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
27,757
9,144
15,003
2,353
22,883

Debt/
Value
48.0%
22.7%
19.4%
24.1%
30.8%
29.0%

Debt/
Equity
92.3%
29.3%
24.1%
31.7%
44.4%
40.8%

Equity
Beta
0.86
0.89
1.17
0.97
1.13
1.00

Asset
Beta
0.55
0.76
1.02
0.81
0.89
0.81

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
0.81
0.81
0.81
0.81
0.81
0.81
0.81
0.81
0.81
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%

WACC
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

5,532
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

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

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:
14.0%
14.0%
7.5%
7.5%
14.3%
14.0%
80.0%
80.0%
-140.0% -140.0%
40.0%
40.0%
24.6%
24.6%
15.6%
15.6%
9.0%
9.0%
40.0%
40.0%
14.0%
14.0%

Intermediate Operating Cash Flows

Based on projected cashflows excluding 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

435.5
101.0
41.6
143.4
260.8
59.2
114.6
0

521.9
135.0
46.9
163.2
335.5
64.7
140.4
25.8

Cash Flows

benefits of Synergy
2009

2010

2011

2012

595.0
153.9
53.5
186.1
382.4
73.7
160.1
19.7

669.4
173.1
60.1
209.3
430.2
82.9
180.1
20.0

736.3
190.4
66.2
230.3
473.2
91.2
198.1
18.0

787.9
203.7
70.8
246.4
506.4
97.6
212.0
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

119.7
Less: Scheduled Principal Payments 289.9
Excess Cash
(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)

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 Payments 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:
Beginning Cash Balance
Plus: Cash From Operations
Less: Aft-Tax Interest Exp.
Less: Principal Payments
Ending Cash Balance

2008
204.5
291.6
119.7
289.9
86.58

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

Cash on Balance Sheet

86.58

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%
79.8

2009
183.1
40.0%
73.2

2010
165.8
40.0%
66.3

2011
147.5
40.0%
59.0

2012
128.3
40.0%
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 Present Value

Excludes Synergy

2012
434.6
952.9
13.9
1,055.0
318.6
214.0

51.3
39.3

6,372.8

djusted Present Value

Excludes 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

12.5%
7.5%
14.1%
80.0%
-140.0%
40.0%
27.3%
15.0%
12.3%
40.0%

10.0%
7.5%
12.3%
80.0%
-140.0%
40.0%
28.3%
14.5%
13.8%
40.0%

7.0%
7.5%
8.4%
80.0%
-140.0%
40.0%
29.0%
14.0%
15.0%
40.0%

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%
40.0%

14.0%
7.5%
15.9%
80.0%
-140.0%
40.0%
26.6%
15.6%
11.0%
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
31.8
5,611.9

2,518.6
1,482.4
15.4
157.7
4.4
491.3
31.8
5,594.7

2,429.9
1,482.4
15.4
157.7
4.4
491.3
31.8
5,618.4

2,429.9
1,482.4
15.4
157.7
4.4
491.3
31.8
5,734.4

2,481.8
1,482.4
15.4
157.7
4.4
491.3
31.8
5,956.0

260.8
143.4
59.2
43.1
97.7
604.2

341.6
163.2
65.8
43.1
97.7
711.5

391.7
186.1
75.5
43.1
97.7
794.1

443.0
209.3
85.4
43.1
97.7
878.5

490.6
230.3
94.6
43.1
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
289.9
119.2

119.2
416.5
109.8
306.3
119.6

119.6
424.5
99.5
323.6
121.1

121.1
487.9
88.5
341.8
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
2

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)

sh Flows

sh Flows

sh Flows

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
59.2
114.6
0

540.0
135.0
47.8
163.2
341.6
65.8
152.1
37.4

626.1
153.9
54.8
186.1
391.7
75.5
181.4
29.4

714.2
173.1
61.9
209.3
443.0
85.4
211.5
30.1

802.3
190.4
68.6
230.3
490.6
94.6
245.9
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
653.2
324.3

2009
357.2
846.0
29.4
757.3
416.5

2010
454.6
925.5
30.1
925.5
424.5

2011
574.2
1,005.0
34.3
1,057.0
487.9

2012
674.6
1,051.5
26.3
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

Wireless Business Subscribers:

Average Monthly Subscribers (in MM's)
Average Monthly Minutes
Total Monthly Minutes
Revenue Per Minute
Annual Business Revenue Increase

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

Backhaul Savings:
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

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