STM Wirelss, INC. (STM), a worldwide supplier of VSAT networks based in Irvine, California, today announced that it has obtained a Peruvian court injunction against OSIPTEL, a Peruvian Government entity, and Gilat-To-Home Peru, controlled by Gilat Satellite Networks, Ltd. of Israel, regarding a $27.8 million contract to provide a VSAT network for phone services in Peruvian rural communities.

The court ruling orders Gilat and OSIPTEL to suspend work immediately on the VSAT contract. The injunction was issued after the court found sufficient evidence that OSIPTEL and Gilat had violated Peruvian law regarding competitive bidding for a government contract.

STM, in a consortium with a Peruvian company called CIFSA Telecom, was originally announced the winner of competitive bidding for the contract in September 2000 with a $27.8 million offer.

STM has since obtained 98% of the shares in CIFSA Telecom. Gilat’s original bid was approximately $10 million higher than STM’s consortium. Even though the contract was initially awarded to STM, the Government allowed Gilat and others to reduce their bid to match that of STM’s consortium and revoked the award to STM.

The court found probable cause to conclude that other irregularities, along with permitting Gilat to reduce its bid after the conclusion of the public bidding process violated Peruvian law.

STM also announced today that it has filed a lawsuit against Gilat Satellite Networks, Ltd and its subsidiary rStar (NASDAQ NM Symbol:RSTR – news) in the Superior Court of California for Gilat’s improper interference with STM’s winning bid.

One of the suit’s allegations is that Gilat had improper, privileged access to government information. This information allowed Gilat to make a public announcement of government actions even though government records indicate that these actions had not yet occurred.

Additionally, the suit alleges that in an effort that will help Gilat recover its irregular $10 million price reduction, OSIPTEL on October 6, 2001, issued a new tender with a budget in excess of $12 million which for practical reasons, only Gilat can be the main beneficiary.

Emil Youssefzadeh, STM’s Chief Executive Officer said, “One way or the other, Gilat is now the VSAT supplier for all three rural telephone tenders that OSIPTEL/FITEL have ever conducted. While we are pleased with the court’s decision, the ruling shows that OSIPTEL has been clearly favoring Gilat in a highly questionable manner.”

Mr. Youssefzadeh continued by saying, “We have brought this matter to the attention of President Toledo and U.S. government officials. It is our hope that in an effort to enforce the rule of law in a democratic administration with free market policies, the government will react promptly to conduct an independent investigation in order to restore STM’s rights.

Peru is currently seeking expanded trade benefits from the United States under the Andean Trade Preference Act, which is due for renewal in December. This incident could raise questions about Peru’s willingness and ability to allow U.S. companies to compete fairly in the Peruvian marketplace.”