Telecom Lead China: UTStarcom Holdings has decided to
divest its IPTV equipment business.
The company’s main focus will be on media operational
support services business.
UTStarcom’s IPTV equipment business will become a
privately-held, standalone company.
Jack Lu, CEO, will leave UTStarcom to lead the IPTV
equipment business.
As part of the structuring, UTStarcom has appointed
William Wong as chief operating officer. He will assume the role of CEO after
the transaction.
Recently, UTStarcom evaluated opportunities to accelerate
revenue growth, bolster profit margins, improve operational cash flow, and
increase shareholder value.
After evaluating several potential strategic options, the
Strategy Committee of UTStarcom determined the best way to achieve these goals
is to concentrate capital and resources on building out value-added services,
divest non-profitable parts of the business, and move into high-growth areas,
such as media operational support services.
The IPTV business accounts for approximately one-third of
revenue and is expected to negatively contribute to the overall company
results. This strategic initiative will significantly reduce UTStarcom’s
expenses by $17 million per year.
Recently, MRG said the number of global IPTV subscribers
will grow from 53 million in 2011 to 105.1 million in 2015, a CAGR of 18.7
percent. The service revenue for the global IPTV market was US$21.8 billion in
2011 and is projected to grow to $45.3 billion in 2015, a CAGR of 20 percent.
By 2015, Europe and North America will continue to generate a larger share of
the global revenue.
“A result of an extensive review of potential
options, this transaction offers the best solution for the Company to exit a
non-strategic business segment and leaves UTStarcom with a dynamic core
business well-positioned for future transformational initiatives,” said
Xiaoping Li, Lead Independent Director and Chair of the Strategy
Committee.
“With our leading technology, solid foundation in
the IPTV market and strength in resources, we will continue to improve our
support and services to our customers. We will continue to abide by our mission
statement of ‘we succeed as our customers succeed,’ and actively drive IPTV
technology development and the new company’s sustainable growth,” Jack Lu
said.
UTStarcom will divest the IPTV business to Jack Lu.
UTStarcom will purchase a $20 million convertible bond that will be convertible
into 33 percent of the new IPTV business’s common stock in five years.
The new IPTV business will enter into a brand licensing
arrangement with UTStarcom to ensure business continuity for customers and
business partners.
