AIRTHREAD ACQUISITION
Comparable Companies:
Universal Mobile Neuberger Wireless Agile Connections Big Country Communications Rocky Mountain Wireless Average
Equity Market Value 65,173 94,735 37,942 47,314 5,299 50,093
Net Debt 60,160 27 27,757 9,144 15,003 2,353 22,883
Debt/ Value 48.0% 22.7% 19.4% 24.1% 30.8% 29.0%
Debt/ Equity 92 9 2.3% 29.3% 24 2 4.1% 31.7% 44.4% 40.8%
Equity Bet a 0.86 0.89 1.17 0.97 1.13 1.00
Asset Beta 0 .5 5 0.76 1.02 0.81 0 .8 9 0 .8 1
Debt/ Value 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 29.0% 35.0% 40.0% 45.0% 47.0% 50.0%
Debt/ Equity 0.0% 5.3% 11.1% 17.6% 25.0% 33.3% 40.8% 53.8% 66.7% 81.8% 88.7% 100.0%
Asset Beta 0.81 0 .8 1 0 .8 1 0 .8 1 0 .8 1 0 .8 1 0.81 0 .8 1 0 .8 1 0 .8 1 0.81 0.81
Equity Beta 0.81 0.85 0.90 0.95 1.01 1.08 1.14 1.24 1.35 1.47 1.52 1.62
Cost of Equity 8.29% 8.50% 8.74% 9.00% 9.30% 9.64% 9.94% 10.47% 10.98% 11.60% 11.87% 12.33%
Cost of Debt 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
WA W ACC 8.29% 8.24% 8.19% 8.15% 8.10% 8.05% 8.01% 7.96% 7.91% 7.86% 7.84% 7.81%
Assumptions:
Marginal Tax Rate Debt Beta
40.0% 0.00
Market Risk Premium Risk-Free Rate
5.00% 4.25%
Cost of Debt
5.50%
Average industry EBIT Average Industry P/E
5, 53 2 13.19
Re-levering the asset beta on the constant capital structure assumption, Equity Beta = Asset Beta (V/E) i.e., Be = Ba*(1/1-(D/V))
Cost of Capital
AIRTHREAD ACQUISITION
Operating Results:
Service Revenue Plus: Equipment Sales Plus: Synergy Related Business Revenue Total Revenue Less: System Operating Expenses Plus: Backhaul Synergy Savings Less: Cost of Equipment Sold Less: Selling, General & Administrative
2008 4,194.3 314.8 0.0 4,509.1 838.9 0.0 755.5 1,803.6
2009 4,781.5 358.8 0.0 5,140.4 956.3 0.0 861.2 2,056.2
2010 5,379.2 403.7 0.0 5,782.9 1,075.8 0.0 968.9 2,313.2
2011 5,917.2 444.1 0.0 6,361.2 1,183.4 0.0 1,065.8 2,544.5
2012 6,331.4 475.2 0.0 6,806.5 1,266.3 0.0 1,140.4 2,722.6
EBITDA Less: Depreciation & Amortization EBIT Tax @40% Un-Levered Free Cash Flow: NOPAT Plus: Depreciation & Amortization Less: Changes in Working Capital Less: Capital Expenditures Un-Levered Free Cash Flow
PV Intermediate FCF
8.29%
1,256.6
1,111.1 705.2 405.9 162.4
1,266.7 804.0 462.7 185.1
1,425.0 867.4 557.6 223.0
1,567.5 922.4 645.2 258.1
1,677.3 952.9 724.4 289.7
243.5 705.2 25.9 631.3 291.6
277.6 804.0 19.7 719.7 342.3
334.6 867.4 20.0 867.4 314.5
387.1 922.4 18.0 970.1 321.4
434.6 952.9 13.9 1,055.0 318.6
269.3
291.9
247.7
233.7
214.0
12.5% 7.5% 12.5% 80.0% -140.0% 40.0% 24.6% 15.0% 9.6% 40.0% 15.0%
10.0% 7.5% 10.0% 80.0% -140.0% 40.0% 24.6% 14.5% 10.1% 40.0% 15.3%
7.0% 7.5% 7.0% 80.0% -140.0% 40.0% 24.6% 14.0% 10.6% 40.0% 15.5%
Operating Margins:
Service Revenue Growth Equipment Sales/Service Revenue Total Revenue Growth Wireless Service Gross Profit Margin Equipment Sales Gross Profit Selling, General & Administrative EBITDA Depreciation & Amortization EBIT Effective Tax Rate Cap-x/Revenue
14.0% 7.5% 14.3% 80.0% -140.0% 40.0% 24.6% 15.6% 9.0% 40.0% 14.0%
14.0% 7.5% 14.0% 80.0% -140.0% 40.0% 24.6% 15.6% 9.0% 40.0% 14.0%
Intermediate Operating Cash Flows
Based on projected cashflows excluding the benefits of
Changes in Working Capital: Accounts Receivable Plus: Inventory Plus: Prepaid Expenses Less: Deferred Revenue Less: Accounts Payable Less: Accrued Liabilities Net Working Capital Increase in NWC
2007
2008
435.5 101.0 41.6 143.4 260.8
521.9 135.0 46.9 163.2 335.5
59.2 114.6
64.7 140.4
0
25.8
ynergy 2009
2010
2011
2012
595.0 153.9 53.5 186.1 382.4
669.4 173.1 60.1 209.3 430.2
736.3 190.4 66.2 230.3 473.2
787.9 203.7 70.8 246.4 506.4
73.7 160.1
82.9 180.1
91.2 198.1
97.6 212.0
19.7
20.0
18.0
13.9
AIRTHREAD ACQUISITION
Pre-Synergy Est. 2007 EBITDA Interest Coverage Ratio Maximum Interest Expense Interest Rate Est. Debt Capacity
Excess Cash: Un-Levered Free Cash Flow
1,033 5.00x 207 5.50% 3,758
AirThread Debt Capacity: Total Borrowing Amortization Period Payments Per Year Monthly Payment
Excludes Synergies: 2008 2009 291.6 342.3
2010 314.5
2011 321.4
2012 318.6
Less: After-Tax Interest Expenses Less: Scheduled Principal Payme Excess Cash
119.7 289.9 (118.0)
109.8 306.3 (73.8)
99.5 323.6 (108.5)
88.5 341.8 (109.0)
77.0 2,496.0 (2,254.3)
86.58
12.7
(95.8)
(204.7)
(2,459.0)
Includes Synergies: Excess Cash: 2008 2009 Un-Levered Free Cash Flow 324.3 416.5 Less: After-Tax Interest Expsnse 119.7 109.8 Less: Scheduled Principal Payme 289.9 306.3 Excess Cash (85.3) 0.4
2010 424.5 99.5 323.6 1.5
2011 487.9 88.5 341.8 57.6
2012 535.7 77.0 2,496.0 (2,037.3)
Cash on Balance Sheet
119.2
121.1
178.7
(1,858.6)
Cash Reconciliation:
2008 204.5 291.6 119.7 289.9 86.58
Cash on Balance Sheet
Beginning Cash Balance Plus: Cash From Operations Less: Aft-Tax Interest Exp. Less: Principal Payments Ending Cash Balance
Cash Reconciliation:
Beginning Cash Balance Plus: Cash From Operations Less: Aft-Tax Interest Exp. Less: Principal Payments Ending Cash Balance
2008 204.5 324.3 119.7 289.9 119.2
119.6
3,758 10 Years 12 41
Debt Capacity
AIRTHREAD ACQUISITION
Interest Tax Shields:
Interest Expense Tax Rate Tax Shield Interest Rate 5.50% PV of Intermediate Tax Shields
284.8
2008 199.4 40.0%
2009 183.1 40.0%
2010 165.8 40.0%
2011 147.5 40.0%
2012 128.3 40.0%
79.8
73.2
66.3
59.0
51.3
75.6
65.8
56.5
47.6
39.3
Intermediate Tax Shields
AIRTHREAD ACQUISITION Terminal Value With Lon-Term D/V of 29%
Un-Levered Free Cash Flows: NOPAT
Plus: Depreciation & Amortization Less: Changes in Working Capital Less: Capital Expenditures Un-Levered Free Cash Flow PV of FCF
8.29%
1,256.6
2008 243.5 705.2 25.9 631.3 291.6
2009 277.6 804.0 19.7 719.7 342.3
2010 334.6 867.4 20.0 867.4 314.5
2011 387.1 922.4 18.0 970.1 321.4
269.3
291.9
247.7
233.7
Interest Tax Shields PV of Interest Tax Shields Total Intermediate Term Value TV Growth Rate TV WACC Cash Flow Value of Operating Assets Value of Non-Operating Assets Total Enterprise Value
284.8 1,541.3
2.9% 4,334.3 5,875.7 1,187.3 7,063.0
79.8 75.6
73.2 65.8
66.3 56.5
59.0 47.6
Adjusted Pre Exclud
2012 434.6 952.9 13.9 1,055.0 318.6
214.0
51.3 39.3
6,372.8
sent Value es Synergy
AIRTHREAD CONNECTION ACQUISITION
Project: Analysis:
AIRTHREAD CONNECTION ACQUISITION Projected Cash Flows
AIRTHREAD CONNECTION ACQUISITION Projected Income Statements
Operating Results: Service Revenue Plus: Equipment Sales
Plus: Synergy Related Business Revenue Total Revenue Less: System Operating Expenses Plus: Backhaul Synergy Savings Less: Cost of Equipment Sold Less: Selling, General & Administrative EBITDA Less: Depreciation & Amortization EBIT Less: Interest Expense EBT
Less: Taxes @ 40% Net Income
2008 4,194.3 314.8 156.5 4,665.6 838.9 0.0 755.5 1,866.2 1,205.0 729.7 475.3 199.4 275.9 110.4 165.5
2009 4,781.5 358.8 268.6 5,409.0 956.3 (13.4) 861.2 2,163.6 1,441.3 846.0 595.3 183.1 412.2 164.9 247.3
2010 5,379.2 403.7 387.3 6,170.3 1,075.8 (25.8) 968.9 2,468.1 1,683.3 925.5 757.7 165.8 591.9 236.8 355.2
2011 5,917.2 444.1 569.9 6,931.2 1,183.4 (52.5) 1,065.8 2,772.5 1,962.1 1,005.0 957.0 147.5 809.5 323.8 485.7
2012 6,331.4 475.2 704.5 7,511.0 1,266.3 (76.0) 1,140.4 3,004.4 2,175.9 1,051.5 1,124.4 128.3 996.1 398.4 597.7
357.2 846.0 29.4 757.3 416.5
454.6 925.5 30.1 925.5 424.5
574.2 1,005.0 34.3 1,057.0 487.9
674.6 1,051.5 26.3 1,164.2 535.7
Un-Levered Free Cash Flow: NOPAT Plus: Depreciation & Amortization Less: Changes in Working Capital Less: Capital Expenditures Un-Levered Free Cash Flow
285.2 729.7 37.4 653.2 324.3
Operating Margins: Service Revenue Growth Equipment Sales/Service Revenue Total Revenue Growth Wireless Service Gross Profit Margin Equipment Sales Gross Profit Selling, General & Administrative EBITDA Depreciation & Amortization EBIT Effective Tax Rate
14.0% 7.5% 18.2% 80.0% -140.0% 40.0% 25.8% 15.6% 10.2%
14.0% 7.5% 15.9% 80.0% -140.0% 40.0% 26.6% 15.6% 11.0%
12.5% 7.5% 14.1% 80.0% -140.0% 40.0% 27.3% 15.0% 12.3%
10.0% 7.5% 12.3% 80.0% -140.0% 40.0% 28.3% 14.5% 13.8%
7.0% 7.5% 8.4% 80.0% -140.0% 40.0% 29.0% 14.0% 15.0%
40.0%
40.0%
40.0%
40.0%
40.0%
Cap-x/Revenue
14.0%
14.0%
15.0%
15.3%
15.5%
AIRTHREAD CONNECTION ACQUISITION Projected Balance Sheets
Assets: Cash & Cash Equivalents Marketable Securities Accounts Receivable Inventory Prepaid Expenses Deferred Taxes Other Current Assets Total Current Assets Property, Plan & Equipment Licenses Customer Lists Investments in Affiliated Entities Long Term Note Receivable Goodwill Other Long Term Assets Total Assets Liabilities & Owners' Equity: Accounts Payable Deferred Revenue & Deposits Accrued Liabilities Taxes Payable Other Current Liabilities Total Current Liabilities Long Term Debt Deferred Tax Liability Asset Retirement Obligation Other Deferred Liabilities
2007 204.5 16.4 435.5 101.0 41.6 18.6 16.2 833.8
2008 119.2 16.4 540.0 135.0 47.8 18.6 16.2 893.1
2009 119.6 16.4 626.1 153.9 54.8 18.6 16.2 1,005.5
2010 121.1 16.4 714.2 173.1 61.9 18.6 16.2 1,121.5
2011 178.7 16.4 802.3 190.4 68.6 18.6 16.2 1,291.1
2,595.1 1,482.4 15.4 157.7 4.4 491.3
2,518.6 1,482.4 15.4 157.7 4.4 491.3
2,429.9 1,482.4 15.4 157.7 4.4 491.3
2,429.9 1,482.4 15.4 157.7 4.4 491.3
2,481.8 1,482.4 15.4 157.7 4.4 491.3
31.8 5,611.9
31.8 5,594.7
31.8 5,618.4
31.8 5,734.4
31.8 5,956.0
260.8 143.4 59.2 43.1
341.6 163.2 65.8 43.1
391.7 186.1 75.5 43.1
443.0 209.3 85.4 43.1
490.6 230.3 94.6 43.1
97.7 604.2
97.7 711.5
97.7 794.1
97.7 878.5
97.7 956.2
1,002.3 554.4 126.8 84.5
3,467.6 554.4 126.8 84.5
3,161 554.4 126.8 84.5
2,838 554.4 126.8 84.5
2,496 554.4 126.8 84.5
Minority Interest Total Equity Total Liabilities & Owners' Equity Cash Balance Beginning Cash Plus: Un-Levered Free Cash Flow Less: After-Tax Interest Expense Less: Principal Payments Ending Cash
43.4
43.4
43.4
43.4
43.4
3,196.2 5,611.9
606.4 5,594.7
853.8 5,618.4
1,208.9 5,734.4
1,694.6 5,956.0
204.5 324.3 119.7
119.2 416.5 109.8
119.6 424.5 99.5
121.1 487.9 88.5
289.9
306.3
323.6
341.8
119.2
119.6
121.1
178.7
Projected Cash Flows
Projected Cash Flows
Synergy Switches:
Bus. Revenue Synergy: Include Synergy Exclude Synergy
Reduction in Backhaul: Include Synergy Exclude Synergy
1
1 2
1
1 2
Projected Cash Flows
2012 0.0 16.4 869.4 203.7 73.6 18.6 16.2 1,197.9 2,594.5 1,482.4 15.4 157.7 4.4 491.3
31.8 5,975.4
526.7 246.4 101.5 43.1
97.7 1,015.4 1,859 554.4 126.8 84.5
43.4
2,292.3 5,975.4 178.7 535.7 77.0
2,496.0 (1,858.6)
Based on projected cashflows including the benefits of Synergy
Changes in Working Capital: Accounts Receivable Plus: Inventory Plus: Prepaid Expenses Less: Deferred Revenue Less: Accounts Payable Less: Accrued Liabilities Net Working Capital Increase in NWC
2007
2008
2009
2010
2011
435.5 101.0 41.6 143.4 260.8
540.0 135.0 47.8 163.2 341.6
626.1 153.9 54.8 186.1 391.7
714.2 173.1 61.9 209.3 443.0
802.3 190.4 68.6 230.3 490.6
59.2 114.6
65.8 152.1
75.5 181.4
85.4 211.5
94.6 245.9
0
37.4
29.4
30.1
34.3
2012
869.4 203.7 73.6 246.4 526.7
101.5 272.2 26.3
AIRTHREAD ACQUISITION Terminal Value With Lon-Term D/V of 29%
Un-Levered Free Cash Flows: NOPAT Plus: Depreciation & Amortization Less: Changes in Working Capital Less: Capital Expenditures Un-Levered Free Cash Flow
PV of FCF
8.29%
1,703.5
2008 285.2 729.7 37.4
2009 357.2 846.0 29.4
2010 454.6 925.5 30.1
2011 574.2 1,005.0 34.3
2012 674.6 1,051.5 26.3
653.2 324.3
757.3 416.5
925.5 424.5
1,057.0 487.9
1,164.2 535.7
299.5
355.2
334.3
354.8
359.7
Interest Tax Shields PV of Interest Tax Shields Total Intermediate Term Value Discount rate 8.01% TV Growth Rate 3.4% TV WACC Cash Flow Value of Operating Assets Value of Non-Operating Assets Total Enterprise Value
284.8 1,988.2
8,132.1 10,120.4
1,187.3 11,307.7
79.8 75.6
73.2 65.8
66.3 56.5
59.0 47.6
51.3 39.3
11,956.8
Adjusted Present Value Synergies Included
AIRTHREAD CONNECTIONS ACQUISITION
Project: Analysis:
AIRTHREAD CONNECTIONS ACQUISITION Synergies
AIRTHREAD CONNECTIONS ACQUISITION
2008 0.30 859 258 0.0506 156.5
2009 0.50 885 442 0.0506 268.6
2010 0.70 911 638 0.0506 387.3
2011 1.00 939 939 0.0506 569.9
2012 1.20 967 1,160 0.0506 704.5
System Operating Expenses
2008 838.9
2009 956.3
2010 1,075.8
2011 1,183.4
2012 1,266.3
Backhaul Percentage
20.0%
20.0%
20.0%
20.0%
20.0%
Estimated Backhaul Costs
167.8
191.3
215.2
236.7
253.3
Wireless Business Subscribers:
Average Monthly Subscribers (in MM's) Average Monthly Minutes Total Monthly Minutes Revenue Per Minute Annual Business Revenue Increase Backhaul Savings:
Reduction in Backhaul Costs Backhaul Savings
0.0%
7.0%
12.0%
22.2%
30.0%
0.0
13.4
25.8
52.5
76.0
Synergies
Synergies
AIRTHREAD ACQUISITION
Date: 1/31/2008 2/28/2008 3/31/2008 4/30/2008 5/31/2008 6/30/2008 7/31/2008
Payment 41 40.78 40.78 40.78 40.78 40.78 40.78 40.78
Annual Interest 5.5% 17.22 17.11 17.01 16.90 16.79 16.68 16.57
Principal 23.56 23.67 23.77 23.88 23.99 24.10 24.21
Amortization Balance Period 3,758 120 3,733.99 1 3,710.32 2 3,686.55 3 3,662.67 4 3,638.67 5 3,614.57 6 3,590.36 7
8/31/2008 9/30/2008 10/31/2008 11/30/2008 12/31/2008 1/31/2009 2/28/2009 3/31/2009 4/30/2009 5/31/2009 6/30/2009 7/31/2009 8/31/2009 9/30/2009 10/31/2009 11/30/2009 12/31/2009 1/31/2010 2/28/2010 3/31/2010 4/30/2010 5/31/2010 6/30/2010 7/31/2010 8/31/2010 9/30/2010 10/31/2010 11/30/2010 12/31/2010 1/31/2011 2/28/2011 3/31/2011 4/30/2011 5/31/2011
40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78
16.46 16.34 16.23 16.12 16.01 15.89 15.78 15.66 15.55 15.43 15.32 15.20 15.08 14.97 14.85 14.73 14.61 14.49 14.37 14.25 14.13 14.00 13.88 13.76 13.63 13.51 13.38 13.26 13.13 13.01 12.88 12.75 12.62 12.49
24.32 24.43 24.55 24.66 24.77 24.89 25.00 25.11 25.23 25.35 25.46 25.58 25.70 25.81 25.93 26.05 26.17 26.29 26.41 26.53 26.65 26.78 26.90 27.02 27.14 27.27 27.39 27.52 27.65 27.77 27.90 28.03 28.16 28.29
3,566.04 3,541.60 3,517.06 3,492.40 3,467.62 3,442.74 3,417.74 3,392.62 3,367.39 3,342.05 3,316.59 3,291.01 3,265.31 3,239.50 3,213.57 3,187.52 3,161.35 3,135.06 3,108.65 3,082.12 3,055.46 3,028.69 3,001.79 2,974.77 2,947.62 2,920.36 2,892.96 2,865.44 2,837.80 2,810.02 2,782.12 2,754.09 2,725.94 2,697.65
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41
Date: 6/30/2011 7/31/2011 8/31/2011 9/30/2011 10/31/2011 11/30/2011 12/31/2011
Payment 41 40.78 40.78 40.78 40.78 40.78 40.78 40.78
Annual Interest 5.50% 12.36 12.23 12.10 11.97 11.84 11.71 11.57
Principal 28.41 28.55 28.68 28.81 28.94 29.07 29.21
Balance 2,698 2,669.24 2,640.69 2,612.02 2,583.21 2,554.27 2,525.20 2,495.99
1/31/2012 2/28/2012 3/31/2012 4/30/2012 5/31/2012 6/30/2012 7/31/2012 8/31/2012 9/30/2012 10/31/2012 11/30/2012 12/31/2012
40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 40.78 2,175.69
11.44 11.31 11.17 11.03 10.90 10.76 10.62 10.49 10.35 10.21 10.07 9.93
29.34 29.47 29.61 29.74 29.88 30.02 30.16 30.29 30.43 30.57 30.71 2,165.76
2,466.65 2,437.18 2,407.57 2,377.83 2,347.95 2,317.93 2,287.77 2,257.48 2,227.05 2,196.47 2,165.76 0.00
Amortization Schedule
Amortization Period 84 42 43 44 45 46 47 48
Interest Expense per Annum ($mn) 2008 2009 2010 199.43 183.08 165.80 Principal payment per Annum 289.92 306.28 323.55 After-Tax Interest Expense per Annum 119.7 109.8 99.5
2011 147.55
2012 128.27
341.80
2,495.99
88.5
77.0
49 50 51 52 53 54 55 56 57 58 59 60
Amortization Schedule
AIRTHREAD ACQUISITION
Long-Term Growth Rate:
NOPAT Invested Capital ROC Net Reinvestment NOPAT Reinvestment Rate
estmd from with synergy CF 2012 674.6 4,107.5 16.4% 138.9 674.6 20.6%
estmd from without synergy CF 2012 434.6 4,039.5 10.8% 116.0 434.6 26.7%
Est. EBIT Growth Rate
3.4%
2.9%
Growth Rate
