarter ended June 30, 2003, filed August 4, 8 2003; 9 (c) The Company’s Current Reports on Form 8-K (i) dated March 6, 2003 (filed 10 March 7, 2003), (ii) dated and filed March 7, 2003, (iii) dated May 23, 2003 (filed June 4, 2003, as 11 amended on July 10, 2003) and (iv) dated July 10, 2003; and 12 (d) The description of the Company’s common stock contained in its registration 13 statement filed with the SEC on February 23, 2000 and any further amendment or report filed 14 hereafter for the purpose of updating any such description. 15 95. Banc of America was the lead banker on the initial sale and registration of the March 16 2003 private placement. The false and misleading Notes Registration Statement was signed by Lu, 17 Sophie, Wu, Son, Toy, Betsy Atkins, and Larry Horner. 18 96. As referred to hereinafter, the “Notes Registration Statement” includes the Amended 19 20 Registration Statement filed September 3, 2003; the Notes Prospectuses filed September 16, 2003,

21 October 7, 2003, November 5, 2003, February 10, 2004, April 26, 2004, and May 26, 2004; and the

22 SEC filings incorporated therein as described in ¶¶94 and 118-119. 23 B. Stock Registration Statement 24 97. On August 25, 2003, UTStarcom filed an Amendment No. 1 to Form S-3 Registration 25 Statement under the 1933 Act (the “Stock Registration Statement”). The maximum aggregate 26 amount of securities to be offered by UTStarcom thereunder was $500 million. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 40 -

1 98. The so-called “shelf registration” (completed pursuant to Rule 415) permitted

2 UTStarcom to quickly raise cash by issuing securities and denominations as it saw fit without 3 seeking time-consuming SEC approval. In exchange for receiving the ability to bypass the formal 4 registration process for specific offerings, UTStarcom agreed to incorporate by reference into the 5 Stock Registration Statement: (i) any SEC filing made by the Company after the Stock Registration 6 Statement was filed; and (ii) any other documents specifically incorporated by reference into the 7 8 Stock Registration Statement. The SEC filings incorporated by reference into the Stock Registration

9 Statement included:

10 (a) The Company’s Annual Report on Form 10-K for the fiscal year ended 11 December 31, 2002, filed February 21, 2003, including the information incorporated by reference 12 from its definitive proxy statement relating to its 2003 annual meeting of stockholders; 13 (b) The Company’s quarterly reports on Form 10-Q for the fiscal quarter ended 14 March 31, 2003, filed May 12, 2003, and the fiscal quarter ended June 30, 2003, filed August 4, 15 2003; 16 (c) The Company’s Current Reports on Form 8-K (i) dated March 6, 2003 (filed 17 March 7, 2003); (ii) dated and filed March 7, 2003; (iii) dated May 23, 2003 (filed June 4, 2003, as 18 amended on July 10, 2003) and (iv) dated and filed July 10, 2003; and 19 (d) The description of the Company’s common stock contained in its Registration 20 Statement on Form 8-A, filed with the SEC on February 23, 2000. 21 99. The January 2004 public common stock offering (the “January 2004 Offering”) 22 commenced January 8, 2004, the date Banc of America began selling the common stock to its clients 23 (though the settlement date was not until January 14, 2004). The Prospectus issued in connection 24 with the January 2004 Offering was filed with the SEC on January 29, 2004. The SEC filings 25 26 incorporated into the Stock Registration Statement pursuant to Rule 415 included: 27 (a) The Company’s Annual Report on Form 10-K for the fiscal year ended 28 December 31, 2002, as amended September 8, 2003; FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 41 -

1 (b) The Company’s quarterly reports on Form 10-Q for the fiscal quarter ended 2 March 31, 2003, as amended September 8, 2003, and the fiscal quarter ended June 30, 2003, filed 3 August 4, 2003; and 4 (c) The Company’s Current Reports on Form 8-K (i) dated and filed September 5 25, 2003; (ii) dated and filed October 24, 2003; (iii) dated and filed December 12, 2003; (iv) dated 6 and filed January 7, 2004; (v) dated and filed January 12, 2004; (vi) dated and filed January 13, 7 2004; and (vii) dated and filed January 22, 2004. 8 100. Banc of America was sole underwriter of the January 2004 Offering. Banc of

9 America, UTStarcom and the individual signatories of the Stock Registration Statement, including 10 defendants Lu, Sophie, Wu, and Toy, and Son, Betsy Atkins and Larry Horner, signed the false and 11 misleading Stock Registration Statement. The “Stock Registration Statement” includes the 12 Amended Registration Statement filed August 25, 2003, the Prospectus filed January 29, 2004, and 13 the SEC filings incorporated therein as described ¶¶99 and 118-119. 14 15 C. False Statements in the Stock and Notes Registration Statement Concerning the Company’s Lack of Internal and Disclosure Controls 16 101. With respect to defendants’ design and evaluation of the Company’s internal and 17 disclosure controls, the Registration Statements both incorporated by reference the Company’s SEC 18 19 filings described above in ¶¶94, 99, 118-119. Each of these SEC filings contained representations 20 and attached a certification substantially similar to the following:

21 CONTROLS AND PROCEDURES

22 (a) Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of 23 our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934 (the “Exchange Act”)) as of a date (the 24 “Evaluation Date”) within 90 days before the filing date of this quarterly report on Form 10-Q, have concluded that as of the Evaluation Date, our disclosure controls 25 and procedures are effective to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, 26 processed, summarized and reported within the time periods specified in SEC rules and forms. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 42 -

1 (b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure 2 controls and procedures subsequent to the Evaluation Date. 3 * * * 4 5 CERTIFICATION 6 I, [Hong Liang Lu or Michael Sophie], certify that: 7 1. I have reviewed this quarterly report on Form 10-Q of UTStarcom, Inc.; 8 2. Based on my knowledge, this report does not contain any untrue 9 statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were 10 made, not misleading with respect to the period covered by this report; 11 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial 12 condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 13 4. The registrant’s other certifying officer(s) and I are responsible for 14 establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial 15 reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 16 a. Designed such disclosure controls and procedures, or caused such 17 disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the 18 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in 19 which this report is being prepared;

20 b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under 21 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial 22 statements for external purposes in accordance with generally accepted accounting principles; 23 c. Evaluated the effectiveness of the registrant’s disclosure controls 24 and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the 25 end of the period covered by this report based on such evaluation; and 26 d. Disclosed in this report any change in the registrant’s internal control 27 over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case 28 of an annual report) that has materially affected, or is reasonably FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 43 -

1 likely to materially affect, the registrant’s internal control over financial reporting; and 2 5. The registrant’s other certifying officer and I have disclosed, based 3 on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors 4 (or persons performing the equivalent functions):

5 a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are 6 reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 7 b. Any fraud, whether or not material, that involves management or 8 other employees who have a significant role in the registrant’s internal control over financial reporting. 9 102. In fact, the truth was, as UTStarcom later admitted, it had: 10 (a) Ineffective controls over the financial reporting process due to an insufficient 11 compliment of personnel with an adequate level of accounting knowledge experience and training; 12 (b) Inadequate controls over revenue and deferred revenue accounts and the 13 associated costs of sales; 14 (c) Inadequate controls over inventory-deferred costs and the calculation of the 15 inventory reserve; 16 (d) Inadequate controls for accounting for good will; 17 (e) Inadequate accounting controls for currency translation adjustments; 18 (f) Inadequate controls for accruing expenses primarily in China and Japan 19 (where the bulk of UTStarcom’s business was located); 20 (g) Inadequate controls over the financial reporting process to ensure accurate 21 preparation in the review of its financial statements; 22 (h) Inadequate controls with respect to calculating the tax provision and related 23 balance sheet accounts; 24 (i) Inadequate segregation of duties; 25 (j) Inadequate identification and accounting for related-party transactions and 26 related-party relationships; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 44 -

1 (k) Inadequate monitoring of the accounting function for operations outside the 2 United States; and 3 (l) An overall poor control environment. 4 103. Defendants’ representations concerning the design and evaluation of the Company’s

5 internal controls were false and misleading when made. Defendants lacked any reasonable basis for 6 making them, as at the time these statements were made, defendants Lu, Sophie and UTStarcom 7 each were aware that UTStarcom did not possess adequate internal or disclosure controls or even the 8 ability to report meaningful or accurate operating or financial information in a timely manner. These 9 representations to UTStarcom’s investors were acutely material as the investment community closely 10 11 followed the Company’s reports of balance sheet items such as “deferred revenues,” “deferred

12 costs,” “customer advances,” “inventory at customer site,” and projected “gross margins,” because

13 of UTStarcom’s unique business model and the length of time it took the Company to recognize 14 revenues and profits. 15 104. Specifically, 90% of the Company’s historical revenues had been derived from sales 16 of PAS infrastructure and handsets to China Telecom and China Netcom. Of those two, the PAS 17 18 infrastructure products had historically garnered margins as high as 50% whereas the Company’s 19 sale of handsets had garnered margins as low as 4% - 5%. Moreover, whereas handsets are a cash

20 and carry item for which sales revenues are immediately recognized, sales revenues from PAS

21 infrastructure sales could not be recognized until the Company received “final acceptance.” 22 Receiving “final acceptance” had historically taken a year or longer, but defendants were stating 23 during the Class Period “final acceptance” was being achieved within 6-12 months. 24 105. Because the PAS infrastructure products were the Company’s most profitable 25 26 product, and because the Company’s sales pipeline for PAS infrastructure items could take upwards 27 of 12 months to complete before revenue could be recognized, and defendants’ entire business model 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 45 -

1 was dependent upon selling these infrastructure networks (including to support the Company’s sales

2 of PAS handsets which were often sold as a package deal with the higher margin infrastructure 3 products), the investment community was keenly focused on balance sheet items demonstrating what 4 was in the Company’s sales pipeline at any given time because this foretold UTStarcom’s revenues, 5 profits and margins for the next 6-12 months. The investment community was observant of these 6 items because defendants repeatedly told the investment community that these Balance Sheet items 7 8 provided “high visibility” into the Company’s otherwise oblique financial performance. The PAS

9 infrastructure sales parked in the Company’s sales pipeline were very material as they constituted

10 40% - 60% of its annual revenues at any given time and a much larger percentage of its profits. 11 106. When an order for PAS infrastructure was placed, the anticipated revenues were 12 added to UTStarcom’s “backlog” which was reported at the end of each fiscal year. Thereafter, as 13 the infrastructure purchases were shipped to the customers and set up in China, the anticipated 14 15 revenues were booked as deferred costs on the Company’s balance sheet and any payments made by 16 customers were booked on the Company’s balance sheet as deferred revenues and customer

17 advances. Product sitting at the customers’ site which was not subject to contract was simply listed

18 as “inventory at customer site,” whereas product sitting at the customers’ site which was subject to 19 contract was broken out as “inventory at customer site subject to contract.” 20 107. However, for at least the reasons defined in ¶27 (a)-(j), defendants knew throughout 21 the Class Period that demand for PAS infrastructure was declining and would cease at some point in 22 23 the not too distant future (which appears to have occurred in the Q1 05 when infrastructure revenues 24 dipped down to $110 million).

25 108. As the Company’s ability to calculate and report current revenues and expenses, and 26 thus margins, or to forecast future revenues and expenses, and thus margins, was severely impaired, 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 46 -

1 the Registration Statements’ false and misleading statements concerning UTStarcom’s internal and

2 disclosure controls were particularly deceptive and material. 3 D. Additional False and Misleading Statements in the Registration Statements 4 109. The Registration Statements both stated that: 5 We provide a range of next-generation wireless and wireline network service 6 products that support widely adopted international standards and protocols, so service providers can easily integrate them into existing networks and deploy them 7 in new networks. 8 * * * 9 [B]ecause our products offer a migration path, service providers can easily add new wireless services and additional revenue streams while maintaining the value of 10 their previous technology investments.” 11 These statements were false and misleading for the reasons laid out in ¶27(a)-(j). 12 110. During the Class Period, defendants UTStarcom, Banc of America, SOFTBANK and

13 the signatories of the Registration Statements caused to be filed with the SEC Registration

14 Statements in connection with the sale of 12.1 million shares of UTStarcom common stock on or 15 about January 8, 2004 and convertible notes sold in March 2003 and registered in September 2003. 16 111. UTStarcom. UTStarcom is the registrant for and the issuer of the common stock and 17 convertible notes issued via the false and misleading Registration Statements. 18 19 112. SOFTBANK. During the Class Period, SOFTBANK was a controlling shareholder 20 of UTStarcom, owning and controlling between 13%-15% of the Company’s common stock.

21 UTStarcom, the Registration Statements signatories and SOFTBANK conceded SOFTBANK’s 22 control over the Company in the Company’s IPO Registration Statement and in the Company’s 23 Form 10-K filed for the fiscal years ending December 31, 2003 and 2004. During the Class Period, 24 Son, SOFTBANK’s Chairman, CEO and President, was a director of UTStarcom. UTStarcom did 25 tens of millions of dollars worth of business and financing transactions with SOFTBANK annually. 26 27 SOFTBANK also controlled over $5 million of the $10 million in investment funds SOFTBANK 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 47 -

1 received from the Company’s IPO proceeds. SOFTBANK also received $140 million of the

2 proceeds of the March 2003 private placement underwritten by Banc of America. SOFTBANK also 3 had retained Banc of America to conduct other public offerings of UTStarcom stock for it prior to 4 the commencement of the Class Period. SOFTBANK also oversaw the selection of Banc of 5 America as the underwriter in the January 2004 Offering. Son, as a representative of SOFTBANK, 6 participated in the preparation and dissemination of the Registration Statements by preparing, 7 8 reviewing and/or signing the Registration Statements and thereby causing their filing with the SEC.

9 Neither Son nor SOFTBANK made a reasonable investigation or possessed reasonable grounds for

10 the belief that the statements contained in the Registration Statements were true and did not omit any 11 material fact and were not misleading. SOFTBANK was a control person of UTStarcom, by virtue 12 of its own admissions, stock ownership, significant financial relationships with and representation on 13 UTStarcom’s Board. 14 15 113. Signatories. The signatories of the Registration Statements (including defendants 16 Lu, Sophie, Toy and Wu) participated in the preparation and dissemination of the Registration

17 Statements by preparing, reviewing and/or signing of the Registration Statements and causing their

18 filing with the SEC. None of the signatories made a reasonable investigation or possessed 19 reasonable grounds for the belief that the statements contained in the Registration Statements were 20 true and did not omit any material fact and were not misleading. Each of the signatories were 21 control persons of UTStarcom, by virtue of their position as UTStarcom shareholders and senior 22 23 officers and directors, and is liable for violations of the federal securities laws. Each of them also 24 had substantial holdings in UTStarcom stock.

25 114. Banc of America. Banc of America is an investment banking firm that served as an 26 underwriter in the Offerings. Banc of America failed to conduct a reasonable investigation and/or 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 48 -

1 did not have reasonable grounds to believe that UTStarcom’s Registration Statements (and the

2 materials incorporated therein) were not false and misleading. 3 115. UTStarcom, the signatories, Banc of America and SOFTBANK were obligated under 4 the federal securities laws to make reasonable and diligent investigations of the statements contained 5 in the Registration Statements at the time they were filed with the SEC and/or became effective, to 6 ensure that said statements were not misleading and that there was no omission to state a material 7 8 fact required to be stated in order to make the statements contained therein not misleading. They did

9 not make a reasonable and diligent investigation, nor did they possess reasonable grounds for the

10 belief that the statements contained in the Registration Statements at the time they became effective 11 were true and that there was no omission to state a material fact required to be stated in order to 12 make the statements contained therein not misleading. 13 DEFENDANTS’ FALSE AND MISLEADING STATEMENTS OR MATERIAL 14 OMISSIONS AND FRAUDULENT SCHEME DURING THE CLASS PERIOD 15 116. On February 21, 2003, UTStarcom issued its Form 10-K for the fiscal year ended 16 December 31, 2002. 17 117. February 21, 2003 False Statements in UTStarcom’s Form 10-K for Fiscal 2002 18 Concerning Continued Expected PAS Infrastructure Sales in China Despite a Shift to Capital 19 Spending on 3G: 20 21 Migration to Next-Generation IP Networks. Our core IP products are designed with the flexibility to allow service providers to deliver voice and data 22 services over today’s circuit-based networks and to migrate to next-generation broadband wireline and wireless networks based on IP and other international open 23 standards. As a result, service providers can preserve their investment in existing networks and generate incremental revenue from their investment in our products 24 while migrating to next-generation networks over time. 25 * * * 26 Our solutions are easy to deploy, [and] offer a clean migration strategy to future network requirements . . . . 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 49 -

1 (a) Date of Statement. The statements were made in UTStarcom’s 2002 10-K 2 filed on February 21, 2003.

3 (b) Recipient. The recipients of statements were the public at large and 4 UTStarcom’s shareholders.

5 (c) Identity of Authors. The 10-K was signed by defendants Lu, Sophie, Toy 6 and Wu.

7 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 8 recklessness or actual knowledge of falsity when they told the market that China Telecom and China 9 Netcom operators would be able to preserve their investment in PAS infrastructure purchases by 10 gradually “migrating” customers from the PAS network systems UTStarcom was selling to the 11 operators’ “next generation” networks, which they knew would include systems operated on the TD- 12 SCDMA 3G transmission standard being developed and promoted by the Chinese government. In 13 reality defendants knew but concealed: 14 (i) That, because PAS was viewed as an interim solution by the Chinese 15 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 16 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 17 UTStarcom in China; 18 (ii) That the Chinese government was taking steps to protect the 19 development of its nascent mobile industries, including permitting China Mobile and China Unicom 20 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 21 subscriber growth; 22 (iii) That the roll out of TD-SCDMA technology would limit the ability to 23 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 24 decreases in PAS infrastructure purchases by China Telecom and China Netcom; and 25 (iv) That China’s MII had confirmed that it would take steps to ensure that 26 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 50 -

1 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 2 by China Telecom and China Netcom in 2004 and 2005. 3 118. February 21, 2003 False Statement in UTStarcom’s 2002 10-K Concerning the

4 Adequacy of Internal and Disclosure Controls at UTStarcom: 5 ITEM 14—CONTROLS AND PROCEDURES 6 (a) Evaluation of disclosure controls and procedures. Our chief 7 executive officer and our chief financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 8 15d-14(c) of the Securities Exchange Act of 1934) as of a date (the “Evaluation Date”) within 90 days before the filing date of this quarterly report, believe that as of 9 the Evaluation Date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company 10 would be made known to them by others within the Company. 11 (b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure 12 controls and procedures subsequent to the Evaluation Date. 13 (a) Date of Statement. The statement appears in the Form 10-K for the fiscal 14 year ended December 31, 2002, filed with the SEC on February 21, 2003. 15 (b) Recipient. The recipients of the false statement were UTStarcom’s public 16 stockholders. 17 (c) Identity of Authors. The Form 10-K was signed by defendants Lu, Sophie, 18 Wu and Toy. 19 (d) True Facts, Scienter and Pleading Basis. These statements were false when 20 made. As defendants would detail in Item 9A of the Company’s Amended Form 10-K, filed 21 April 13, 2005, UTStarcom’s internal controls had never been properly designed or evaluated prior 22 to the review initiated in late August 2004. UTStarcom’s internal controls were in fact defective 23 through late August 2004, and because they were defective, Lu and Sophie had no reasonable basis 24 upon which to certify that UTStarcom had effective internal controls. As such, defendants were 25 deliberately reckless (if not willfully deceptive) in specifically representing that they had: (i) 26 “designed such disclosure controls and procedures to ensure that material information relating to 27 the registrant, including its consolidated subsidiaries, is made known to us by others within those 28 entities”; (ii) disclosed “all significant deficiencies in the design or operation of internal controls FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 51 -

1 which could adversely affect the registrant’s ability to record, process, summarize and report 2 financial data”; and (iii) “identified for the registrant’s auditors any material weaknesses in 3 internal controls.” In fact, the Company’s independent auditors would require the Company include 4 a statement that because the Company’s internal control deficiencies were so pervasive, the auditors 5 were not even able to detail all of the Company’s past accounting misstatements, even in the spring 6 of 2005. Specifically, the Amended 2004 Form 10-K admitted that throughout the Class Period:

7 1. The Company did not maintain effective controls over the financial reporting process due to an insufficient complement of personnel with a level of 8 accounting knowledge, experience and training in the application of generally accepted accounting principles commensurate with the Company’s financial 9 reporting requirements. This material weakness contributed to the following control deficiencies relating to the preparation of the Company’s financial statements which 10 are individually considered to be material weaknesses: 11 (a) The Company did not maintain effective controls over its revenue and deferred revenue accounts and associated cost of sales. Specifically, the Company’s 12 controls over its processes and procedures related to the recording and review of its revenue and deferred revenue accounts were not adequate to ensure that such 13 accounts were completely and accurately recorded.

14 (b) The Company did not maintain effective controls over its inventory, deferred costs, inventory reserve accounts and cost of sales. Specifically, the 15 Company’s controls failed to adequately identify, document and analyze the conditions which should have been considered relative to the existence and expected 16 recoverability of inventory and deferred costs.

17 (c) The Company did not maintain effective controls over its processes for accounting for goodwill. Specifically, the Company’s controls over its 18 processes and procedures related to its assessment of the impairment of its goodwill account were not sufficiently detailed to identify instances of impairment as 19 required under generally accepted accounting principles. 20 (d) The Company did not maintain effective controls over the process for the translation of its accounts and transactions denominated in a currency 21 other than U.S. dollars. Specifically, the Company’s controls over its processes and procedures related to the translation of transactions and account balances 22 denominated in a currency other than U.S. dollars failed to identify and utilize the appropriate foreign exchange rates primarily related to the cash, accounts receivable, 23 accounts payable and other comprehensive income accounts.

24 (e) The Company did not maintain effective controls over the recording of accrued expenses, primarily in China and Japan. Specifically, the Company’s 25 controls over its processes and procedures related to accrued expenses failed to completely and accurately record expenses in the proper period. The review of open 26 purchase orders and invoices received as part of the close process was insufficient to ensure that year-end accrued expense balances were completely and accurately 27 recorded in the proper period. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 52 -

1 (f) The Company did not maintain effective controls over the financial reporting process to ensure the accurate preparation and review of its consolidated 2 financial statements. Specifically, the Company’s controls over the completeness, accuracy and review of its documentation of close processes relating to 3 reconciliations, journal entries, spreadsheets, international reporting packages and review and preparation of monthly expenditure reports were ineffective in their 4 design and execution. In addition, the Company did not have effective controls over the process for identifying and accumulating all required supporting information to 5 ensure the completeness of its footnote disclosures, including the support for the accounting positions taken on non-routine transactions, goodwill impairment, 6 purchase accounting, segment reporting, accounting for potential variable interest entities, intercompany profit eliminations and income tax accounting and proper 7 classification of inventory and deferred costs, deferred revenue and accounts receivable, and revenue and cost of goods sold. These control deficiencies resulted 8 in certain audit adjustments to and additional disclosures made in the 2003 financial statements. 9 (g) The Company did not maintain effective controls over the 10 completeness and accuracy of its income tax provision and related balance sheet accounts. Specifically, as part of its 2004 year-end close process, certain errors 11 related to income taxes payable, deferred income tax assets and liabilities, other long- term assets, prepaids and other current assets were identified in the calculation of the 12 Company’s 2003 income tax provision. This control deficiency resulted in the restatement of the Company’s financial statements for the quarters and full year of 13 2003 financial statements to adjust the provision for income taxes, stockholders’ equity, income taxes payable, other long-term assets, prepaids and other current 14 assets. 15 (h) The Company did not maintain effective controls in relation to segregation of duties and user access to certain Oracle business process applications 16 nor were there effective controls in place to monitor user access. There were instances in which either information technology or finance personnel maintained 17 access to specific applications within the Oracle environment beyond that needed to perform their individual job responsibilities. This deficiency related to financial 18 reporting, inventory and purchasing applications in China and financial reporting applications in the United States. . . . . Additionally, the control deficiencies 19 described above could individually or in the aggregate result in a material misstatement to the annual or interim financial statements that would not be 20 prevented or detected. Accordingly, management has determined that these control deficiencies constitute material weaknesses. 21 2. The Company did not maintain effective controls over the 22 identification of and accounting for related party relationships and related party transactions. Specifically, the Company’s controls over its policies and procedures 23 were ineffective in identifying all significant related party relationships and transactions on a timely basis in order for such relationships and transactions to be 24 appropriately reflected in the Company’s financial statements in accordance with generally accepted accounting principles. Specifically, a previously undisclosed 25 significant related party relationship was identified and determined to be a variable interest entity in which the Company was determined to be the primary beneficiary. 26 This control deficiency resulted in a restatement of the Company’s financial statements for the year ended December 31, 2003. Additionally, this control 27 deficiency could result in a material misstatement to annual or interim financial statements that would not be prevented or detected. Accordingly, management has 28 determined that this control deficiency constitutes a material weakness. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 53 -

1 3. The Company did not maintain effective controls over the monitoring of its accounting functions located outside of the U.S. The Company’s 2 policies and procedures with respect to the review and supervision of its accounting operations in foreign locations, principally Japan and China, were inadequate. 3 Specifically, corporate senior financial management did not provide adequate oversight of the accounting functions based principally in Japan and China nor was 4 there sufficient and accurate information for monitoring the financial results of non- U.S. operations. Reviews of local financial results were inadequate in either their 5 design or operation to detect errors to the Company’s financial statements as described in items 1 and 2 above. Additionally, this control deficiency could result 6 in a material misstatement to annual or interim financial statements that would not be prevented or detected. Accordingly, management has determined that this control 7 deficiency constitutes a material weakness.

8 4. The Company did not maintain an effective control environment. The financial reporting organizational structure was not adequate to support the size, 9 complexity, operating activities or locations of the Company. Deficiencies in local accounting operations, such as the lack of a senior finance director in China with 10 sufficient depth and skill in the application of U.S. generally accepted accounting principles and inadequate understanding of U.S. generally accepted accounting 11 principles by local accounting staff resulted in the adjustments to the financial statements as discussed in items 1-3 above. In addition, in some cases, certain key 12 finance positions were staffed with individuals who did not have the appropriate skills, training and experience to meet the objectives as outlined in their job 13 descriptions or that should be expected of these roles. Further, the following specific areas are examples of some of the corporate departments in the Company where 14 additional skilled resources are required: tax, external financial reporting, revenue recognition, treasury, financial planning and analysis and corporate accounting. This 15 control deficiency, together with the material weaknesses described in items 1-3 above, indicate that the Company did not maintain an effective control environment. 16 These control deficiencies could result in a material misstatement to annual or interim financial statements that would not be prevented or detected. Accordingly, 17 management has determined that this control deficiency constitutes a material weakness. 18 119. February 21, 2003 False SOX Certifications: In connection with UTStarcom’s FY 19 2002 10-K filed February 21, 2003, defendants Lu and Sophie each certified: 20 21 1. I have reviewed this annual report on Form 10-K of UTStarcom, Inc.; 22 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 23 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 24 3. Based on my knowledge, the financial statements, and other financial 25 information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and 26 for, the periods presented in this annual report; 27 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 28 Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 54 -

1 a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its 2 consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 3 report is being prepared; 4 b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of 5 this annual report (the “Evaluation Date”); and 6 c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our 7 evaluation as of the Evaluation Date; 8 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of 9 registrant’s board of directors (or persons performing the equivalent function):

10 a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to 11 record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in 12 internal controls; and 13 b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal 14 controls; and 15 6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in 16 other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant 17 deficiencies and material weaknesses.

18 (a) Date of Statements. The statements were made in the Form 10-K filed 19 February 21, 2003.

20 (b) Recipient. UTStarcom’s public stockholders. 21 (c) Identity of Authors. UTStarcom filed the 10-K. Defendants Lu, Sophie, 22 Toy and Wu each signed the 10-K. Defendants Lu and Sophie signed the SOX certifications.

23 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 24 recklessness or actual knowledge of falsity when they reiterated that adequate internal and disclosure 25 controls were in place. Defendants were deliberately reckless (if not willfully deceptive) in 26 specifically representing that they had “designed such disclosure controls and procedures to ensure 27 that material information relating to the registrant, including its consolidated subsidiaries, is made 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 55 -

1 known to us by others within those entities,” and that they had disclosed “all significant deficiencies 2 in the design or operation of internal controls which could adversely affect the registrant’s ability to 3 record, process, summarize and report financial data,” and had “identified for the registrant’s 4 auditors any material weaknesses in internal controls.” Defendants also knew: (i) the market was 5 focusing on items such as deferred costs and revenue recognition which defendants could not control 6 or warrant the veracity of; (ii) suppliers were complaining UTStarcom was violating purchase 7 agreements; (iii) UTStarcom was experiencing significant cost overruns resulting from significant 8 defects and under-budgeting of PAS deployments; and (iv) the Company’s internal disclosure 9 controls were woefully defective and were not able to allow defendants to provide the “high 10 visibility” defendants kept assuring investors of. The Amended 2003 Form 10-K filed by defendants 11 Lu and Sophie with the SEC on April 13, 2005 admitted that “[t]he Company did not maintain 12 effective controls over the financial reporting process due to an insufficient complement of personnel 13 with a level of accounting knowledge, experience and training in the application of generally 14 accepted accounting principles commensurate with the Company’s financial reporting requirements” 15 during 2003. 16 120. False Statements in the March 10, 2003 Press Release Concerning Continued

17 Expected PAS Infrastructure Sales in China Despite a Shift to Capital Spending on 3G: On 18 March 10, 2003, the Company issued a press release entitled “UTStarcom Signs Contracts Valued at 19 $50 Million with China Netcom For New and Expansion Deployments of Its IP-Based PAS 20 Systems.” The press release stated in relevant part: 21 22 [UTStarcom’s PAS technology was] [i]ntroduced in China in 1998 as a replacement to antiquated fixed-line systems . . . . Marketed as a low-cost investment option for wireless local telephone service, the PAS system features advanced voice and data 23 services within a flexible network architecture that can be seamlessly integrated 24 with future 3G and broadband technologies. 25 (a) Date of Statement. The statement was made in the UTStarcom press release dated March 10, 2003. 26 27 (b) Recipient. The recipients of the press release were the public at large and 28 UTStarcom’s shareholders. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 56 -

1 (c) Identity of Author. UTStarcom issued the press release and the release is 2 attributed to defendant Sophie.

3 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 4 recklessness or actual knowledge of falsity when they stated PAS infrastructure would be 5 “seamlessly integrated with future 3G” technologies, which they then knew would include systems 6 operated on the 3G TD-SCDMA standard being developed and promoted by the Chinese 7 government. In reality defendants knew but concealed: 8 (i) That, because PAS was viewed as an interim solution by the Chinese 9 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 10 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 11 UTStarcom in China; 12 (ii) That the Chinese government was taking steps to protect the 13 development of its nascent mobile industries, including permitting China Mobile and China Unicom 14 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 15 subscriber growth; 16 (iii) That the roll out of TD-SCDMA technology would limit the ability to 17 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 18 decreases in PAS infrastructure purchases by China Telecom and China Netcom; and 19 (iv) That China’s MII had confirmed that it would take steps to ensure that 20 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 21 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 22 by China Telecom and China Netcom in 2004 and 2005. 23 121. On March 12, 2003, UTStarcom issued $402.5 million of convertible notes pursuant

24 to a private placement underwritten by Banc of America, Credit Suisse First Boston and Merrill 25 Lynch, which had been priced on March 7, 2003. After underwriting and other costs were deducted, 26 UTStarcom received $347.6 million in net proceeds. Banc of America received a substantial portion 27 of the $54.9 million in underwriting fees and costs. The March 12, 2003 private placement provided 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 57 -

1 defendants, including Banc of America, with significant motive to inflate the Company’s stock

2 following the issuance of these notes, including: 3 (a) As the notes were convertible into UTStarcom’s common stock, defendants 4 were motivated to artificially inflate the price of UTStarcom’s common stock to induce the holders 5 of the notes to convert them into common stock – thereby eliminating a $400 million debt obligation 6 from the Company’s balance sheet and a $1 million per quarter interest expense; and 7 8 (b) UTStarcom’s controlling shareholder SOFTBANK (which owned almost 60%

9 of the Company at the time of its IPO in 2000) was receiving a significant portion of the private

10 placement proceeds and was also using Banc of America to monetize its significant interest in 11 UTStarcom as UTStarcom’s financial future deteriorated. SOFTBANK used its control over 12 UTStarcom to select Banc of America as an underwriter in the Company’s IPO – control conceded 13 in the Company’s IPO prospectus and 2002-2004 10-Ks, and buttressed by the facts that at the time 14 15 of the IPO: (i) UTStarcom’s Chairman was non-party Son, SOFTBANK’s President and CEO; (ii) 16 Yoshitaka Kitao, SOFTBANK’s CFO, served as a UTStarcom director; (iii) Chauncey Shey

17 (“Shey”), head of SOFTBANK’s venture capital unit in China, served as a third UTStarcom director;

18 (iv) SOFTBANK owned a significant amount of the Company’s Series C-G preferred shares issued 19 to SOFTBANK in exchange for pre-IPO venture capital financing (the terms of which entitled 20 SOFTBANK to considerable control over UTStarcom); (v) $10 million of UTStarcom’s IPO 21 proceeds were contributed to an investment fund managed by SOFTBANK; and (vi) the Company 22 23 had significant business relationships with and loans outstanding from SOFTBANK. In July 2001, 24 Banc of America underwrote a $180 million follow-on offering of nine million shares of UTStarcom

25 stock, with the Company issuing and selling approximately $120 million worth of shares, 26 SOFTBANK’s Son and Shey selling more than $31 million worth of their UTStarcom stock 27 (reducing SOFTBANK’s collective interest to 53%) and defendants Wu and Lu selling another $23 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 58 -

1 million worth of their own shares. In March 2002, Banc of America underwrote a secondary

2 offering to permit SOFTBANK to sell 10 million additional shares and receive over $200 million in 3 proceeds, reducing SOFTBANK’s interest in UTStarcom to approximately 32%. In August 2002, 4 the Company repurchased 6 million shares of its common stock from SOFTBANK for $73 million. 5 Approximately $140 million of the March 2003 private placement proceeds were being used to 6 repurchase 8 million shares from SOFTBANK for $140 million, reducing SOFTBANK’s interest in 7 8 UTStarcom to 15%.

9 122. False Statements in the March 25, 2003 Press Release Concerning Continued

10 Expected PAS Infrastructure Sales in China Despite a Shift to Capital Spending on 3G: On 11 March 25, 2003, the Company issued a press release entitled “UTStarcom Signs Contracts Valued at 12 $40 Million with China Telecom Guangdong and Jiangsu Province for IP-Based PAS – New and 13 Expansion Contracts Show UTStarcom’s PAS Market Leadership in Major Cities Experiencing 14 15 Strong Economic Growth in China.” The press release stated in relevant part: 16 [UTStarcom’s PAS technology was] [i]ntroduced in China in 1998 as a replacement to antiquated fixed-line systems . . . . Marketed as a low-cost 17 investment option for wireless local telephone service, the PAS system features advanced voice and data services within a flexible network architecture that can be 18 seamlessly integrated with future 3G and broadband technologies. 19 (a) Date of Statement. The statement was made in the UTStarcom press release 20 dated March 25, 2003. 21 (b) Recipient. The recipients of the press release were the public at large and 22 UTStarcom’s shareholders. 23 (c) Identity of Author. UTStarcom issued the press release and the release is 24 attributed to defendant Sophie. 25 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 26 recklessness or actual knowledge of falsity when they told the market that PAS infrastructure would 27 be “seamlessly integrated with future 3G” technologies, which they then knew would include 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 59 -

1 systems operated on the 3G TD-SCDMA standard being developed and promoted by the Chinese 2 government. In reality defendants knew but concealed: 3 (i) That, because PAS was viewed as an interim solution by the Chinese 4 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 5 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 6 UTStarcom in China; 7 (ii) That the Chinese government was taking steps to protect the 8 development of its nascent mobile industries, including permitting China Mobile and China Unicom 9 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 10 subscriber growth; 11 (iii) That the roll out of TD-SCDMA technology would limit the ability to 12 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 13 decreases in PAS infrastructure purchases by China Telecom and China Netcom; and 14 (iv) That China’s MII had confirmed that it would take steps to ensure that 15 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 16 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 17 by China Telecom and China Netcom in 2004 and 2005.

18 123. False Statements in the April 16, 2003 Press Release Concerning the Company’s 19 Contracts with Beijing Telecom: On April 16, 2003, the Company issued a press release entitled 20 “UTStarcom Signs First IP-Based PAS Contract Valued at $17.5 Million With Beijing China 21 Netcom – PAS Deployments Continue to Gain Acceptance in Major Metropolitan Cities Throughout 22 Asia.” The press release stated in relevant part: 23 UTStarcom Inc., a leading global provider of wireless and wireline access and IP switching solutions, today announced that it has signed a contract with China 24 Netcom valued at approximately $17.5 million for new deployments of its IP-based PAS (Personal Access System) (iPAS(TM)) platform in six suburban counties of 25 Beijing.

26 (a) Date of Statement. The statement was made in the UTStarcom press release 27 dated April 16, 2003. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 60 -

1 (b) Recipient. The recipients of the press release were the public at large and 2 UTStarcom’s shareholders.

3 (c) Identity of Author. UTStarcom issued the press release and the release is 4 attributed to Sophie.

5 (d) True Facts, Scienter and Pleading Basis. Executives of the Company, 6 SOFTBANK, and a venture capital fund associated with SOFTBANK owned a majority equity 7 interest in an affiliated Beijing entity, and as defendants would later admit in connection with the

8 Company’s restatement of its 2003 financial results, “[d]ue to the uncertainties surrounding the 9 [Beijing] customer’s subscriber income and ability to pay under this arrangement, the Company 10 determined that an impairment charge should have been recorded in 2003 when these conditions 11 should have been identified,” and that because the Beijing entity’s financial statements should have 12 been consolidated with its own, the Company’s assets were overstated by at least $8.7 million in 13 fiscal 2003 due to the Company’s failure to record an impairment associated with the Beijing entity’s 14 assets. Defendants acted with deliberate recklessness or actual knowledge of falsity when they 15 announced the $17.5 million contract with Beijing China Netcom without disclosing that: (i) the 16 value of the contract was impaired due to “uncertainties surrounding the [Beijing] customer’s 17 subscriber income and ability to pay”; (ii) that the Beijing contract involved a related party; and (iii) 18 that as further detailed herein at ¶11, China Netcom and SOFTBANK had an important financial 19 relationship giving China Netcom a vested interest in helping SOFTBANK inflate UTStarcom’s 20 stock price in order to make SOFTBANK’s balance sheet appear more sound. 21 124. False Statements in the April 16, 2003 Press Release Concerning Continued

22 Expected PAS Infrastructure Sales in China Despite a Shift to Capital Spending on 3G: The 23 April 16, 2003 press release entitled “UTStarcom Signs First IP-Based PAS Contract Valued at 24 $17.5 Million With Beijing China Netcom – PAS Deployments Continue to Gain Acceptance in 25 Major Metropolitan Cities Throughout Asia” also stated in relevant part: 26 Marketed as a low-cost investment option for wireless local telephone service, the 27 PAS system features advanced voice and data services within a flexible network 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 61 -

1 architecture that can be seamlessly integrated with future 3G and broadband technologies. 2 (a) Date of Statement. The statement was made in the UTStarcom press release 3 dated April 16, 2003. 4 (b) Recipient. The recipients of the press release were the public at large and 5 UTStarcom’s shareholders. 6 (c) Identity of Author. UTStarcom issued the press release, defendant Wu is 7 quoted in the release and the release is attributed to defendant Sophie. 8 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 9 recklessness or actual knowledge of falsity when they told the market that PAS infrastructure could 10 be “seamlessly integrated with future 3G” technologies, which they then knew would include 11 systems operated on the 3G TD-SCDMA standard being developed and promoted by the Chinese 12 government. In reality defendants knew but concealed: 13 (i) That, because PAS was viewed as an interim solution by the Chinese 14 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 15 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 16 UTStarcom in China; 17 (ii) That the Chinese government was taking steps to protect the 18 development of its nascent mobile industries, including permitting China Mobile and China Unicom 19 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 20 subscriber growth; 21 (iii) That the roll out of TD-SCDMA technology would limit the ability to 22 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 23 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 24 (iv) That the Company’s high margin PAS infrastructure sales had eroded 25 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 26 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 27 products and because the systems had to be installed and repaired by Chinese speaking engineers; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 62 -

1 (v) That because UTStarcom’s historical PAS success in China was 2 dependent upon China’s unique market and pricing controls, the Company would be unable to 3 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 4 margins; 5 (vi) That because a significant portion of the PAS infrastructure placed into 6 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 7 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 8 (vii) That China’s MII had confirmed that it would take steps to ensure that 9 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 10 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 11 by China Telecom and China Netcom in 2004 and 2005; 12 (viii) That the Chinese government, through China Telecom and China 13 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 14 (ix) That the contract of sale to entities in Beijing announced in 2003 15 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 16 customers’ inability to pay; and 17 (x) That the Company lacked effective internal controls in its financial 18 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 19 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 20 and accrued expenses, all of which were required to competently analyze and/or estimate 21 UTStarcom’s future financial and operational performance. 22 125. False Statements in the April 16, 2003 Press Release Concerning Ongoing

23 Demand for PAS Infrastructure Sales Then Being Experienced in China: On April 16, 2003, 24 the Company issued a press release entitled “UTStarcom Q1 2003 Earnings Results – Best Quarter 25 in Company’s History; Company Reaches 13 Consecutive Quarters of Profitability With Record 26 Revenues And Earnings, and Raises Guidance for 2003.” The press release stated in relevant part: 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 63 -

1 “The unparalleled demand across all of UTStarcom’s product lines continues to drive strong revenue growth for the company,” added Mike Sophie, 2 chief financial officer of UTStarcom, Inc.

3 (a) Date of Statement. The statement was made in the UTStarcom press release 4 dated April 16, 2003.

5 (b) Recipient. The recipients of the press release were the public at large and 6 UTStarcom’s shareholders.

7 (c) Identity of Author. UTStarcom issued the press release, defendants Lu and 8 Sophie are quoted in the release.

9 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 10 recklessness or actual knowledge of falsity when they told the market that the Company was 11 experiencing “unparalleled demand across all of UTStarcom’s products lines,” of which PAS 12 infrastructure was the most important product by far, knowing but concealing: 13 (i) That, because PAS was viewed as an interim solution by the Chinese 14 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 15 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 16 UTStarcom in China; 17 (ii) That the Chinese government was taking steps to protect the 18 development of its nascent mobile industries, including permitting China Mobile and China Unicom 19 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 20 subscriber growth; 21 (iii) That the roll out of TD-SCDMA technology would limit the ability to 22 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 23 decreases in PAS infrastructure purchases by China Telecom and China Netcom; and 24 (iv) That China’s MII had confirmed that it would take steps to ensure that 25 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 26 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 27 by China Telecom and China Netcom in 2004 and 2005. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 64 -

1 126. April 16, 2003 False Statement in UTStarcom’s Conference Call Concerning the

2 Effect the Shift of Capital Spending on 3G in China Would Have on the Company’s Financial 3 Results: 4 Finally, this quarter we continue to lay the foundation of the sustainability 5 and long term growth in our business. For example, the company’s technologies are conceived to satisfy today’s needs, but it’s also able to layer an additional 6 service and a functionality such as 3G. 7 (a) Date of Statement. The statement was made during the April 16, 2003, Q1 8 03 UTStarcom earnings conference call held with Wall Street analysts, investors and members of the 9 public. 10 (b) Recipient. The recipients of the statement were UTStarcom’s public 11 stockholders, who received the information from Wall Street analysts and from news items 12 circulating within the investment news media and other channels. 13 (c) Identity of Author. Defendant Lu made the statement. Defendant Sophie 14 was present. 15 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 16 recklessness or actual knowledge of falsity when they told the market they were laying “the 17 foundation” for “sustainability and long term growth in [their] business” because they knew the 18 Company’s most important product and largest driver of sales and earnings was PAS and that in 19 reality: 20 (i) Because PAS was viewed as an interim solution by the Chinese 21 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 22 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 23 UTStarcom in China; 24 (ii) The Chinese government was taking steps to protect the development 25 of its nascent mobile industries, including permitting China Mobile and China Unicom to offer 26 mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 27 subscriber growth; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 65 -

1 (iii) The roll out of TD-SCDMA technology would limit the ability to use 2 existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory decreases in 3 PAS infrastructure purchases by China Telecom and China Netcom; 4 (iv) The Company’s high margin PAS infrastructure sales had eroded in 5 China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 6 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 7 products and because the systems had to be installed and repaired by Chinese speaking engineers; 8 (v) Because UTStarcom’s historical PAS success in China was dependent 9 upon China’s unique market and pricing controls, the Company would be unable to generate enough 10 higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross margins; 11 (vi) Because a significant portion of the PAS infrastructure placed into 12 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 13 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 14 (vii) China’s MII had confirmed that it would take steps to ensure that 15 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 16 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 17 by China Telecom and China Netcom in 2004 and 2005; 18 (viii) The Chinese government, through China Telecom and China Netcom, 19 retained the power to unilaterally alter terms in contracts with UTStarcom; 20 (ix) The contract of sale to entities in Beijing announced in 2003 should 21 have been written down as impaired in 2003 based on defendants’ knowledge then of the customers’ 22 inability to pay; and 23 (x) The Company lacked effective internal controls in its financial 24 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 25 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 26 and accrued expenses, all of which were required to competently analyze and/or estimate 27 UTStarcom’s future financial and operational performance. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 66 -

1 127. April 16, 2003 False Statement in UTStarcom’s Conference Call Concerning

2 Continued Expected PAS Infrastructure Sales in China Despite a Shift to Capital Spending on 3 3G: 4 Another example of our long-term sustainable growth can be seen in today’s 5 announcement of our first contract to deploy our IP-based PAS systems in the city of Beijing. This illustrates the broad consumer acceptance of the PAS in China and 6 the carrier continue [sic] to invest in PAS for the long term as the best way for them to increase their subscriber numbers, and revenue and profitability. In mid- 7 2003 Beijing is just at the very beginning of the deployment plan for PAS. This speaks that Beijing believes that PAS will meet the needs of their subscribers for 8 the long-term. 9 (a) Date of Statement. The statement was made during the April 16, 2003, Q1 10 03 UTStarcom earnings conference call held with Wall Street analysts, investors and members of the 11 public. 12 (b) Recipient. The recipients of the statement were UTStarcom’s public 13 stockholders, who received the information from Wall Street analysts and from news items 14 circulating within the investment news media and other channels. 15 (c) Identity of Author. Defendant Lu made the statement. Defendant Sophie 16 was present. 17 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 18 recklessness or actual knowledge of falsity when they told the market that the Beijing contract 19 “illustrate[d] the broad consumer acceptance of the PAS in China,” and that China Netcom would 20 “continue to invest in PAS for the longterm.” First, defendants’ statements concealed that: (i) the 21 value of the $17.5 million contract with Beijing announced on April 16, 2003 was overstated due to 22 “uncertainties surrounding the [Beijing] customer’s subscriber income and ability to pay”; (ii) the 23 fact that the Beijing contract, involved a related party; (iii) the fact that China Netcom, the purported 24 “other” party to the Beijing contract, had just entered into a significant financial transaction with 25 SOFTBANK the prior month when the two purchased Asia Global Crossing out of bankruptcy in 26 March 2003, gave China Netcom a vested interest in SOFTBANK’s financial health as the two were 27 joint guarantors of over one billion dollars in Asia Global Crossing debt; and (iv) because 28 SOFTBANK’s financial position was so precarious, both China Netcom and SOFTBANK shared an FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 67 -

1 interest in propping up UTStarcom’s stock price through the announcement of fictitious values of 2 contracts between UTStarcom and China Netcom in order to make SOFTBANK’s balance sheet 3 appear more solid in order to increase SOFTBANK’s chances of obtaining an investment grade 4 credit rating. Moreover, defendants knew but concealed: 5 (i) That, because PAS was viewed as an interim solution by the Chinese 6 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 7 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 8 UTStarcom in China; 9 (ii) That the Chinese government was taking steps to protect the 10 development of its nascent mobile industries, including permitting China Mobile and China Unicom 11 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 12 subscriber growth; 13 (iii) That the roll out of TD-SCDMA technology would limit the ability to 14 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 15 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 16 (iv) That the Company’s high margin PAS infrastructure sales had eroded 17 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 18 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 19 products and because the systems had to be installed and repaired by Chinese speaking engineers; 20 (v) That because UTStarcom’s historical PAS success in China was 21 dependent upon China’s unique market and pricing controls, the Company would be unable to 22 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 23 margins; 24 (vi) That because a significant portion of the PAS infrastructure placed into 25 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 26 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 68 -

1 (vii) That China’s MII had confirmed that it would take steps to ensure that 2 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 3 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 4 by China Telecom and China Netcom in 2004 and 2005; 5 (viii) That the Chinese government, through China Telecom and China 6 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 7 (ix) That the contract of sale to entities in Beijing announced in 2003 8 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 9 customers’ inability to pay; and 10 (x) That the Company lacked effective internal controls in its financial 11 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 12 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 13 and accrued expenses, all of which were required to competently analyze and/or estimate 14 UTStarcom’s future financial and operational performance. 15 128. April 16, 2003 False Statement in UTStarcom’s Conference Call Concerning the

16 Company’s 2003 Gross Margin Projections: 17 Our targets for gross margins as a percentage of revenue for Q1 was 18 approximately 33% to 34%. And [we] anticipate margins will improve slightly, perhaps the half percent – 1% sequentially each quarter throughout 2003. Given 19 Q1 margins exceeded our target, we anticipate Q2 remained consistent with Q1. Plus or minus a few tenths of a percent with slight sequential improvements in Q3 20 and Q4. For the full year 2003, our target for gross margins as a percent of revenue is between 34% and 35%. 21 (a) Date of Statement. The statement was made during the April 16, 2003, Q1 22 03 UTStarcom earnings conference call held with Wall Street analysts. 23 (b) Recipient. The recipients of the statement were UTStarcom’s public 24 stockholders, who received the information from Wall Street analysts and from news items 25 circulating within the investment news media and other channels. 26 (c) Identity of Author. Defendant Sophie made the statement. Defendant Lu 27 was present. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 69 -

1 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 2 recklessness or actual knowledge of falsity when they guided gross profit margins of 33%-34% 3 throughout FY 2003. In reality, defendants knew but concealed: 4 (i) That, because PAS was viewed as an interim solution by the Chinese 5 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 6 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 7 UTStarcom in China; 8 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 9 budgets, as set in 2003, were dedicated to 3G development; 10 (iii) That the Chinese government was taking steps to protect the 11 development of its nascent mobile industries, including permitting China Mobile and China Unicom 12 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 13 subscriber growth; 14 (iv) That the roll out of TD-SCDMA technology would limit the ability to 15 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 16 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 17 (v) That the Company’s high margin PAS infrastructure sales had eroded 18 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 19 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 20 products and because the systems had to be installed and repaired by Chinese speaking engineers; 21 (vi) That because UTStarcom’s historical PAS success in China was 22 dependent upon China’s unique market and pricing controls, the Company would be unable to 23 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 24 margins; 25 (vii) That the Company lacked the infrastructure to balance supply with 26 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 27 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 70 -

1 (viii) That UTStarcom’s PAS infrastructure deployments were under- 2 budgeted because they were defective and required significant additional expenditures to make them 3 operational, causing excessive cost overruns and missed margin projections; 4 (ix) That because a significant portion of the PAS infrastructure placed into 5 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 6 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 7 (x) That China’s MII had confirmed that it would take steps to ensure that 8 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 9 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 10 by China Telecom and China Netcom in 2004 and 2005; 11 (xi) That the Chinese government, through China Telecom and China 12 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 13 (xii) That the contract of sale to entities in Beijing announced in 2003 14 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 15 customers’ inability to pay; 16 (xiii) That the Company lacked effective internal controls in its financial 17 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 18 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 19 and accrued expenses, all of which were required to competently analyze and/or estimate 20 UTStarcom’s future financial and operational performance; and 21 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 22 to believe, and did not in fact believe, their FY 2004 34%-35% margin projections. 23 129. Following the April 16, 2003, Q1 03 earnings conference and press releases,

24 UTStarcom’s stock jumped almost 10% from $19.99 to close at $21.94. 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 71 -

1 130. May 12, 2003 False Statement in UTStarcom’s 10-Q Concerning the Existence of Internal Controls: 2 Item 4 – CONTROLS AND PROCEDURES 3 (a) Evaluation of disclosure controls and procedures. Our chief 4 executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) 5 of the Securities Exchange Act of 1934 (the “Exchange Act”)) as of a date (the “Evaluation Date”) within 90 days before the filing date of this quarterly report on 6 Form 10-Q, have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information that we are required to 7 disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules 8 and forms. 9 (b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure 10 controls and procedures subsequent to the Evaluation Date.

11 (a) Date of Statement. The statement appears in the Form 10-Q for the quarter 12 ended March 31, 2003, filed with the SEC on May 12, 2003.

13 (b) Recipient. The recipients of the false statement were UTStarcom’s public 14 stockholders, who received the information from Wall Street analysts and from news items 15 circulating within the investment news media and other channels.

16 (c) Identity of Author. The Form 10-Q was signed by defendants Lu and 17 Sophie.

18 (d) True Facts, Scienter and Pleading Basis. See 118(d). 19 131. May 12, 2003 False SOX Certifications: Defendants Lu and Sophie signed 20 certifications pursuant to §302 of the Sarbanes-Oxley Act, which stated that: 21 1. I have reviewed this quarterly report on Form 10-Q of UTStarcom, 22 Inc.; 23 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 24 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 25 3. Based on my knowledge, the financial statements, and other financial 26 information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and 27 for, the periods presented in this quarterly report; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 72 -

1 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 2 Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: 3 a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its 4 consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is 5 being prepared; 6 b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this 7 quarterly report (the “Evaluation Date”); and 8 c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our 9 evaluation as of the Evaluation Date; 10 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of 11 registrant’s board of directors (or persons performing the equivalent function): 12 a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to 13 record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in 14 internal controls; and 15 b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal 16 controls; and 17 6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or 18 in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to 19 significant deficiencies and material weaknesses.

20 (a) Date of Statement. The statement appears in the Form 10-Q for the quarter 21 ended March 31, 2003, filed with the SEC on May 12, 2003.

25 (c) Identity of Author. The SOX certifications were signed by defendants Lu 26 and Sophie.

27 (d) True Facts, Scienter and Pleading Basis. See ¶119(d). 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 73 -

1 132. On May 13, 2003, the day after the 10-Q was filed, UTStarcom’s stock jumped

2 6.45% from $23.55 to close at $25.07 as a result of the positive statements therein. In fact, by July 3 16, 2003, the Company’s stock price had doubled since March 25, 2003, on the statements made 4 between February 21, 2003 and July 16, 2003. Between March 25, 2003 and July 16, 2003, 5 defendants sold a total of 497,691 of their UTStarcom shares for proceeds of nearly $14 million as 6 detailed below: 7 8 Defendant Shares Sold Price Range Proceeds Chou 200,000 $22.70 - $40.50 $5,765,562 9 Huang 27,539 $22.55 - $41.61 $781,761 Kwock 10,000 $25.25 $252,500 10 Lu 45,000 $19.90 $895,500 11 Soloway 85,527 $19.90 - $40.00 $2,776,205 Sophie 129,000 $19.99 - $34.28 $3,511,962 12 133. False Statements in the May 21, 2003 Press Release Concerning the Company’s 13 Contracts with Beijing Telecom: On May 21, 2003, the Company issued a press release entitled 14 “UTStarcom Signs $57.9 Million Contract with Beijing China Netcom to Deploy IP-Based PAS 15 16 System in City of Beijing; PAS Gaining Widespread Acceptance and Growth Potential in China’s 17 Metropolitan Areas.” The press release stated in relevant part:

18 UTStarcom Inc., a leading provider of wireless, wireline, and broadband access equipment, today announced that it has signed a contract with Beijing China Netcom 19 valued at $57.9 million for UTStarcom’s IP-based PAS (Personal Access System) (iPAS) platform. 20 (a) Date of Statement. The statement was made in the UTStarcom press release 21 dated May 21, 2003. 22 (b) Recipient. The recipients of the press release were the public at large and 23 UTStarcom’s shareholders. 24 (c) Identity of Author. UTStarcom issued the press release and the release is 25 attributed to Sophie. 26 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 27 recklessness or actual knowledge of falsity when they announced the $57.9 million contract with 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 74 -

1 Beijing China Netcom without disclosing that: (i) the value of the contract was impaired due to 2 “uncertainties surrounding the [Beijing] customer’s subscriber income and ability to pay”; (ii) that 3 the Beijing contract involved a related party; and (iii) that as further detailed herein at ¶11, China 4 Netcom and SOFTBANK had an important financial relationship giving China Netcom a vested 5 interest in helping SOFTBANK inflate UTStarcom’s stock price in order to make SOFTBANK’s 6 balance sheet appear more sound. 7 134. On July 17, 2003, UTStarcom loaned over $10 million to a SOFTBANK affiliate. 8 SOFTBANK had experienced massive losses in its portfolio and was hemorrhaging cash. 9 135. July 17, 2003 False Statement in UTStarcom’s Conference Call Using the

10 Purported “Visibility” Provided by UTStarcom’s Long Sales Pipeline to Reinforce Margin 11 Guidance: 12 Guidance going forward. We continue to see the strength and growing 13 demand across all product lines, both in mainland China and globally. UTStarcom is again raising revenue guidance for both Q3 and the full year 2003. 14 * * * 15 Due to the continued expansion and performance of PAS networks in China 16 and in global markets, total revenue from wireless systems will be around 35%. Each of these (inaudible) metrics can fluctuate plus or minus 5%. Our gross 17 margins as a percentage of revenue for Q2 was approximately 34%. Given the anticipated mix shift to handsets, increased ramp-up cost activities in global markets 18 in (inaudible) and competitive landscape, we are targeting gross margin as a percentage of revenue for the full year 2003 continue [sic] to stay at the current 19 levels, plus or minus a few tenths of a percent.

20 (a) Date of Statement. The statement was made during the July 17, 2003, Q2 03 21 UTStarcom earnings conference call held with Wall Street analysts.

22 (b) Recipient. The recipients of the statement were UTStarcom’s public 23 stockholders, who received the information from Wall Street analysts and from news items 24 circulating within the investment news media and other channels. For instance, citing defendants’ 25 comments at the earnings conference and the important role ongoing demand for UTStarcom’s 26 products would play in valuing the Company, Prudential Equity Group’s July 18, 2003 report stated 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 75 -

1 the “company noted that its already building backlog for 1Q 04, and we believe this suggest its 2 visibility is uniquely high.”

3 (c) Identity of Author. Defendant Sophie made the statement. Defendant Lu 4 was present.

5 (d) True Facts, Scienter and Pleading Basis. UTStarcom could not possibly 6 post 2003 gross margins of 34%. Defendants acted with deliberate recklessness or actual knowledge 7 of falsity when they used the purported growing “demand” for PAS infrastructure they were 8 reporting (including “deferred costs” and “backlog” posted by the Company) and other indicia of 9 purported “visibility” into future revenues virtually guaranteed from sales of PAS infrastructure then 10 contracted (according to them), while knowing but concealing: 11 (i) That, because PAS was viewed as an interim solution by the Chinese 12 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 13 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 14 UTStarcom in China; 15 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 16 budgets, as set in 2003, were dedicated to 3G development; 17 (iii) That the Chinese government was taking steps to protect the 18 development of its nascent mobile industries, including permitting China Mobile and China Unicom 19 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 20 subscriber growth; 21 (iv) That the roll out of TD-SCDMA technology would limit the ability to 22 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 23 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 24 (v) That the Company’s high margin PAS infrastructure sales had eroded 25 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 26 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 27 products and because the systems had to be installed and repaired by Chinese speaking engineers; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 76 -

1 (vi) That because UTStarcom’s historical PAS success in China was 2 dependent upon China’s unique market and pricing controls, the Company would be unable to 3 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 4 margins; 5 (vii) That the Company lacked the infrastructure to balance supply with 6 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 7 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 8 (viii) That UTStarcom’s PAS infrastructure deployments were under- 9 budgeted because they were defective and required significant additional expenditures to make them 10 operational, causing excessive cost overruns and missed margin projections; 11 (ix) That because a significant portion of the PAS infrastructure placed into 12 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 13 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 14 (x) That China’s MII had confirmed that it would take steps to ensure that 15 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 16 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 17 by China Telecom and China Netcom in 2004 and 2005; 18 (xi) That the Chinese government, through China Telecom and China 19 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 20 (xii) That the contract of sale to entities in Beijing announced in 2003 21 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 22 customers’ inability to pay; 23 (xiii) That the Company lacked effective internal controls in its financial 24 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 25 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 26 and accrued expenses, all of which were required to competently analyze and/or estimate 27 UTStarcom’s future financial and operational performance; and 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 77 -

1 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 2 to believe, and did not in fact believe, their FY 2003 34%-35% margin projections. 3 136. July 17, 2003 False Statement in UTStarcom’s Conference Call Using the

4 Purported “Visibility” Provided by UTStarcom’s Long Sales Pipeline to Reinforce Margin 5 Guidance: 6 [Hasan Imam, Thomas Weisel Partners] . . . [O]n backlog [g]iven that you report the 7 number once a year, could you give an update, even if it’s qualitative. If you look at your deferred revenue numbers, and then inventory customer location, and after that 8 contract announcement, would it be right to assume that backlog is now over a billion? Is that in the right ballpark? 9 * * * 10 [Michael J. Sophie] We do report backlog once a year, off our year-end results. 11 These last couple quarters, we’ve tried to be not only qualitative but quantitative on the business. It’s been so strong, we wanted everyone to have a sense. We’re quite 12 open with our book-to-bill was around 2 in Q1 . . . It’s 1.4 in Q2. So if you run the numbers you would come up with a number that’s above a billion, you’re in the 13 ballpark. 14 The other quantitative comment on the backlog is that we have our backlog in place for the remainder of the year. [W]e’re scheduling backlog into Q1 15 2004 . . . . We’re excited about that. It gives us a tremendous amount of visibility we think is unmatched in the industry . . . . 16 (a) Date of Statement. The statement was made during the July 17, 2003 2Q 03 17 UTStarcom earnings conference call held with Wall Street analysts. 18 (b) Recipient. The recipients of the statement were UTStarcom’s public 19 stockholders, who received the information from Wall Street analysts and from news items 20 circulating within the investment news media and other channels. 21 (c) Identity of Author. Defendant Sophie made the statement. Defendant Lu 22 was present. 23 (d) True Facts, Scienter and Pleading Basis. The reported indicia of then- 24 current demand and purported PAS infrastructure sales in UTStarcom’s sales pipeline, including 25 deferred revenue and a purported $1 billion “backlog,” did not provide investors with “visibility” to 26 the Company’s future financial performance (including future gross margins) into Q1 04. 27 Defendants knew in July 2003, or were deliberately reckless in not knowing, that a material portion 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 78 -

1 of the $1 billion dollars in sales contracts the “backlog” represented would never materialize despite 2 their repeated representations that the Company had a long and highly visible sales pipeline. 3 UTStarcom’s reported wireless infrastructure sales of $184.7 million, $264.2 million, and $336.5 4 million in the Q3 03, Q4 03 and Q1 04, respectively, would miss the $1 billion “backlog” by almost 5 25%. As a result, the gross margins UTStarcom would later report on revenue from higher margin 6 PAS infrastructure sales it purportedly had “contracted” and in the sales pipeline in July 2003, 31.8% 7 in Q3 03, 29.2% in Q4 03, and 28.3% in Q1 04, fell well below the 34% gross margins represented 8 by defendants in July 2003. Defendants’ material margin misses were significant as the margin 9 projections were purportedly backed up by sales contracts with definitive terms and the margins 10 projected for those contracts were missed because of concealed factors such as declining demand 11 and substantially high costs, which defendants were required to disclose but were concealing, and, 12 because UTStarcom had defective internal controls, its auditors were not able to authenticate 13 defendants’ financial estimates. Defendants acted with deliberate recklessness or actual knowledge 14 of falsity when they stated that the deferred costs, inventory and backlog posted by the Company, 15 and other indicia of purported “demand” gave “visibility” into future financial performance 16 (including margins), knowing but concealing: 17 (i) That, because PAS was viewed as an interim solution by the Chinese 18 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 19 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 20 UTStarcom in China; 21 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 22 budgets, as set in 2003, were dedicated to 3G development; 23 (iii) That the Chinese government was taking steps to protect the 24 development of its nascent mobile industries, including permitting China Mobile and China Unicom 25 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 26 subscriber growth; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 79 -

1 (iv) That the roll out of TD-SCDMA technology would limit the ability to 2 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 3 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 4 (v) That the Company’s high margin PAS infrastructure sales had eroded 5 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 6 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 7 products and because the systems had to be installed and repaired by Chinese speaking engineers; 8 (vi) That because UTStarcom’s historical PAS success in China was 9 dependent upon China’s unique market and pricing controls, the Company would be unable to 10 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 11 margins; 12 (vii) That the Company lacked the infrastructure to balance supply with 13 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 14 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 15 (viii) That UTStarcom’s PAS infrastructure deployments were under- 16 budgeted because they were defective and required significant additional expenditures to make them 17 operational, causing excessive cost overruns and missed margin projections; 18 (ix) That because a significant portion of the PAS infrastructure placed into 19 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 20 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 21 (x) That China’s MII had confirmed that it would take steps to ensure that 22 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 23 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 24 by China Telecom and China Netcom in 2004 and 2005; 25 (xi) That the Chinese government, through China Telecom and China 26 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 80 -

1 (xii) That the contract of sale to entities in Beijing announced in 2003 2 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 3 customers’ inability to pay; and 4 (xiii) That the Company lacked effective internal controls in its financial 5 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 6 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 7 and accrued expenses, all of which were required to competently analyze and/or estimate 8 UTStarcom’s future financial and operational performance. 9 137. July 17, 2003 False Statement in UTStarcom’s Conference Call Using the

10 Purported “Visibility” Provided by UTStarcom’s Long Sales Pipeline to Reinforce Margin 11 Guidance: 12 [HONG LU:] . . .[O]ur booking continues to be strong for the quarter, and as such, 13 our visibility now extends into Q1 if 2004. 14 * * *

15 [MICHAEL SOPHIE:] . . . To transition to the balance sheet, I would once again like to point out that UTStarcom views the rise in inventory and 16 corresponding increase in deferred revenues as a powerful indicator and is a direct reflection of the extraordinary strong demand we are seeing for our products and 17 translates into increased visibility, revenues and profits. 18 Although I discussed this on the Q1 conference call, I would like to remind everyone that I understand our balance sheet is extremely important to understand 19 UTStarcom’s business cycle because this is what drives the metrics on the balance sheet. When we receive an order from a customer and announce contracts, we do not 20 recognize revenue on these contracts until we receive a final acceptance certificate signed by the customer. It can take between 90 to 100 days after we deploy the 21 network to complete the revenue recognition cycle.

22 To that end, 72% of our inventory is already deployed in the field of customer locations pending final acceptance. The inventory of customer locations 23 gives us tremendous visibility into future quarters, revenues and profits. In addition, we have a history of no inventory being returned, and we have already 24 received final acceptance on our deployments.

25 (a) Date of Statement. The statement was made during the July 17, 2003 Q2 03 26 UTStarcom earnings conference call held with Wall Street analysts. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 81 -

1 (b) Recipient. The recipients of the statements were UTStarcom’s public 2 stockholders, who received the information from Wall Street analysts and from news items 3 circulating within the investment news media and other channels. For instance, in its July 18, 2003 4 report, Prudential Equity Group stated based on defendants’ statements at the July 17, 2003 5 conference that: “We estimate that substantially all of the expected revenues for the next two

6 quarters have already shipped. To date, the company said that no order has failed customer 7 acceptance and we believe it maintains close relationships with customers, which provides us with 8 the comfort to expect shipped inventories to be recognized as revenues in due time.” Similarly, 9 Thomas Weisel Partners LLC stated: “Backlog now north of $1 bn, providing visibility extending to 10 1Q 04,” supported by facts that: “(3) nearly $800 mn in inventory already at customer premises 11 waiting to be recognized as revenues; (4) deferred revenue more than doubled in 2Q 03 to $545 mn 12 from $257 mn in 1Q 03.”

13 (c) Identity of Author. Defendants Lu and Sophie made the statements. 14 (d) True Facts, Scienter and Pleading Basis. The reported indicia of then- 15 current demand and purported PAS infrastructure sales in UTStarcom’s sales pipeline, purportedly 16 constituting a $1 billion “backlog,” did not provide investors with “visibility” to the Company’s 17 future financial performance (including future gross margins) into Q1 04. Defendants knew in 18 July 2003, or were reckless in not knowing, that a material portion of the $1 billion dollars in sales 19 contracts the “backlog” represented would never materialize despite their repeated representations 20 that the Company had a long and highly visible sales pipeline. Defendants acted with deliberate 21 recklessness or actual knowledge of falsity when they stated that the deferred costs, inventory and 22 backlog posted by the Company, and other indicia of purported “demand,” gave “visibility” into 23 future financial performance (including margins), knowing but concealing: 24 (i) That, because PAS was viewed as an interim solution by the Chinese 25 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 26 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 27 UTStarcom in China; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 82 -

1 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 2 budgets, as set in 2003, were dedicated to 3G development; 3 (iii) That the Chinese government was taking steps to protect the 4 development of its nascent mobile industries, including permitting China Mobile and China Unicom 5 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 6 subscriber growth; 7 (iv) That the roll out of TD-SCDMA technology would limit the ability to 8 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 9 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 10 (v) That the Company’s high margin PAS infrastructure sales had eroded 11 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 12 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 13 products and because the systems had to be installed and repaired by Chinese speaking engineers; 14 (vi) That because UTStarcom’s historical PAS success in China was 15 dependent upon China’s unique market and pricing controls, the Company would be unable to 16 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 17 margins; 18 (vii) That the Company lacked the infrastructure to balance supply with 19 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 20 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 21 (viii) That UTStarcom’s PAS infrastructure deployments were under- 22 budgeted because they were defective and required significant additional expenditures to make them 23 operational, causing excessive cost overruns and missed margin projections; 24 (ix) That because a significant portion of the PAS infrastructure placed into 25 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 26 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 83 -

1 (x) That China’s MII had confirmed that it would take steps to ensure that 2 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 3 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 4 by China Telecom and China Netcom in 2004 and 2005; 5 (xi) That the Chinese government, through China Telecom and China 6 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 7 (xii) That the contract of sale to entities in Beijing announced in 2003 8 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 9 customers’ inability to pay; and 10 (xiii) That the Company lacked effective internal controls in its financial 11 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 12 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 13 and accrued expenses, all of which were required to competently analyze and/or estimate 14 UTStarcom’s future financial and operational performance. 15 138. Following the Company’s earnings announcement on July 17, 2003 after the close of

16 trading, on July 18, 2003, the Company’s stock price rose approximately $2 per share in one trading 17 session on well over 8 million shares traded. By August 21, 2003, the Company’s stock price had 18 spiked up above $45 per share. 19 139. Between July 21, 2003 and September 8, 2003, defendants sold 506,149 of their 20 UTStarcom shares at inflated prices for proceeds of $21.8 million as detailed below: 21 22 23 24 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 84 -

1 Defendant Shares Sold Price Range Proceeds 2 Chou 20,000 $42.54 $850,780 Huang 4,461 $41.60 $185,560 3 Kwock 4,000 $42.36 - $ 43.84 $172,400 Lu 130,000 $42.00 -$ 45.24 $5,804,570 4 Soloway 38,688 $39.65- $ 43.83 $1,661,374 Sophie 24,000 $43.06- $ 43.77 $1,029,948 5 Toy 30,000 $42.00- $ 43.61 $1,276,730 Wu 255,000 $42.00- $ 43.18 $10,816,080 6 140. Following a September 8, 2003 report by Prudential securities that the Chinese 7 government’s then impending plan to issue 3G licenses would result in dramatic declines in China 8 Telecom’s and China Netcom’s PAS spending and a September 9, 2003 report in the 21st Century 9 10 Business Herald that China Netcom was going to stop deploying PAS altogether in anticipation of

11 China’s impending 3G rollout, the Company’s stock fell precipitously from an opening price of

12 $41.79 per share on September 8, 2003 to close at $38.49 on more than 13 million shares volume, 13 and continued its downward spiral as the market questioned the Company’s business model, 14 eventually closing at $35.08 on September 24, 2003. 15 141. On September 16, 2003, at Banc of America’s insistence, UTStarcom filed a 16 17 Registration Statement and Prospectus pursuant to Rule 424(b)(3) which registered the 18 $402.5 million of convertible notes issued in the private placement in March 2003, and the

19 underlying stock. At 2:30 p.m. EST on September 17, 2003, UTStarcom representatives appeared at

20 the Banc of America Securities 33rd Annual Investment Conference at the Ritz-Carlton in San 21 Francisco to continue inflating the price of the Company’s stock and bonds. Once again, defendants 22 highlighted the balance sheet factors they told investors provided “high visibility” and attempted to 23 nullify concerns, at the insistence of Banc of America, that its PAS sales in China were at risk. 24 25 142. Suddenly, on September 25, 2003, the Company issued a press release and held an 26 impromptu analyst conference to attempt to address the market’s growing concerns concerning the

27 long-term prospects of PAS infrastructure sales. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 85 -

1 143. September 25, 2003 False Statement in UTStarcom’s Conference Call

2 Concerning Continued Expected PAS Infrastructure Sales in China Despite a Shift to Capital 3 Spending on 3G: 4 UTStarcom believes that 3G will serve a completely different market segment 5 than PAS . . . . PAS will continue to deploy to meet the demand of the majority of the market in China . . . . 6 (a) Date of Statement. The statement was made during the September 25, 2003, 7 UTStarcom conference call held with Wall Street analysts. 8 (b) Recipient. The recipients of the statement were UTStarcom’s public 9 stockholders, who received the information from Wall Street analysts and from news items 10 circulating within the investment news media and other channels. For instance, in a September 26, 11 2003 report WR Hambrecht & Co. stated: “On yesterday’s impromptu intraday conference call, 12 management confirmed our sources’ earlier suggestions that business momentum remains solid . . . . 13 Over the past few weeks, unsubstantiated rumors have circulated regarding the viability of the 14 Company’s PAS business. We remain confident that primarily due to the substantially lower prices 15 of PAS handsets and services as well as the lower cost of deployment to carriers, China Netcom’s 16 and China Telecom’s demand for PAS will remain strong well into 2005.” 17 (c) Identity of Author. Defendant Lu made the statement. Defendant Sophie 18 was present. 19 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 20 recklessness or actual knowledge of falsity when they implied to the market that China Telecom and 21 China Netcom would continue spending the “majority” of their telecom capital expenditures on PAS 22 infrastructure. In reality defendants knew but concealed: 23 (i) That, because PAS was viewed as an interim solution by the Chinese 24 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 25 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 26 UTStarcom in China; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 86 -

1 (ii) That the Chinese government was taking steps to protect the 2 development of its nascent mobile industries, including permitting China Mobile and China Unicom 3 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 4 subscriber growth; 5 (iii) That the roll out of TD-SCDMA technology would limit the ability to 6 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 7 decreases in PAS infrastructure purchases by China Telecom and China Netcom; and 8 (iv) That China’s MII had confirmed that it would take steps to ensure that 9 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 10 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 11 by China Telecom and China Netcom in 2004 and 2005. 12 144. September 25, 2003 False Statement in UTStarcom’s Conference Call

13 Concerning Ongoing Demand for PAS Infrastructure Sales Then Being Experienced in China: 14 Now, regarding the PAS, UTStarcom continues to see the strong demand across 15 China for our PAS solutions. 16 (a) Date of the Statement. The statement was made during the September 25, 17 2003, UTStarcom conference call held with Wall Street analysts. 18 (b) Recipient. The recipients of the statement were UTStarcom’s public 19 stockholders, who received the information from Wall Street analysts and from news items 20 circulating within the investment news media and other channels. 21 (c) Identity of Author. Defendant Lu made the statement. Defendant Sophie 22 was present. 23 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 24 recklessness or actual knowledge of falsity when they told the market that the Company continued to 25 “see strong demand across” China for PAS, knowing but concealing: 26 (i) That, because PAS was viewed as an interim solution by the Chinese 27 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 87 -

1 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 2 UTStarcom in China; 3 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 4 budgets, as set in 2003, were dedicated to 3G development; 5 (iii) That the Chinese government was taking steps to protect the 6 development of its nascent mobile industries, including permitting China Mobile and China Unicom 7 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 8 subscriber growth; 9 (iv) That the roll out of TD-SCDMA technology would limit the ability to 10 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 11 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 12 (v) That because a significant portion of the PAS infrastructure placed into 13 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 14 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 15 (vi) That China’s MII had confirmed that it would take steps to ensure that 16 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 17 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 18 by China Telecom and China Netcom in 2004 and 2005; and 19 (vii) That the Company lacked effective internal controls in its financial 20 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 21 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 22 and accrued expenses, all of which were required to competently analyze and/or estimate 23 UTStarcom’s future financial and operational performance. 24 145. September 25, 2003 False Statement in UTStarcom’s Press Release Concerning

25 Continuing PAS Sales in Light of Pending 3G Rollout in China: 26 “We continue to see strength and growth in infrastructure spending in China.” 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 88 -

1 (a) Date of Statement. This statement appears in the September 25, 2003 press 2 release entitled “UTStarcom Reiterates Continued Strength in Business and Positive Outlook 3 Company to Conduct Conference Call at 2:00 p.m. (EDT) to Discuss Recent Concerns and Take 4 Investor Questions.”

5 (b) Recipient. The recipients of the statement were UTStarcom’s public 6 stockholders, who received the information from Wall Street analysts and from news items 7 circulating within the investment news media and other channels.

8 (c) Identity of Author. Statements are attributed to defendant Lu in the 9 September 25, 2003 press release. In addition, it is a group-published document. As such, each 10 Individual Defendant may be held liable for statements made in the press release.

11 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 12 recklessness or actual knowledge of falsity when they told the market that the Company continued to 13 “see strength and growth in infrastructure spending” in China for PAS, knowing but concealing: 14 (i) That, because PAS was viewed as an interim solution by the Chinese 15 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 16 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 17 UTStarcom in China; 18 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 19 budgets, as set in 2003, were dedicated to 3G development; 20 (iii) That the Chinese government was taking steps to protect the 21 development of its nascent mobile industries, including permitting China Mobile and China Unicom 22 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 23 subscriber growth; 24 (iv) That the roll out of TD-SCDMA technology would limit the ability to 25 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 26 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 89 -

1 (v) That because a significant portion of the PAS infrastructure placed into 2 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 3 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 4 (vi) That China’s MII had confirmed that it would take steps to ensure that 5 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 6 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 7 by China Telecom and China Netcom in 2004 and 2005; and 8 (vii) That the Company lacked effective internal controls in its financial 9 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 10 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 11 and accrued expenses, all of which were required to competently analyze and/or estimate 12 UTStarcom’s future financial and operational performance. 13 146. September 25, 2003 False Statement in UTStarcom’s Conference Call

14 Concerning Continuing PAS Sales in Anticipation of Pending 3G Rollout in China: 15 DALE PFAU: Great. Okay. Now the real question here Hong, there’s been 16 so much speculation on this 3G. And for whatever reason, people continue to draw negative implications for you on that. Could you talk a little bit about your 17 comments with Netcom and Telecom, and what they have told you relative to their cap ex plans on PAS when they do indeed get a 3G license? 18 * * * 19 HONG LU: Now I . . . believe that when they have a 3G license, they’re 20 going to increase their spending from both sides into 3G, as well as in the PAS. If you can increase in your continuation of a customer, which is 42% of your existing 21 wire line business up until this year, you do not want it to slow that down. In fact, we have been seeing the acceleration of the customer bases from Q1, Q2, and now in 22 Q3. 23 * * * 24 So you can see the significant improvements. And what that really means is a lot more subscribers are building up capacities. And therefore there is a lot more 25 revenues coming in. And therefore they will be continuing to do the expansion for the system-wise as well. And if they receive the 3Gs they were spending on 3G as 26 well, and they will be able to go and grade the money and the bank – the financing and so forth. So there will be spending in both. And we see it is a lot more positive, 27 because we will have a lot more part to play in terms of once they have received the 3Gs. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 90 -

1 (a) Date of Statement. The statement was made during the September 25, 2003, 2 UTStarcom conference call held with Wall Street analysts.

6 Pacific Growth Equities issued a report stating: “We do not believe PAS and 3G are mutually 7 exclusive options for the carriers to deploy, and we expect demand from their customer bases will 8 likely support demand for both options.”

9 (c) Identity of Author. Defendant Lu made the statement. Defendant Sophie 10 was present.

11 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 12 recklessness or actual knowledge of falsity when they told the market that based on defendants’ 13 conversations with China Telecom and China Netcom, those two customers, responsible for 90% of 14 the Company’s historical sales, would continue to expand their PAS networks resulting in significant 15 capital expenditures, knowing but concealing: 16 (i) That, because PAS was viewed as an interim solution by the Chinese 17 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 18 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 19 UTStarcom in China; 20 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 21 budgets, as set in 2003, were dedicated to 3G development; 22 (iii) That the Chinese government was taking steps to protect the 23 development of its nascent mobile industries, including permitting China Mobile and China Unicom 24 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 25 subscriber growth; 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 91 -

17 Concerning the Effect PAS Subscriber Growth and Demand Would Have on Visibility into its 18 Future Financial Performance: 19 HONG LU: Sure. Well, if you look at our current trend, we’re saying 30 20 million. And I think, in my opinion, that is a relatively conservative number for 30 million. And also, with the momentum that we are growing, what the people are 21 buying, and the types of people we have been expanding, we are just seeing that when you do that installation in a city, first you have two ways of doing. One is the 22 new cities. You would do the metropolitan major cities. And that will expand by itself. And then you go to the suburban areas or the satellite cities. And they will 23 continue to grow. 24 And our historical experience is we have been putting our systems in nine months. Ninety percent of our customers will give us repeat orders. And we haven’t 25 seen any changes at all. In other words, we have implemented in Q1/Q2. And now they’re becoming - coming to the nine months time. And we’re seeing the repeat 26 orders continue to come in. And therefore you see our capacity is continuing to grow. 27 The more capacity to grow, the more users we’re at. And that is a type of a 28 thing that we’re not even saying hypothetically that it’s going to happen. We know FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 92 -

1 from historical information, we’re very, very confident that we’ll continue to grow. And that’s how we’re saying we’re driving 50 million. 2 (a) Date of Statement. The statement was made during the September 25, 2003, 3 UTStarcom conference call held with Wall Street analysts. 4 (b) Recipient. The recipients of the statement were UTStarcom’s public 5 stockholders, who received the information from Wall Street analysts and from news items 6 circulating within the investment news media and other channels. 7 (c) Identity of Author. Defendant Lu made the statement. Defendant Sophie 8 was present. 9 (d) True Facts, Scienter and Pleading Basis. UTStarcom’s PAS subscriber 10 growth would not reach 50 million and defendants knew it based on information then available to 11 them. Defendants have, in fact, admitted PAS subscribers declined 30% toward the end of 2004, 12 and that PAS spending was now contracting 50%-60% in China. Defendants acted with deliberate 13 recklessness or actual knowledge of falsity when they used the purported PAS subscriber growth and 14 other indicia of purported demand to justify “visibility” into the Company’s Q1 04 and Q2 04, while 15 knowing but concealing: 16 (i) That, because PAS was viewed as an interim solution by the Chinese 17 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 18 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 19 UTStarcom in China; 20 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 21 budgets, as set in 2003, were dedicated to 3G development; 22 (iii) That the Chinese government was taking steps to protect the 23 development of its nascent mobile industries, including permitting China Mobile and China Unicom 24 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 25 subscriber growth; 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 93 -

1 (iv) That the roll out of TD-SCDMA technology would limit the ability to 2 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 3 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 4 (v) That because a significant portion of the PAS infrastructure placed into 5 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 6 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 7 (vi) That China’s MII had confirmed that it would take steps to ensure that 8 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 9 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 10 by China Telecom and China Netcom in 2004 and 2005; 11 (vii) That the Chinese government, through China Telecom and China 12 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 13 (viii) That the contract of sale to entities in Beijing announced in 2003 14 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 15 customers’ inability to pay; and 16 (ix) That the Company lacked effective internal controls in its financial 17 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 18 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 19 and accrued expenses, all of which were required to competently analyze and/or estimate 20 UTStarcom’s future financial and operational performance. 21 148. On October 2, 2003, Banc of America “initiated coverage” of UTStarcom with a

22 “buy” rating. The Company’s stock price rose $2.35 per share to $34.26 per share that day. The 23 Company’s stock price continued to spike almost 16% in response to Banc of America’s “buy” 24 recommendation and favorable report issued October 2, 2003, advancing from its closing price of 25 $31.91 on October 1, 2003 to its closing price of $37 on October 8, 2003, as the market absorbed the 26 report. Over 14 million shares traded on October 2, 2003, more than 400% times the average daily 27 28 trading volume during the Class Period. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 94 -

1 149. October 23, 2003 False Statement in UTStarcom’s Conference Call Concerning

2 Continued Expected PAS Infrastructure Sales in China Despite a Shift to Capital Spending on 3 3G: 4 We want everyone to understand 3G and PAS service, they serve two 5 different market segments with a significant cost difference between them. Operators will initially roll out only in strategic hot spots and they will continue to 6 market PAS to the majority of the population. Over the next 10 to 20 years, 400 million people in China will move from farms to cities. This is a target market for 7 PAS service. PAS will remain an important service for the long-term because the strength of the subscriber demand and the revenue and the profit it provides to the 8 carriers. 9 (a) Date of Statement. The statement was made during the October 23, 2003, 10 Q3 03 UTStarcom earnings conference call held with Wall Street analysts. 11 (b) Recipient. The recipients of the statement were UTStarcom’s public 12 stockholders, who received the information from Wall Street analysts and from news items 13 circulating within the investment news media and other channels. For instance, in its October 24, 14 2003 report citing defendants’ statements at the October 23, 2003 earnings conference call, WR 15 Hambrecht & Co. stated that based on defendants’ statements they believed “that not only will the 16 sale of PAS equipment receive little to no cannibalization from the introduction of 3G during 2004, 17 but also that both technologies will co-exist.” Similarly, in its October 24, 2003 report, Pacific 18 Growth Equities reported that the “Company . . . stated its belief 3G is still a long way off and that 19 3G services will not compete with PAS over at least the next four years.” 20 (c) Identity of Author. Defendant Lu made the statement. Defendants Sophie 21 and Soloway were present. 22 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 23 recklessness or actual knowledge of falsity when they told the market that China Telecom and China 24 Netcom operators would continue purchasing PAS infrastructure equipment while 3G was being 25 rolled out and after its rollout, which they knew would include systems operated on the 3G TD- 26 SCDMA standard being developed and promoted by the Chinese government. In reality defendants 27 knew but concealed: 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 95 -

17 the Effect Lowering Demand for PAS was then Having on PAS Infrastructure Sales in China 18 and Would Have on its Future Financial Performance: 19 Sales for the third quarter increased to 584.4 million compared to 20 265.5 million in the third quarter of 2002, an increase of 120% year over year. For the quarter, PAS infrastructure accounted for 33% of our sales and PAS handsets 21 accounted for 57% of our sales. The balance of 10% consisted primarily of our wire line products. 22 Gross margins came in at 32%, which is in line with the preliminary results 23 we gave on October 1st. Mixed changes can impact gross margins as a percentage of sales. Handsets increased from 46% of sales in Q2 to 57% of sales in the current 24 quarter, while at the same time wire line products declined as percentage from approximately 20% in Q2 to 10% in the current quarter. It is important to note that 25 this mixed change was the result of incremental sales opportunities for the company, delivering higher revenues and profits and not as a result of losing 26 higher profit business to lower. 27 (a) Date of Statement. The statement was made during the October 23, 2003, 28 Q3 03 UTStarcom earnings conference call held with Wall Street analysts. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 96 -

1 (b) Recipient. The recipients of the statement were UTStarcom’s public 2 stockholders, who received the information from Wall Street analysts and from news items 3 circulating within the investment news media and other channels. For instance, in its October 24, 4 2003 report, HR Hambrecht & Co. dismissed the Q3 03 decrease in gross margins from 34% to 32% 5 explaining that increased handset sales (with lower 25% margins) had only temporarily decreased 6 margins, stating they would “later expect that associated follow-on sales of additional PAS

7 infrastructure equipment may have an equivalent favorable impact on margins over the coming 8 quarters.”

9 (c) Identity of Author. Defendant Sophie made the statement. Defendants Lu 10 and Soloway were present.

11 (d) True Facts, Scienter and Pleading Basis. UTStarcom’s margins would 12 continue to materially decline. In fact, by the end of Q1 04, the actual gross margins UTStarcom 13 would report on sales purportedly in its pipeline in October 2003 (6-12 months prior to recognition 14 upon “final acceptance” according to defendants) would fall substantially to below 30%. Defendants 15 acted with deliberate recklessness or actual knowledge of falsity when they told the market that the 16 increased handset sales would be “incremental” to, rather than “instead of,” higher margin PAS 17 infrastructure sales, knowing but concealing: 18 (i) That, because PAS was viewed as an interim solution by the Chinese 19 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 20 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 21 UTStarcom in China; 22 (ii) That the Chinese government was taking steps to protect the 23 development of its nascent mobile industries, including permitting China Mobile and China Unicom 24 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 25 subscriber growth; 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 97 -

1 (iii) That the roll out of TD-SCDMA technology would limit the ability to 2 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 3 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 4 (iv) That because a significant portion of the PAS infrastructure placed into 5 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 6 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 7 and 8 (v) That China’s MII had confirmed that it would take steps to ensure that 9 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 10 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 11 by China Telecom and China Netcom in 2004 and 2005. 12 151. October 23, 2003 False Statement in UTStarcom’s Conference Call Concerning

13 the Company’s 2003 and 2004 Gross Margin Projections: 14 Gross margins. Given the continued upside in handsets and ramping 15 revenues in India, our gross margins for the fourth quarter of 2003 are anticipated to range between 30 and 32%. 16 * * * 17 Our philosophy on guidance will continue to be conservative. Our 2004 18 guidance includes the following assumptions, which give us much confidence in these projected results. We anticipate entering 2004 with approximately two quarters 19 in backlog. The PAS subscriber growth rate is anticipated to continue to be strong, going from 30 million at the end of 2003 to surpass 50 million in 2004. This will 20 drive incremental handset and infrastructure spending in China. 21 * * *

22 In total we expect international revenues between 500 and 600 million in 2004. By product type, the 2004 revenue breakdown is targeted as follows: . . . 23 Wireless systems will be approximately 30%, reflecting continued expansion and new deployments of PAS networks, both inside and outside of Mainland China, 24 representing a growth rate of approximately 20% over 2003. Gross margins for 2004 should range between 30 and 32% due to continued strong PAS subscriber 25 and handset growth, a significant ramp in India, and reflective of continued world wide competitive and pricing trends in telecom. 26 (a) Date of Statement. The statement was made during the October 23, 2003, 27 Q3 03 UTStarcom earnings conference call held with Wall Street analysts. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 98 -

1 (b) Recipient. The recipients of the statement were UTStarcom’s public 2 stockholders, who received the information from Wall Street analysts and from news items 3 circulating within the investment news media and other channels. For instance, on October 24, 4 2003, WR Hambrech & Co. issued a report citing the earnings conference and stating that the 5 Company’s reported unrecognized contracts gave it “visibility well into the June quarter of 2004.”

6 (c) Identity of Author. Defendant Sophie made the statement. Defendants Lu 7 and Soloway were present.

8 (d) True Facts, Scienter and Pleading Basis. UTStarcom’s PAS infrastructure 9 sales inside and outside of China had already deteriorated, which, as defendants then knew based on 10 the terms of any “sales” or attempted “sales” in the Company’s pipeline in October 2003, precluded 11 UTStarcom from posting margins anywhere near 32% in 2003 or 2004. Defendants’ statements that 12 the investment community could look to the Company’s “approximately two-quarters in backlog” 13 going into 2004 for reassurance that it would achieve its 2004 projections were belied by the fact that 14 defendants were aware that revenues from sales to China Telecom and China Netcom from PAS 15 infrastructure sales would all but evaporate by the end of FY 2004 (total wireless infrastructure sales 16 were $205.5 million in Q4 04 and $110 million in Q1 05). Moreover, defendants knew the 17 Company’s international PAS infrastructure sales would never replace the 40%-50% margin sales 18 the Company had previously achieved in China, because other countries, including developing 19 nations, would not share the political, economic or regulatory factors which led to the high revenue 20 PAS sales in China in the first place. PAS, with its limited range – and more importantly limited 21 reception capabilities in buildings and moving vehicles – could not and would not compete in an 22 open market environment, even in other developing nations. In fact, by the end of 2003, the actual 23 gross margins UTStarcom would report on revenues, including those from sales of PAS 24 infrastructure products the Company purportedly had in the pipeline in October 2003 (6-12 months 25 prior to recognition upon “final acceptance” according to defendants), had declined dramatically to 26 15%. Defendants acted with deliberate recklessness or actual knowledge of falsity when they told 27 the market that that their financial projections were “conservative,” knowing but concealing that: 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 99 -

1 (i) That, because PAS was viewed as an interim solution by the Chinese 2 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 3 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 4 UTStarcom in China; 5 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 6 budgets, as set in 2003, were dedicated to 3G development; 7 (iii) That the Chinese government was taking steps to protect the 8 development of its nascent mobile industries, including permitting China Mobile and China Unicom 9 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 10 subscriber growth; 11 (iv) That the roll out of TD-SCDMA technology would limit the ability to 12 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 13 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 14 (v) That the Company’s high margin PAS infrastructure sales had eroded 15 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 16 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 17 products and because the systems had to be installed and repaired by Chinese speaking engineers; 18 (vi) That because UTStarcom’s historical PAS success in China was 19 dependent upon China’s unique market and pricing controls, the Company would be unable to 20 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 21 margins; 22 (vii) That the Company lacked the infrastructure to balance supply with 23 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 24 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 25 (viii) That UTStarcom’s PAS infrastructure deployments were under- 26 budgeted because they were defective and required significant additional expenditures to make them 27 operational, causing excessive cost overruns and missed margin projections; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 100 -

1 (ix) That because a significant portion of the PAS infrastructure placed into 2 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 3 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 4 (x) That China’s MII had confirmed that it would take steps to ensure that 5 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 6 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 7 by China Telecom and China Netcom in 2004 and 2005; 8 (xi) That the Chinese government, through China Telecom and China 9 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 10 (xii) That the contract of sale to entities in Beijing announced in 2003 11 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 12 customers’ inability to pay; 13 (xiii) That the Company lacked effective internal controls in its financial 14 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 15 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 16 and accrued expenses, all of which were required to competently analyze and/or estimate 17 UTStarcom’s future financial and operational performance; and 18 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 19 to believe, and did not in fact believe, their Q4 03 30%-32% margin projections repeated as late as 20 October 2003 or their FY 2004 margin projections of 30%-32% confirmed as late as March 2004. 21 152. October 23, 2003 False Statement in UTStarcom’s Conference Call Concerning

22 the Company’s 2004 Gross Margin Projections: 23 SAM MAY: Second question, your forecast for GAAP EPS for Q1 is 35 to 24 36 cents. That implies a fairly significant ramp throughout the quarters -- ramp throughout the quarters, something over 60 cents to get to the $1.92, the low end of 25 the range. Are you anticipating a gross margin below 30% for Q1? 26 MIKE SOPHIE: No, we don’t anticipate the gross margin in any quarter going below 30%. We do see it fluctuating throughout the year between 30 and 27 32%. Probably Q1, given that it’s the normal dip in overall revenues, heavily concentrated with handsets in India is probably at the lower end of the range. I 28 would tell you later in the year we would move towards the higher end of the range. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 101 -

1 (a) Date of Statement. The statement was made during the October 23, 2003, 2 Q3 03 UTStarcom earnings conference call held with Wall Street analysts.

6 (c) Identity of Author. Defendant Sophie made the statement. Defendants Lu 7 and Soloway were present.

8 (d) True Facts, Scienter and Pleading Basis. UTStarcom’s PAS infrastructure 9 sales had already deteriorated which, as defendants then knew based on the terms of “sales” in the 10 Company’s pipeline in October 2003, would not support the Company achieving margins anywhere 11 near 30%-32% – much less higher – in 2003 or 2004. These projections were belied by the fact that 12 defendants were aware that revenues received from sales of PAS infrastructure to China Telecom 13 and China Netcom would all but evaporate by the end of fiscal 2004 (total wireless infrastructure 14 sales including, but not limited to PAS, were $205.5 million in Q4 04 and $110 million in Q1 05). 15 This, coupled with the fact that defendants repeatedly assured the investment community throughout 16 the Class Period that it had a highly “visible” 6-12 month sales pipeline, leads to the undeniable 17 result that defendants had to know when the October 2003 gross margin projections were made that 18 the terms of the sales contracts then in the “sales pipeline” did not support 30%-32% margins and 19 that the margins would not be increasing at the end of 2004. In fact, by the end of 2003, the actual 20 gross margins UTStarcom would report on revenues, including those from sales of PAS 21 infrastructure products the Company purportedly had in the pipeline in October 2003 (6-12 months 22 prior to recognition upon “final acceptance” according to defendants), had declined dramatically to 23 15%. Defendants acted with deliberate recklessness or actual knowledge of falsity when they told 24 the market that that their financial projections of margins of 30%-32% were “conservative,” 25 knowing but concealing: 26 (i) That, because PAS was viewed as an interim solution by the Chinese 27 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 102 -

1 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 2 UTStarcom in China; 3 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 4 budgets, as set in 2003, were dedicated to 3G development; 5 (iii) That the Chinese government was taking steps to protect the 6 development of its nascent mobile industries, including permitting China Mobile and China Unicom 7 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 8 subscriber growth; 9 (iv) That the roll out of TD-SCDMA technology would limit the ability to 10 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 11 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 12 (v) That the Company’s high margin PAS infrastructure sales had eroded 13 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 14 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 15 products and because the systems had to be installed and repaired by Chinese speaking engineers; 16 (vi) That because UTStarcom’s historical PAS success in China was 17 dependent upon China’s unique market and pricing controls, the Company would be unable to 18 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 19 margins; 20 (vii) That the Company lacked the infrastructure to balance supply with 21 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 22 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 23 (viii) That UTStarcom’s PAS infrastructure deployments were under- 24 budgeted because they were defective and required significant additional expenditures to make them 25 operational, causing excessive cost overruns and missed margin projections; 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 103 -

1 (ix) That because a significant portion of the PAS infrastructure placed into 2 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 3 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 4 (x) That China’s MII had confirmed that it would take steps to ensure that 5 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 6 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 7 by China Telecom and China Netcom in 2004 and 2005; 8 (xi) That the Chinese government, through China Telecom and China 9 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 10 (xii) That the contract of sale to entities in Beijing announced in 2003 11 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 12 customers’ inability to pay; 13 (xiii) That the Company lacked effective internal controls in its financial 14 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 15 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 16 and accrued expenses, all of which were required to competently analyze and/or estimate 17 UTStarcom’s future financial and operational performance; and 18 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 19 to believe, and did not in fact believe, their FY 2004 margin projections of 30%-32% confirmed as 20 late as March 2004. 21 153. October 23, 2003 False Statement in UTStarcom’s Conference Call Using the

22 Purported “Visibility” Provided by UTStarcom’s Long Sales Pipeline to Reinforce Margin 23 Guidance: 24 MIKE SOPHIE: . . . . Part of what we’re doing also when we give our 25 guidance is we look at our backlog, we’re looking at our pipeline and all the trends out there and we do try to be conservative in the financial guidance. We try to 26 provide factoring into the overall numbers. That’s in there as well when you take a look at how we build up our guidance. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 104 -

1 (a) Date of Statement. The statement was made during the October 23, 2003, 2 Q3 03 UTStarcom earnings conference call held with Wall Street analysts.

6 (c) Identity of Author. Defendant Sophie made the statement. Defendants Lu 7 and Soloway were present.

8 (d) True Facts, Scienter and Pleading Basis. UTStarcom’s “guidance,” 9 including both gross margin and subscribers on UTStarcom’s own PAS system (as opposed to the 10 entire China PHS market) was materially short of defendants’ projections. By Q4 03, the actual 11 gross margins UTStarcom would report on revenue from sales of PAS infrastructure products the 12 Company purportedly had in the sales pipeline in April 2003 (6-12 months prior to recognition upon 13 “final acceptance” according to defendants) had fallen dramatically to below 30% and in fact was 14 approaching 15%. Defendants acted with deliberate recklessness or actual knowledge of falsity 15 when they claimed the purported growing “backlog,” “pipeline” and “trends” for PAS infrastructure 16 sales they were reporting provided “conservative financial. . . guidance,” while knowing but 17 concealing: 18 (i) That, because PAS was viewed as an interim solution by the Chinese 19 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 20 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 21 UTStarcom in China; 22 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 23 budgets, as set in 2003, were dedicated to 3G development; 24 (iii) That the Chinese government was taking steps to protect the 25 development of its nascent mobile industries, including permitting China Mobile and China Unicom 26 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 27 subscriber growth; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 105 -

1 (xii) That the contract of sale to entities in Beijing announced in 2003 2 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 3 customers’ inability to pay; and 4 (xiii) That the Company lacked effective internal controls in its financial 5 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 6 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 7 and accrued expenses, all of which were required to competently analyze and/or estimate 8 UTStarcom’s future financial and operational performance. 9 154. October 23, 2003 False Statement in UTStarcom’s Conference Call Concerning

10 the Demand for the Company’s PAS Infrastructure Products Prompted by Defendant Banc of 11 America: 12 TIM LUKE [Banc of America Analyst]: One of the things for Hong with 13 respect to the guidance, I think you said you felt that the wireless system piece would be about 30% of the mix with PAS infrastructure up 20% year over year. Would 14 you expect the China-based PAS infrastructure would be flat as part of that? Is that the way the numbers work? 15 HONG LU: Well, let me try to take on that, Tim. You know, if you can 16 imagine the infrastructure built always from a wave, from what we built, gradually to expand. In other words, when you do the expansion in the city, they will have two 17 types of expansion. One is the overall capacity expansion and the geological expansions. Now, what we have been seeing right now is we have been using up a 18 lot of the capacity, so therefore, we do expect that there will be more capacity orders coming in Q4. Now, as a whole, we are projecting both from handsets and 19 our infrastructure are growing. So what I wanted to say, that is, from a PAS growth of business, we are still seeing growth. 20 (a) Date of Statements. The statement was made during the October 23, 2003, 21 Q3 03 UTStarcom earnings conference call held with Wall Street analysts. 22 (b) Recipient. The recipients of the statements were UTStarcom’s public 23 stockholders, who received the information from Wall Street analysts and from news items 24 circulating within the investment news media and other channels. 25 (c) Identity of Author. Defendants Banc of America and Lu made the 26 statements. Defendants Sophie and Soloway were present. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 107 -

1 (d) True Facts, Scienter and Pleading Basis. During the exchange, defendant 2 Banc of America, having successfully obtained the registration of $402.5 million in convertible notes 3 for its clients a few weeks earlier and preparing to conduct a multi-hundred million dollar equity 4 offering of the Company’s shares, tossed “softball” questions which were designed to enable 5 UTStarcom to continue its promises of increased 2004 PAS infrastructure sales and gross margins. 6 In reality, regardless of increased capacity use, defendants knew the Chinese government would not 7 be increasing its capex investment in PAS, and PAS infrastructure sales would not increase 20% 8 year-over-year, and were significantly contracting, plummeting to $205.8 million in wireless 9 infrastructure revenue in the Q4 04. As defendants knew, because as they repeatedly stated, the 10 Company’s revenues and profits were not “hypothetical” but instead were baked into its “highly 11 visible” sales pipeline that extended up to a year at any given time, the Company’s gross margins 12 would fall, plummeting to 15% by Q4 04. As such, defendants’ guidance of 20% growth in PAS 13 infrastructure sales in 2004 was materially false and misleading as it concealed: 14 (i) That, because PAS was viewed as an interim solution by the Chinese 15 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 16 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 17 UTStarcom in China; 18 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 19 budgets, as set in 2003, were dedicated to 3G development; 20 (iii) That the Chinese government was taking steps to protect the 21 development of its nascent mobile industries, including permitting China Mobile and China Unicom 22 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 23 subscriber growth; 24 (iv) That the roll out of TD-SCDMA technology would limit the ability to 25 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 26 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 108 -

1 (v) That because a significant portion of the PAS infrastructure placed into 2 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 3 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 4 (vi) That China’s MII had confirmed that it would take steps to ensure that 5 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 6 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 7 by China Telecom and China Netcom in 2004 and 2005; 8 (vii) That the Chinese government, through China Telecom and China 9 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 10 (viii) That the contract of sale to entities in Beijing announced in 2003 11 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 12 customers’ inability to pay; and 13 (ix) That the Company lacked effective internal controls in its financial 14 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 15 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 16 and accrued expenses, all of which were required to competently analyze and/or estimate 17 UTStarcom’s future financial and operational performance. 18 155. October 23, 2003 False Statement in UTStarcom’s Conference Call Concerning

19 the Company’s Cash Position and Need to Access the Capital Markets: 20 Shelf registration and offering. Also in July we filed a $500 million universal 21 shelf registration. This has raised investor concerns on our need to raise cash. As you can see with the Q3 results, the Company was cash flow positive for the quarter 22 and has over 440 million of cash on the balance sheet. We do not currently anticipate any need to raise money to fund operations. The shelf registration was 23 filed to give the Company flexibility in the future if strategic opportunities presented themselves, that were in the best interests of the Company and our shareholders. 24 (a) Date of Statement. The statement was made during the October 23, 2003, 25 Q3 03 UTStarcom earnings conference call held with Wall Street analysts. 26 (b) Recipient. The recipients of the statement were UTStarcom’s public 27 stockholders, who received the information from Wall Street analysts and from news items 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 109 -

1 circulating within the investment news media and other channels. For instance, WR Hambrecht &

2 Co. stated in its October 24, 2003 research report that “Management indicated that . . . the Company 3 has no imminent cash needs that would cause it to complete an equity offering based on its pending 4 shelf registration. We believe that these revelations may allay some of the dilution concerns, which 5 some investors may have raised over the past several weeks.” Similarly, in its October 24, 2003 6 report, Pacific Growth Equities reported that: “Management stated it currently has no intention of 7 sourcing the market to raise capital. This issues has been a concern for some investors.”

8 (c) Identity of Author. Defendant Sophie made the statement. Defendants Lu 9 and Soloway were present. Defendant Banc of America was on the call.

10 (d) True Facts, Scienter and Pleading Basis. Defendants knew UTStarcom was 11 burning through cash, was experiencing drastic cost overruns, and that as demand for PAS 12 infrastructure continued to decline as China Telecom and China Netcom turned more of their capital 13 expenditures to 3G spending rather than PAS expansion or upgrades, the Company’s cash position 14 would continue to deteriorate. The Company’s cash flow from operations was substantially 15 deteriorating over Q4 03, going from $155 million positive cash flow in Q4 03, to $45 million

16 positive cash flow in Q4 04, reaching a cash loss on operations of $28 million in Q1 05, and a cash 17 loss on operations of $91 million in Q2 05. Moreover, on January 8, 2004 – less than three months 18 after the October 23, 2003 earnings conference – defendants would in fact issue and sell 12.1 million 19 shares of UTStarcom stock, with the Company pocketing over $475 million in cash proceeds. 20 According to the prospectus filed with the SEC in connection with that offering, as to the “Use of

21 Proceeds,” defendants stated “We will use the net proceeds of this offering for strategic and general 22 corporate purposes, including, but not limited to, acquisitions, investments, working capital or 23 capital expenditures.” Defendants, including Banc of America, knowing the Company was already 24 preparing for the January 2004 Offering, acted with deliberate recklessness or actual knowledge of 25 falsity when they stated UTStarcom did not “need to raise money to fund operations” and would not 26 tap the capital markets because at the time that statement was made defendants knew but concealed: 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 110 -

1 (i) That the Company’s high margin PAS infrastructure sales had eroded 2 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 3 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 4 products and because the systems had to be installed and repaired by Chinese speaking engineers; 5 (ii) That, in addition to causing the Company to miss projected margins, 6 the added costs associated with constantly repairing the significant system malfunctions coupled 7 with the Company’s inability to achieve “final acceptance,” permitting it to obtain payment in full 8 for PAS infrastructure sales, was creating a severe cash flow problem at UTStarcom; 9 (iii) That the Company lacked the infrastructure to balance supply with 10 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 11 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 12 (iv) That UTStarcom’s PAS infrastructure deployments were under- 13 budgeted because they were defective and required significant additional expenditures to make them 14 operational, causing excessive cost overruns and missed margin projections; 15 (v) That because a significant portion of the PAS infrastructure placed into 16 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 17 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 18 and 19 (vi) That the Company lacked effective internal controls in its financial 20 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 21 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 22 and accrued expenses, all of which were required to competently analyze and/or estimate 23 UTStarcom’s future financial and operational performance. 24 156. October 29, 2003 False Statement at the 20th Annual Prudential Technology

25 Conference Concerning Expected Increases of PAS Infrastructure Sales to China Telecom 26 Despite a Shift to Capital Spending on 3G: 27 China Telecom . . . . may actually continue to spend more on PAS than on cellular 28 after 3G is rolled out. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 111 -

1 (a) Date of Statement. The statement was made during the October 29, 2003, 2 Prudential Equity Group, Inc.’s 20th Annual Technology Conference held with Wall Street analysts.

6 (c) Identity of Author. Defendant Sophie made the statement on behalf of 7 UTStarcom.

8 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 9 recklessness or actual knowledge of falsity when they told the market that China Telecom planned to

10 increase PAS infrastructure purchases in anticipation of and/or following the rollout of 3G in China, 11 which they knew would include systems operated on the 3G TD-SCDMA standard being developed 12 and promoted by the Chinese government. In reality, defendants knew but concealed: 13 (i) That, because PAS was viewed as an interim solution by the Chinese 14 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 15 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 16 UTStarcom in China; 17 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 18 budgets, as set in 2003, were dedicated to 3G development; 19 (iii) That the Chinese government was taking steps to protect the 20 development of its nascent mobile industries, including permitting China Mobile and China Unicom 21 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 22 subscriber growth; 23 (iv) That the roll out of TD-SCDMA technology would limit the ability to 24 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 25 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 112 -

11 Association Classic Financial Conference Concerning the Demand for the Company’s PAS 12 Infrastructure Products and Forward Guidance: 13 What we want to accomplish by calendar year ‘06 is to have about half our 14 revenues in China, and about half our revenues outside of China. And again, it’s not that we want to back away from China. We still want to focus on China. In fact, 15 we’re guiding to China growing about 20% for the company in calendar year ’04. 16 * * *

17 Then last point is really the financial performance for the company. It’s continued quite strong. We’re looking at -- excuse me. We’ve been public now 15 18 quarters. Each quarter we’ve been public we’ve been profitable and we’ve been able to beat estimates and we’ve been able to raise guidance off the call. So, obviously, 19 we’re very proud of that track record, and we want to continue to deliver nice visibility and nice profits for the financial community. 20 * * * 21 Whereas if you look at global telecom cap ex, they’re projected to be flat or 22 down a couple of percent points next year versus this year. And yet, we’re able to 23 guide to a 25 to 27% top-line growth. And again, that’s because of the technologies and the markets that we’re focused on are growing. And again, with 24 that guidance, we have tremendous confidence. We’ll have about six months of backlog as we enter calendar year ‘04. We’ve got a great pipeline of contracts. We 25 need subscriber growth numbers to build that guidance on. And it comes down to the technology and the geographical locations that we’ve focused on are both 26 growing. 27 (a) Date of Statement. The statement was made during the November 3, 2003, American Electronics Association Classic Financial Conference held with Wall Street analysts. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 113 -

4 (c) Identity of Author. Defendant Sophie made the statement on behalf of 5 UTStarcom.

6 (d) True Facts, Scienter and Pleading Basis. The Company’s financial 7 performance was not “quite strong”; the Company was not providing “nice visibility” into its 8 eroding profitability; the PAS market in China, where the Company had historically derived 90%+ 9 of its revenues was not “growing”; and the Company did not have a “six months of backlog” or 10 “great pipeline of contracts” going into 2004. Each of these pronouncements, including defendants’ 11 guidance of 20% growth in China sales in 2004, was materially false and misleading as it concealed: 12 (i) That, because PAS was viewed as an interim solution by the Chinese 13 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 14 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 15 UTStarcom in China; 16 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 17 budgets, as set in 2003, were dedicated to 3G development; 18 (iii) That the Chinese government was taking steps to protect the 19 development of its nascent mobile industries, including permitting China Mobile and China Unicom 20 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 21 subscriber growth; 22 (iv) That the roll out of TD-SCDMA technology would limit the ability to 23 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 24 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 25 (v) That the Company’s high margin PAS infrastructure sales had eroded 26 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 114 -

1 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 2 products and because the systems had to be installed and repaired by Chinese speaking engineers; 3 (vi) That because UTStarcom’s historical PAS success in China was 4 dependent upon China’s unique market and pricing controls, the Company would be unable to 5 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 6 margins; 7 (vii) That the Company lacked the infrastructure to balance supply with 8 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 9 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 10 (viii) That UTStarcom’s PAS infrastructure deployments were under- 11 budgeted because they were defective and required significant additional expenditures to make them 12 operational, causing excessive cost overruns and missed margin projections; 13 (ix) That because a significant portion of the PAS infrastructure placed into 14 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 15 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 16 (x) That China’s MII had confirmed that it would take steps to ensure that 17 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 18 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 19 by China Telecom and China Netcom in 2004 and 2005; 20 (xi) That the contract of sale to entities in Beijing announced in 2003 21 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 22 customers’ inability to pay; and 23 (xii) That the Company lacked effective internal controls in its financial 24 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 25 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 26 and accrued expenses, all of which were required to competently analyze and/or estimate 27 UTStarcom’s future financial and operational performance. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 115 -

1 158. November 3, 2003 False Statements by UTStarcom at the American Electronics

2 Association Classic Financial Conference Concerning Gross Margin Projections, the 3 Company’s Accounting and Guidance: 4 One thing I would like to pause and just highlight just for a second is, again, I talked 5 about our profitability. Everything we do from a reporting point of view and from a guidance point of view is based on GAAP earnings per share . . . . 6 So, again, when we give guidance and report results, you know, we’re very 7 happy to live with GAAP numbers. We don’t feel that we need to move anything out of those results. 8 Target business modeling -- now again, we’re very profitable and you can see 9 we’re executing to our business model. Again, we do believe this is something the company can sustain. 10 Let me point out a couple of points on here. The gross margins -- 31 to 11 35%. We didn’t get much questions, so I want to point out a couple of things here -- is we have two main types of businesses that we’re selling: we’re selling handsets 12 and the target margins for handsets are a little about 25%; we’re also selling infrastructure -- both wireline and wireless infrastructure that support the 13 networks. The target margins on those are about 40%. So on a blended basis, that’s why we do something in the 30s, because the margins are very different 14 between the two. 15 (a) Date of Statement. The statement was made during the November 3, 2003, 16 American Electronics Association Classic Financial Conference held with Wall Street analysts. 17 (b) Recipient. The recipients of the statement were UTStarcom’s public 18 stockholders, who received the information from Wall Street analysts and from news items 19 circulating within the investment news media and other channels. 20 (c) Identity of Author. Defendant Sophie made the statement on behalf of 21 UTStarcom. 22 23 24 (d) True Facts, Scienter and Pleading Basis. Based on internal UTStarcom 25 data then available to and known by defendants, the Company’s financial reporting did not comply 26 with GAAP; the Company would never again achieve anything near 31%-35% margins; the 27 Company was not on course to be “profitable”; its “business model” was now known internally to be 28 a failure; and the Company’s past profitability would not be “sustain[ed].” Each of these FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 116 -

1 pronouncements, including defendants’ guidance of 31%-35% gross margins in 2004, was materially 2 false and misleading as it concealed: 3 (i) That, because PAS was viewed as an interim solution by the Chinese 4 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 5 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 6 UTStarcom in China; 7 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 8 budgets, as set in 2003, were dedicated to 3G development; 9 (iii) That the Chinese government was taking steps to protect the 10 development of its nascent mobile industries, including permitting China Mobile and China Unicom 11 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 12 subscriber growth; 13 (iv) That the roll out of TD-SCDMA technology would limit the ability to 14 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 15 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 16 (v) That the Company’s high margin PAS infrastructure sales had eroded 17 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 18 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 19 products and because the systems had to be installed and repaired by Chinese speaking engineers; 20 (vi) That because UTStarcom’s historical PAS success in China was 21 dependent upon China’s unique market and pricing controls, the Company would be unable to 22 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 23 margins; 24 (vii) That the Company lacked the infrastructure to balance supply with 25 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 26 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 117 -

1 (viii) That UTStarcom’s PAS infrastructure deployments were under- 2 budgeted because they were defective and required significant additional expenditures to make them 3 operational, causing excessive cost overruns and missed margin projections; 4 (ix) That because a significant portion of the PAS infrastructure placed into 5 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 6 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 7 (x) That China’s MII had confirmed that it would take steps to ensure that 8 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 9 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 10 by China Telecom and China Netcom in 2004 and 2005; 11 (xi) That the Chinese government, through China Telecom and China 12 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 13 (xii) That the contract of sale to entities in Beijing announced in 2003 14 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 15 customers’ inability to pay; 16 (xiii) That the Company lacked effective internal controls in its financial 17 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 18 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 19 and accrued expenses, all of which were required to competently analyze and/or estimate 20 UTStarcom’s future financial and operational performance; and 21 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 22 to believe, and did not in fact believe, their Q3 03 margin projections. 23 159. During the November 3, 2003 American Electronics Association Classic Financial

24 Conference, Sophie also presented graphic demonstrations of UTStarcom’s projections of how much 25 the “Total Addressable” PAS market would grow between 2003 and 2006: 26

27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 118 -

1 2 3 4 5 6 7 8 9 10 11 12

24 And how much of that growing “Total Addressable” PAS market UTStarcom would capture: 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 119 -

1 2 3 4 5 6 7 8 9 10 11 12

13 160. During the November 3, 2003 American Electronics Association Classic Financial

14 Conference, defendants also emphasized that PAS would co-exist with 3G:

23 161. Defendants’ misstatements in the preceding three paragraphs concealed, at least with 24 regards to sales of PAS in the Company’s all-important Chinese market, (i) the effect the 25 technological conflict between operating PAS and 3G together in China (arising out of their use of 26 some of the same radio frequencies) would have on the Company’s ongoing sales of PAS in China; 27 28 (ii) the fact that China’s unique political, economic and regulatory landscape which made PAS FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 120 -

1 profitable in China did not exist elsewhere, even in other low-teledensity developing nations; and

2 (iii) that defendants knew, based on their extensive contacts in the Chinese telecommunications 3 industry, that China’s appetite for PAS had already diminished. 4 162. November 12, 2003 False Statements Attesting to Adequacy of Internal Controls 5 in UTStarcom’s 10-Q: 6 ITEM 4 —CONTROLS AND PROCEDURES 7 Our management, including the Chief Executive Officer and the Chief 8 Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(b) as of September 9 30, 2003. Based on that evaluation, the Chief Executive Officer and the Chief 10 Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that all material information required to be filed in this 11 quarterly report has been made known to them in a timely fashion and no changes are required at this time. 12 In connection with the evaluation by our management, including the Chief Executive Officer and Chief Financial Officer, of our internal control over financial 13 reporting, pursuant to the Exchange Act Rule 13a-15(d), no changes during the quarter ended September 30, 2003 were identified that have materially affected, or 14 are reasonably likely to materially affect, our internal control over financial reporting. 15 16 (a) Date of Statement. The statement appears in the Form 10-Q for the quarter ended September 30, 2003, filed with the SEC on November 12, 2003. 17 18 (b) Recipient. The recipients of the statement were UTStarcom’s public stockholders, who received the information from Wall Street analysts and from news items 19 circulating within the investment news media and other channels. 20 21 (c) Identity of Author. The Form 10-Q was signed by defendants Lu and Sophie. Additionally, it is a group-published document. As such, each Individual Defendant may be 22 held liable for statements made in this SEC filing. 23 24 (d) True Facts, Scienter and Pleading Basis. See ¶118(d). 163. November 12, 2003 False SOX Certifications: Defendants Lu and Sophie signed 25 26 certifications pursuant to §302 of the Sarbanes-Oxley, which stated that:

27 1. I have reviewed this quarterly report on Form 10-Q of UTStarcom, Inc.; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 121 -

1 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, 2 in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3 3. Based on my knowledge, the financial statements, and other financial 4 information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the 5 periods presented in this report; 6 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 7 Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: 8 a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our 9 supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to 10 us by others within those entities, particularly during the period in which this report is being prepared; 11 b) evaluated the effectiveness of the registrant’s disclosure controls and 12 procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end 13 of the period covered by this report based on such evaluation; and 14 c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most 15 recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably 16 likely to materially affect, the registrant’s internal control over financial reporting; and 17 5. The registrant’s other certifying officer(s) and I have disclosed, based on our 18 most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons 19 performing the equivalent functions): 20 a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to 21 adversely affect the registrant’s ability to record, process, summarize and report financial information; and 22 b) Any fraud, whether or not material, that involves management or 23 other employees who have a significant role in the registrant’s internal control over financial reporting. 24 (a) Date of Statement. The statement appears in the Form 10-Q for the quarter 25 ended September 30, 2003, filed with the SEC on November 12, 2003. 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 122 -

4 (c) Identity of Author. The SOX certifications were signed by defendants Lu 5 and Sophie.

6 (d) True Facts, Scienter and Pleading Basis. See ¶119(d). 7 164. Based upon the Company’s positive forward guidance in October and November 8 2003 at roadshows and confirmed by the filing of the Form 10-Q for the Q3 03 certifying the 9 Company’s internal controls, the Company’s stock price soared and was trading above $37 by 10 December 31, 2003. 11 165. Between October 28, 2003 and January 8, 2004, the Individual Defendants

12 collectively sold a total of 616,888 of their UTStarcom shares at inflated prices for proceeds 13 exceeding $22 million as detailed below: 14 Defendant Shares Sold Price Range Proceeds 15 Huang 16,000 $34.75 - $ 37.87 $577,279 16 Kwock 6,000 $40.25 $241,500 Lu 40,000 $31.64 - $ 38.75 $1,408,420 17 Soloway 99,566 $32.45 - $ 41.84 $3,883,015 Sophie 75,322 $31.64 - $ 38.75 $2,601,431 18 Toy 40,000 $34.26 - $38.75 $1,451,030 Wu 340,000 $31.64 - $ 39.86 $12,066,005 19 166. After the close of trading on Thursday, January 8, 2004, at 5:24 p.m. EST, 20 UTStarcom announced without warning that it was issuing and selling 12.1 million shares of its 21 common stock through Banc of America. The shares were sold to Banc of America for $39.25 each 22 23 for a total of $474.9 million in proceeds. Banc of America intended to turn around and sell the 24 shares to the public for $40.25 each or more, as this “bought offering” would permit, but the

25 Company’s stock price began plummeting in after-hours trading, falling 10% by the morning of 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 123 -

1 January 9, 2004 to $37.40 per share.6 In order to support the Company’s rapidly falling stock price,

2 at 5:28 p.m. EST on January 8, 2004, the Company took the unusual step of pre-announcing Q4 03 3 financial results, then scheduled to be released January 22, 2004, stating it was “currently in the 4 process of its year-end audit, but anticipate[d]” beating its previous Q4 revenue guidance of $630- 5 $640 million and reporting $640-$645 million in sales and beating its previous EPS guidance of 6 $0.49-$0.50 per share and reporting EPS of $0.50-$0.51. As the Company’s share price continued to 7 8 plummet through the night, on the morning of Friday, January 9, 2004, at the insistence of Banc of

9 America, defendants raised UTStarcom’s FY 2004 revenue guidance to $2.5-$2.55 billion and

10 confirmed its gross margin projections of 30%-32% in FY 2004. 11 167. January 9, 2004 False Statement in UTStarcom’s Press Release Concerning 12 Margin Guidance for 2004: 13 “Gross Margin guidance remains 30 - 32%.” 14 (a) Date of Statement. The statement was made in the January 9, 2004 press 15 release. 16 (b) Recipient. The recipients of the statement were UTStarcom’s public 17 stockholders, who received the information directly from Wall Street analysts and from news items 18 circulating within the investment news media and other channels. For instance, in its January 9, 19 2004 report entitled “Fueling up for more growth,” Merrill Lynch stated: “We are slightly surprised 20 that the Company has chosen to preannounce results less than two weeks before it releases official 21 numbers, but clearly business has been good. The revised 2004 guidance brings the company’s 22 revenue estimates in-line with our forecasts.” 23 24

25 6 It should be noted that because this was a “bought offering” rather than a traditional offering, 26 Banc of America did not sell all of the stock it purchased from UTStarcom on January 3, 2004. In fact, at the end of Q1 04 Banc of America was still holding and offering for sale millions of these 27 shares. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 124 -

1 (c) Identity of Author. The press release issued by UTStarcom quotes defendant 2 Sophie. Banc of America authorized and, in fact, insisted upon its issuance.

3 (d) True Facts, Scienter and Pleading Basis. By the end of 2004 the 4 Company’s gross margins, then purportedly “visible” and backed up by the terms of sales in the 5 Company’s sales pipeline, would have drastically declined to 15% for Q4 04 and 22% for FY 2004. 6 Based on defendants’ own repeated Class Period representations that their 6-12 month revenue 7 recognition process gave them full “visibility” into the sales pipeline, defendants’ guidance of 30%- 8 32% gross margins in 2004 was materially false and misleading as it concealed: 9 (i) That, because PAS was viewed as an interim solution by the Chinese 10 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 11 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 12 UTStarcom in China; 13 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 14 budgets, as set in 2003, were dedicated to 3G development; 15 (iii) That the Chinese government was taking steps to protect the 16 development of its nascent mobile industries, including permitting China Mobile and China Unicom 17 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 18 subscriber growth; 19 (iv) That the roll out of TD-SCDMA technology would limit the ability to 20 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 21 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 22 (v) That the Company’s high margin PAS infrastructure sales had eroded 23 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 24 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 25 products and because the systems had to be installed and repaired by Chinese speaking engineers; 26 (vi) That because UTStarcom’s historical PAS success in China was 27 dependent upon China’s unique market and pricing controls, the Company would be unable to 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 125 -

1 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 2 margins; 3 (vii) That the Company lacked the infrastructure to balance supply with 4 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 5 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 6 (viii) That UTStarcom’s PAS infrastructure deployments were under- 7 budgeted because they were defective and required significant additional expenditures to make them 8 operational, causing excessive cost overruns and missed margin projections; 9 (ix) That because a significant portion of the PAS infrastructure placed into 10 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 11 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 12 (x) That China’s MII had confirmed that it would take steps to ensure that 13 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 14 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 15 by China Telecom and China Netcom in 2004 and 2005; 16 (xi) That the Chinese government, through China Telecom and China 17 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 18 (xii) That the contract of sale to entities in Beijing announced in 2003 19 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 20 customers’ inability to pay; 21 (xiii) That the Company lacked effective internal controls in its financial 22 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 23 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 24 and accrued expenses, all of which were required to competently analyze and/or estimate 25 UTStarcom’s future financial and operational performance; and 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 126 -

1 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 2 to believe, and did not in fact believe, their FY 2004 margin projections of 30%-32% confirmed as 3 late as March 2004. 4 168. January 13, 2004 False Statement in UTStarcom Press Release Announcing

5 Signing of a Contract with China Telecom Concerning Then-Present Demand for PAS 6 Infrastructure: 7 “This contract is another example of the consistent demand for UTStarcom’s 8 PAS solutions throughout China. This deployment of PAS equipment will continue to improve the coverage and quality of PAS services, which in turn should facilitate 9 the long-term growth of PAS in China,” said Ying Wu, chairman and chief executive officer of UTStarcom China. 10 (a) Date of Statement. The statement was made on January 13, 2004. 11 (b) Recipient. The recipients of the statement were UTStarcom’s public 12 stockholders, who received the information from Wall Street analysts and from news items 13 circulating within the investment news media and other channels. For instance, in its January 13, 14 2004 report Pacific Growth Equities stated that “this large contract represents a significant expansion 15 of China’s commitment to PAS technology” and led that firm to “believe it is increasingly difficult 16 for anyone to effectively argue PAS is only a short term or interim technology in China.” 17 (c) Identity of Author. Defendant Wu. 18 (d) True Facts, Scienter and Pleading Basis. Rather than “facilitat[ing] the 19 long-term growth of PAS in China,” this would be the last PAS infrastructure purchase contract 20 announcement between China Telecom and UTStarcom through the end of the Class Period. China 21 Telecom would continue announcing small purchases of IP-based PAS equipment for certain 22 providences during the remainder of the Class Period, but contrary to defendants’ Class Period 23 statements that China Telecom was “committed” to expanding PAS both through geographic 24 expansions and upgrades as capacity use increased, there would be no further significant PAS 25 infrastructure contracts announced with China Telecom. Defendants acted with deliberate 26 recklessness or actual knowledge of falsity when they announced this contract typified “consistent 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 127 -

1 demand for UTStarcom’s PAS solutions throughout China” and prospects for “long-term” growth 2 when, in reality, they knew: 3 (i) That, because PAS was viewed as an interim solution by the Chinese 4 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 5 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 6 UTStarcom in China; 7 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 8 budgets, as set in 2003, were dedicated to 3G development; 9 (iii) That the Chinese government was taking steps to protect the 10 development of its nascent mobile industries, including permitting China Mobile and China Unicom 11 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 12 subscriber growth; 13 (iv) That the roll out of TD-SCDMA technology would limit the ability to 14 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 15 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 16 (v) That because a significant portion of the PAS infrastructure placed into 17 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 18 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 19 (vi) That China’s MII had confirmed that it would take steps to ensure that 20 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 21 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 22 by China Telecom and China Netcom in 2004 and 2005; 23 (vii) That the Chinese government, through China Telecom and China 24 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; and 25 (viii) That the Company lacked effective internal controls in its financial 26 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 27 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 128 -

1 and accrued expenses, all of which were required to competently analyze and/or estimate 2 UTStarcom’s future financial and operational performance. 3 169. January 22, 2004 False Statement in UTStarcom’s Conference Call Concerning

4 2004 Margin Projections: 5 Our target for gross margin[s] as a percentage of revenue in 2004 is 6 approximately 30%-32%. We expect margins will begin the year at the low end of the range and improve slightly each quarter throughout 2004. 7 (a) Date of Statement. The statement was made during the January 22, 2004, 8 Q4 03 UTStarcom earnings conference call held with Wall Street analysts. 9 (b) Recipient. The recipients of the statement were UTStarcom’s public 10 stockholders, who received the information from Wall Street analysts and from news items 11 circulating within the investment news media and other channels. 12 (c) Identity of Author. Defendant Sophie made the statement. Defendant Lu 13 was present. 14 (d) True Facts, Scienter and Pleading Basis. The gross margins on sales then 15 in the pipelines and purportedly “visible” to defendants were in fact just half the 30%-32% 16 represented by defendants. Based on defendants’ own repeated Class Period representations that 17 their 6-12 month revenue recognition pipeline provided full “visibility” to guidance, defendants’ 18 guidance of 30%-32% gross margins in 2004 was materially false and misleading as it pretended the 19 Company had sales contracts in place to support that guidance and concealed: 20 (i) That, because PAS was viewed as an interim solution by the Chinese 21 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 22 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 23 UTStarcom in China; 24 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 25 budgets, as set in 2003, were dedicated to 3G development; 26 (iii) That the Chinese government was taking steps to protect the 27 development of its nascent mobile industries, including permitting China Mobile and China Unicom 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 129 -

1 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 2 subscriber growth; 3 (iv) That the roll out of TD-SCDMA technology would limit the ability to 4 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 5 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 6 (v) That the Company’s high margin PAS infrastructure sales had eroded 7 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 8 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 9 products and because the systems had to be installed and repaired by Chinese speaking engineers; 10 (vi) That because UTStarcom’s historical PAS success in China was 11 dependent upon China’s unique market and pricing controls, the Company would be unable to 12 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 13 margins; 14 (vii) That the Company lacked the infrastructure to balance supply with 15 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 16 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 17 (viii) That UTStarcom’s PAS infrastructure deployments were under- 18 budgeted because they were defective and required significant additional expenditures to make them 19 operational, causing excessive cost overruns and missed margin projections; 20 (ix) That because a significant portion of the PAS infrastructure placed into 21 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 22 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 23 (x) That China’s MII had confirmed that it would take steps to ensure that 24 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 25 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 26 by China Telecom and China Netcom in 2004 and 2005; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 130 -

1 (xi) That the Chinese government, through China Telecom and China 2 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 3 (xii) That the contract of sale to entities in Beijing announced in 2003 4 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 5 customers’ inability to pay; 6 (xiii) That the Company lacked effective internal controls in its financial 7 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 8 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 9 and accrued expenses, all of which were required to competently analyze and/or estimate 10 UTStarcom’s future financial and operational performance; and 11 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 12 to believe, and did not in fact believe, their FY 2004 margin projections of 30%-32% confirmed as 13 late as March 2004. 14 170. January 22, 2004 False Statement in UTStarcom’s Conference Call Concerning

15 Ongoing Demand for PAS Infrastructure Sales then Being Experienced in China: 16 DALE FARRELL: Okay, and then as we look forward across the year with 17 your guidance on the gross margins if we get a firther skew toward infrastructure, I assume that would help - - your gross margins Mike? 18 MIKE SOPHIE: Yes. Very much so, what we are seeing actually right now 19 is - - the business is very [Indiscernible] as we pointed out in prior calls and we’re actually seeing a very strong upswing in infrastructural orders right now and in 20 fact, you know, we - - you know as Hong will probably tell you shortly is - - we’re pushing to get at base stations. We could get - - we need more base stations - - and 21 then obviously if they roll out the infrastructure we could think the - - subscriber numbers will continue to accelerate as well. 22 Hong, do you want to add anything to this? 23 HONG LU: Yeah. Dale, the market is - - once we have deployed a 24 significant number of base stations, early part of last year and for Q3 and Q4 base station has been slowing down but while we’re adding a number of new subscribers 25 and gradually we have successfully expanded capacities and extended it - - reach a geographical territory. 26 Results are that, as we have always said, 90% of our customers after they are 27 first installed will give us repeat orders and that has - - coming in very positively toward the end of the last year and the beginning of this year. So, we are in the 28 situation that we’re in the shortage of base station again. And so that is what we FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 131 -

1 have been experiencing for the last several years. It’s the same situation. It’s happening just as we speak now. 2 (a) Date of Statement. The statement was made during the January 22, 2004, Q4 3 03 UTStarcom earnings conference call held with Wall Street analysts. 4 (b) Recipient. The recipients of the statement were UTStarcom’s public 5 stockholders, who received the information from Wall Street analysts and from news items 6 circulating within the investment news media and other channels. 7 (c) Identity of Author. Defendants Sophie and Lu made the statements. 8 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 9 recklessness or actual knowledge of falsity when they told the market that the Company was then 10 experiencing “a very strong upswing in infrastructural orders” and tremendous demand for PAS 11 infrastructure, leading to shortages of basic stations as a result of strong demand (rather than because 12 their supplier had all but given up on the Company’s ability to keep sales commitments), as they 13 knew but concealed: 14 (i) That, because PAS was viewed as an interim solution by the Chinese 15 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 16 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 17 UTStarcom in China; 18 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 19 budgets, as set in 2003, were dedicated to 3G development; 20 (iii) That the Chinese government was taking steps to protect the 21 development of its nascent mobile industries, including permitting China Mobile and China Unicom 22 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 23 subscriber growth; 24 (iv) That the roll out of TD-SCDMA technology would limit the ability to 25 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 26 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 132 -

1 (v) That because a significant portion of the PAS infrastructure placed into 2 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 3 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 4 (vi) That China’s MII had confirmed that it would take steps to ensure that 5 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 6 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 7 by China Telecom and China Netcom in 2004 and 2005; 8 (vii) That the Chinese government, through China Telecom and China 9 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; and 10 (viii) That the Company lacked effective internal controls in its financial 11 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 12 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 13 and accrued expenses, all of which were required to competently analyze and/or estimate 14 UTStarcom’s future financial and operational performance. 15 171. January 22, 2004 False Statement in UTStarcom’s Conference Call Concerning

16 Ongoing Demand for PAS Infrastructure Sales then Being Experienced in China Prompted by 17 Banc of America: 18 TIM LUKE [Banc of America Analyst]: Just in terms of the mix. In the 19 fourth quarter it looked like with the extra competition, the handset business will move the lower sequentially while the infrastructure business had a very strong 20 sequential improvement and obviously wire line was up as well. When you look at the mix in the first quarter, should we look at the competition and think its going to 21 be a similar percentage or how would see that in terms of the mix? 22 MIKE SOPHIE: Yeah I think the mix that we had guided to is around 15% for wire line, 40-50% handsets and the balance obviously being wireless 23 infrastructures. And then you know that what could through some lumpiness into that is obviously the timing of book and ship business on handsets. We also always 24 have final acceptances and so we want to continue to obviously very conservative there. So that was the kind of the numbers I would use knowing also there could be 25 plus and minus you know some you know maybe 5 percentage points depending on how the business plays out. But we’re in a cycle right now where we’re seeing a 26 tremendous amount of infrastructural [sic] orders as Hong pointed out. You guys saw the signing, we’ve got other contracts that you haven’t seen announced yet. 27 We’re pushing very hard to get a lot of base stations and then as we’re able to achieve the final acceptance obviously we will report revenue for those. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 133 -

1 (a) Date of Statement. The statement was made during the January 22, 2004, Q4 2 03 UTStarcom earnings conference call held with Wall Street analysts.

6 (c) Identity of Authors. Defendants Sophie and Banc of America made the 7 statement. Defendant Lu was present.

8 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 9 recklessness or actual knowledge of falsity when they stated and Banc of America did not question 10 that the Company was experiencing a “tremendous amount of infrastructural . . . orders,” that the 11 Company had a lot of unreported contracts, and that when it was “able to achieve the final 12 acceptance obviously we will report revenue for those,” knowing Banc of America’s sales of the 13 12.1 million shares of UTStarcom it started selling January 8, 2004 was still ongoing and concealing: 14 (i) That, because PAS was viewed as an interim solution by the Chinese 15 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 16 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 17 UTStarcom in China; 18 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 19 budgets, as set in 2003, were dedicated to 3G development; 20 (iii) That the Chinese government was taking steps to protect the 21 development of its nascent mobile industries, including permitting China Mobile and China Unicom 22 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 23 subscriber growth; 24 (iv) That the roll out of TD-SCDMA technology would limit the ability to 25 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 26 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 134 -

1 (v) That because a significant portion of the PAS infrastructure placed into 2 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 3 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 4 (vi) That China’s MII had confirmed that it would take steps to ensure that 5 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 6 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 7 by China Telecom and China Netcom in 2004 and 2005; 8 (vii) That the Chinese government, through China Telecom and China 9 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; and 10 (viii) That the Company lacked effective internal controls in its financial 11 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 12 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 13 and accrued expenses, all of which were required to competently analyze and/or estimate 14 UTStarcom’s future financial and operational performance. 15 172. March 9, 2004 False Statement in UTStarcom’s Form 10-K Concerning

16 Adequacy of Internal Controls: 17 ITEM 9A—CONTROLS AND PROCEDURES 18 (a) Evaluation of disclosure controls and procedures. Our chief executive 19 officer and our chief financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 20 15d-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this annual report (the “Evaluation Date”), believe that, as of the 21 Evaluation Date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company would be 22 made known to them by others within the Company. 23 (b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure 24 controls and procedures subsequent to the Evaluation Date. 25 (a) Date of Statement. The statement appears in the Form 10-K for the year 26 ended December 31, 2003, filed with the SEC on March 9, 2004. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 135 -

4 (c) Identity of Author. The Form 10-K was signed by defendants Lu, Sophie, 5 Toy and Wu. Additionally, it is a group-published document. As such, each Individual Defendant 6 may be held liable for statements made in this SEC filing.

7 (d) True Facts, Scienter and Pleading Basis. See ¶118(d). 8 173. March 9, 2004 False SOX Certifications: Defendants Lu and Sophie signed

9 certifications pursuant to §302 of the Sarbanes-Oxley, which stated that: 10 1. I have reviewed this annual report on Form 10-K of UTStarcom, Inc.; 11 2. Based on my knowledge, this report does not contain any untrue statement of 12 a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading 13 with respect to the period covered by this report; 14 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial 15 condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 16 4. The registrant’s other certifying officer(s) and I are responsible for 17 establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: 18 a. Designed such disclosure controls and procedures, or caused such 19 disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the 20 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in 21 which this report is being prepared; 22 b. [Paragraph omitted pursuant to SEC Release Nos. 33-8238; 34 47986]; 23 c. Evaluated the effectiveness of the registrant’s disclosure controls and 24 procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end 25 of the period covered by this report based on such evaluation; and 26 d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most 27 recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 136 -

1 likely to materially affect, the registrant’s internal control over financial reporting; and 2 5. The registrant’s other certifying officers and I have disclosed, based on our 3 most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons 4 performing the equivalent function): 5 a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are 6 reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 7 b. Any fraud, whether or not material, that involves management or 8 other employees who have a significant role in the registrant’s internal control over financial reporting. 9 (a) Date of Statement. The statement appears in the Form 10-K for the year 10 ended December 31, 2003, filed with the SEC on March 9, 2004. 11 (b) Recipient. The recipients of the statement were UTStarcom’s public 12 stockholders, who received the information from Wall Street analysts and from news items 13 circulating within the investment news media and other channels. 14 (c) Identity of Author. The SOX certifications were signed by defendants Lu 15 and Sophie. 16 (d) True Facts, Scienter and Pleading Basis. See¶119(d). 17 174. March 22, 2004 False Statement in UTStarcom’s Conference Call Confirming 18 2004 Gross Margins of 30%-32%: 19 20 At this time we are not making any changes to the financial guidance we gave on the [January 22, 2004] Q4 conference call. Our core business continues to be very 21 strong. We are seeing tremendous amount of demand for both infrastructure and handsets in China, led by growing consumer demand. 22 (a) Date of Statement. The statement was made during the March 22, 2004, Q1 23 04 UTStarcom conference call held with Wall Street analysts. 24 (b) Recipient. The recipients of the statement were UTStarcom’s public 25 stockholders, who received the information from Wall Street analysts and from news items 26 circulating within the investment news media and other channels. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 137 -

1 (c) Identity of Author. Defendant Sophie made the statement. Defendant Lu 2 and was present.

3 (d) True Facts, Scienter and Pleading Basis. By the end of 2004, the 4 Company’s gross margins, then purportedly “visible” in its guidance for the year, would have 5 drastically declined to 15%. Based on defendants’ own repeated Class Period representations that 6 their 6-12 month revenue recognition process gave them full “visibility” into the sales pipeline, 7 defendants’ guidance of 30%-32% gross margins for FY 2004 was materially false and misleading 8 as it concealed: 9 (i) That, because PAS was viewed as an interim solution by the Chinese 10 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 11 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 12 UTStarcom in China; 13 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 14 budgets, as set in 2003, were dedicated to 3G development; 15 (iii) That the Chinese government was taking steps to protect the 16 development of its nascent mobile industries, including permitting China Mobile and China Unicom 17 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 18 subscriber growth; 19 (iv) That the roll out of TD-SCDMA technology would limit the ability to 20 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 21 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 22 (v) That the Company’s high margin PAS infrastructure sales had eroded 23 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 24 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 25 products and because the systems had to be installed and repaired by Chinese speaking engineers; 26 (vi) That because UTStarcom’s historical PAS success in China was 27 dependent upon China’s unique market and pricing controls, the Company would be unable to 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 138 -

1 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 2 to believe, and did not in fact believe, their FY 2004 margin projections of 30%-32% confirmed as 3 late as March 2004. 4 175. April 27, 2004 False Statement in UTStarcom’s Conference Call Concerning the

5 Anticipated Impact of 3G on Continued PAS Sales: 6 [W]e have always said that PAS would continue for many years and gives 7 operators the best return on investment. Our contacts in China Telecom and China Netcom continue to validate this. 8 (a) Date of Statement. The statement was made during the April 27, 2004, Q1 9 04 UTStarcom earnings conference call held with Wall Street analysts. 10 (b) Recipient. The recipients of the statement were UTStarcom’s public 11 stockholders, who received the information from Wall Street analysts and from news items 12 circulating within the investment news media and other channels. 13 (c) Identity of Author. Defendant Sophie made the statement. Defendants Lu 14 and Banc of America were present and Banc of America was still selling shares from the January 15 2004 Offering. 16 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 17 recklessness or actual knowledge of falsity when they told the market that PAS sales would 18 “continue for many years” because it “gives operators the best return on investment,” knowing 19 operators were gearing up for the 3G rollout, which they knew would include systems operated on 20 the 3G TD-SCDMA standard being developed and promoted by the Chinese government. 21 Moreover, to the extent they insinuated China Telecom and China Netcom were privately expressing 22 long-term goals to continue their PAS investments, defendants knew China Telecom and China 23 Netcom would say anything because they had nothing to lose and everything to gain by encouraging 24 U.S. investors to dump billions of dollars (including the $875 million already raised by UTStarcom 25 in the Offerings) into building China a telecommunications system defendants knew was defective 26 and knew China would never pay them for. Moreover, defendants knew many of the past sales 27 China Netcom in particular had “announced” were announced to benefit SOFTBANK, its partner in 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 140 -

1 Asia Global Crossing. As such, any ongoing promises by China Telecom and China Netcom to 2 purchase PAS systems defendants were relaying to the market were meaningless. In reality 3 defendants knew but concealed: 4 (i) That, because PAS was viewed as an interim solution by the Chinese 5 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 6 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 7 UTStarcom in China; 8 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 9 budgets, as set in 2003, were dedicated to 3G development; 10 (iii) That the Chinese government was taking steps to protect the 11 development of its nascent mobile industries, including permitting China Mobile and China Unicom 12 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 13 subscriber growth; 14 (iv) That the roll out of TD-SCDMA technology would limit the ability to 15 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 16 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 17 (v) That the Company lacked the infrastructure to balance supply with 18 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 19 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 20 (vi) That UTStarcom’s PAS infrastructure deployments were under- 21 budgeted because they were defective and required significant additional expenditures to make them 22 operational, causing excessive cost overruns and missed margin projections; 23 (vii) That because a significant portion of the PAS infrastructure placed into 24 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 25 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 26 and 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 141 -

1 (viii) That China’s MII had confirmed that it would take steps to ensure that 2 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 3 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 4 by China Telecom and China Netcom in 2004 and 2005. 5 176. April 27, 2004 False Statement in UTStarcom’s Conference Call Concerning the

6 Company’s 2004 Gross Margin Projections: 7 [W]e are confident we will be able to improve gross margins later in the year. 8 (a) Date of Statement. The statement was made during the April 27, 2004, Q1 9 04 UTStarcom earnings conference call held with Wall Street analysts. 10 (b) Recipient. The recipients of the statement were UTStarcom’s public 11 stockholders, who received the information from Wall Street analysts and from news items 12 circulating within the investment news media and other channels. For instance, in its April 28, 2004 13 report Pacific Growth Equities stated “margins are expected to move higher in the second and third 14 quarters of this year.” 15 (c) Identity of Authors. Defendant Sophie made the statement. Defendants Lu 16 and Banc of America were present and Banc of America was still concluding the January 2004 17 Offering. 18 (d) True Facts, Scienter and Pleading Basis. The gross margins on sales then 19 in the pipeline and purportedly “visible” to defendants were in fact just half of the 30%-32% 20 represented by defendants. Based on defendants’ own repeated Class Period representations that 21 their 6-12 month revenue recognition process gave them full “visibility” into the sales pipeline, 22 defendants’ promises they were “confident” they would “improve gross margins later in the year” 23 were materially false and misleading as they concealed: 24 (i) That, because PAS was viewed as an interim solution by the Chinese 25 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 26 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 27 UTStarcom in China; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 142 -

1 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 2 budgets, as set in 2003, were dedicated to 3G development; 3 (iii) That the Chinese government was taking steps to protect the 4 development of its nascent mobile industries, including permitting China Mobile and China Unicom 5 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 6 subscriber growth; 7 (iv) That the roll out of TD-SCDMA technology would limit the ability to 8 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 9 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 10 (v) That the Company’s high margin PAS infrastructure sales had eroded 11 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 12 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 13 products and because the systems had to be installed and repaired by Chinese speaking engineers; 14 (vi) That because a significant portion of the PAS infrastructure placed into 15 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 16 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 17 (vii) That China’s MII had confirmed that it would take steps to ensure that 18 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 19 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 20 by China Telecom and China Netcom in 2004 and 2005; 21 (viii) That the Chinese government, through China Telecom and China 22 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; and 23 (ix) That the Company lacked effective internal controls in its financial 24 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 25 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 26 and accrued expenses, all of which were required to competently analyze and/or estimate 27 UTStarcom’s future financial and operational performance. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 143 -

1 177. April 27, 2004 False Statement in UTStarcom’s Conference Call Concerning

2 Ongoing Demand for PAS Infrastructure: 3 We believe our universal expectations for continued strong PAS subscriber growth 4 and with network capacity of 70 percent of utilization, it is clear subscriber growth will continue to drive both handsets and infrastructure sales. 5 (a) Date of Statement. The statement was made during the April 27, 2004, Q1 6 2004 UTStarcom earnings conference call held with Wall Street analysts. 7 (b) Recipient. The recipients of the statement were UTStarcom’s public 8 stockholders, who received the information from Wall Street analysts and from news items 9 circulating within the investment news media and other channels. For instance, in its April 28, 2004 10 report, citing defendants’ statements during the earnings conference, Pacific Growth Equities stated 11 that “Management stated capacity utilization for PAS in China is currently about 70%. Typically, 12 service providers begin adding extra capacity to their networks well before reaching the 65% 13 utilization level. Thus, current levels suggest to us growing short-term sales for UTSI.” 14 (c) Identity of Authors. Defendant Lu made the statement. Defendants Sophie 15 and Banc of America were present and Banc of America was still concluding the January 2004 16 Offering. 17 (d) True Facts, Scienter and Pleading Basis. In fact, PAS growth was declining 18 by 30% in 2005. If defendants were truthful in stating the sales pipeline was 6-12 months long and 19 that they always got “final acceptance and always got paid, and because wireless infrastructure sales 20 plummeted to $205.5 million by Q4 04 and to $110 million by Q1 05, defendants were aware in 21 April 2004 that PAS sales commitments had significantly decreased rather than increased looking 22 toward the end of fiscal 2004. Defendants acted with deliberate recklessness or actual knowledge of 23 falsity when they told the market that PAS subscriber increases were materializing and that as 24 capacity exceeded 70% additional PAS infrastructure would be sold, knowing but concealing: 25 (i) That, because PAS was viewed as an interim solution by the Chinese 26 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 144 -

1 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 2 UTStarcom in China; 3 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 4 budgets, as set in 2003, were dedicated to 3G development; 5 (iii) That the Chinese government was taking steps to protect the 6 development of its nascent mobile industries, including permitting China Mobile and China Unicom 7 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 8 subscriber growth; 9 (iv) That the roll out of TD-SCDMA technology would limit the ability to 10 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 11 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 12 (v) That the Company’s high margin PAS infrastructure sales had eroded 13 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 14 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 15 products and because the systems had to be installed and repaired by Chinese speaking engineers; 16 (vi) That because a significant portion of the PAS infrastructure placed into 17 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 18 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 19 (vii) That China’s MII had confirmed that it would take steps to ensure that 20 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 21 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 22 by China Telecom and China Netcom in 2004 and 2005; 23 (viii) That the Chinese government, through China Telecom and China 24 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; and 25 (ix) That the Company lacked effective internal controls in its financial 26 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 27 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 145 -

1 and accrued expenses, all of which were required to competently analyze and/or estimate 2 UTStarcom’s future financial and operational performance. 3 178. April 27, 2004 False Statement in UTStarcom’s Conference Call Concerning

4 Gross Margin Projections: An analyst asked: “And [ ]could you comment on what you think your 5 shares are heading into next year and the competitive pressures in pricing on infrastructure in 6 particular?” Sophie replied: 7 Gross margin guidance -- . . .we see Q2 gross margin percent consistent with Q1 8 levels in the 27 to 28 percent range, and Q3 gross margins should increase slightly to 29 to 30 percent and we should see further improvement in Q4 to 30 to 31 9 percent . . . . Three, infrastructure pricing on PAS is stable and contracts we are currently signing will be recognized as revenue in Q3 and Q4 with higher margins. 10 (a) Date of Statement. The statement was made during the April 27, 2004, Q1 11 04 UTStarcom earnings conference call held with Wall Street analysts. 12 (b) Recipient. The recipients of the statement were UTStarcom’s public 13 stockholders, who received the information from Wall Street analysts and from news items 14 circulating within the investment news media and other channels. For instance, Thomas Weisel 15 Partners LLC’s April 28, 2004 report cited defendants’ statements in the earnings conference stating: 16 “Management stated that GMs will stabilize with revenues from contracts recently signed being 17 recognized in 2H04.” 18 (c) Identity of Authors. Defendant Sophie made the statement. Defendants Lu 19 and Banc of America were present and Banc of America was still concluding the January 2004 20 offering. 21 (d) True Facts, Scienter and Pleading Basis. If defendants were truthful in 22 stating the sales pipeline was 6-12 months long and that they always got “final acceptance” and 23 always got paid, and because wireless infrastructure sales plummeted to $205.5 million by Q4 04 24 and to $110 million by Q1 05, then a fortiori, defendants had to know in April 2004 that PAS sales 25 would significantly decrease rather than increase in FY 2004 driving down gross margins. 26 Defendants acted with deliberate recklessness or actual knowledge of falsity when they told the 27 market that “infrastructure pricing on PAS [was] stable,” that “contracts [they were] currently 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 146 -

1 signing [would] be recognized as revenue in Q3 and Q4 with higher margins,” and that gross 2 margins would increase to 30%-31% by end of fiscal 2004, knowing but concealing: 3 (i) That, because PAS was viewed as an interim solution by the Chinese 4 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 5 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 6 UTStarcom in China; 7 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 8 budgets, as set in 2003, were dedicated to 3G development; 9 (iii) That the Chinese government was taking steps to protect the 10 development of its nascent mobile industries, including permitting China Mobile and China Unicom 11 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 12 subscriber growth; 13 (iv) That the roll out of TD-SCDMA technology would limit the ability to 14 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 15 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 16 (v) That the Company’s high margin PAS infrastructure sales had eroded 17 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 18 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 19 products and because the systems had to be installed and repaired by Chinese speaking engineers; 20 (vi) That because UTStarcom’s historical PAS success in China was 21 dependent upon China’s unique market and pricing controls, the Company would be unable to 22 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 23 margins; 24 (vii) That the Company lacked the infrastructure to balance supply with 25 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 26 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 147 -

1 (viii) That UTStarcom’s PAS infrastructure deployments were under- 2 budgeted because they were defective and required significant additional expenditures to make them 3 operational, causing excessive cost overruns and missed margin projections; 4 (ix) That because a significant portion of the PAS infrastructure placed into 5 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 6 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 7 (x) That China’s MII had confirmed that it would take steps to ensure that 8 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 9 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 10 by China Telecom and China Netcom in 2004 and 2005; 11 (xi) That the Chinese government, through China Telecom and China 12 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 13 (xii) That the contract of sale to entities in Beijing announced in 2003 14 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 15 customers’ inability to pay; 16 (xiii) That the Company lacked effective internal controls in its financial 17 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 18 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 19 and accrued expenses, all of which were required to competently analyze and/or estimate 20 UTStarcom’s future financial and operational performance; and 21 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 22 to believe, and did not in fact believe, their Q3 04 29%-30% margin projections. 23 179. April 27, 2004 False Statement in UTStarcom’s Conference Call Concerning

24 PAS Infrastructure Price Stabilization, Reduced Expenses and Gross Margin Projections: 25 DALE PFAU: And on infrastructure? 26 HONG LU: The infrastructure pricing, I am sorry the question was? 27 MIKE SOPHIE: The question was, what we see on the structure pricing 28 environment throughout the year. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 148 -

1 HONG LU: The infrastructure pricing -- we’re seeing stabilizing and obviously customers always want us to see what we can do to improve their 2 operational side as well. But we have been enjoying the -- compared to handsets, we only have three vendors, including ours, and we pretty much have -- territory-wise, 3 that we have a pretty much very, very clear defined. And therefore, if we can introduce our cost reduction in infrastructure and that will help us to increase our 4 margin. Therefore, when Mike was saying about towards . . . Q2, Q3 and Q4, our margin will be increasing, is because we have been seeing -- we can take 5 advantage of cost reduction and our price will be pretty much stabilized, therefore, we will see that margin increase. 6 (a) Date of Statement. The statement was made during the April 27, 2004, Q1 7 04 UTStarcom earnings conference call held with Wall Street analysts. 8 (b) Recipient. The recipients of the statement were UTStarcom’s public 9 stockholders, who received the information from Wall Street analysts and from news items 10 circulating within the investment news media and other channels. 11 (c) Identity of Authors. Defendant Lu made the statement. Defendants Sophie 12 and Banc of America were present and Banc of America was still concluding the January 2004 13 Offering. 14 (d) True Facts, Scienter and Pleading Basis. If defendants were truthful in 15 stating the sales pipeline was 6-12 months long and that they always got “final acceptance” and 16 always got paid, then a fortiori, defendants had to know in April 2004 that PAS sales prices had not 17 stabilized and that the Company was experiencing gross cost overruns which would drive down 18 gross margins. Defendants acted with deliberate recklessness or actual knowledge of falsity when 19 they told the market that in Q2, Q3 and Q4 04 the Company could “take advantage of cost reduction 20 and our price will be pretty much stabilized, therefore, we will see that margin increase,” knowing 21 but concealing: 22 (i) That, because PAS was viewed as an interim solution by the Chinese 23 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 24 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 25 UTStarcom in China; 26 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 27 budgets, as set in 2003, were dedicated to 3G development; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 149 -

1 (iii) That the Chinese government was taking steps to protect the 2 development of its nascent mobile industries, including permitting China Mobile and China Unicom 3 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 4 subscriber growth; 5 (iv) That the roll out of TD-SCDMA technology would limit the ability to 6 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 7 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 8 (v) That the Company’s high margin PAS infrastructure sales had eroded 9 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 10 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 11 products and because the systems had to be installed and repaired by Chinese speaking engineers; 12 (vi) That because UTStarcom’s historical PAS success in China was 13 dependent upon China’s unique market and pricing controls, the Company would be unable to 14 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 15 margins; 16 (vii) That the Company lacked the infrastructure to balance supply with 17 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 18 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 19 (viii) That UTStarcom’s PAS infrastructure deployments were under- 20 budgeted because they were defective and required significant additional expenditures to make them 21 operational, causing excessive cost overruns and missed margin projections; 22 (ix) That because a significant portion of the PAS infrastructure placed into 23 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 24 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 25 (x) That China’s MII had confirmed that it would take steps to ensure that 26 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 150 -

1 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 2 by China Telecom and China Netcom in 2004 and 2005; 3 (xi) That the Chinese government, through China Telecom and China 4 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 5 (xii) That the contract of sale to entities in Beijing announced in 2003 6 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 7 customers’ inability to pay; 8 (xiii) That the Company lacked effective internal controls in its financial 9 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 10 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 11 and accrued expenses, all of which were required to competently analyze and/or estimate 12 UTStarcom’s future financial and operational performance; and 13 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 14 to believe, and did not in fact believe, their Q2, Q3 and Q4 04 margins would be increasing. 15 180. April 27, 2004 False Statement in UTStarcom’s Conference Call Concerning

16 Demand for PAS Infrastructure: 17 MIKE SOPHIE: William, and for the audience, this is -- your first question 18 was a very important point that I’d like to kind of come back to, because I commented in our prepared script here a little bit is that, as you pointed out, 19 historically, we talked about a 60 percent capacity utilization on the infrastructure. And we’re talking about numbers around 70 percent here in Q1. As Hong pointed 20 out, phenomenal sub growth here in Q1. At the same time, you saw the tremendous amount of contracts that we were signing as well. Just those contracts have not been 21 put into service yet, so you’re not necessarily seeing the capacity. But the point we’re really trying to drive home is the sub numbers are all expected to continue. 22 And obviously, with this high of a utilization rate, that means as the sub numbers continue to increase, they are going to be buying a lot of additional infrastructure 23 and a lot more handsets. 24 HONG LU: I think maybe I wanted to add one more point. Typically, if any company -- when they are running the infrastructure in any similar environment, 25 if they are about 60 percent, 65 percent, that’s pretty much they will have to add more infrastructure is because no system can handle 100 percent of the capacities. 26 And typically, the capacity is at the range of 70 percent. So that means that we are very -- looking forward to a more expansion business that’s coming. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 151 -

1 (a) Date of Statement. The statement was made during the April 27, 2004, Q1 2 04 UTStarcom earnings conference call held with Wall Street analysts.

3 (b) Recipient. The recipients of the statement were UTStarcom’s public 4 stockholders, who received the information from Wall Street analysts and from news items 5 circulating within the investment news media and other channels. For instance, Thomas Weisel 6 Partners LLC’s April 28, 2004 report cited defendants’ comments in the conference call and stated 7 that the increased capacity utilization would “prompt a strong replacement cycle over the next 6 8 months,” leading to additional PAS infrastructure sales.

9 (c) Identity of Authors. Defendants Sophie and Lu made the statement. 10 Defendant Banc of America was present and was still concluding the January 2004 Offering.

11 (d) True Facts, Scienter and Pleading Basis. PAS growth would actually 12 decline 30% in Q4 04 and by Q1 05 defendants would announce 40%–50% declines in PAS 13 revenues. If defendants were truthful in stating the sales pipeline was 6-12 months long backed up 14 by verifiable contracts and that they always got “final acceptance” and always got paid, and because 15 wireless infrastructure sales obviously plummeted to $205.5 million in Q4 04 and to $110 million in 16 Q1 05, then a fortiori, defendants had to know in April 2004 that PAS sales would significantly 17 decrease rather than increase at the end of fiscal 2004. Defendants acted with deliberate recklessness 18 or actual knowledge of falsity when they told the market that growth in PAS subscribers was still 19 occurring and that as capacity exceeded 70% additional PAS infrastructure would be sold, knowing 20 but concealing: 21 (i) That, because PAS was viewed as an interim solution by the Chinese 22 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 23 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 24 UTStarcom in China; 25 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 26 budgets, as set in 2003, were dedicated to 3G development; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 152 -

18 Stabilization of PAS Infrastructure Prices and Margin Projections Prompted by Banc of 19 America: 20 TIM LONG [Banc of America Analyst:] just one last question -- Hong, I got 21 the message on the gross margin side, but hat the infrastructure side in the 33 percent range, obviously, that’s down a bit. And it’s a less competitive market. Could you tell 22 us what has driven that and how quickly could that potentially rebound? 23 HONG LU: Yes. I think we are talking about the PAS infrastructure, we have been seeing stabilization on that. And then we were really moving towards -- 24 we have a lot of cost reduction programs, putting them together. And if you can imagine that some of our contract has been signed much earlier, so we know we 25 have to use up some of our inventory. And then we’re looking forward, we have a very, very clear picture of how we are going to be able to improve that margin. 26 (a) Date of Statement. The statement was made during the April 27, 2004, Q1 27 04 UTStarcom earnings conference call held with Wall Street analysts. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 153 -

4 (c) Identity of Authors. Defendants Banc of America and Lu made the 5 statements. Defendants Sophie and Banc of America were present. Defendant Banc of America was 6 still concluding the January 2004 Offering.

7 (d) True Facts, Scienter and Pleading Basis. If defendants were truthful in 8 stating the sales pipeline was 6-12 months long and that they always got “final acceptance” and 9 always got paid, then a fortiori, defendants had to know in April 2004 that PAS sales prices had not 10 stabilized and that the Company was experiencing gross cost overruns which would drive down 11 gross margins. Defendants also knew demand had disappeared. Defendants acted with deliberate 12 recklessness or actual knowledge of falsity when they told the market that looking forward they were 13 “seeing stabilization” on PAS infrastructure prices, that they were experiencing “a lot of cost 14 reduction,” and that because certain “contract[s] ha[d] been signed much earlier,” defendants had “a 15 very, very clear picture of how [they were] going to be able to improve that margin,” knowing but 16 concealing: 17 (i) That, because PAS was viewed as an interim solution by the Chinese 18 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 19 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 20 UTStarcom in China; 21 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 22 budgets, as set in 2003, were dedicated to 3G development; 23 (iii) That the Chinese government was taking steps to protect the 24 development of its nascent mobile industries, including permitting China Mobile and China Unicom 25 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 26 subscriber growth; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 154 -

1 (xii) That the contract of sale to entities in Beijing announced in 2003 2 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 3 customers’ inability to pay; and 4 (xiii) That the Company lacked effective internal controls in its financial 5 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 6 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 7 and accrued expenses, all of which were required to competently analyze and/or estimate 8 UTStarcom’s future financial and operational performance. 9 182. April 27, 2004 False Statement in UTStarcom’s Conference Call Concerning

10 Earnings Guidance for 2004: 11 GAAP EPS guidance for Q2 is approximately 33 cents, which is inclusive of the 12 acquisition-related charges. Full-year 2004 earnings should be approximately $1.85, inclusive of acquisition-related charges. 13 (a) Date of Statement. The statement was made during the April 27, 2004, Q1 14 04 UTStarcom earnings conference call held with Wall Street analysts. 15 (b) Recipient. The recipients of the statement were UTStarcom’s public 16 stockholders, who received the information from Wall Street analysts and from news items 17 circulating within the investment news media and other channels. 18 (c) Identity of Author. Defendant Sophie made the statement. Defendants Lu 19 and Banc of America were present and Banc of America was still concluding the January 2004 20 Offering. 21 (d) True Facts, Scienter and Pleading Basis. UTStarcom’s Q2 04 GAAP EPS 22 would only come in at $0.32 per share and UTStarcom’s GAAP EPS for FY 2004 would come in a 23 full two-third below guidance at $0.56 per share. Defendants acted with deliberate recklessness or 24 actual knowledge of falsity when they announced these EPS projections based on growing demand 25 and continued success of PAS. In reality defendants knew: 26 (i) That, because PAS was viewed as an interim solution by the Chinese 27 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 156 -

1 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 2 UTStarcom in China; 3 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 4 budgets, as set in 2003, were dedicated to 3G development; 5 (iii) That the Chinese government was taking steps to protect the 6 development of its nascent mobile industries, including permitting China Mobile and China Unicom 7 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 8 subscriber growth; 9 (iv) That the roll out of TD-SCDMA technology would limit the ability to 10 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 11 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 12 (v) That the Company’s high margin PAS infrastructure sales had eroded 13 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 14 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 15 products and because the systems had to be installed and repaired by Chinese speaking engineers; 16 (i) That because UTStarcom’s historical PAS success in China was 17 dependent upon China’s unique market and pricing controls, the Company would be unable to 18 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 19 margins; 20 (ii) That the Company lacked the infrastructure to balance supply with 21 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 22 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 23 (iii) That UTStarcom’s PAS infrastructure deployments were under- 24 budgeted because they were defective and required significant additional expenditures to make them 25 operational, causing excessive cost overruns and missed margin projections; 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 157 -

1 (iv) That because a significant portion of the PAS infrastructure placed into 2 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 3 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 4 (v) That China’s MII had confirmed that it would take steps to ensure that 5 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 6 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 7 by China Telecom and China Netcom in 2004 and 2005; 8 (vi) That the Chinese government, through China Telecom and China 9 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 10 (vii) That the contract of sale to entities in Beijing announced in 2003 11 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 12 customers’ inability to pay; 13 (viii) That the Company lacked effective internal controls in its financial 14 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 15 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 16 and accrued expenses, all of which were required to competently analyze and/or estimate 17 UTStarcom’s future financial and operational performance; and 18 (ix) That as a result of (i)-(viii) above, defendants had no reasonable basis 19 to believe, and did not in fact believe, their Q2 04 EPS guidance of $0.33 or FY 2004 EPS of $1.85. 20 183. May 10, 2004 False Statement in UTStarcom’s 10-Q Concerning Evaluation of

21 Internal and Disclosure Controls: 22 ITEM 4 -- CONTROLS AND PROCEDURES 23 Our management, including the Chief Executive Officer and the Chief 24 Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e) as 25 of March 31, 2004. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures are 26 effective in ensuring that all material information required to be disclosed in this quarterly report has been made known to them in a timely fashion and no changes are 27 required at this time. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 158 -

1 In connection with the evaluation by our management, including the Chief Executive Officer and Chief Financial Officer, of our internal control over financial 2 reporting, no changes during the quarter ended March 31, 2004 were identified that could significantly affect our internal control over financial reporting subsequent to 3 March 31, 2004.

4 (a) Date of Statement. The statement appears in the Form 10-Q for the quarter 5 ended March 31, 2004, filed with the SEC on May 10, 2004.

6 (b) Recipient. The recipients of the statement were UTStarcom’s public 7 stockholders, who received the information from Wall Street analysts and from news items 8 circulating within the investment news media and other channels.

9 (c) Identity of Author. The Form 10-Q was signed by defendants Lu and 10 Sophie. Additionally, it is a group-published document. As such, each Individual Defendant may be 11 held liable for statements made in this SEC filing.

12 (d) True Facts, Scienter and Pleading Basis. See ¶118(d). 13 184. May 10, 2004 False SOX Certifications: Defendants Lu and Sophie signed

14 certifications pursuant to §302 of the Sarbanes-Oxley Act, which stated that: 15 1. I have reviewed this quarterly report on Form 10-Q of UTStarcom, 16 Inc.; 17 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the 18 statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 19 3. Based on my knowledge, the financial statements, and other financial 20 information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the 21 periods presented in this report; 22 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 23 Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: 24 a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our 25 supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to 26 us by others within those entities, particularly during the period in which this report is being prepared; 27 b. [Paragraph omitted pursuant to SEC Release Nos. 33-8238; 34- 28 47986]; FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 159 -

1 c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the 2 effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 3 d. Disclosed in this report any change in the registrant’s internal control 4 over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case 5 of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over 6 financial reporting; and 7 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the 8 registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): 9 a. All significant deficiencies and material weaknesses in the design or 10 operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, 11 process, summarize and report financial information; and 12 b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s 13 internal control over financial reporting.

14 (a) Date of Statement. The statement appears in the Form 10-Q for the quarter 15 ended March 31, 2004, filed with the SEC on May 10, 2004.

16 (b) Recipient. The recipients of the statement were UTStarcom’s public 17 stockholders, who received the information from Wall Street analysts and from news items 18 circulating within the investment news media and other channels.

19 (c) Identity of Author. The SOX certifications were signed by defendants Lu 20 and Sophie

21 (d) True Facts, Scienter and Pleading Basis. See ¶119(d). 22 185. June 14, 2004 False Statements Issued During Conference Call Concerning

23 Margin Projections: 24 [M]anufacturing and design synergies will enable [UTStarcom] to sustain gross 25 margins of 27%+ through 2005. 26 (a) Date of Statement. The statement was made during the June 14, 2004, 27 conference call held with Wall Street analysts to announce UTStarcom’s acquisition of Audiovox. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 160 -

4 (c) Identity of Author. The call was hosted by defendants Lu and Sophie. 5 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 6 recklessness or actual knowledge of falsity when they announced guidance of 27%+ gross margins 7 throughout 2005 knowing verifiable sales contracts then in the sales “pipeline” did not support this 8 and that significant cost overruns would prevent this. In reality defendants knew but concealed: 9 (i) That, because PAS was viewed as an interim solution by the Chinese 10 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 11 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 12 UTStarcom in China; 13 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 14 budgets, as set in 2003, were dedicated to 3G development; 15 (iii) That the Chinese government was taking steps to protect the 16 development of its nascent mobile industries, including permitting China Mobile and China Unicom 17 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 18 subscriber growth; 19 (iv) That the roll out of TD-SCDMA technology would limit the ability to 20 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 21 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 22 (v) That the Company’s high margin PAS infrastructure sales had eroded 23 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 24 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 25 products and because the systems had to be installed and repaired by Chinese speaking engineers; 26 (vi) That because UTStarcom’s historical PAS success in China was 27 dependent upon China’s unique market and pricing controls, the Company would be unable to 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 161 -

1 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 2 margins; 3 (vii) That the Company lacked the infrastructure to balance supply with 4 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 5 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 6 (viii) That UTStarcom’s PAS infrastructure deployments were under- 7 budgeted because they were defective and required significant additional expenditures to make them 8 operational, causing excessive cost overruns and missed margin projections; 9 (ix) That because a significant portion of the PAS infrastructure placed into 10 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 11 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 12 (x) That China’s MII had confirmed that it would take steps to ensure that 13 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 14 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 15 by China Telecom and China Netcom in 2004 and 2005; 16 (xi) That the Chinese government, through China Telecom and China 17 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 18 (xii) That the contract of sale to entities in Beijing announced in 2003 19 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 20 customers’ inability to pay; 21 (xiii) That the Company lacked effective internal controls in its financial 22 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 23 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 24 and accrued expenses, all of which were required to competently analyze and/or estimate 25 UTStarcom’s future financial and operational performance; and 26 (xiv) That as a result of (i)-(xiii) above, defendants had no reasonable basis 27 to believe, and did not in fact believe, their FY 2005 margin projections of 27+%. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 162 -

1 THE TRUTH BEGINS TO BE REVEALED 2 186. After the close of trading on July 27, 2004, the Company shocked the market by

3 issuing a press release entitled “UTStarcom Reports Second Quarter 2004 Results-Updates 2004 and 4 2005 Financial Guidance.” In the press release and during the earnings conference that day, 5 defendants would admit that: 6 • Contrary to the Company’s April 27, 2004 EPS projection of $0.33 per share, the 7 Company’s EPS had only come in at $0.32 per share – well below Q2 03 EPS. 8 • Contrary to defendants’ earlier promises that UTStarcom would actually increase 9 gross margins from their previous Q1 04 low watermark of 28%, the Company’s gross margins had continued their downward spiral to 25.4% for the Q2 04 – 500 to 10 600 basis points below the projections defendants made as late as March 22, 2004.

11 • That UTStarcom’s new PAS subscriber growth had declined significantly, with the Company having added one-third less new PAS subscribers during the Q2 04 than it 12 had guided it was on track to add in the quarter during the April 27, 2004 conference 13 call – translating to lower capacity usage by China Telecom and China Netcom and negating the tellcoms’ need to purchase additional PAS infrastructure from 14 UTStarcom going forward.7

15 • Despite the fact that utilization of PAS network capacity exceeded 70% in some locations, China Telecom and China Netcom had still not added additional capacity 16 through expansions or upgrades as Lu and Sophie had promised they would. 17 • The Company was guiding down its Q3 04 GAAP EPS expectations to $0.34 per 18 share – well below the $0.50 cents average estimate of analysts surveyed by Thomson Financial prior to the announcement. 19 • The Company was downgrading its FY 2004 GAAP EPS expectations by 20 approximately 10% from $1.85 per share (announced April 27, 2004) to “$1.65- 21 $1.70” per share – though the Company would ultimately only achieve FY 2004 GAAP EPS of one-third that amount, or $0.56 per share. 22 • That the Company had significant internal control problems and had retained the 23 consulting firm Accenture (an offshore accountancy consultancy known as Andersen Consulting until 2001, when it was spun off from accounting firm Arthur Andersen), 24

25 7 This significant decline would continue in Q3 04 and Q4 04, with defendants explaining at an 26 impromptu January 8, 2005 conference: “To give you some specific metrics here, sum PAS subscriber added were approximately 12.1 million in the second half of 2004. This represents a 27 decline of over 30 percent from a total subscriber adds of 17.5 million in the first half of 2004.” 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 163 -

1 to assist with strategic sourcing issues, product life cycle management and purchasing process issues. 2 187. Investors panicked – more than 30 million UTStarcom shares exchanged hands on 3 4 July 28, 2004, about 15 times its daily average, as the Company lost nearly a billion dollars of 5 market value.

6 188. Knowing that the market would react severely negatively to the Company’s

7 disclosure of disappointing gross margins, defendants tried to soften the blow by telling the market 8 that higher-margin non-China revenues for 2004 would increase from $284 million in the prior year 9 to $600 million. $220 million of those $600 million in revenues were to come from an equipment 10 sale contract of iAN-8000 equipment to Japan Telecom, which had recently been bought by 11 12 SOFTBANK, a related party. However, a project of the size of the Japan Telecom contract should 13 have taken six to nine months, so recognition of the contract in the second half of 2004 was

14 extremely doubtful. In fact, the iAN-8000 equipment, which began to be shipped in 15 September 2004, had such significant quality issues with both hardware and software that it was 16 unacceptable for Japan Telecom. On September 20, 2004, defendants would be forced to admit that 17 revenues for the Japan Telecom contract could not be recognized in 2004 because the promotional 18 services portion of the contract to be performed by UTStarcom would delay revenue recognition. 19 20 189. July 27, 2004 False Statement in UTStarcom’s Conference Call Concerning

21 Recognition of $290 Million in Revenue on the Japan Telecom Contract in the 2H 04:

22 We have projected 600 million in international revenues outside of China in 2004. . . . 23 International bookings remain on track to make our revenue goal over (ph) 24 2004. As of June 30, we have booked more than 400 million in international contracts; nearly 300 million were booked in Q2 alone. This is greater than our total 25 international revenues for all of the year 2003. 26 * * * 27 While we had anticipated international revenue of 100 million, actual revenue 28 was 71.3 million. It took us longer than expected to deliver new products to FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 164 -

1 international customers and achieve final acceptance. Much of this shortfall occurred in the last two weeks of the quarter. For example, in the second quarter, we missed 2 revenue recognition of one international contract by one day. This was due to delay of the key components and the problem clearing (ph) customs. As a result, we will 3 recognize about 3 cents EPS in the third quarter instead of the second quarter, as originally anticipated. 4 * * * 5 Revenue for mainland China represented approximately 90 percent of total 6 revenue for the quarter. As Hong discussed, we continue to be confident that non- China’s revenue will come in at about 600 million for the year. 7 * * * 8 9 MIKE OUNJIAN, ANALYST, CREDIT SUISSE FIRST BOSTON: Great, thank you. Could we talk a little bit more about -- in terms of the international 10 revenues that were delayed from Q2 to Q3 -- they were delayed from Q2 -- sort of how much we should expect to see in Q3 . . . ? 11 MIKE SOPHIE: I will go ahead and take that one. The slip was -- we don’t 12 want to go into too specifics, but it was in Japan where we saw the slip in Q2 that Hong referred to. 13 * * * 14 TIENYU SIEH, ANALYST, MERRILL LYNCH: I guess I just wanted to 15 check -- since the analysts’ day, what has been some of the most specific changes in your outlook as far as margins are concerned? It appears to be concentrated on the 16 operating expenses and the gross margin. But again, it seems to be a very sharp deterioration in terms of the last 30 odd days. Can we get a bit more color as to the 17 (multiple speakers) trajectory of change might --. 18 MIKE SOPHIE: I would be happy to take that question. I think what we saw specifically is a significant amount of dollars actually slipped out of Q2 that was 19 international but had significant margins. So that clearly impacted our Q2 gross margins, as well as our overall level of EPS . . . . 20 HONG LU: I just wanted to point out that we were not until the very last 21 two weeks of the last quarter that we were fully anticipated to ship out the product. And because of -- as I have admitting that our poor execution and not being able to 22 get the product out in time and some of the blame is because the shortage was much more severe than we have anticipated, and that had compounded. But at any rate, 23 the business itself we feel very, very strong. We are very happy about the customers’ demand, and just we did not execute it, and that is just that. So we see 24 with Q3, we have already put the program together, so we hope that would not happen again like what happened in Q2. 25 MIKE SOPHIE: The key thing is we do have the backlog, and as Hong 26 says, it comes down to execution. 27 * * * 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 165 -

1 IAN CONN, ANALYST, THOMAS WEISEL PARTNERS: This is Ian Conn (ph) for Hasan Imam. Not to beat a dead horse, but if we could just go back 2 to slippage in the quarter. Did I hear you say that it was worth 3 cents of EPS, and are you saying that you would have had 35 cents for the quarter without the 3 slippage? And what would have been the impact, if you can carry it through to gross margin in the quarter and maybe even top line -- whatever you feel comfortable 4 stating.

5 MIKE SOPHIE: I think what Hong was referring to was one specific shipment that actually missed by 24 hours. And that alone would have contributed 6 3 cents and close to 1 percent improvement in gross margin. If you take a look at what we came in at, as we originally were targeting revenues north of 100 million for 7 our non-China revenues for the quarter, (indiscernible) significantly higher gross margins, and most of that slipped out in the last couple weeks of the quarter. So I 8 think we want -- to be very specific here, if we take that last shipment that we talked to, that was definitely 3 cents, up to a percent impact on gross margin. 9 * * * 10 IAN CONN: And that 34 to 35 guidance for Q3, that kind of includes the 3 11 cent --?

12 MIKE SOPHIE: Yes, because what we’re doing is we kind of have reset (ph) for the balance of the year to achieve the 600 million. 13 (a) Date of Statement. The statement was made during the July 27, 2004, Q2 04 14 UTStarcom earnings conference call held with Wall Street analysts. 15 (b) Recipient. The recipients of the statement were UTStarcom’s public 16 stockholders, who received the information from Wall Street analysts and from news items 17 circulating within the investment news media and other channels. For instance, in its July 28, 2004 18 report, Wachovia Securities stated that it was setting its EPS estimates at $0.33 for Q3 04 and $1.59 19 for FY 2004, and its FY 2004 gross margin estimate at 26.3% – despite the drastic misses – 20 reckoning that the “shortfall in EPS was mainly due to delay in international orders” and the 21 “decrease in gross margin was mainly due to the delay in order acceptance and delivery to a 22 customer in Japan.” Similarly, Thomas Weisel Partners LLC noted in its own July 28, 2004 report 23 that: “Wireline infrastructure (10% of revenues) up 11% QoQ, despite the $30mn slipping into 24 SepQ, which if included, would translate to a blistering 57% QoQ growth.” Pacific Growth Equities 25 noted that UTStarcom’s “first major disappointing earnings news since the Company’s public debut” 26 was to be blamed on “a rather significant piece of international business [having] just missed 27 shipment during the June quarter,” and noting that with “gross margins higher than the Company’s 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 166 -

1 average, such an international shipment would have significantly enhanced overall gross margins at 2 UTSI.”

3 (c) Identity of Author. Defendants Lu and Sophie made the statements. 4 (d) True Facts, Scienter and Pleading Basis. The Japan Telecom contract was 5 something cooked up by SOFTBANK and the Individual Defendants and had the potential of 6 resulting in so-called a “wash transaction” where companies pay each other for services/products 7 exchanged between the two of them which artificially inflates the reported revenues of both 8 companies involved. Related-party transactions also provide participants with the motive and 9 opportunity to inflate the sales price each side is declaring as it is not really being paid. In the end, 10 the $100 million promotional portion of the Japan Telecom contract which caused the purported 11 delay in recognition would be unceremoniously dropped. Defendants acted with deliberate 12 recklessness or actual knowledge of falsity when they stated the revenues from the Japan Telecom 13 contract (consisting of $290 million of the $600 million in international sales forecasted) would be 14 recognized in the 2H of 2004. In reality defendants knew but concealed: 15 (i) That the Company’s high margin PAS infrastructure sales had eroded 16 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 17 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 18 products and because the systems had to be installed and repaired by Chinese speaking engineers; 19 (ii) Because the wireless products UTStarcom was marketing were very 20 substandard, broke down excessively and because UTStarcom was making no efforts through R&D 21 or otherwise to improve the quality of these products, defendants knew the Company’s wireless 22 products would not sell in other Asian, South American, African or other nations, including 23 developing nations. Instead, defendants knew they had capitalized on Lu’s and Wu’s ties to the 24 Chinese government-controlled telecommunications market to achieve the sales of PAS 25 infrastructure they had managed thus far and that the political, economic and regulatory factors that 26 made these sales possible in China were not present in other developing nations and that their 27 attempts to sell PAS networks to other developing nations were categorically failing; and 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 167 -

1 (iii) That defendants had no reasonable basis to believe and did not in fact 2 believe UTStarcom’s FY 2004 revenue and EPS estimates when made on July 28, 2004, including 3 2H 04 revenue and EPS estimates based upon $290 million of fixed-line revenue from Japan 4 Telecom. 5 190. In order to stop the massive decline in the Company’s stock price, defendants would

6 also make a series of unfounded statements on July 27, 2004, designed to assure the market that 7 demand for Chinese PAS was ongoing, that the Chinese rollout of 3G would not interfere with PAS 8 infrastructure sales, that PAS margins were stabilizing in China, and that international sales 9 (especially international PAS sales) would make up for any shortfall in Chinese PAS infrastructure 10 sales, all designed to convince the market that UTStarcom’s financial performance would recover in 11 12 the 2H of FY 2004.

13 191. July 27, 2004 False Statement in UTStarcom’s Press Release Concerning the

14 Company’s 2H 04 Guidance: 15 Financial Guidance 16 Revised guidance for 2004 and 2005 is as follows: 17 Revenue Range: Q3 2004: $695-$700 million 18 FY 2004: $2.95-$3.0 billion 19 FY 2005: $4.0-$4.3 billion 20 Gross Margins: Q3 2004: 27-28% 21 FY 2004: 27% 22 FY 2005: 27%+ 23 As previously projected, the company believes that gross margins have 24 reached a low point in Q2 2004 and will improve throughout the balance of 2004. 25 GAAP EPS Range: Q3 2004: $0.34-$0.35 26 FY 2004: $1.65-$1.70 27 FY 2005: $2.20 28 (Footnotes omitted.) FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 168 -

1 (a) Date of Statement. The statement was made in the Company’s July 27, 2004 2 press release.

6 (c) Identity of Author. The press release was issued by UTStarcom, and quoted 7 defendants Lu and Sophie.

8 (d) True Facts, Scienter and Pleading Basis. As announced September 20, 9 2004 and February 8, 2005, UTStarcom’s actual financial performance in the 2H 2004 would be as 10 follows: 11 3Q 2004 12 Revenue $645 million 13 EPS $0.04/share 14 Gross Margins 21.3% 15 FY 2004 16 Revenues $2.7 billion 17 EPS $0.56/share 18 Gross Margins 22% [4Q 04 gross margin 15%] 19 Defendants acted with deliberate recklessness or actual knowledge of falsity when they made their 20 revenue, EPS and margin projections for the second half of 2004 because they knew: 21 (i) That, because PAS was viewed as an interim solution by the Chinese 22 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 23 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 24 UTStarcom in China; 25 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 26 budgets, as set in 2003, were dedicated to 3G development; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 169 -

1 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 2 by China Telecom and China Netcom in 2004 and 2005; 3 (xi) That China Netcom was not stretching out its payables as reported by 4 defendants on July 28, 2004 in anticipation of China Netcom’s own IPO in late 2004, but rather had 5 advised UTStarcom that it was dramatically reducing its investment in PAS; 6 (xii) That the Chinese government, through China Telecom and China 7 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 8 (xiii) That the contract of sale to entities in Beijing announced in 2003 9 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 10 customers’ inability to pay; 11 (xiv) That the Company lacked effective internal controls in its financial 12 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 13 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 14 and accrued expenses, all of which were required to competently analyze and/or estimate 15 UTStarcom’s future financial and operational performance; and 16 (xv) That as a result of (i)-(xiv) above, defendants had no reasonable basis 17 to believe and did not in fact believe UTStarcom’s FY 2004 revenue and EPS estimates when made 18 on July 27, 2004, including 2H 04 revenue and EPS estimates based upon $290 million of fixed-line 19 revenue from Japan Telecom. 20 192. July 27, 2004 False Statements in UTStarcom’s Conference Call Concerning

21 Continued PAS Infrastructure Sales in China Despite a Shift to Capital Spending on 3G: 22 We expect PAS spending will continue even when 3G is introduced, as it addressed 23 the needs of a very large base of a low-end consumers in China. 24 (a) Date of Statement. The statement was made during the July 27, 2004, Q2 04 25 UTStarcom earnings conference call held with Wall Street analysts. 26 (b) Recipient. The recipients of the statement were UTStarcom’s public 27 stockholders, who received the information from Wall Street analysts and from news items 28 circulating within the investment news media and other channels. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 171 -

1 (c) Identity of Author. Defendant Lu made the statement. Defendants Sophie 2 and Wu were present.

3 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 4 recklessness or actual knowledge of falsity when they promised ongoing PAS infrastructure sales in 5 China during the 2H of 2004, despite one-half of China Telecom’s and China Netcom’s budget 6 having been directed to 3G and knowing: 7 (i) That, because PAS was viewed as an interim solution by the Chinese 8 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 9 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 10 UTStarcom in China; 11 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 12 budgets, as set in 2003, were dedicated to 3G development; 13 (iii) That the Chinese government was taking steps to protect the 14 development of its nascent mobile industries, including permitting China Mobile and China Unicom 15 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 16 subscriber growth; 17 (iv) That the roll out of TD-SCDMA technology would limit the ability to 18 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 19 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 20 (v) That China’s MII had confirmed that it would take steps to ensure that 21 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 22 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 23 by China Telecom and China Netcom in 2004 and 2005; and 24 (vi) That the Chinese government, through China Telecom and China 25 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom. 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 172 -

1 193. July 27, 2004 False Statements in UTStarcom’s Conference Call Concerning

2 Expected Margins on International Wireless Infrastructure Sales then Booked to be 3 Recognized in the 2H 04 and Beyond: 4 LU: . . . International bookings on our core business also typically bring higher 5 gross margin of between 45 and 50 percent. 6 * * *

7 “The success of PAS is not limited to China alone. We are replicating our proven PAS deployment model in other emerging markets.” 8 * * * 9 10 SOPHIE: Specific margin guidance is as follows. In Q3, gross margins should improve to approximately 27 to 28 percent, and we should see further improvement 11 in Q4 to approximately 30 percent of the core business. . . . 12 Our confidence in improved margin percentage is driven by the following factors. One, a significant ramp in international revenues in the second half of ‘04, 13 which typically carry a higher gross margin in the range of 45 to 50 percent. * * * 14 15 As the whole of our overall margin as a Company, our mix of our international revenue as well as our China mix will be heavily towards the 16 international revenue side, so we see a significant improvement in our margin towards the second half of the year, and I hope that will continue into 2005. 17 (a) Date of Statement. The statement was made during the July 27, 2004, Q2 04 18 UTStarcom earnings conference call held with Wall Street analysts. 19 (b) Recipient. The recipients of the statement were UTStarcom’s public 20 stockholders, who received the information from Wall Street analysts and from news items 21 circulating within the investment news media and other channels. For instance, in its July 28, 2004 22 report, Thomas Weisel Partners LLC included as two of “five positive trends for UTSI’s overall 23 GM’s. . . (4) Pricing in PAS infrastructure will be higher margin, with revenues from more recent, 24 better-priced contracts being recognized in 2H04. (5) Mix shift toward higher margin, non-China 25 revenues.” Similarly, Prudential Equity Group, LLC stated in its July 28, 2004 report that the 26 “company sees margins increasing in the current quarter to 27% - 28% before recovering to 30% in 27 the fourth quarter, helped by. . . improving margins in PAS infrastructure, and an increasing mix of 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 173 -

1 non-China business.” Pacific Growth Equities LLC stated in its own report that “installations” 2 continued on the “international (non-China) front,” that “[b]ased on these and other orders, it appears 3 to us UTSI remains on track to meet its goal of $600 million in revenue during 2004 from regions 4 outside of China,” and that since “[t]ypically, this international business garners gross margins of 5 45% to 50% and, therefore, as these non-China revenues grow in Q3 and Q4, we believe gross 6 margins for the Company as a whole should also rise.”

7 (c) Identity of Author. Defendants Lu and Sophie made the statements. 8 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 9 recklessness or actual knowledge of falsity when they expressed confidence in the outrageous, 10 bordering on absurd, 45%-50% margin projections for international product sales for the 2H of 2004 11 and in FY 2005 because they knew 45%-50% margins, such as the Company’s pre-Class Period PAS 12 infrastructure sales to China, were not possible outside of China where the political, economic and 13 regulatory factors which led to the high margin sales on PAS infrastructure in China were not 14 present. The fallacy is demonstrated by defendants’ own admissions during the same conference 15 call. Defendants stated on July 27th that as of June 30, 2004 the Company had “booked more than 16 400 million in international contracts” and that “nearly 300 million were booked in Q2 alone.” 17 Defendants stated consistently through the Class Period that revenue recognition lags approximately 18 6-12 months following a sale as revenues were not recognized until “final acceptance” has been 19 granted. If the Company had $400 million in international sales purportedly “booked” pursuant to 20 contracts in 1H 04 which provided for 45%-50% profit margins, the high-margin international sales 21 would have significantly boosted the Company’s gross margins reported in the following nine 22 months, including the 21.3% in gross margins reported in Q3 04 (comprised of 9% international 23 sales); the 15% in gross margins reported in the Q4 04 (comprised of 53% international sales); and 24 the 22% in gross margins reported in the Q1 05 (comprised of 75% international sales). Defendants 25 also acted with deliberate recklessness or actual knowledge of falsity when they made these 26 statements knowing but concealing: 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 174 -

1 (ix) That because a significant portion of the PAS infrastructure placed into 2 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 3 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 4 (x) That China’s MII had confirmed that it would take steps to ensure that 5 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 6 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 7 by China Telecom and China Netcom in 2004 and 2005; 8 (xi) That defendants had no reasonable basis to believe and did not in fact 9 believe UTStarcom’s FY 04 revenue and EPS estimates when made on July 27, 2004, including 2H 10 04 revenue and EPS estimates based upon $290 million of fixed-line revenue from Japan Telecom; 11 (xii) That China Netcom was not stretching out its payables as reported by 12 defendants on July 27, 2004 in anticipation of China Netcom’s own IPO in late 2004, but rather had 13 advised UTStarcom that it was dramatically reducing its investment in PAS; 14 (xiii) That the Chinese government, through China Telecom and China 15 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 16 (xiv) That the contract of sale to entities in Beijing announced in 2003 17 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 18 customers’ inability to pay; 19 (xv) That the Company lacked effective internal controls in its financial 20 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 21 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 22 and accrued expenses, all of which were required to competently analyze and/or estimate 23 UTStarcom’s future financial and operational performance; and 24 (xvi) That as a result of (i)-(xv) above, defendants had no reasonable basis 25 to believe, and did not in fact believe, their Q3-Q4 04 margin projections of 27%-30%. 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 176 -

1 194. July 27, 2004 False Statements in UTStarcom’s Conference Call Concerning

2 Then-Current Demand for PAS Infrastructure in China: 3 The [2Q 04 revenue] growth is primarily due to strong demand for our core PAS 4 infrastructure solutions in China. In Q2, wireless infrastructure accounted for approximately 62 percent of sales, handsets accounted for 28 percent of sales, and 10 5 percent of sales came from our wireline products. 6 . . . With utilization of UTStarcom PAS networks at about 70 percent, it is clear that PAS subscriber growth will continue to drive both handset and 7 infrastructure sales. 8 * * * 9 Due to continued expansion in deployments of PAS networks in China and global markets, total [FY 2004] revenue from wireless systems will be approximately 40 10 percent. 11 * * * 12 JEFF KVAAL, ANALYST, LEHMAN BROTHERS: My question is about the 2005 guidance. It seems as though that your 4Q guidance is reasonably similar to 13 what you had anticipated earlier. So could give us some sense of why you think the 2005 guidance should come in a little bit? Thanks very much. 14 MIKE SOPHIE: Jeff, I think we do have input from the customers that we 15 have built our 2005 guidance on. Clearly, it’s not all in backlog. I think what we have experienced is pretty competitive pricing environment over the last quarter. 16 And when you step back and look at what we are guiding to, we really are guiding to a 25 percent growth in our core business, both in top line and earnings. We 17 think in that environment we have a good degree of confidence in those numbers and we think they are fairly aggressive. 18 (a) Date of Statement. The statement was made during the July 27, 2004, Q2 04 19 UTStarcom earnings conference call held with Wall Street analysts. 20 (b) Recipient. The recipients of the statement were UTStarcom’s public 21 stockholders, who received the information from Wall Street analysts and from news items 22 circulating within the investment news media and other channels. For instance, in its July 28, 2004 23 report, Wachovia Securities noted that “[a]t the end of Q2 UTSI had 30 million PAS subscribers 24 compared with 26 million at the end of Q1 2004 and 21 million at the end of 2003,” indicating an 25 increase of 9 million subscribers in the first half of 2004, but reiterating their understanding of 26 management’s expectation that the Company’s PAS subscribers would increase by 20 million in the 27 second half of the year “to reach 40-50 million by the end of 2004.” Thomas Weisel Partners LLC 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 177 -

1 noted in its own July 28, 2004 report that “capacity utilization on UTSI’s PAS networks continues to 2 run hot at around 70%, which demands a large capacity add every couple of quarters.”

3 (c) Identity of Author. Defendant Sophie made the statement. Defendant Lu 4 was present.

5 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 6 recklessness or actual knowledge of falsity when they stated the Company was then experiencing 7 high demand for PAS infrastructure products in China. Rather than demonstrating ongoing high 8 demand for PAS infrastructure products in China, defendants knew that the PAS infrastructure 9 revenues received from China Telecom and China Netcom in the Q2 04 would be some of its last. 10 China’s PAS market in China had not merely “matured,” as defendants quibbled, rather it was dead. 11 Though the Company would stop specifically breaking out PAS infrastructure sales in its Q4 04 12 financial reporting (to help camouflage the decline), total wireless infrastructure sales (including 13 PAS infrastructure) would only amount to 27.5% of sales by Q4 04 – a far cry less than the 40% of 14 2H 04 revenues defendants had guided during the July 27, 2004 conference call. In fact, during an 15 impromptu January 8, 2005 conference, Lu would finally concede – only after being prodded by an 16 analyst from Standard & Poors (who provides the Company’s corporate debt ratings) – “that the

17 [Chinese PAS] market, overall, from our study shows there is a significant slow down – at least 30 18 percent slow down from the beginning of the year down to the end of the year.” As there was not 19 going to be subscriber growth, there would not be PAS infrastructure upgrades or expansions. Thus,

20 neither revenues nor earnings would grow as promised. Defendants could and did anticipate the 21 drastic drop off in PAS sales in FY 2004 based on the following factors known to them throughout 22 the Class Period: 23 (i) That, because PAS was viewed as an interim solution by the Chinese 24 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 25 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 26 UTStarcom in China; 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 178 -

1 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 2 budgets, as set in 2003, were dedicated to 3G development; 3 (iii) That the Chinese government was taking steps to protect the 4 development of its nascent mobile industries, including permitting China Mobile and China Unicom 5 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 6 subscriber growth; 7 (iv) That the roll out of TD-SCDMA technology would limit the ability to 8 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 9 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 10 (v) That because a significant portion of the PAS infrastructure placed into 11 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 12 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 13 (vi) That China’s MII had confirmed that it would take steps to ensure that 14 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 15 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 16 by China Telecom and China Netcom in 2004 and 2005; 17 (vii) That China Netcom was not stretching out its payables as reported by 18 defendants on July 27, 2004 in anticipation of China Netcom’s own IPO in late 2004, but rather had 19 advised UTStarcom that it was dramatically reducing its investment in PAS; 20 (viii) That the Chinese government, through China Telecom and China 21 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; and 22 (ix) That the Company lacked effective internal controls in its financial 23 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 24 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 25 and accrued expenses, all of which were required to competently analyze and/or estimate 26 UTStarcom’s future financial and operational performance. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 179 -

1 195. July 27, 2004 False Statements in UTStarcom’s Conference Call Purportedly

2 Explaining Decreasing Customer Contract Commitments for PAS Infrastructure Sales: 3 REGGIE KING, ANALYST, WR HAMBRECHT: Thank you. First, Mike, I 4 was hoping that you could help me with the inventory breakdown that you predicted for this quarter. The inventories at customer sites under contract seems to have 5 gone down a little bit from last quarter. Is that related to the slippage that you saw in the international shipments that may slip into next quarter? 6 MIKE SOPHIE: No, the inventories at customer sites is primarily associated 7 with our China PAS infrastructure. And we specifically–- ever since June of last year, we have targeted to shorten the final acceptance second cycle as well as our 8 supply chain cycle times . . . we want to bring our inventory levels down. 9 REGGIE KING: Related to that, Mike, the inventory at factories is up, so I imagine that those two are related to each other. Is that correct? (multiple speakers) 10 MIKE SOPHIE: It gets a little complicated with mix, because you’ve got 11 your – in the factory, it’s a combination of wireline products as well as [PAS] infrastructure that’s not been deployed and a lot of our handsets as well, because the 12 handsets is more of a book and ship, turns-type business that doesn’t have to go through a final acceptance. 13 (a) Date of Statement. The statement was made during the July 27, 2004, Q2 04 14 UTStarcom earnings conference call held with Wall Street analysts. 15 (b) Recipient. The recipients of the statement were UTStarcom’s public 16 stockholders, who received the information from Wall Street analysts and from news items 17 circulating within the investment news media and other channels. 18 (c) Identity of Author. Defendant Sophie made the statements. Defendant Lu 19 was present. 20 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 21 recklessness or actual knowledge of falsity when they discounted the reduction in PAS infrastructure 22 inventory sitting at customer sites awaiting final approval, implying that the reduction was planned, 23 knowing instead that PAS infrastructure was not being shipped to China Telecom and China Netcom 24 because: 25 (i) PAS was viewed as an interim solution by the Chinese government 26 and China Telecom’s and China Netcom’s capital spending budgets were dictated by the Chinese 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 180 -

1 government, defendants knew PAS would not generate long-term sales or profitability for 2 UTStarcom in China; 3 (ii) One-half of China Telecom’s and China Netcom’s 2004 capital 4 budgets, as set in 2003, were dedicated to 3G development; 5 (iii) The Chinese government was taking steps to protect the development 6 of its nascent mobile industries, including permitting China Mobile and China Unicom to offer 7 mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 8 subscriber growth; 9 (iv) The roll out of TD-SCDMA technology would limit the ability to use 10 existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory decreases in 11 PAS infrastructure purchases by China Telecom and China Netcom; 12 (v) China Netcom was not stretching out its payables as reported by 13 defendants on July 27, 2004 in anticipation of China Netcom’s own IPO in late 2004, but rather had 14 advised UTStarcom that it was dramatically reducing its investment in PAS; 15 (vi) The Chinese government, through China Telecom and China Netcom, 16 retained the power to unilaterally alter terms in contracts with UTStarcom; and 17 (vii) The Company lacked effective internal controls in its financial 18 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 19 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 20 and accrued expenses, all of which were required to competently analyze and/or estimate 21 UTStarcom’s future financial and operational performance. 22 196. July 27, 2004 False Statements in UTStarcom’s Conference Call Concerning

23 “Stabilization” of PAS Pricing and Expected 2H 04 Margin Improvements: 24 With regard to gross margin guidance, we stated on the first-quarter 25 conference call we believe Q2 was the low point for gross margins and believe we can and will improve core company gross margins in the balance of 2004. Specific 26 margin guidance is as follows. In Q3, gross margins should improve to approximately 27 to 28 percent, and we should see further improvement in Q4 to 27 approximately 30 percent of the core business. With the ACC revenue contribution of approximately 200 million in the fourth quarter, overall gross margins should be 28 approximately 27 percent in Q4. FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 181 -

1 Our confidence in improved margin percentage is driven by the following factors. . . . Four, the continued stabilization of infrastructure pricing on PAS in 2 China. 3 * * *

4 From an infrastructure point of view, we have already seen the stabilization of our margin, so in the second half of this year, we will see the improvement and 5 continuing into the next year. 6 As the whole of our overall margin as a Company, our mix of our international revenue as well as our China mix will be heavily towards the 7 international revenue side, so we see a significant improvement in our margin towards the second half of the year. . . . 8 * * * 9 STEPHEN KOFFLER, ANALYST, WACHOVIA SECURITIES: I would 10 like to ask about the China PAS infrastructure. When you were talking on the Q1 results and during the Q2, you were consistently saying that the PAS gross margin in 11 the first half had been low because a lot of it was on new business, where you had to price aggressively. But after that, we should get some margin relief because most of 12 the business, I believe starting sometime in Q2, was supposed to be follow-on. Did anything change in that scenario? Did you see pricing pressure on follow-on 13 business, and if so, why?

14 MIKE SOPHIE: We actually have seen stabilization on the PAS infrastructure business this year. And the contracts we are signing, we do believe 15 the margins are much better than we’ve been experiencing here in Q1 and Q2. What we’re seeing really is the purging of the existing backlog through these first 16 couple quarters, and we are projecting the PAS infrastructure margins to start flowing out much stronger here late in Q3 as we go into the fourth quarter. 17 STEPHEN KOFFLER: Is the forward look on the gross margin on PAS 18 infrastructure in China above or below the expectations you were thinking about one month ago and two months ago? 19 MIKE SOPHIE: I would say we feel it’s pretty consistent. 20 (a) Date of Statement. The statement was made during the July 27, 2004, Q2 04 21 UTStarcom earnings conference call held with Wall Street analysts. 22 (b) Recipient. The recipients of the statement were UTStarcom’s public 23 stockholders, who received the information from Wall Street analysts and from news items 24 circulating within the investment news media and other channels. For instance, in its July 28, 2004 25 report, Thomas Weisel Partners LLC included as one of “five positive trends for UTSI’s overall 26 GM’s. . . (4) Pricing in PAS infrastructure will be higher margin, with revenues from more recent, 27 better-priced contracts being recognized in 2H04.” Similarly, Prudential Equity Group, LLC stated 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 182 -

1 in its July 28, 2004 report that the “company sees margins increasing in the current quarter to 27% - 2 28% before recovering to 30% in the fourth quarter, helped by. . . improving margins in PAS 3 infrastructure.”

4 (c) Identity of Author. Defendant Sophie made the statement. Defendant Lu 5 and was present.

6 (d) True Facts, Scienter and Pleading Basis. Defendants acted with deliberate 7 recklessness or actual knowledge of falsity when they stated PAS pricing had stabilized, and 8 defendants acted with deliberate recklessness or actual knowledge of falsity when they announced 9 guidance of 27%+ gross margins throughout 2005 knowing sales purported in the sales “pipeline” 10 did not support this and that significant cost overruns would prevent this. In reality defendants knew 11 but concealed: 12 (i) That, because PAS was viewed as an interim solution by the Chinese 13 government and China Telecom’s and China Netcom’s capital spending budgets were dictated by the 14 Chinese government, defendants knew PAS would not generate long-term sales or profitability for 15 UTStarcom in China; 16 (ii) That one-half of China Telecom’s and China Netcom’s 2004 capital 17 budgets, as set in 2003, were dedicated to 3G development; 18 (iii) That the Chinese government was taking steps to protect the 19 development of its nascent mobile industries, including permitting China Mobile and China Unicom 20 to offer mobile rates competitive to PAS rates, decreasing the cost advantage of PAS and thus new 21 subscriber growth; 22 (iv) That the roll out of TD-SCDMA technology would limit the ability to 23 use existing PHS spectrum in China by limiting the volume of usage, leading to anticipatory 24 decreases in PAS infrastructure purchases by China Telecom and China Netcom; 25 (v) That the Company’s high margin PAS infrastructure sales had eroded 26 in China and could not be replaced by PAS sales elsewhere, even sales to other low-teledensity 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 183 -

1 developing nations, because of significant quality problems with UTStarcom’s PAS infrastructure 2 products and because the systems had to be installed and repaired by Chinese speaking engineers; 3 (vi) That because UTStarcom’s historical PAS success in China was 4 dependent upon China’s unique market and pricing controls, the Company would be unable to 5 generate enough higher-margin non-China sales sufficient to halt UTStarcom’s deteriorating gross 6 margins; 7 (vii) That the Company lacked the infrastructure to balance supply with 8 demand in its supply-chain and had little or no ability to track or forecast costs and expenses, 9 causing broken commitments to suppliers, excessive cost overruns and missed margin projections; 10 (viii) That UTStarcom’s PAS infrastructure deployments were under- 11 budgeted because they were defective and required significant additional expenditures to make them 12 operational, causing excessive cost overruns and missed margin projections; 13 (ix) That because a significant portion of the PAS infrastructure placed into 14 UTStarcom’s sales pipeline was defective, UTStarcom was often being compelled to secretly waive 15 its final 20% payment in order to avoid disclosure of these defects and achieve “final acceptance”; 16 (x) That China’s MII had confirmed that it would take steps to ensure that 17 China would have 3G networks up and running in time for the 2008 Beijing Olympics, which 18 defendants knew would necessarily result in dramatic declines in PAS-related capital expenditures 19 by China Telecom and China Netcom in 2004 and 2005; 20 (xi) That defendants had no reasonable basis to believe and did not in fact 21 believe UTStarcom’s FY 04 revenue and EPS estimates when made on July 27, 2004, including 2H 22 04 revenue and EPS estimates based upon $290 million of fixed-line revenue from Japan Telecom; 23 (xii) That China Netcom was not stretching out its payables as reported by 24 defendants on July 27, 2004 in anticipation of China Netcom’s own IPO in late 2004, but rather had 25 advised UTStarcom that it was dramatically reducing its investment in PAS; 26 (xiii) That the Chinese government, through China Telecom and China 27 Netcom, retained the power to unilaterally alter terms in contracts with UTStarcom; 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 184 -

1 (xiv) That the contract of sale to entities in Beijing announced in 2003 2 should have been written down as impaired in 2003 based on defendants’ knowledge then of the 3 customers’ inability to pay; 4 (xv) That the Company lacked effective internal controls in its financial 5 reporting process which affected virtually every aspect of UTStarcom’s accounting, including 6 deferred revenue accounts, revenue recognition criteria, inventory, deferred costs, inventory reserves 7 and accrued expenses, all of which were required to competently analyze and/or estimate 8 UTStarcom’s future financial and operational performance; and 9 (xvi) That as a result of (i)-(xv) above, defendants had no reasonable basis 10 to believe, and did not in fact believe, their FY 2004 margin projections of 27%-28%. 11 197. July 27, 2004 False Statement in UTStarcom’s Conference Call Concerning

12 China Netcom’s Purported Temporary Deferral of Payments Until Completion of its 13 November 2004 IPO: 14 Our accounts receivable balances increased to 539.5 million at the end of Q2 from 15 432.5 million at the end of Q1. There are two factors behind this increase. . . . . secondly, the receivable cycle in China lengthened, primarily due to the anticipated 16 China Netcom IPO. 17 * * * 18 Account receivables Days Sales Outstanding were 70 days for the second quarter, compared to 58 days for the second quarter in 2003. This figure also 19 reflects the lengthening of the receivable cycle. 20 * * * 21 [W]e are seeing a slightly slower payment cycle from China Netcom, due to their targeted IPO in late Q3 or early Q4. 22 (a) Date of Statement. The statement was made during the July 27, 2004, Q2 04 23 UTStarcom earnings conference call held with Wall Street analysts. 24 (b) Recipient. The recipients of the statement were UTStarcom’s public 25 stockholders, who received the information from Wall Street analysts and from news items 26 circulating within the investment news media and other channels. For instance, in its July 28, 2004 27 report Thomas Weisel Partners LLC stated that one source of the Company’s excessive cash burn 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 185 -

1 was “that DSOs rose sequentially from 58 to 70 days, as the receivable cycle from China Netcom 2 has lengthened given its IPO timing,” but stating that “[g]oing forward management guided DSOs in 3 a range of 50-80 days though the China Netcom issue should be mitigated after its IPO, expected to 4 occur in the Fall.” Similarly, Prudential Equity Group, LLC stated in its July 28, 2004 report that: 5 “Management noted that China Netcom has been stretching its payables ahead of its IPO.”

6 (c) Identity of Author. Defendant Sophie made the statement. Defendant Lu 7 was present.

8 (d) True Facts, Scienter and Pleading Basis. Though the American leg of 9 China Netcom’s global IPO was effected on November 10, 2004, the purportedly delayed revenues 10 have never been caught up. In fact, following the November 2004 China Netcom IPO, defendants 11 would dramatically change their story, now stating that the Company’s Chinese customers simply 12 changed the terms of payment upon acceptance to six months after final acceptance though they had 13 consistently stated throughout the Class Period that their revenue cycle was highly “visible” because 14 payment was always made upon “final acceptance” without exception. Defendants also consistently 15 stated its sales were pursuant to “contracts” and did not disclose that China Telecom and China 16 Netcom could unilaterally change payment terms. Defendants acted with deliberate recklessness or 17 actual knowledge of falsity when they stated China Netcom was stretching out payments in 18 anticipation of its own IPO in November 2004. In fact, as would be admitted in the Company’s 19 January 6, 2005 conference call concerning the Company’s own Q4 04 financial results when the 20 China Telecom and China Netcom revenues again did not materialize, the slowdown in receivables 21 from China reflected a permanent decision to defer payment on PAS infrastructure purchases. 22 Concerning its disappointing Q4 04 financial results, defendants stated that “revenue shortfall in 23 China, a little over $100 million was related to PAS infrastructure that was deployed in the fields and

24 in service. Due to the operator’s new centralized contract structure that was put in place in 25 December, revenue recognition for these contracts has been moved into 2005.” When asked to 26 explain at the January 6, 2005 conference why Q1 05 revenue was not being guided up if it was truly 27 a temporary timing issue, Lu, Sophie and Wu refused to elaborate, simply stating that “this quarter 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 186 -

1 we had about $100 million of contracts affected by timing of final acceptances. I think at this point 2 what we are saying with China is we do see an overall slowing and maturation of the market. So, we 3 are revising our guidance in China down a little bit from previously.” Later, in May 2005, 4 defendants would explain that the Chinese government mandated in 2004 that China Telecom and 5 China Netcom begin waiting six months following final acceptance before they make future 6 payments for PAS infrastructure – demonstrating the government’s non-committal to PAS 7 infrastructure in China. 8 198. On August 10, 2004, UTStarcom announced that it would delay the filing of its 10-Q

9 for Q2 04 by five days after discovering that it had identified a $1.9 million equipment sale 10 transaction that was in the process of being recorded as revenue in 2Q 04, but was found to not have 11 met the requirements of revenue recognition. Defendants now stated that in addition to Accenture’s 12 work, the Company’s Audit Committee was commencing a full-scale investigation. UTStarcom’s 13 stock price plunged over 14% from $17.95 to $15.37 on this news. 14 15 199. False Statements in UTStarcom’s August 16, 2004 Press Release Concerning the

16 Completion of Its Review of Its Previously Issued Financial Results and Internal Controls:

17 Facing potential delisting for falling delinquent on its SEC filings and more stock price erosion as 18 the investment community continued to question the purported “high visibility” into the Company’s 19 future financial performance in China, on August 16, 2004, defendants issued in a press release 20 announcing that: (i) the Company had filed its Form 10-Q for the financial period ended June 30, 21 22 2004; (ii) the Audit Committee’s investigation had been a success in that there would be: “No 23 Changes to Financial Statements as a Result of This Review”; and (iii) the Audit Committee’s

24 investigation had concluded that the internal control issues related to revenue recognition in the

25 Company’s non-China segment would be remedied by the following enhancements: 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 187 -

1 • a centralized review, analysis and control of all non-China revenue recognition by

2 US Corporate management, including receipt of third party evidence of delivery and 3 the final acceptance certificate issued by the customer; 4 • limitations of local signature approval authority for signing contracts; and 5 • additional reconciliation and review of customer site inventory balances. 6 7 (a) Date of Statement. The statement was made in an August 16, 2004 press 8 release issued to the financial media and to Wall Street analysts. 9 (b) Recipient. The recipients of the statement were UTStarcom’s public 10 stockholders, who received the information from Wall Street analysts and from news items 11 circulating within the investment news media and other channels. For instance, in its August 16, 12 2004 report Thomas Weisel Partners LLC indicated that “the fact that [the investigation] was 13 recognized without a ‘major accounting blow-up’ and corrective actions are being taken now, gives 14 us some comfort,” and that bringing the SEC filing current “removes the overhang regarding 15 potential delisting and resolves the immediate accounting concerns.” 16 (c) Identity of Author. Defendant Sophie was quoted in the release. UTStarcom 17 is credited with issuing the release. 18 (d) True Facts, Scienter and Pleading Basis. As would be revealed in the 19 Company’s FY 2004 Form 10-K, UTStarcom had extensive internal control deficiencies on 20 August 16, 2004. These deficiencies were so glaring that only willful blindness could have shielded 21 them from defendants’ view. 22 200. Finally, on September 20, 2004, defendants revealed that: 23 (a) UTStarcom could not recognize revenues of $290 million for the Japan

24 Telecom contract in the second half of 2004 ($220 million of which had been included in the 25 Company’s July 27, 2004 earnings release). Japan Telecom is a wholly-owned subsidiary of 26 SOFTBANK. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 188 -

1 (b) Citing a “maturation of the PAS market in China,” defendants admitted

2 operators in China were “slowing in spending for new network construction” and that “China Capex 3 Slows in Anticipation of Next-Generation Network Spending.” 4 (c) Some PAS networks were experiencing capacity usage as high as 80% but 5 neither expansion nor upgrades were being announced. 6 (d) UTStarcom’s China PAS sales were expected to plunge in FY 2005. 7 8 (e) Gross margins for Q3 would only be 22%–23%.

9 (f) Revenue guidance for Q3 04 was slashed by more than 15% to

10 $590-$600 million from $695-$700 million and revenue guidance for FY 2004 was ramped-down 11 from $2.75 billion from $2.95-$3 billion. 12 (g) EPS guidance for Q3 04 was slashed by 1700% to an expected $0.02–$0.04 13 per share from $0.34-$0.35 and EPS guidance for FY 2004 was more than halved to $0.80-$0.85 14 15 from prior guidance of $1.65-$1.70 per share. 16 (h) Non-party Masayoshi Son, president and CEO of SOFTBANK, had resigned

17 from the Company’s Board of Directors.

18 201. Following the September 20, 2004 guidance from UTStarcom, the Company’s stock 19 price dropped precipitously by approximately 10% from $15.21 to $13.71 as several analysts 20 downgraded the Company’s future expected performance, including Prudential Equity Group LLC, 21 which reported that: 22 23 We believe the slowdown in PAS represents the more important piece of the company’s guidance revision. Sales of PAS systems to China Telecom and China 24 Netcom have accounted for roughly 85% - 90% of UTSI’s revenues in recent years, but this business has widely been expected to slow. China’s MII (MII) has been 25 expected to issue 3G wireless licenses some time over the next 12-18 months and UTStarcom’s two largest customers have been expected to curtail PAS spending in 26 an effort to focus on these 3G investments. The timing of this license issuance has been uncertain with expectations pushed out several times. We believe that MII will 27 likely want to have the 3G networks up and running in time for the 2008 Beijing Olympics, meaning that these delays would likely come to an end over the next year. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 189 -

1 POST-CLASS PERIOD INDICIA OF DEFENDANTS’ FRAUD 2 202. On March 10, 2005, the Company announced that it would miss the March 16, 2005 3 filing deadline for its 2004 Form 10-K and that it needed additional time to complete “the 4 Company’s assessment of Internal Controls under Section 404 of the Sarbanes-Oxley Act of 2002.” 5 203. When it did not file the Form 10-K for the year ended December 31, 2004 with the 6 SEC by March 31, 2005, UTStarcom, which trades under the symbol UTSI, temporarily was traded 7 under “UTSIE,” effective April 7, 2005, as a result of its inability to timely file its Form 10-K. 8 204. On April 13, 2005, UTStarcom filed its Amended 2003 Annual Report on 9 Form 10-K/A with the SEC, amending the Form 10-K for the year ended December 31, 2003, 10 previously filed on March 9, 2004, and restating its consolidated financial statements for the year 11 ended December 31, 2003, and the quarters ended March 31, 2003, June 30, 2003, and 12 September 30, 2003. 13 205. Instead of the usual two-paragraph discussion regarding the Company’s disclosure 14 controls and procedures, the amended Form 10-K contained 10 pages of discussions related to the 15 lack of controls and procedures necessary for complete and accurate financial reporting. 16 206. On April 15, 2005, UTStarcom filed its 2004 Form 10-K with the SEC, which 17 contained further admissions about UTStarcom’s severe internal control deficiencies. The 10-K 18 contains 13 pages of control deficiencies over financial reporting processes and remediation 19 initiatives which had yet to be implemented. 20 207. On May 5, 2005, in connection with the release of UTStarcom’s Q1 05 financial 21 results, defendants finally conceded that:

22 • The Company was “seeing much faster dropoff in PAS spending as carriers reserve budgets in anticipation of 3G rollout in China.” 23 • UTStarcom’s international business was growing, but revenues were “lumpy” quarter 24 to quarter, making them an unreliable replacement for the PAS sales it lost in China.

25 • UTStarcom’s PAS sales to China would now decline 40%-50% in 2005. 26 • UTStarcom’s Q1 05 sales in China had plummeted to 25% of revenues, with much of what was sold in China being lower margin PAS handsets. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 190 -

1 • The Company was laying off 1,400 workers globally and would undertake a $20-$25 million restructuring to pull assets and people out of the declining China 2 market.

3 • UTStarcom had only 40-43 million PAS subscribers in China despite its Class Period promises that the Company was on track to exceed 50 million subscribers by the end 4 of FY 2004.

5 • China Telecom had unilaterally changed their procurement process in 2004 to require a six month delay after final acceptance was achieved before they would make 6 payments on PAS infrastructure purchases.

7 • Because UTStarcom’s Chinese customers experienced significant PAS infrastructure “capacity build up” in FY 2004, those customers had purchased far less PAS 8 infrastructure product in Q1 05.

9 • China Telecom and China Netcom were “holding their investment” that would otherwise be spent on PAS infrastructure expansion “for the potential 3G license that 10 they are getting,” in order to “they preserve[] their cash flow potential for 3G expenditures.” 11 208. The investment community again punished UTStarcom driving its shares down 12 another $3.21 per share, or 30% on very high volume. 13 ADDITIONAL FACTS DEMONSTRATING INDIVIDUAL DEFENDANTS’ SCIENTER 14 A. The Individual Defendants Disposed of Over $58 Million in Insider Proceeds 15 While in Possession of Material Adverse Information

16 209. The Individual Defendants had the motive and opportunity to commit the alleged 17 fraud. As top management within the Company, they were directly responsible for the false and 18 misleading statements disseminated to the public through press releases, public filings, and securities 19 analysts. The Individual Defendants were motivated to inflate the price of UTStarcom stock to 20 enable them to raise almost $1 billion in cash to fund UTStarcom’s failing operations and to sell vast 21 quantities of their own UTStarcom stock. 22 210. Notwithstanding their access to confidential information as a result of their status as 23 officers and insiders of the Company, and their corresponding duty to disclose adverse material facts 24 before trading in UTStarcom stock, the Individual Defendants sold significant amounts of their own 25 shares while in possession of material non-public information at artificially inflated prices in order to 26 profit from the fraud. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 191 -

1 211. The Individual Defendants took advantage of the inflated price of UTStarcom stock 2 by selling stock as detailed below:

3 Hong Liang Lu, CEO, President, Director 4 Date Shares Price Proceeds 3/25/03 45,000 $19.90 $895,500 5 7/22/03 10,000 $42.00 $420,000 8/1/03 10,000 $42.03 $420,300 6 8/21/03 100,000 $45.24 $4,524,300 9/2/03 10,000 $44.00 $439,970 7 10/28/03 10,000 $32.62 $326,240 11/3/03 10,000 $31.64 $316,370 8 12/1/03 10,000 $37.83 $378,340 1/2/04 10,000 $38.75 $387,470 9 Total 215,000 $8,108,490 10 Michael J. Sophie, CFO, VP 11 Date Shares Price Proceeds 12 3/25/03 31,251 $19.90 $621,895 3/25/03 4,749 $19.90 $94,505 13 4/22/03 12,000 $22.86 $274,322 5/2/03 12,000 $23.20 $278,400 14 6/3/03 12,000 $28.07 $336,852 6/16/03 45,000 $33.21 $1,494,630 15 7/1/03 12,000 $34.28 $411,348 8/1/03 12,000 $42.06 $504,708 16 9/2/03 12,000 $43.77 $525,240 10/29/03 21,839 $32.25 $704,308 17 11/3/03 21,839 $31.64 $690,920 12/1/03 21,805 $37.83 $824,970 18 1/2/04 9,839 $38.75 $381,232 Total 228,322 $7,143,340 19 Howard Kwock 20 Date Shares Price Proceeds 21 5/14/03 10,000 $25.25 $252,500 8/1/03 2,000 $42.36 $84,720 22 9/2/03 2,000 $43.84 $87,680 1/5/04 6,000 $40.25 $241,500 23 Total 20,000 $666,400

24 Shao-Ning J. Chou, VP 25 Date Shares Price Proceeds 26 4/21/03 10,000 $22.73 $227,300 4/21/03 17,500 $22.76 $398,300 27 4/21/03 8,500 $22.70 $192,950 4/21/03 14,000 $22.74 $318,360 28 5/6/03 6,687 $23.70 $158,482 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 192 -

1 5/6/03 13,313 $23.51 $312,989 5/12/03 10,000 $23.55 $235,500 2 5/12/03 20,000 $23.60 $472,000 5/20/03 10,000 $26.50 $265,000 3 5/29/03 10,000 $29.40 $294,000 6/17/03 10,000 $34.50 $345,000 4 6/17/03 10,000 $33.85 $338,540 6/17/03 10,000 $34.75 $347,500 5 6/24/03 20,000 $33.01 $660,200 7/8/03 10,000 $39.83 $398,290 6 7/8/03 10,000 $39.62 $396,150 7 7/14/03 10,000 $40.50 $405,000 7/21/03 20,000 $42.54 $850,780 8 Total 220,000 $6,616,341 9 Gerald S. Soloway, Senior VP Date Shares Price Proceeds 10 3/25/03 3,000 $19.90 $59,700 11 5/14/03 5,000 $26.052 $130,250 5/14/03 10,000 $26.00 $260,000 12 5/15/03 5,000 $27.15 $135,750 6/6/03 5,625 $29.87 $167,996 13 6/6/03 25,000 $30.00 $750,000 7/8/03 20,000 $40.00 $800,000 14 7/8/03 11,902 $39.70 $472,509 8/7/03 6,698 $39.65 $265,576 15 8/19/03 30,054 $43.83 $1,317,117 9/8/03 1,936 $40.64 $78,681 16 10/28/03 2,873 $32.62 $93,729 11/7/03 8,947 $34.33 $307,106 17 11/13/03 4,125 $32.45 $133,856 11/14/03 4,875 $32.45 $158,194 18 12/5/03 4,374 $36.55 $159,870 1/5/04 40,000 $40.09 $1,603,800 19 1/6/04 10,000 $41.00 $410,000 1/7/04 10,000 $41.52 $415,180 20 1/8/04 14,372 $41.84 $601,281 21 Total 223,781 $8,320,594

22 Bill Huang, CTO, Senior VP Date Shares Price Proceeds 23 4/21/03 10,000 $22.55 $225,500 24 5/22/03 10,000 $27.30 $273,000 6/19/03 4,000 $34.00 $136,000 25 7/16/03 3,539 $41.61 $147,261 8/13/03 4,461 $41.60 $185,560 26 11/19/03 5,000 $34.75 $173,750 11/20/03 7,000 $36.01 $252,049 27 12/2/03 4,000 $37.87 $151,480 Total 48,000 $1,544,600 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 193 -

1 Thomas J. Toy, Director 2 Date Shares Price Proceeds 7/22/03 10,000 $42.00 $420,000 3 8/1/03 10,000 $42.06 $420,640 9/2/03 10,000 $43.61 $436,090 4 11/5/03 20,000 $34.26 $685,220 12/1/03 10,000 $37.83 $378,340 5 1/2/04 10,000 $38.75 $387,470 Total 70,000 $2,727,760 6 Ying Wu, Executive VP, Director 7 Date Shares Price Proceeds 8 7/22/03 85,000 $42.00 $3,570,000 9 8/1/03 85,000 $42.06 $3,575,440 9/2/03 35,000 $43.18 $1,511,440 10 9/2/03 50,000 $43.18 $2,159,200 10/28/03 85,000 $32.62 $2,773,040 11 11/3/03 85,000 $31.64 $2,689,145 12/1/03 85,000 $37.83 $3,215,890 12 1/5/04 85,000 $39.86 $3,387,930 Total 595,000 $22,882,085 13 212. Defendants’ sales of UTStarcom common stock were unusual and suspicious in both 14 timing and amount. Defendants sold a huge amount of stock – more than $58 million worth – in the 15 months immediately between the Company’s securities offerings. As demonstrated below, 16 17 defendants’ stock sales in the year preceding the commencement of the Class Period on February 21,

18 2003 pale in comparison to their Class Period stock sales: 19 20 21 22 23 24 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 194 -

1 2 3 4 5 6 7 8 9 10 11

12 13

14 213. As defendants’ early 2003 false statements had their intended effect of driving up the 15 price of UTStarcom stock and as they prepared to register the 400+ million of convertible notes and 16 sold another 12.1 million common shares, defendants also caused the Company to repurchase 17 millions of dollars worth of its common stock, further driving the stock’s price up, while they 18 19 disposed of over $58 million worth stock themselves: 20 21 22 23 24 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 195 -

1 2 3 4 5 6 7 8 9 10 11 12

13 B. Defendants Were Motivated to Keep Stock Prices Artificially Inflated to Meet Obligations to Private Placement Debt Holders 14 214. On or about March 12, 2003, UTStarcom issued and together with Banc of America 15 completed a private sale of $402.5 million worth of UTStarcom notes. In connection with the 16 issuance of these notes, defendants agreed that such notes would be convertible into common stock 17 at a conversion price of $23.79 per share. Given the notes were convertible into UTStarcom 18 common stock, defendants were highly motivated for yet another reason to drive the price of 19 UTStarcom stock up over $23.79 so that the holders of the UTStarcom notes would opt to convert 20 the notes into UTStarcom stock and thereby extinguish a $400 million liability from UTStarcom’s 21 balance sheet. 22 C. Defendants Were Motivated to Keep Stock Prices Artificially Inflated to Sell 23 Additional Common Stock 24 215. On January 9, 2004, the Individual Defendants together with Banc of America sold 25 another 12.1 million shares of UTStarcom common stock raising an additional $475 million in cash 26 to fund UTStarcom’s failing operations. UTStarcom’s stock price plunged 9.53% on news that 27 UTStarcom was tapping the markets for more cash, in light of their previous denials that UTStarcom 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 196 -

1 needed to access the capital markets. To complete the Offering the Individual Defendants worked 2 with Banc of America to effectuate the sale, going so far as to structure the sale so that Banc of 3 America would be able to engage in secret short selling of UTStarcom stock before the Offering and 4 then buy the 12.1 million shares from the Company. Defendants also took the unusual step of pre- 5 announcing the Company’s Q4 03 financial results through an earnings announcement on January 9, 6 2004, which had been previously set for January 22, 2004, in order to prop up the price of 7 UTStarcom stock and facilitate Banc of America’s disposition of the 12.1 million shares it purchased 8 from UTStarccom. 9 216. The following morning, January 9, 2004, the Company, at the insistence of Banc of 10 America, which had watched UTStarcom’s stock plummet $7 per share over the preceding evening, 11 issued a press release increasing its 2004 earnings and revenue guidance and confirming the FY 12 2003 margin guidance of 30%-32% the Company had previously issued. 13 D. Defendants Were Motivated to Use SOFTBANK’s Relationship with China Netcom to Prop Up the Company’s Common Stock Price 14 217. In the mid-1990s, Masayoshi Son and his SOFTBANK focused on computer- 15 16 magazine publishing, trade shows, and software distribution – with mixed results. Then, as the 17 Internet bubble started to take off, Son spent more than $3 billion buying stakes in some 800

18 Internet-related companies. But SOFTBANK’s growing tech portfolio included many dot-bombs,

19 such as online retailer Webvan Group. When the Internet bubble burst in 2000, SOFTBANK’s share 20 price and earnings collapsed along with the rest of the sector. SOFTBANK’s profits, which had 21 increased from $73 million in FY 2000 to $290.6 million in FY 2001, crashed and turned to losses. 22 In fact, SOFTBANK has recognized losses of over $2.4 billion since 2001, including a $721.5 23 24 million loss in FY 2002, a $857 million loss in FY 2003 and a $982 million loss in FY 2004. 25 Because of its substantial losses and $1.7+ billion in short-term debt, SOFTBANK was unable to get

26 an investment grade credit rating, threatening SOFTBANK’s multi-billion dollar investment in its 27 two biggest assets – Yahoo! BB and Japan Telecom. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 197 -

1 218. This financial crunch put tremendous pressure on SOFTBANK to sell off its other

2 assets with unrealized gains, including its significant interest in UTStarcom. As detailed herein at 3 ¶121, between the Company’s 2000 IPO and the beginning of the Class Period, SOFTBANK and 4 Banc of America sold $300 million worth of SOFTBANK’s UTStarcom stock. The March 2003 5 private placement was designed to allow UTStarcom to fund the repurchase of another $140 million 6 worth of UTStarcom stock from SOFTBANK in order to ease SOFTBANK’s fiscal crisis, which 7 8 proceeds were transferred to SOFTBANK in April 2003.

9 219. SOFTBANK was contractually obligated to continue to hold its remaining 13%

10 interest in UTStarcom for one year following the private placement. 11 220. In March 2003, SOFTBANK partnered with China Netcom and another investor to 12 acquire the assets of Asia Global Crossing out of bankruptcy. 13 221. As SOFTBANK’s partner, China Netcom was willing to, and in fact did on several 14 occasions, make positive statements concerning its intent to continue deploying PAS allowing the 15 rollout of 3G in China at the behest of SOFTBANK which helped ameliorate the fears of 16 UTStarcom’s investors. For instance, following the rumors which spread in September and October 17 of 2003 that China Telecom and China Netcom would stop purchasing PAS infrastructure and would 18 not expand existing networks, China Netcom representatives appeared at at least one UTStarcom 19 analyst conference to deny the rumor – despite the fact that it was true – that the Chinese 20 government had already set China Netcom’s 2004 capital spending budget and because one half of 21 the budget would be dedicated to 3G, there was very little left after the company completed 22 necessary wire-line upgrades to spend any additional money expanding or upgrading its PAS 23 network. 24 GROUP PLEADING AND CONTROL 25 222. Because of their senior executive and managerial positions with UTStarcom and 26 UTStarcom’s Board, the Individual Defendants and SOFTBANK (through Son) had access to the 27 adverse undisclosed information described herein regarding the Company’s business operations, 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 198 -

1 financial condition, markets, customer relationships, and present and future business prospects and 2 product demand. The Individual Defendants and SOFTBANK obtained such information through 3 internal corporate documents, conversations and connections with other corporate officers and 4 employees, attendance at management and/or board of directors meetings and committees thereof 5 and through reports and other information provided to them in connection therewith. The Individual 6 Defendants and SOFTBANK knew and with deliberate disregard ignored the adverse information 7 had not been disclosed to, and was being concealed from, the investing public. 8 223. It is appropriate to treat the Individual Defendants and SOFTBANK as a group for 9 pleading purposes and to presume that the false, misleading and incomplete information contained in 10 the Company’s public filings, releases and other publications as alleged herein are the collective 11 actions of the narrowly defined group of defendants identified above. Each of the above officers 12 and/or directors of UTStarcom, by virtue of their high-level positions with the Company, directly 13 participated in the management of the Company, was directly involved in the day-to-day operations 14 of the Company at the highest levels and was privy to confidential, proprietary information 15 concerning the Company and its business, operations, products, growth, financial statements, and 16 financial condition, as alleged herein. The Individual Defendants and SOFTBANK were involved in 17 drafting, producing, reviewing and/or disseminating the false and misleading statements and 18 information alleged herein, were aware of or deliberately disregarded that the false and misleading 19 statements were being issued regarding the Company, and approved or ratified these statements, in 20 violation of the federal securities laws. 21 224. As officers and/or directors and controlling persons of a publicly held company 22 whose common stock was, and is, registered with the SEC pursuant to the 1933 Act, traded on 23 NASDAQ, and governed by the provisions of the federal securities laws, the Individual Defendants 24 and SOFTBANK each had a duty to disseminate promptly accurate and truthful information with 25 respect to the Company’s financial condition and performance, growth, operations, financial 26 statements, business, products, markets, management, earnings and present and future business 27 prospects, and to correct any previously issued statements that had become materially misleading or 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 199 -

1 untrue, so that the market price of the Company’s common stock would be based upon truthful and 2 accurate information. The Individual Defendants’ and SOFTBANK’s misrepresentations and 3 omissions during the Class Period violated these specific requirements and obligations. 4 225. Each of the defendants is liable as a direct participant with respect to the wrongs 5 complained of herein. In addition, the Individual Defendants and SOFTBANK, by reason of their 6 status as senior officers and/or directors (including SOFTBANK through Son and its ownership in 7 and business ties to UTStarcom), were “controlling persons” within the meaning of §20 of the 1934 8 Act, and had the power and influence to cause the Company to engage in the unlawful conduct 9 complained of herein. Because of their positions of control, the Individual Defendants and 10 SOFTBANK were able to and did, directly or indirectly, control the conduct of UTStarcom’s 11 business. 12 226. In addition to the above-described involvement, each Individual Defendant and 13 SOFTBANK had knowledge of UTStarcom’s problems and was motivated to conceal such 14 problems. Defendants Lu, Sophie and Soloway participated in some or all of the conference calls. 15 Defendants Lu and Sophie prepared and were signatories to Forms 10-Q, filed with the SEC on May 16 12, 2003, August 4, 2003, November 12, 2003, and May 10, 2004, which contained materially false 17 and misleading statements. Defendants Lu, Sophie, Toy and Wu, together with Masayoshi Son, 18 prepared and were signatories to Forms 10-K, filed with the SEC on February 21, 2003 and March 9, 19 2004, and the Registration Statements, which contained materially false and misleading statements. 20 Defendants Lu and Sophie, as UTStarcom’s CEO and CFO, respectively, signed the false and 21 misleading certifications under §302 of the Sarbanes-Oxley Act, which falsely stated that they had 22 evaluated and disclosed deficiencies in the Company’s internal controls. Defendant Chou, by virtue 23 of his position as Chief Operating Officer for China and President of UTStarcom China Co., Ltd., 24 was intimately familiar with the PAS business in mainland China. In addition, each Individual 25 Defendant drafted, prepared and/or otherwise approved the Company’s press releases. Non-party 26 Son and defendant SOFTBANK, through their ties to China Netcom, were directly aware of the 27 falsity of defendants’ positive PAS growth statements. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 200 -

1 227. Each Individual Defendant and SOFTBANK was motivated to engage in the 2 fraudulent practice alleged herein because each sold UTStarcom stock during the Class Period and 3 before any announcements were made that UTStarcom’s performance and prospects were not as 4 reported by defendants and confirming that defendants had no internal controls during the Class 5 Period. Together, defendants reaped illegal insider trading proceeds of over $198 million, including 6 the $140 million in stock sold by SOFTBANK. 7 228. Further, defendants were also motivated to engage in the fraudulent practices alleged 8 herein because, among other things, they desperately needed to raise cash, as they did via the 9 $475 million stock offering, and SOFTBANK needed to keep the value of its UTStarcom investment 10 inflated while its remaining 14% interest was locked up through April 2004, before the truth about 11 UTStarcom’s operations was publicly disclosed. 12 229. Each of the Individual Defendants and SOFTBANK are liable as a participant in the 13 fraudulent course of business that operated as a fraud or deceit on purchasers of UTStarcom common 14 stock by disseminating materially false and misleading statements and/or concealing material 15 adverse facts. The fraudulent course of conduct included: (a) deceiving the investing public 16 regarding UTStarcom’s business operations, financial condition, markets, customer relationships, 17 and present and future business prospects, as well as the intrinsic value of UTStarcom’s securities; 18 (b) enabling the Company to obtain $875 million from the public capital markets; (c) enabling 19 UTStarcom insiders to sell at least $198 million worth of their own UTStarcom securities; and (d) 20 causing lead plaintiffs and other members of the Class to be damaged in their purchase of 21 UTStarcom securities at artificially inflated prices. 22 230. The Individual Defendants and SOFTBANK, because of their positions with the 23 Company, controlled and/or possessed the authority to control the contents of its reports, press 24 releases and presentations to securities analysts and through them, to the investing public. The 25 Individual Defendants and SOFTBANK were provided with copies of the Company’s reports and 26 press releases alleged herein to be misleading, prior to or shortly after their issuance and had the 27 ability and opportunity to prevent their issuance or cause them to be corrected. The Individual 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 201 -

1 Defendants and SOFTBANK are liable for the false statements pleaded herein at ¶¶116-201, as those 2 statements were each “group-published” information, and are the result of the collective actions of 3 the Individual Defendants and SOFTBANK. Thus, each of the defendants had the opportunity to 4 commit the fraudulent acts alleged herein.

5 FRAUD-ON-THE-MARKET PRESUMPTION OF RELIANCE 6 231. The market for UTStarcom’s common stock was open, well-developed and efficient 7 at all relevant times. UTStarcom’s stock met the requirements for listing, and was listed and actively 8 traded on the NASDAQ, a highly efficient and automated market. 9 232. As a regulated issuer, UTStarcom filed periodic public reports with the SEC and the 10 NASDAQ. UTStarcom regularly communicated with public investors via established market 11 communication mechanisms, including through regular disseminations of press releases on the 12 national circuits of major newswire services and through other wide-ranging public disclosures, such 13 as communications with the financial press and other similar reporting services. 14 233. UTStarcom was followed by several securities analysts employed by major brokerage 15 firms – including Banc of America – who wrote reports which were distributed to the sales force and 16 certain customers of their respective brokerage firms. Each of these reports was publicly available 17 and entered the public marketplace. 18 234. As a result of the foregoing, the market for UTStarcom’s common stock promptly 19 digested current information regarding UTStarcom from all publicly available sources and reflected 20 such information in UTStarcom’s stock price. Under these circumstances, all purchasers of 21 UTStarcom’s securities during the Class Period suffered similar injury through their purchase of 22 UTStarcom’s securities at artificially inflated prices and a presumption of reliance applies. 23 235. During the Class Period, defendants materially misled the investing public, thereby 24 inflating the price of UTStarcom’s publicly traded securities, by publicly issuing false and 25 misleading statements and omitting to disclose material facts necessary to make defendants’ 26 statements not false and misleading. Said statements and omissions were materially false and 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 202 -

1 misleading in that they failed to disclose material adverse information and misrepresented the truth 2 about the Company, its business and operations, as alleged herein. 3 236. As a result of these materially false and misleading statements and failures to 4 disclose, UTStarcom’s publicly traded securities traded at artificially inflated prices during the Class 5 Period. Plaintiffs and other members of the Class purchased or otherwise acquired UTStarcom 6 publicly traded securities relying upon the integrity of the market price of UTStarcom’s publicly 7 traded securities and market information relating to UTStarcom, and have been damaged thereby. 8 Plaintiffs and the other members of the Class purchased their UTStarcom publicly traded securities 9 between the time defendants made the misrepresentations and the time the truth was fully revealed, 10 without knowledge of the falsity of the misrepresentations. 11 237. At all relevant times, the material misrepresentations and omissions particularized in 12 this complaint directly or proximately caused or were a substantial contributing cause of the 13 damages sustained by plaintiffs and other members of the Class. As described herein, during the 14 Class Period, defendants made or caused to be made a series of materially false or misleading 15 statements about UTStarcom’s business, prospects and operations. These material misstatements 16 and omissions had the cause and effect of creating in the market an unrealistically positive 17 assessment of UTStarcom and its business, prospects and operations, thus causing the Company’s 18 publicly traded securities to be overvalued and artificially inflated at all relevant times. Defendants’ 19 materially false and misleading statements during the Class Period resulted in plaintiffs and other 20 members of the Class purchasing the Company’s publicly traded securities at artificially inflated 21 prices, thus causing the damages complained of herein. Defendants’ materially false and misleading 22 statements during the Class Period also benefited defendants directly.

23 CLASS ACTION ALLEGATIONS 24 238. Plaintiffs bring this action as a class action pursuant to Rule 23 of the Federal Rules 25 of Civil Procedure on behalf of all persons who purchased UTStarcom publicly traded securities on 26 the open market during the Class Period, and were damaged thereby (the “Class”). Excluded from 27 the Class are defendants, directors and officers of UTStarcom and their families and affiliates. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 203 -

1 239. The members of the Class are so numerous that joinder of all members is 2 impracticable. The disposition of their claims in a class action will provide substantial benefits to 3 the parties and the Court. As of May 2005, UTStarcom had more than 172 million shares of stock 4 outstanding, owned by hundreds if not thousands of persons. 5 240. There is a well-defined community of interest in the questions of law and fact 6 involved in this case. Questions of law and fact common to the members of the Class which 7 predominate over questions which may affect individual Class members include: 8 (a) Whether the federal securities laws were violated by defendants; 9 (b) Whether defendants omitted and/or misrepresented material facts; 10 (c) Whether defendants’ statements omitted material facts necessary to make the 11 statements made, in light of the circumstances under which they were made, not misleading; 12 (d) Whether defendants knew or deliberately disregarded that their statements 13 were false and misleading; 14 (e) Whether the prices of UTStarcom’s publicly traded securities were artificially 15 inflated; and 16 (f) The extent of damage sustained by Class members and the appropriate 17 measure of damages. 18 241. Plaintiffs’ claims are typical of those of the Class because plaintiffs and the Class 19 sustained damages from defendants’ wrongful conduct. 20 242. Plaintiffs will adequately protect the interests of the Class and have retained counsel 21 who are experienced in class action securities litigation. Plaintiffs have no interests which conflict 22 with those of the Class. 23 243. A class action is superior to other available methods for the fair and efficient 24 adjudication of this controversy.

25 NO SAFE HARBOR 26 244. The statutory safe harbor provided for forward-looking statements under certain 27 circumstances does not apply to any of the allegedly false statements pleaded in this complaint. The 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 204 -

1 specific statements pleaded herein were not “forward-looking statements” when made, nor were they 2 adequately identified as such. To the extent there were any forward-looking statements, there were 3 no meaningful cautionary statements identifying important factors that could cause actual results to 4 differ materially from those in the purportedly forward-looking statements. Alternatively, to the 5 extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, 6 defendants are liable for those false forward-looking statements because at the time each of those 7 forward-looking statements was made, the particular speaker knew that the particular forward- 8 looking statement was false, and/or the forward-looking statement was authorized and/or approved 9 by an executive officer of UTStarcom who knew that those statements were false when made.

10 LOSS CAUSATION/ECONOMIC LOSS 11 245. During the Class Period, as detailed herein, defendants engaged in a scheme to

12 deceive the market and a course of conduct that artificially inflated UTStarcom’s stock price and 13 operated as a fraud or deceit on Class Period purchasers of UTStarcom stock by misrepresenting the 14 Company’s business success and future business prospects. Defendants achieved this façade of 15 success, growth and strong future business prospects by blatantly misrepresenting the Company’s 16 business prospects. Later, however, when defendants’ prior misrepresentations and fraudulent 17 18 conduct were disclosed and became apparent to the market, UTStarcom stock fell precipitously as

19 the prior artificial inflation came out of UTStarcom’s stock price. As a result of their purchases of

20 UTStarcom stock during the Class Period, plaintiffs and other members of the Class suffered 21 economic loss, i.e., damages, under the federal securities laws. 22 246. During the Class Period, the defendants presented a misleading picture of 23 UTStarcom’s business and prospects. Thus, instead of truthfully disclosing during the Class Period 24 25 that UTStarcom’s PAS infrastructure sales in China were dissipating and the high margin PAS sales 26 the Company had obtained in China could not be replicated outside of China, defendants caused

27 UTStarcom to falsely represent the demand for its products and its forecasted earnings and margins. 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 205 -

1 247. These false claims of strong future results and demand for UTStarcom products

2 caused and maintained the artificial inflation in UTStarcom’s stock price throughout the Class Period 3 and until the truth was revealed to the market. 4 248. Defendants’ false and misleading statements had the intended effect and caused 5 UTStarcom stock to trade at artificially inflated levels throughout the Class Period, permitting 6 insiders, including SOFTBANK, to sell $198 million of their own UTStarcom stock, and UTStarcom 7 8 to (i) to issue and privately place $402.5 million in convertible notes in March 2003; (ii) register for

9 public sale the $402.5 million in convertible notes in September 2003; and (iii) issue and sell $475

10 million worth of UTStarcom stock in January 2004, with Banc of America, serving as the lead 11 underwriter in both the private placement and stock offering, receiving tens of millions of dollars in 12 fees. 13 249. On July 27, 2004, defendants announced that UTStarcom would drastically miss its 14 15 previously projected financial results and that its internal control were deficient, casting tremendous 16 doubt on the reliability of its forward guidance, including demand, market acceptance for and future

17 expected profitability of PAS. As investors and the market became aware that UTStarcom’s actual

18 business prospects were poorer than represented, which had been obfuscated by defendants, the prior 19 artificial inflation began to come out of UTStarcom’s stock price, damaging investors. As a direct 20 result of defendants’ admissions and the public revelations regarding the truth about UTStarcom’s 21 previous representations and its actual business prospects going forward, UTStarcom’s stock price 22 23 plummeted approximately 30% on July 28, 2004, on unusually high volume, falling from a closing 24 price of $25.25 on July 27, 2004 (before the Company’s after-hours announcement that it grossly

25 missed Q2 04 margins) and closing at $17.85 on July 28, 2004, on very high volume of over 31 26 million shares, more than 860% of the Company’s average Class Period trading volume. 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 206 -

1 250. Thereafter, on September 20, 2004, following defendants’ revelation that the PAS

2 market in China had drastically deteriorated and that the Company would not be able to recognize 3 the related-party sale of $290 million to Japan Telecom (a subsidiary of SOFTBANK), the 4 Company’s stock price declined another 10%, on unusually high volume, falling from a closing price 5 of $15.21 on Friday September 17, 2004 and closing at $13.71 on September 20, 2004, on very high 6 volume of over 25 million shares trading, more than 660% of the Company’s average Class Period 7 8 trading volume. This drop removed the inflation from UTStarcom’s stock price, causing real

9 economic loss to investors who had purchased the stock at inflated prices during the Class Period. In

10 sum, as the truth about defendants’ fraud and UTStarcom’s business performance was revealed, the 11 Company’s stock price plummeted, the artificial inflation came out of the stock and members of the 12 Class were damaged, suffering economic losses of at least $11.50 per share. 13 251. The 45% decline in UTStarcom’s stock price was a direct result of the nature and 14 15 extent of defendants’ fraud finally being revealed to investors and the market. The timing and 16 magnitude of UTStarcom’s stock price declines negate any inference that the loss suffered by

17 plaintiffs and other Class members was caused by changed market conditions, macroeconomic or

18 industry factors or Company-specific facts unrelated to the defendants’ fraudulent conduct. During 19 the same period in which UTStarcom’s stock price fell more than 45% as a result of defendants’ 20 fraud being revealed, the Standard & Poor’s 500 securities index was essentially flat. The economic 21 loss, i.e., damages, suffered by plaintiffs and other members of the Class was a direct result of 22 23 defendants’ fraudulent scheme to artificially inflate UTStarcom’s stock price and the subsequent 24 significant decline in the value of UTStarcom’s stock when defendants’ prior misrepresentations and

25 other fraudulent conduct was revealed. 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 207 -

1 FIRST CLAIM FOR RELIEF 2 For Violation of §10(b) of the 1934 Act and Rule 10b-5 Against All Defendants 3 252. Plaintiffs incorporate ¶¶1-251 by reference. 4 253. During the Class Period, defendants disseminated or approved the false statements 5 specified above, which they knew or recklessly disregarded were materially false and misleading in 6 that they contained material misrepresentations and failed to disclose material facts necessary in 7 order to make the statements made, in light of the circumstances under which they were made, not 8 misleading. 9 254. Defendants violated §10(b) of the 1934 Act and Rule 10b-5 in that they: 10 (a) Employed devices, schemes, and artifices to defraud; 11 (b) Made untrue statements of material facts or omitted to state material facts 12 necessary in order to make statements made, in light of the circumstances under which they were 13 made, not misleading; or 14 (c) Engaged in acts, practices, and a course of business that operated as a fraud or 15 deceit upon plaintiffs and others similarly situated in connection with their purchases of UTStarcom 16 publicly traded securities during the Class Period. 17 255. Plaintiffs and the Class have suffered damages in that, in reliance on the integrity of 18 the market, they paid artificially inflated prices for UTStarcom publicly traded securities. Plaintiffs 19 and the Class would not have purchased UTStarcom publicly traded securities at the prices they 20 paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated 21 by the defendants’ false and misleading statements. 22 256. As a direct and proximate result of these defendants’ wrongful conduct, plaintiffs and 23 the other members of the Class suffered damages in connection with their purchases of UTStarcom 24 publicly traded securities during the Class Period. 25 26 27 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 208 -

1 SECOND CLAIM FOR RELIEF 2 For Violation of §20(a) of the 1934 Act Against the Individual Defendants and SOFTBANK 3 257. Plaintiffs incorporate ¶¶1-256 by reference. 4 258. The Individual Defendants and SOFTBANK acted as controlling persons of 5 UTStarcom within the meaning of §20(a) of the 1934 Act. They prepared, or were responsible for 6 preparing, the Company’s press releases and SEC filings. By reason of their positions as officers 7 and/or directors of UTStarcom, and their ownership of UTStarcom stock, the Individual Defendants 8 and SOFTBANK had the power and authority to cause UTStarcom to engage in the wrongful 9 conduct complained of herein. UTStarcom controlled each of the Individual Defendants and all of 10 its employees. By reason of such conduct, defendants are liable pursuant to §20(a) of the 1934 Act. 11 PRAYER FOR RELIEF 12 WHEREFORE, plaintiffs pray for relief and judgment, including preliminary and permanent 13 injunctive relief, as follows: 14 A. Determining that this action is a proper class action, and certifying plaintiffs as Class 15 representatives under Rule 23 of the Federal Rules of Civil Procedure; 16 B. Awarding preliminary and permanent injunctive relief in favor of plaintiffs and the 17 Class against defendants and their counsel, agents and all persons acting under, in concert with, or 18 for them, including an accounting of and the imposition of a constructive trust and/or an asset freeze 19 on defendants’ insider trading proceeds; 20 C. Ordering an accounting of defendants’ insider-trading proceeds; 21 D. Disgorgement of defendants’ insider-trading proceeds; 22 E. Restitution of investors’ monies of which they were defrauded; 23 F. Awarding compensatory damages in favor of plaintiffs and the other Class members 24 against all defendants, jointly and severally, for all damages sustained as a result of defendants’ 25 wrongdoing, in an amount to be proven at trial, including interest thereon; 26 G. Awarding plaintiffs and the Class their reasonable costs and expenses incurred in this 27 action, including counsel fees and expert fees; and 28 FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Master File No. C-04-4908-JW(PVT) - 209 -

1 H. Such other and further relief as the Court may deem just and proper.

2 JURY DEMAND 3 Plaintiffs demand a trial by jury. 4 DATED: July 26, 2005 LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 5 WILLIAM S. LERACH DARREN J. ROBBINS 6 7 /S/ Darren J. Robbins 8 DARREN J. ROBBINS 9 401 B Street, Suite 1600 San Diego, CA 92101-4297 10 Telephone: 619/231-1058 619/231-7423 (fax) 11 LERACH COUGHLIN STOIA GELLER 12 RUDMAN & ROBBINS LLP KIMBERLY C. EPSTEIN 13 SYLVIA SUM 100 Pine Street, Suite 2600 14 San Francisco, CA 94111 Telephone: 415/288-4545 15 415/288-4534 (fax) 16 Lead Counsel for Plaintiffs

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