Campus Maverick_US Telco Ltd 00
Campus Maverick _US Telco Ltd | Table of contents
Table of contents Company
Background
Data Sheet Questions
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Additional Information
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Campus Maverick _US Telco Ltd | CompanyBackground
Company
Background
US Telco Limited is a holding company that operates as a real estate investment trust (REIT) which owns, operates, and develops multitenant communications real estate. US Telco’s major presence is in the United States with some presence in Canada and EU through its fully owned subsidiaries. Its primary business is property operations, which includes the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities, and tenants in various other industries. Its US property segment includes operations in the United States, and its services segment offers towerrelated services in the United States. In addition to leasing space on towers to wireless communications companies, US Telco plans to expand its services segment in other regions and provide customized colocation solutions through in-building systems, distributed antenna systems and other right-of-way options, managed rooftops, and services that increase the speed of network deployment. The company has a strong asset base that can cater to new tenants and new equipment for existing tenants on it s sites. The company's communications real estate portfolio consisted of 85,000 communications sites, including 35,000 domestic communications towers and 50,000 international communications towers. The company has a well-established domestic and international tenant base. Around 65% of domestic revenues come from five clients and 45% of international revenues come from four established global clients in India (two clients with 25% of international revenue) and Nigeria (two government agencies with 20% of international revenue). As part of its growth strategy, the company is currently looking at various organic and inorganic opportunities that will facilitate strong growth and increased presence in both the national and i nternational market. US Telco has also identified four preliminary targets in case it decides to grow inorganically. In order to achieve the above-mentioned goals, the management has approached Deloitte to provide its expert opinion on various growth options. Industry Trends The global wireless network infrastructure market stood at $52 billion in 2014 Global Long-Term Evolution (LTE) revenue is up 9 percent year-over-year, totaling $6.1 billion Significant economic incentive exists for carriers to choose a colocation model over building their own site Approximately 63% of sites in the US are on owned land or have a ground lease with at least 20 years until renewal
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Campus Maverick _US Telco Ltd | CompanyBackground
Geographic Benchmarks Country-wise benchmarks (2015) GDP Growth Rate (%)
Telecom Penetration (%)
US
2.2%
80%
Argentina
2.9%
83%
Namibia
5.1%
110%
Czech Republic
-0.7%
75%
Competitive Intensity
Regulatory Environment
Potential M&A Targets NZone Communications, Inc. Geography: New York, United States Geography : New York, United States Background : NZone Communications Inc., through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. Its Wireless segment offers wireless voice and data services; messaging services; wireless Internet access services on notebook computers and tablets; multimedia access services; business-focused services; location-based services; global data services; home phone connect services; high-speed Internet service; and network access and value-added services to suppo rt wireless connections for the Internet of Things (IoT). This segment also provides IoT services that support devices used in health monitoring, education, manufacturing, utilities, distribution, and consumer products markets, as well as wireless devices, including smartphones and basic phones, tablets, and other Internet access devices. ASA Towers, Inc. Geography: Argentina, SA Geography : Argentina, South America Background : ASA Towers, Inc., through its subsidiaries, is primarily engaged in the operation and renting out of telecommunications towers in Argentina and internationally. The company was founded in 2012 and specializes in leasing space to wireless communications companies, providing customized colocation solutions, high-speed network deployment, and distributed antenna systems. The company’s Wireline segment provides high-speed Internet, voice services, such as local exchange, regional and long-distance calling, and voice messaging services, as well as VoIP services; network pro ducts and solutions comprising private Internet protocol (IP), public Internet, Ethernet, and optical networking services; IT infrastructure services, including managed hosting; clo ud services, such as computing, storage, backup, recovery, and application platforms; and business communications services.
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Legal Protection
Campus Maverick _US Telco Ltd | CompanyBackground
BBA Africa Limited Geography: Namibia, Africa Geography : Namibia, Africa Background : BBA Africa Limited provides mobile telecommunication services. The company offers personal and business plans, including prepaid and postpaid services, mobile enterprise products, and SMS and fax services. The company also provides 3.75 generation (3G) services, which enable consumers to access mobile broadband and Internet access, watch live TV, download music, make video calls, and send and receive emails using enabled devices. It offers its services through a network of shops and dealers. The company was founded in 2000 and is based in Namibia. Apart from leasing space to telecommunication companies, it provides corporate enterprise Internet infrastructure solutions and distributed antenna systems. TeleMo Networks Limited Geography: Czech Republic Geography : Czech Republic Background : TeleMo Networks Limited, a telecommunications infrastructure company, builds, rents, operates, and manages telecommunication towers for telecom service providers in Czech Republic. Its telecom towers include selfsupporting latticed towers, monopoles, and rapid deployment towers. The company also provides integrated data solutions and in-building solutions. Exhibit A
Financials of US Telco Limited.
Particulars (Figures in Millions)
2015
2016
2017
2018
2019
2020
383
425
480
525
567
595
11%
13%
9%
8%
5%
287
319
360
394
425
446
75%
75%
75%
75%
75%
75%
EBITDA
115
128
144
157
170
179
EBITDA Margin
30%
30%
30%
30%
30%
30%
(73.0)
(93.7)
(96.5)
(30.8)
(33.4)
(32.8)
(0.9)
(0.8)
(1.1)
(0.9)
(0.8)
(0.6)
Revenue Revenue Growth
Operating Expenses As a % of revenue
Capital Expenditures Change in Working Capital WACC: 10; Tax Rate: 30%
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Campus Maverick _US Telco Ltd | CompanyBackground
Exhibit B
Financials of NZone Communications, Inc.
Particulars (Figures in Millions)
2015
2016
2017
2018
2019
2020
297
336
366
391
407
419
13%
9%
7%
4%
3%
202
228
249
266
277
285
68%
68%
68%
68%
68%
68%
EBITDA
104
117
128
137
142
147
EBITDA Margin
35%
35%
35%
35%
35%
35%
(20.8)
(23.5)
(25.6)
(27.4)
(28.5)
(29.4)
(0.8)
(0.5)
(0.4)
(0.4)
(0.2)
(0.2)
Revenue Revenue Growth
Operating Expenses As a % of revenue
Capital Expenditures Change in Working Capital
Exhibit C
Financials of ASA Towers, Inc.
Particulars (Figures in Millions)
2015
2016
2017
2018
2019
2020
12
16
23
36
51
82
30%
47%
58%
42%
60%
16
22
29
40
50
80
134%
140%
126%
111%
98%
97%
(3)
(2)
(3)
(1)
10
19
EBITDA Margin
-23%
-11%
-14%
-3%
19%
23%
Capital Expenditures
(4.1)
(3.9)
(8.3)
(11.6)
(8.7)
(9.9)
Change in Working Capital
(1.2)
(0.1)
(0.3)
(0.5)
(0.6)
(1.2)
2015
2016
2017
2018
2019
2020
79
97
125
164
207
242
23%
29%
31%
26%
17%
65
85
99
133
176
194
82%
87%
79%
81%
85%
80%
36
42
45
66
87
109
46%
43%
36%
40%
42%
45%
(19.0)
(17.5)
(20.1)
(27.9)
(26.9)
(21.8)
(1.5)
(0.6)
(0.8)
(0.9)
(1.0)
(0.8)
Revenue Revenue Growth
Operating Expenses As a % of revenue
EBITDA
Exhibit D
Financials of BBA Africa Limited
Particulars (Figures in Millions) Revenue Revenue Growth
Operating Expenses As a % of revenue
EBITDA EBITDA Margin
Capital Expenditures Change in Working Capital
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Campus Maverick _US Telco Ltd | CompanyBackground
Exhibit E
Financials of TeleMo Networks Limited
Particulars (Figures in Millions)
2015
2016
2017
2018
2019
2020
421
459
491
511
526
542
9%
7%
4%
3%
3%
278
303
324
337
347
358
66%
66%
66%
66%
66%
66%
EBITDA
177
193
206
214
221
228
EBITDA Margin
42%
42%
42%
42%
42%
42%
Capital Expenditures
(8.4)
(9.2)
(9.8)
(10.2)
(10.5)
(10.8)
Change in Working Capital
(0.5)
(0.2)
(0.2)
(0.1)
(0.1)
(0.1)
Revenue Revenue Growth
Operating Expenses As a % of revenue
Exhibit F
Recent Deal Multiples in the Industry
–
Key Rations
EBITDA Multiple
EV Multiple
NPV Multiple
Deal 1
10.20x
0.90x
4.20x
Deal 2
10.30x
1.20x
3.80x
Deal 3
11.50x
1.60x
4.80x
Deal 4
20.50x
0.90x
5.70x
Deal 5
12.00x
1.50x
9.60x
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Campus Maverick _US Telco Ltd | Data Sheet Additional Information
Data Sheet Additional Information
From 2011 to 2016, industry revenue declined at an annualized rate of 4.6% to $25 billion. In 2016, revenue is expected to grow by 3.9%. Demand from the Wireless Telecommunications Carriers industry is expected to steadily rise, while demand from the Radio Broadcasting industry and Television Broadcasting industry is also anticipated to somewhat increase over the next five years. From 2016 to 2021, industry revenue is expected to recover at an average annual rate of 1.6% to $2 7.1 billion. The mobile phone market in the US has reached nearly saturation levels. Smartphone penetration in the country is about 77.1%. Accordingly, mobile phone subscription growth will be negatively impacted. As the wireless industry continues to mature, future wireless growth will increasingly depend on the carriers' ability to offer innovative data services to customers, which in turn, will depend on the availability of additional spectrum. The telecom sector in the United States is witnessing significant spectrum and capacity constraints on the wireless network in certain markets. Such constraints will limit the carriers' ability to increase and expand to additional markets in the coming years. The impending saturation and unavailability of spectrum will impact wireless growth prospects in the United States. Customer demand for communication real estate could be adversely affected by the emergence and growth of new technologies, which could make it possible for wireless carriers to increase the capacity and efficiency of their existing networks. The increased use of spectrally efficient technologies could potentially reduce the demand for tower-based antenna space. Additionally, certain complementary network technologi es, such as femtocells and wireless fidelity (Wi-Fi), could reduce the dependency on tower-based networks and also reduce the need for carriers to add more equipment at certain communications sites. In addition, any increase in the use of network sharing, roaming, or resale arrangements by wireless service providers could adversely affect customer demand for tower space. Consolidation among wireless carriers could impact customer demand for the communications sites, because the existing networks of wireless carriers o ften overlap. In addition, if wireless carriers share their sites or permit equipment location swapping on their sites with other carriers to a significant degree, it could reduce demand for communications sites. Consumers’ demand for broadband technologies and the speed at which they shift to 4G technologies will influence capital expenditure on wireless infrastructure beyond 2016. To effectively compete in a market for products
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Campus Maverick _US Telco Ltd | Data Sheet Additional Information
that enable consumers to move to 4G networks, equipment manufacturers will need to have access to requisite technologies, while employees must possess the experience and skills necessary to deploy these technologies. Wi-Fi operates in unlicensed free radio bands, and communications service providers are building base stations, also known as hot spots, to facilitate wireless access outside users’ homes. Despite generating demand for the industry’s Wi-Fi-capable devices and base station equipment, the technology may also adversely affect cellular 3G-network use and deployment. Moreover, new networks that incorporate Mobile WiMax technologies, for which demand is greater than that for Wi-Fi, will negatively affect 3G-network and Wi-Fi use. In the five years to 2021, consumer spending is forecast to increase at an average annual rate of 2.8%.
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Campus Maverick _US Telco Ltd | Questions
Questions Question 1: Given the current business/industry situation, what are the some of the growth avenues that US Telco should look at and why? Question 2: From the list of preliminary targets identified by US Telco, what are the two most attractive targets and why? Question 3: For the two targets identified, what buying price would you recommend to US Telco? Question 4a: What would be the key integration risks and considerations that US Telco will have to consider to integrate successfully with your chosen target? Question 4b: Please provide recommendations that US Telco will have to execute in the short term (30 days) and long term (180 days) Note: Please state any assumptions you make very clearly
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Campus Maverick _US Telco Ltd | Questions
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