airthread connections work sheet self
DESCRIPTION
AirthreadTRANSCRIPT
Cost of CapitalAIRTHREAD ACQUISITIONCost of Capital
Project:AIRTHREAD ACQUISITIONAnalysis:Cost of CapitalDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONCost of Capital
EquityNetDebt/Debt/EquityAssetAssumptions:Comparable
Companies:Market ValueDebtValueEquityBetaBetaMarginal Tax
Rate40.0%Universal Mobile65,17360,16048.0%92.3%0.860.45
R K Jain: R K Jain:unlevered asset beta
Ba= Be/1+(D/E)(1-t)Debt Beta0.00Neuberger
Wireless94,73527,75722.7%29.3%0.890.69
R K Jain: R K Jain:unlevered asset beta
Ba= Be/1+(D/E)(1-t)Agile
Connections37,9429,14419.4%24.1%1.170.94
R K Jain: R K Jain:unlevered asset beta
Ba= Be/1+(D/E)(1-t)Market Risk Premium5.00%Big Country
Communications47,31415,00324.1%31.7%0.970.74
R K Jain: R K Jain:unlevered asset beta
Ba= Be/1+(D/E)(1-t)Risk-Free Rate4.25%Rocky Mountain
Wireless5,2992,35330.8%44.4%1.130.78
R K Jain: R K Jain:unlevered asset beta
Ba= Be/1+(D/E)(1-t)5,532Average50,09322,88329.0%40.8%1.000.72Cost of Debt5.50%13.19
Debt/Debt/AssetEquityCost ofCost
ofValueEquityBetaBetaEquityDebtWACC
R K Jain: R K Jain:WACC =
Ke(E/V)+Kd(D/V)(1-t)0.0%0.0%0.720.72
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))7.85%5.50%7.85%5.0%5.3%0.720.76
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))8.04%5.50%7.80%10.0%11.1%0.720.80
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))8.25%5.50%7.75%15.0%17.6%0.720.85
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))8.48%5.50%7.70%20.0%25.0%0.720.90
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))8.75%5.50%7.66%25.0%33.3%0.720.96
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))9.05%5.50%7.61%29.0%40.8%0.721.01
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))9.32%5.50%7.57%35.0%53.8%0.721.11
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))9.78%5.50%7.51%40.0%66.7%0.721.20
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))10.25%5.50%7.47%45.0%81.8%0.721.31
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))10.79%5.50%7.42%47.0%88.7%0.721.36
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))11.04%5.50%7.40%50.0%100.0%0.721.44
R K Jain: R K Jain:Equity Beta = Asset Beta (V/E) =>Be = Ba
(1/1-(D/V))11.44%5.50%7.37%
Intermediate Operating CFAIRTHREAD ACQUISITIONIntermediate Operating Cash Flows
Project:AIRTHREAD ACQUISITIONAnalysis:Intermediate Operating Cash FlowsDraft:nFooter:Harvard Business Publishing
Harvard Business PublishingAIRTHREAD ACQUISITIONIntermediate Operating Cash Flows
Operating Results:20082009201020112012Service
Revenue4,194.34,781.55,379.25,917.26,331.4Plus: Equipment
Sales314.8358.8403.7444.1475.2Plus: Synergy Related Business
Revenue0.00.00.00.00.0Total
Revenue4,509.15,140.45,782.96,361.26,806.5Less: System Operating
Expenses838.9956.31,075.81,183.41,266.3Plus: Backhaul Synergy
Savings0.00.00.00.00.0Less: Cost of Equipment
Sold755.5861.2968.91,065.81,140.4Less: Selling, General &
Administrative1,803.62,056.22,313.22,544.52,722.6EBITDA1,111.11,266.71,425.01,567.51,677.3Less:
Depreciation &
Amortization705.2804.0867.4922.4952.9EBIT405.9462.7557.6645.2724.4Tax
@40%162.4185.1223.0258.1289.7Un-Levered Free Cash
Flow:NOPAT243.5277.6334.6387.1434.6Plus: Depreciation &
Amortization705.2804.0867.4922.4952.9Less: Changes in Working
Capital25.919.720.018.013.9Less: Capital
Expenditures631.3719.7867.4970.11,055.0Un-Levered Free Cash
Flow291.6342.3314.5321.4318.6PV Intermediate
FCF7.85%1,271.4270.4294.3250.8237.6218.4Operating Margins:Based on
projected cashflows excluding the benefits of Synergy Service
Revenue Growth14.0%
R K Jain: R K Jain:given in case Exhibit 114.0%
R K Jain: R K Jain:given in case Exhibit 112.5%
R K Jain: R K Jain:given in case Exhibit 110.0%
R K Jain: R K Jain:given in case Exhibit 17.0%
R K Jain: R K Jain:given in case Exhibit 1Changes in Working
Capital:200720082009201020112012Equipment Sales/Service
Revenue7.5%
R K Jain: R K Jain:Given in case exhibit 17.5%
R K Jain: R K Jain:Given in case exhibit 17.5%
R K Jain: R K Jain:Given in case exhibit 17.5%
R K Jain: R K Jain:Given in case exhibit 17.5%
R K Jain: R K Jain:Given in case exhibit 1Accounts
Receivable435.5521.9
R K Jain: R K Jain:based on total revenue595.0
R K Jain: R K Jain:based on total revenue669.4
R K Jain: R K Jain:based on total revenue736.3
R K Jain: R K Jain:based on total revenue787.9
R K Jain: R K Jain:based on total revenueTotal Revenue
Growth14.3%
R K Jain: R K Jain:Calcluated upon 2007 revenue14.0%
R K Jain: R K Jain:Calcluated upon year-on-year12.5%
R K Jain: R K Jain:Calcluated upon year-on-year10.0%
R K Jain: R K Jain:Calcluated upon year-on-year7.0%
R K Jain: R K Jain:Calcluated upon year-on-yearPlus:
Inventory101.0135.0
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold153.9
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold173.1
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold190.4
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold203.7
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold
Wireless Service Gross Profit Margin80.0%
R K Jain: R K Jain:GP margin =(Services rev - Service Op. exp)
Services revenue80.0%
R K Jain: R K Jain:GP margin =(Services rev - Service Op. exp)
Services revenue80.0%
R K Jain: R K Jain:GP margin =(Services rev - Service Op. exp)
Services revenue80.0%
R K Jain: R K Jain:GP margin =(Services rev - Service Op. exp)
Services revenue80.0%
R K Jain: R K Jain:GP margin =(Services rev - Service Op. exp)
Services revenuePlus: Prepaid Expenses41.646.9
R K Jain: R K Jain:is based on total cash operating
expenses53.5
R K Jain: R K Jain:is based on total cash operating
expenses60.1
R K Jain: R K Jain:is based on total cash operating
expenses66.2
R K Jain: R K Jain:is based on total cash operating
expenses70.8
R K Jain: R K Jain:is based on total cash operating expenses
Equipment Sales Gross Profit-140.0%
R K Jain: R K Jain:GP on Equip sale =(Equip sale rev - Equip
cost)Equip sale rev -140.0%
R K Jain: R K Jain:GP on Equip sale =(Equip sale rev - Equip
cost)Equip sale rev -140.0%
R K Jain: R K Jain:GP on Equip sale =(Equip sale rev - Equip
cost)Equip sale rev -140.0%
R K Jain: R K Jain:GP on Equip sale =(Equip sale rev - Equip
cost)Equip sale rev -140.0%
R K Jain: R K Jain:GP on Equip sale =(Equip sale rev - Equip
cost)Equip sale rev Less: Deferred Revenue143.4163.2
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses186.1
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses209.3
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses230.3
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses246.4
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses
Selling, General & Administrative40.0%
R K Jain: R K Jain:Upon total revenue(Given in case Exhibit
1)40.0%
R K Jain: R K Jain:Upon total revenue(Given in case Exhibit
1)40.0%
R K Jain: R K Jain:Upon total revenue(Given in case Exhibit
1)40.0%
R K Jain: R K Jain:Upon total revenue(Given in case Exhibit
1)40.0%
R K Jain: R K Jain:Upon total revenue(Given in case Exhibit 1)Less:
Accounts Payable260.8335.5
R K Jain: R K Jain:is based on total cash operating
expenses382.4
R K Jain: R K Jain:is based on total cash operating
expenses430.2
R K Jain: R K Jain:is based on total cash operating
expenses473.2
R K Jain: R K Jain:is based on total cash operating
expenses506.4
R K Jain: R K Jain:is based on total cash operating expenses
EBITDA24.6%
R K Jain: R K Jain:Upon total revenue24.6%
R K Jain: R K Jain:Upon total revenue24.6%
R K Jain: R K Jain:Upon total revenue24.6%
R K Jain: R K Jain:Upon total revenue24.6%
R K Jain: R K Jain:Upon total revenueLess: Accrued
Liabilities59.264.7
R K Jain: R K Jain:is based on total cash operating
expenses73.7
R K Jain: R K Jain:is based on total cash operating
expenses82.9
R K Jain: R K Jain:is based on total cash operating
expenses91.2
R K Jain: R K Jain:is based on total cash operating
expenses97.6
R K Jain: R K Jain:is based on total cash operating expenses
Depreciation & Amortization15.6%
R K Jain: R K Jain:Upon total revenue15.6%
R K Jain: R K Jain:Upon total revenue15.0%
R K Jain: R K Jain:Upon total revenue14.5%
R K Jain: R K Jain:Upon total revenue14.0%
R K Jain: R K Jain:Upon total revenueNet Working
Capital114.6140.4160.1180.1198.1212.0EBIT9.0%
R K Jain: R K Jain:Upon total revenue9.0%
R K Jain: R K Jain:Upon total revenue9.6%
R K Jain: R K Jain:Upon total revenue10.1%
R K Jain: R K Jain:Upon total revenue10.6%
R K Jain: R K Jain:Upon total revenueIncrease in
NWC025.819.720.018.013.9Effective Tax Rate40.0%
R K Jain: R K Jain:given40.0%
R K Jain: R K Jain:given40.0%
R K Jain: R K Jain:given40.0%
R K Jain: R K Jain:given40.0%
R K Jain: R K Jain:givenCap-x/Revenue14.0%
R K Jain: R K Jain:Upon total revenue(given in case exhibit
1)14.0%
R K Jain: R K Jain:Upon total revenue(given in case exhibit
1)15.0%
R K Jain: R K Jain:Upon total revenue(given in case exhibit
1)15.3%
R K Jain: R K Jain:Upon total revenue(given in case exhibit
1)15.5%
R K Jain: R K Jain:Upon total revenue(given in case exhibit 1)
Estimanting Debt CapacityAIRTHREAD ACQUISITIONDebt Capacity
Project:AIRTHREAD ACQUISITIONAnalysis:Debt CapacityDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONDebt Capacity
AirThread Debt Capacity:Pre-Synergy Est. 2007 EBITDA1,033Total Borrowing3,758Interest Coverage Ratio5.00xAmortization Period10 YearsMaximum Interest Expense207Payments Per Year12Interest Rate5.50%Monthly Payment41Est. Debt Capacity3,758Excludes Synergies:Excess Cash:20082009201020112012Un-Levered Free Cash Flow291.6342.3314.5321.4318.6Less: After-Tax Interest Expenses119.7109.899.588.577.0Less: Scheduled Principal Payments289.9306.3323.6341.82,496.0Excess Cash(118.0)(73.8)(108.5)(109.0)(2,254.3)
Cash on Balance Sheet86.5812.7(95.8)(204.7)(2,459.0)Includes Synergies:Excess Cash:20082009201020112012Un-Levered Free Cash Flow324.3416.5424.5487.9535.7Less: After-Tax Interest Expsnse119.7109.899.588.577.0Less: Scheduled Principal Payments289.9306.3323.6341.82,496.0Excess Cash(85.3)0.41.557.6(2,037.3)
Cash on Balance Sheet119.2119.6121.1178.7(1,858.6)Cash Reconciliation:2008Beginning Cash Balance204.5Plus: Cash From Operations291.6Less: Aft-Tax Interest Exp.119.7Less: Principal Payments289.9Ending Cash Balance86.58Cash Reconciliation:2008Beginning Cash Balance204.5Plus: Cash From Operations324.3Less: Aft-Tax Interest Exp.119.7Less: Principal Payments289.9Ending Cash Balance119.2
Tax Shield calcAIRTHREAD ACQUISITIONIntermediate Tax Shields
Project Name:AIRTHREAD ACQUISITIONAnalysis:Intermediate Tax ShieldsDraft:nFooter:Harvard Business Publishing
Harvard Business PublishingAIRTHREAD ACQUISITIONIntermediate Tax Shields
Interest Tax Shields:20082009201020112012Interest Expense199.4183.1165.8147.5128.3Tax Rate40.0%40.0%40.0%40.0%40.0%Tax Shield79.873.266.359.051.3Interest Rate5.50%PV of Intermediate Tax Shields284.875.665.856.547.639.3
APV excluding SynergyAIRTHREAD ACQUISITIONAdjusted Present Value
Project:AIRTHREAD ACQUISITIONAnalysis:Adjusted Present ValueDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONAdjusted Present Value
Terminal Value With Lon-Term D/V of 29%Excludes SynergyUn-Levered Free Cash Flows:20082009201020112012NOPAT243.5277.6334.6387.1434.6Plus: Depreciation & Amortization705.2804.0867.4922.4952.9Less: Changes in Working Capital25.919.720.018.013.9Less: Capital Expenditures631.3719.7867.4970.11,055.0Un-Levered Free Cash Flow291.6342.3314.5321.4318.6
PV of FCF7.85%1,271.4270.4294.3250.8237.6218.4Interest Tax
Shields79.873.266.359.051.3PV of Interest Tax
Shields284.875.665.856.547.639.3Total Intermediate Term
Value1,556.2TV Growth Rate2.9%TV WACC Cash Flow4,840.76,972.7Value
of Operating Assets6,396.9Value of Non-Operating
Assets1,187.3
R K Jain: R K Jain:Use market multiple method. Industry average P/E
using data from exhibit 7, is 13.19 (ref. sheet 'Cost of capital'
for calc cell p65). Taking 'equity in earnings of affiliates' for
the year 2007 (exhibit:4) as proxy the value of non-operating asset
is arrived at. 90*13.19Total Enterprise Value7,584.2
Projected CFAIRTHREAD CONNECTION ACQUISITIONProjected Cash Flows
Project:AIRTHREAD CONNECTION ACQUISITIONAnalysis:Projected Cash Flows
AIRTHREAD CONNECTION ACQUISITIONProjected Cash Flows
Projected Income StatementsOperating
Results:20082009201020112012Synergy Switches:Service
Revenue4,194.34,781.55,379.25,917.26,331.4Bus. Revenue
Synergy:1Plus: Equipment Sales314.8358.8403.7444.1475.2Include
Synergy1Plus: Synergy Related Business Revenue156.5
R K Jain: R K Jain:Ref table5 in case268.6
R K Jain: R K Jain:Ref table5 in case387.3
R K Jain: R K Jain:Ref table5 in case569.9
R K Jain: R K Jain:Ref table5 in case704.5
R K Jain: R K Jain:Ref table5 in caseExclude Synergy2Total
Revenue4,665.65,409.06,170.36,931.27,511.0Less: System Operating
Expenses838.9956.31,075.81,183.41,266.3Reduction in Backhaul:1Plus:
Backhaul Synergy Savings0.0
R K Jain: R K Jain:Ref. table 4 in case(13.4)
R K Jain: R K Jain:Ref. table 4 in case(25.8)
R K Jain: R K Jain:Ref. table 4 in case(52.5)
R K Jain: R K Jain:Ref. table 4 in case(76.0)
R K Jain: R K Jain:Ref. table 4 in caseInclude Synergy1Less: Cost
of Equipment Sold755.5861.2968.91,065.81,140.4Exclude Synergy2Less:
Selling, General & Administrative1,866.2
R K Jain: R K Jain:40% of total revenue. Ref. operating margins
table below2,163.6
R K Jain: R K Jain:40% of total revenue. Ref. operating margins
table below2,468.1
R K Jain: R K Jain:40% of total revenue. Ref. operating margins
table below2,772.5
R K Jain: R K Jain:40% of total revenue. Ref. operating margins
table below3,004.4
R K Jain: R K Jain:40% of total revenue. Ref. operating margins
table belowEBITDA1,205.01,441.31,683.31,962.12,175.9Less:
Depreciation & Amortization729.7
R K Jain: R K Jain:15.6% of total revenue. Ref. operating margins
table below846.0
R K Jain: R K Jain:15.6% of total revenue. Ref. operating margins
table below925.5
R K Jain: R K Jain:15% of total revenue. Ref. operating margins
table below1,005.0
R K Jain: R K Jain:14.5% of total revenue. Ref. operating margins
table below1,051.5
R K Jain: R K Jain:14% of total revenue. Ref. operating margins
table belowEBIT475.3595.3757.7957.01,124.4Less: Interest
Expense199.4183.1165.8147.5128.3EBT275.9412.2591.9809.5996.1Less:
Taxes @ 40%110.4164.9236.8323.8398.4Net
Income165.5247.3355.2485.7597.7
Un-Levered Free Cash Flow:NOPAT285.2357.2454.6574.2674.6Plus:
Depreciation & Amortization729.7846.0925.51,005.01,051.5Less:
Changes in Working Capital37.429.430.134.326.3Less: Capital
Expenditures653.2
R K Jain: R K Jain:14% of total revenue. Ref.Operating margin table
below757.3
R K Jain: R K Jain:14% of total revenue. Ref.Operating margin table
below925.5
R K Jain: R K Jain:15% of total revenue. Ref.Operating margin table
below1,057.0
R K Jain: R K Jain:15.3% of total revenue. Ref.Operating margin
table below1,164.2
R K Jain: R K Jain:15.5% of total revenue. Ref.Operating margin
table belowUn-Levered Free Cash
Flow324.3416.5424.5487.9535.7Operating Margins:Service Revenue
Growth14.0%14.0%12.5%10.0%7.0%Equipment Sales/Service
Revenue7.5%7.5%7.5%7.5%7.5%Total Revenue
Growth18.2%15.9%14.1%12.3%8.4%Wireless Service Gross Profit
Margin80.0%80.0%80.0%80.0%80.0%Equipment Sales Gross
Profit-140.0%-140.0%-140.0%-140.0%-140.0%Selling, General &
Administrative40.0%
R K Jain: R K Jain:Upon total revenue40.0%
R K Jain: R K Jain:Upon total revenue40.0%
R K Jain: R K Jain:Upon total revenue40.0%
R K Jain: R K Jain:Upon total revenue40.0%
R K Jain: R K Jain:Upon total revenue
EBITDA25.8%26.6%27.3%28.3%29.0%Depreciation &
Amortization15.6%
R K Jain: R K Jain:Upon total revenue15.6%
R K Jain: R K Jain:Upon total revenue15.0%
R K Jain: R K Jain:Upon total revenue14.5%
R K Jain: R K Jain:Upon total revenue14.0%
R K Jain: R K Jain:Upon total revenue
EBIT10.2%11.0%12.3%13.8%15.0%Effective Tax Rate40.0%40.0%40.0%40.0%40.0%Cap-x/Revenue14.0%14.0%15.0%15.3%15.5%
AIRTHREAD CONNECTION ACQUISITIONProjected Cash Flows
Projected Balance SheetsBased on projected cashflows including
the benefits of Synergy Assets:2007
R K Jain: R K Jain:figures for 2007 are given in case. Ref. Exhibit
520082009201020112012Changes in Working
Capital:200720082009201020112012Cash & Cash
Equivalents204.5119.2119.6121.1178.70.0Accounts
Receivable435.5540.0
R K Jain: R K Jain:based on total revenue626.1
R K Jain: R K Jain:based on total revenue714.2
R K Jain: R K Jain:based on total revenue802.3
R K Jain: R K Jain:based on total revenue869.4
R K Jain: R K Jain:based on total revenueMarketable
Securities16.416.416.416.416.416.4Plus: Inventory101.0135.0
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold153.9
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold173.1
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold190.4
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold203.7
R K Jain: R K Jain:based on equipment revenue and not Cost of goods
sold
Accounts Receivable435.5540.0626.1714.2802.3869.4Plus: Prepaid
Expenses41.647.8
R K Jain: R K Jain:is based on total cash operating
expenses54.8
R K Jain: R K Jain:is based on total cash operating
expenses61.9
R K Jain: R K Jain:is based on total cash operating
expenses68.6
R K Jain: R K Jain:is based on total cash operating
expenses73.6
R K Jain: R K Jain:is based on total cash operating expenses
Inventory101.0135.0153.9173.1190.4203.7Less: Deferred
Revenue143.4163.2
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses186.1
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses209.3
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses230.3
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses246.4
R K Jain: R K Jain:is based on service revenue and not on total
cash operating expenses
Prepaid Expenses41.647.854.861.968.673.6Less: Accounts
Payable260.8341.6
R K Jain: R K Jain:is based on total cash operating
expenses391.7
R K Jain: R K Jain:is based on total cash operating
expenses443.0
R K Jain: R K Jain:is based on total cash operating
expenses490.6
R K Jain: R K Jain:is based on total cash operating
expenses526.7
R K Jain: R K Jain:is based on total cash operating expenses
Deferred Taxes18.618.618.618.618.618.6Less: Accrued
Liabilities59.265.8
R K Jain: R K Jain:is based on total cash operating
expenses75.5
R K Jain: R K Jain:is based on total cash operating
expenses85.4
R K Jain: R K Jain:is based on total cash operating
expenses94.6
R K Jain: R K Jain:is based on total cash operating
expenses101.5
R K Jain: R K Jain:is based on total cash operating expenses
Other Current Assets16.216.216.216.216.216.2Net Working Capital114.6152.1181.4211.5245.9272.2Total Current Assets833.8893.11,005.51,121.51,291.11,197.9Increase in NWC037.429.430.134.326.3
Property, Plan & Equipment2,595.12,518.62,429.92,429.92,481.82,594.5Licenses1,482.41,482.41,482.41,482.41,482.41,482.4Customer Lists15.415.415.415.415.415.4Investments in Affiliated Entities157.7157.7157.7157.7157.7157.7Long Term Note Receivable4.44.44.44.44.44.4Goodwill491.3491.3491.3491.3491.3491.3Other Long Term Assets31.831.831.831.831.831.8Total Assets5,611.95,594.75,618.45,734.45,956.05,975.4Liabilities & Owners' Equity:Accounts Payable260.8341.6391.7443.0490.6526.7Deferred Revenue & Deposits143.4163.2186.1209.3230.3246.4Accrued Liabilities59.265.875.585.494.6101.5Taxes Payable43.143.143.143.143.143.1Other Current Liabilities97.797.797.797.797.797.7Total Current Liabilities604.2711.5794.1878.5956.21,015.4
Long Term Debt1,002.33,467.63,1612,8382,4961,859Deferred Tax Liability554.4554.4554.4554.4554.4554.4Asset Retirement Obligation126.8126.8126.8126.8126.8126.8Other Deferred Liabilities84.584.584.584.584.584.5
Minority Interest43.443.443.443.443.443.4
Total Equity3,196.2606.4853.81,208.91,694.62,292.3Total Liabilities & Owners' Equity5,611.95,594.75,618.45,734.45,956.05,975.4Cash BalanceBeginning Cash204.5119.2119.6121.1178.7Plus: Un-Levered Free Cash Flow324.3416.5424.5487.9535.7Less: After-Tax Interest Expense119.7109.899.588.577.0Less: Principal Payments289.9306.3323.6341.82,496.0Ending Cash119.2119.6121.1178.7(1,858.6)
APV including SynergyAIRTHREAD ACQUISITIONAdjusted Present Value
Project:AIRTHREAD ACQUISITIONAnalysis:Adjusted Present ValueDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONAdjusted Present Value
Terminal Value With Lon-Term D/V of 29%Synergies Included
Un-Levered Free Cash Flows:20082009201020112012NOPAT285.2357.2454.6574.2674.6Plus: Depreciation & Amortization729.7846.0925.51,005.01,051.5Less: Changes in Working Capital37.429.430.134.326.3Less: Capital Expenditures653.2757.3925.51,057.01,164.2Un-Levered Free Cash Flow324.3416.5424.5487.9535.7
PV of FCF7.85%1,725.0300.7358.1338.4360.7367.2
Interest Tax Shields79.873.266.359.051.3PV of Interest Tax Shields284.875.665.856.547.639.3Total Intermediate Term Value2,009.8Discount rate7.57%TV Growth Rate3.4%TV WACC Cash Flow9,177.613,219.8
Value of Operating Assets11,187.4Value of Non-Operating
Assets1,187.3
R K Jain: R K Jain:Use market multiple method. Industry average P/E
using data from exhibit 7, is 13.19 (ref. sheet 'Cost of capital'
for calc cell p65). Taking 'equity in earnings of affiliates' for
the year 2007 (exhibit:4) as proxy the value of non-operating asset
is arrived at. 90*13.19Total Enterprise Value12,374.8
Benefits from SynergyAIRTHREAD CONNECTIONS ACQUISITIONSynergies
Project:AIRTHREAD CONNECTIONS ACQUISITIONAnalysis:Synergies
0AIRTHREAD CONNECTIONS ACQUISITIONSynergies
Wireless Business Subscribers:20082009201020112012Average Monthly Subscribers (in MM's)0.300.500.701.001.20Average Monthly Minutes859885911939967Total Monthly Minutes2584426389391,160Revenue Per Minute0.05060.05060.05060.05060.0506Annual Business Revenue Increase156.5268.6387.3569.9704.5Backhaul Savings:20082009201020112012System Operating Expenses838.9956.31,075.81,183.41,266.3Backhaul Percentage20.0%20.0%20.0%20.0%20.0%Estimated Backhaul Costs167.8191.3215.2236.7253.3Reduction in Backhaul Costs0.0%7.0%12.0%22.2%30.0%Backhaul Savings0.013.425.852.576.0
Amortization schedule0Amortization Schedule
Project:AIRTHREAD ACQUISITIONAnalysis:Amortization ScheduleDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONAmortization Schedule
AnnualAmortizationAnnualAmortizationPaymentInterestPrincipalBalancePeriodPaymentInterestPrincipalBalancePeriodInterest Expense per Annum ($mn)Date:415.5%3,758120Date:415.50%2,69884200820092010201120121/31/0840.7817.2223.563,733.9916/30/1140.7812.3628.412,669.2442199.43183.08165.80147.55128.272/28/0840.7817.1123.673,710.3227/31/1140.7812.2328.552,640.69433/31/0840.7817.0123.773,686.5538/31/1140.7812.1028.682,612.0244Principal payment per Annum4/30/0840.7816.9023.883,662.6749/30/1140.7811.9728.812,583.2145289.92306.28323.55341.802,495.995/31/0840.7816.7923.993,638.67510/31/1140.7811.8428.942,554.2746After-Tax Interest Expense per Annum6/30/0840.7816.6824.103,614.57611/30/1140.7811.7129.072,525.2047119.7109.899.588.577.07/31/0840.7816.5724.213,590.36712/31/1140.7811.5729.212,495.99488/31/0840.7816.4624.323,566.0481/31/1240.7811.4429.342,466.65499/30/0840.7816.3424.433,541.6092/28/1240.7811.3129.472,437.185010/31/0840.7816.2324.553,517.06103/31/1240.7811.1729.612,407.575111/30/0840.7816.1224.663,492.40114/30/1240.7811.0329.742,377.835212/31/0840.7816.0124.773,467.62125/31/1240.7810.9029.882,347.95531/31/0940.7815.8924.893,442.74136/30/1240.7810.7630.022,317.93542/28/0940.7815.7825.003,417.74147/31/1240.7810.6230.162,287.77553/31/0940.7815.6625.113,392.62158/31/1240.7810.4930.292,257.48564/30/0940.7815.5525.233,367.39169/30/1240.7810.3530.432,227.05575/31/0940.7815.4325.353,342.051710/31/1240.7810.2130.572,196.47586/30/0940.7815.3225.463,316.591811/30/1240.7810.0730.712,165.76597/31/0940.7815.2025.583,291.011912/31/122,175.699.932,165.760.00608/31/0940.7815.0825.703,265.31209/30/0940.7814.9725.813,239.502110/31/0940.7814.8525.933,213.572211/30/0940.7814.7326.053,187.522312/31/0940.7814.6126.173,161.35241/31/1040.7814.4926.293,135.06252/28/1040.7814.3726.413,108.65263/31/1040.7814.2526.533,082.12274/30/1040.7814.1326.653,055.46285/31/1040.7814.0026.783,028.69296/30/1040.7813.8826.903,001.79307/31/1040.7813.7627.022,974.77318/31/1040.7813.6327.142,947.62329/30/1040.7813.5127.272,920.363310/31/1040.7813.3827.392,892.963411/30/1040.7813.2627.522,865.443512/31/1040.7813.1327.652,837.80361/31/1140.7813.0127.772,810.02372/28/1140.7812.8827.902,782.12383/31/1140.7812.7528.032,754.09394/30/1140.7812.6228.162,725.94405/31/1140.7812.4928.292,697.6541
Amortization Schedule
Estimating growth rateAIRTHREAD ACQUISITIONGrowth Rate
Project:AIRTHREAD ACQUISITIONAnalysis:Growth RateDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONGrowth Rate
estmd from with synergy CFestmd from without synergy CFLong-Term
Growth Rate:20122012NOPAT674.6434.6Invested
Capital4,107.54,039.5
R K Jain: R K Jain:This value should be based on projected balance
sheet without synergy (not presented here)ROC =
NOPAT/(E+D)ROC16.4%10.8%Net
Reinvestment138.9116.0NOPAT674.6434.6Reinvestment
Rate20.6%26.7%Est. EBIT Growth Rate3.4%2.9%
Sheet11