UTStarcom has taken another step forward in its plan to exit the mobile handset business by agreeing to sell its mobile distribution division to a newly-formed entity controlled by AIG Vantage Capital, part of AIG Investments. The deal is worth US$240 million initially, potentially rising to another US$50 million over the next three years if the new company meets certain (unspecified) financial targets. The company will be called Personal Communications Devices (PCD) and will be led by the division’s current management team, who will become part-owners of the company with AIG Vantage Capital and other investors. UTStarcom will continue to make handsets for the division as part of a supply agreement but will also continue to sell its devices directly to operators, the company said in a statement. The deal is expected to complete within two business days.

The sale of the business – which UTStarcom acquired in November 2004 for US$165 million – is part of the company’s ongoing restructuring programme aimed at simplifying its business and focussing on IP-based product offerings in emerging markets. Last month, UTStarcom agreed to sell its Mobile Solutions Business Unit (MSBU) to private-equity firm OpenGate Capital for an undisclosed sum.