UTStarcom

By Kaiser Kuo/Beijing

There's something vaguely radical about Wu Ying, and it's not just his bushy Che Guevara beard. As CEO of China operations for telecommunications company UTStarcom, Wu caused something of a revolution by introducing an inexpensive alternative to the mobile phone in a regulatory environment fuzzier than his facial hair. UTStarcom's Xiao Lingtong (Little Smart) handsets may look and act like cell phones, but in China, where the government allows only two firms to provide cellular service, Wu has had to convince telecom mandarins that cell phones are actually just a wireless extension of fixed-line phones--like household cordless phones on steroids. UTStarcom doesn't provide the actual telephony service, but the handsets, base stations and switching equipment it makes allow China's citizens to receive cell phone-like service at rates as much as 75% cheaper than those of traditional carriers.

When Wu launched Little Smart in China in 1998, few would have predicted he would gain the 18 million users the company now has. Little Smart is based on the "personal handyphone" technology that flopped in Japan in the 1990s. But Wu, who has an electrical-engineering degree from the New Jersey Institute of Technology, refined the system and managed to sell it to China's giant fixed-line firms, China Telecom and China Netcom, both of which wanted to grab a piece of the mobile market but have not yet been granted licenses by China's Ministry of Information Industries (MII). Wu skirted these obstacles by convincing the MII that Little Smart wasn't technically a mobile phone, thus allowing China Telecom and China Netcom to offer the service at least in smaller cities. "Wu has always managed to stay this side of what was legal," says Peter Lovelock, a telecom consultant in Beijing. It was a gamble, but regulators haven't stifled Little Smart.

Wu, who arrived in Newark, N.J., for his studies in 1985 with just $27 in his pocket, is worth more than $180 million today. UTStarcom, listed on NASDAQ, has a market cap of more than $3 billion and reported $330 million in revenue in the first quarter of 2003; China accounted for about 84% of that revenue. With more than 225 million users, China is the world's largest cell-phone market. Yet there are millions more who would like to use cell phones but can't afford them. "The highest-earning 20% of Chinese are going to buy mobile phones, and the poorest 30% wouldn't know who to call if you handed them a phone. It's that middle 50%--650 million people--who would want wireless service if it could be made affordable," says Wu. Little Smart is set to launch in Beijing, and UTStarcom is selling phones with such fancy extras as full-color screens, built-in MP3 players and digital-camera ports. Still, the perception persists that UTStarcom operates in a gray area--even as Little Smart rolls out in the MII's backyard. "But that's not necessarily a bad thing," says Wu. "Potential competitors are not willing to get into the market." Not everyone is cut out to be a revolutionary. --By Kaiser Kuo/Beijing