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Saudi Telecom Launches World's Largest EFM Network with Zhone to Provide up to 45 Mbps on Existing Copper Infrastructure

Saudi Telecom Company (STC) Leverages High-Density EFM Aggregation with Zhone's MALC to Deliver High Bandwidth Services Over Bonded Copper

Oakland, CA — October 9, 2007 — Zhone Technologies, Inc. (NASDAQ: ZHNE), a global provider of advanced communications equipment and a leader in VoIP, IPTV, and Ethernet over copper and fiber access lines, today announced that Zhone's Ethernet in the First Mile (EFM) solution has been selected by Saudi Telecom Company (TASI: STC) as a cornerstone business access technology in STC's preeminent converged all-IP network initiative.

Saudi Telecom Company is the incumbent operator in the Kingdom of Saudi Arabia, the largest wireless and wireline network in the Gulf. Since its independence from the Ministry of Posts and Telecommunications in 1998, Saudi Telecom has embarked on what is recognized as one of the world's most advanced network transformation projects, migrating from legacy TDM to pure IP packet technology. The current phase of STC's network transformation adds more than 60,000 lines of 802.3ah EFM technology — the world's largest EFM deployment to date — supporting the first commercial EFM-based business services in the Europe, Middle East, and Africa (EMEA) region. STC's extensive copper assets coupled with the rapid rise in new businesses in Saudi Arabia have set the stage for an ideal application of EFM. EFM is based on native Ethernet and provides the robust quality of ATM connections, but without the high cost and complexity of provisioning and management normally associated with ATM private virtual circuits. Additionally, Ethernet bonding has advantages over ATM such as the ability to bond pairs operating at different speeds and to perform hitless add/drops if one pair goes down –all of which were important technical factors for STC.

STC has deployed Zhone's MALC multi-service access platform, using the recently-adopted 802.3ah EFM standard over SHDSL.bis lines, to deliver premium-quality transparent LAN services (TLS) throughout Saudi Arabia. Zhone's EFM-standard solution offers symmetric service speeds up to 45 Mbps. The MALC 719 model deployed by STC across their network leverages the industry's highest-density aggregation architecture to support up to 384 EFM ports in a single, compact 7U chassis — maximizing STC's business-service revenue opportunity at minimum cost.

Zhone's EFM solution was selected on the basis of link performance and standards-based interoperability trials, as well as the strengths of Zhone's ZMS Management System. ZMS provides operators synchronous network monitoring and Quality of Service (QoS) prioritization over a full range of services and media.

"We believe Zhone's EFM solution will dramatically improve our service capability through copper loop bonding for higher bandwidth along with symmetric data capabilities for our business customers demanding enhanced services utilizing the existing copper infrastructure." said Sami Al-Zomaia, access engineering manager at STC. "Zhone's EFM standards-based access aggregation ensures our service objectives are met, including simplifying provisioning and management."

"Zhone's EFM enables STC to migrate corporate and business customers to packet-based services bringing the power and speed of STC's immense IP/MPLS backbone closer to the subscriber," said Mory Ejabat, CEO of Zhone Technologies. "Saudi Telecom Company is a highly valued customer and the STC network serves as a model of the state-of-the-art for twenty-first century communications and the efficiency benefits of IP convergence."

About Saudi Telecom Company

Saudi Telecom Co., also known as STC, is Saudi Arabia's pioneer telecommunications services provider, after the then Saudi Ministry of PTT. Established in 1998 as a new joint stock company, it provides both business and residential fixed line telephone, mobile and paging, and internet and data services. For more information on STC, (headquarters in Riyadh, Saudi Arabia), visit www.stc.com.sa

About Zhone Technologies — Access for a Converging World

Zhone Technologies, Inc. (NASDAQ: ZHNE) is a provider of advanced communications equipment to more than 600 operators worldwide. The company's broad line of access and transport networking solutions enables the full range of multi-play services, including residential and business broadband, VoIP, IPTV, and Ethernet. Zhone's converged access platform improves network agility and reduces costs, allowing operators to rapidly deploy premium services on their existing copper and fiber infrastructure while providing a seamless migration path to an efficient, all-IP network. www.zhone.com

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