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Zhone Reduces Campus Loan and Extends Maturity

Oakland, CA — January 9, 2006 — Zhone Technologies, Inc. (Nasdaq:ZHNE - News), the first company dedicated to building total-delivery solutions for voice, data and video content services worldwide, announced today that it refinanced the loan on its Oakland, California campus. The refinancing reduced the principal amount due from approximately $31.1 million to $20 million, lowered the interest rate on the loan and extended the maturity to April 2011.

"Refinancing our campus debt simultaneously allows us to reduce our net interest cost while maintaining adequate liquidity to manage our business well into the future," said Kirk Misaka, Zhone's Chief Financial Officer. "We are reducing our debt as Zhone's business begins to generate positive cash flow while still maintaining adequate liquidity with cash balances in excess of $70 million."

Further details of the terms of the arrangement are disclosed in the Company's Form 8-K filed with the SEC on December 27, 2005.

Forward-Looking Statements

This press release contains forward-looking statements that are entitled to the protection of the safe harbors contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include, among others, statements that refer to projections of positive cash flow, liquidity and other financial items. Readers are cautioned that actual results could differ materially from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include the ability to generate sufficient revenue to achieve or sustain profitability, the ability to raise additional capital to fund existing and future operations, and higher than anticipated expenses that Zhone may incur. In addition, please refer to the risk factors contained in Zhone's SEC filings available at www.sec.gov, including without limitation, Zhone's annual report on Form 10-K for the year ended December 31, 2004 and Zhone's quarterly reports on Form 10-Q for the quarter ended March 31, 2005, June 30, 2005 and September 30, 2005. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Zhone undertakes no obligation to update or revise any forward-looking statements.

About Zhone Technologies

Zhone Technologies, Inc. (NASDAQ: ZHNE) is a global leader in all IP multi-service access solutions, serving more than 750 of the world's most innovative network operators.

The IP Zhone is the only solution that enables service providers to build the network of the future…today, supporting end-to-end Voice, Data, Entertainment Social Media, Business, Mobile Backhaul and Mobility service.

Zhone is committed to building the fastest and highest quality All IP Multi-Service solution for its customers.

Zhone is headquartered in California and its products are manufactured in the USA in a facility that is emission, waste-water and CFC free.

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Zhone, the Zhone logo, and all Zhone product names are trademarks of Zhone Technologies, Inc. Other brand and product names are trademarks of their respective holders. Specifications, products, and/or product names are all subject to change without notice.