From the Ground Up - March_2011

8/7/2019 From the Ground Up - March_2011

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Near Earth LLC Page 1/20

From The Ground Up Volume 7, Issue 2

SPECIALISTS IN SATELLITE, TELECOM AND AEROSPACE INVESTMENT BANKING

FROM THE GROUND UPMarch 2011

THE WAY WE SEE IT

Satellite:Following a competitive process, EchoStarwon the bidding forHughes Communications and agreed to acquire the firm for a totalvalue of $2 billion. We think combining DBS and satellite broadband addresses the principal weakness of DBS (i.e. one way data)and that international expansion of HughesNet offers EchoStara platform to accelerate global ambitions. By vertically integrating,the combined firm may also get a potential leg up on ViaSat/WildBlue in the United States. Charlie Ergens other entity, DISHNetwork, bid $1.4 billion for bankrupt S-band satellite company DBSD, beating a joint bid from Harbingerand Solus AlternativeAsset Management. Orbital Sciences inked a contract to reserve hosted payloads with 20% of the data capacity on Iridiumsplanned replacement constellation, currently in development. The contract includes $10 million in non refundable payments in 2011

with a total value estimated at over $100 million by Iridium. Coming on the heels of The Boeing Companys hosted payloadinitiative and prior success on Intelsats UHF payload, we see hosted payloads remaining a hot topic for the foreseeable future.

Telecom:AT&T shocked many industry observers with a stunning $39 billion offer for Deutsche Telekoms T-Mobile USA unit. For ourcommentary and much more on this, see AT&T swings for the fences winners and losers in this issue. LightSquared announceddeals with Leap Wireless and Best Buy and is quoted as being in discussions with 60 parties and contract negotiations with 15potential customers. While this is welcome news following on the huge ATC waiver from the FCC, the apparent loss of T-Mobile asa customer, or strategic partner, due to the AT&T merger may represent an offsetting challenge. All eyes are on Sprint now.Meanwhile, accusations of GPS signal interference continue to dog LightSquareds planned use of its L-band spectrum, raisingspeculation that Harbinger/LightSquared will re-enter the bidding forTerrestarand its S-band spectrum allocations. Telit boughtMotorolas M2M module business for $26 million, adding additional scale and reach to the already hefty (by M2M standards) Telit.The combined firm is expected to have over $180 million in revenue. Orbcomm agreed to acquire AlancosStartrak subsidiary for$18.5 million, mostly for Orbcomm stock and forgiven debt. While vertically integrating may raise some eyebrows with some ofOrbcomms other customers and prospects, we think the transaction makes sense given Alancos importance as an Orbcommreseller.

Aerospace:SpaceX scores a launch contract with SES, achieving important market validation from the conservative, risk adverse FSSindustry.Similarly, MacDonald Dettwiler and Associates (MDA) announced a first of its kind on-orbit serving contract with Intelsatfor the refueling of up to five satellites for up to $280 million. Both Virgin Galactic and XCOR Aerospace sold seats on theirsuborbital vehicles to Southwest Research Institute, a major breakthrough for this nascent industry. Serial acquirer KratosDefense & Security Solutions Inc. picks up defense RF and microwave supplier Herley Industries for $270 million, addingextensive capabilities to its portfolio of C4ISR products.

Hoyt [email protected]

(212) 551-7960

John [email protected]

(646) 290-7796

Ian [email protected]

(646) 290-7794

Rich [email protected]

(646) 290-7794

Inside this Issue:

Page 1: The Way We See ItSatellite, Telecom and Aerospace News

Page 2: Guest Column: Satellite 2011, a Celebration in HalcyonTimes

Page 5: AT&T swings for the fences winners and losers

Page 8: 2020 Foresight

Page 12: Building Blocks of the Future

Page 17: Near Earth Analysis: Market Comparables

Page 18: Near Earth Analysis: M&A Transactions

See Last Page for Important DisclosureMember FINRA

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Near Earth Indices - Last Twelve Months

Satellite Telecom NASDAQ New Media

See page 17 for details on index components


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Guest Column: Satellite 2011, a Celebration in Halcyon Times

Business has been booming for the communication satellite industry overthe past year as the global economy recovers from recession. Anestimated 10,000 people gathered in Washington, DC from March 14 to17 for the Satellite 2011 Conference and Exhibition.

The event provided a good opportunity to evaluate hot topics in theindustry. In addition to the main Satellite 2011 conference the associatedevents included: Satellite Finance Forum 2011, Global VSAT Forum(GVF), Engineering 2011, Mobile Satellite Users Association (MSUA-8),and The Global Interference Mitigation Initiative.

Positive developmentsDuring 2010, service growth provided substantial increases in revenues.

Established FSS companies are replacing older satellites and expanding

their fleets for emerging markets. All of the failed and bankrupt MSS LEOconstellations are being replaced by a new generation of larger and morecapable satellites. Several new MSS services are being built for NorthAmerica and others are being bought out of bankruptcy. Multiple Ka-bandbroadband satellites are being launched for broadband servicesthroughout the world. Satellite manufactures are building 60 to 70commercial GEO satellites and more than 100 LEO communicationsatellites.

Satellite technology has been revolutionary over the past 30 years.Electrical power has grown to over 20,000 Watts. At the same time the

electrical efficiency has improved substantially. Traveling Wave TubeAmplifier efficiency has leaped from less than 20% to over 66%. Payloadsare much lighter. Propulsion system efficiency has increased by more thana factor of 10. Huge launch vehicles are now boosting communicationsatellites with masses greater than 6000 kg. Overall, the capability ofsatellites has increased by a factor of 10,000 since 1980.

The industry is superheated by Export Credit Agency ECA -- guarantees(effectively stimulus funds) have provided low cost funds for bothestablished operators and new entrants.

McDonald Dettwiler (MDA) announced a satellite servicing agreement torefuel Intelsat satellites within 3.5 years. The prospective revenue to MDAwould be $280 Million. Satellite manufacturing companies expressed theview that the satellites are not designed for servicing and that they wouldexpect full payment of orbital incentives if serving were attempted. Themanufacturing companies did not believe this could be a cost effectivesolution.

Established FSScompanies arereplacing oldersatellites andexpanding theirfleets for emergingmarkets.

Overall, thecapability ofsatellites hasincreased by afactor of 10,000since 1980


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Guest Column: Satellite 2011 (cont.)

DISH Networks, i.e., Charlie Ergen, has bought DBSD (formerly the ICOGEO) satellite system out of bankruptcy.

Ka-band services have definitely become mainstream. There is wideacceptance that the use of these frequency bands greatly expandssatellite throughput and substantially cuts the cost of transmission. Most of

the people in the industry embrace the need for better competition withterrestrial alternatives. There is also an acceptance that adaptive codingcan deal with rain-fade issues.

There will soon be a larger number of available launch vehicles. TheFalcon 9 vehicle has been selected for SES-8 and will undoubtedly beused for a number of other commercial communication satellite programs.The Sea Launch program will be returning to service soon with a numberof launches scheduled through 2013.

A few concerns

To some extent the ECA financing is a mixed blessing. Investment isporing into expanded capacity in all segments. This is laying thefoundation for financial problems over the next five years. We can expectto re-enter a period of excess satellite communications capacity within thenext three to five years that will tend to reduce profit margins for severalyears while the added capacity is absorbed.

Based on fully accounted returns some FSS operators are notprofitable. Fill rates are presently healthy but utilization will dropwhen the new satellite capacity is deployed.

MSS operators are building next generation systems in L, S, andKa-band. The market is probably only big enough for one or two

profitable operators. The U.S. MSS business appears to beterrestrial speculation with free satellite spectrum, exactly whatthe cellular operators expected.

Ka-band broadband services are expanding capacity at anastronomical rate. They are struggling to keep up with expansionon the ground.

Satellite manufacturers are busy but many are predicting thatorders will drop sharply in the next few years.

More launch service companies are entering the market. At thesame time new launches may decline. Launch prices willundoubtedly fall.

Operation of the LightSquared (Skyterra) system is under considerabledoubt due to the anticipated interference issues with GPS. A growingnumber of government and industry groups oppose the system. PrecisionGPS receivers used by the U.S. Government are wideband and would bejammed by the system. Nobody seems to understand how this issue gotout of control. Some senior government officials expect the issue to go to

The Falcon 9vehicle willundoubtedly beused for a numberof othercommercialcommunicationsatellite programs

Ka-bandbroadbandservices areexpandingcapacity at anastronomicalrate


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Guest Column: Satellite 2011 (cont.)

the U.S. President. The prevailing view is that LightSquared will beprecluded from operating in certain frequencies.

Introduction of huge amounts of fiber optic capacity to the coastal regionsof Africa is having a profound impact on satellite service transponderprices. Furthermore, several new regional operators are leasing capacity

at lower rates to become established. Intelsat reports that lease rates forcellular backhaul (which were some of the highest in the world on a $ perMHz basis) have dropped precipitously. This could have a major impact toother types of satellite services.

There was widespread skepticism about the O3B system for providinglow-latency Ka-band bandwidth to tropical regions using a fleet of non-geostationary satellites. Part of the doubt arises from massive fiberinstallations. The O3B CEO has been replaced recently with the prior CEOreturning to SES.

ConclusionThe industry should enjoy prosperous times over the next two to threeyears.

By Roger RuschTelAstra Inc.

Roger Rusch is an expert on the satellite telecommunications industry and is President of space consulting firmTelAstra Inc. For a full set of notes from the conference contact: [email protected]

Introduction ofhuge amounts offiber optic capacityto the coastalregions of Africa ishaving a profoundimpact on satelliteservicetransponder prices


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AT&T swings for the fences winners and losers

I was working out on the treadmill. Where were you? Like a Presidentgetting shot or 9/11, you will always remember where you were when youfirst heard the news. In this case, Im of course referring to the move AT&Tmade by agreeing to buy T-Mobile for $39 billion.

Given that a company as big as AT&T has tentacles that reach throughoutthe telecommunications ecosystem, and since today is a very different dayfrom when Ma Bell was first broken up (and then partially recombined likethe liquid metal robot from Terminator 2), we wanted to join the chorus ofanalysts weighing in on this monumental transaction.

First, lets consider AT&T. We have always considered an AT&T/T-Mobiletransaction as very unlikely - as we penned in our January 2010newsletter article, While it [AT&T] would make a good fit with T-Mobile,the sheer scale of the transaction would make it very likely to attractregulatory attention. (See our January 2010 article Next Moves in the

Wireless Endgame for much more on this and other potentialtransactions.) On a pro forma, post transaction basis, AT&T and Verizonwould control 80% of the subscribers in the United States. The combinedAT&T/T-Mobile would likewise control a vast spectrum portfolio of nearly50 billion MHz-POPs about twice as much as Verizon! We expectwithering scrutiny from the Department of Justice on the market powereffects of the former, and from the Federal Communications Commissionon the latter. In the case of the FCC, consider that in the Skyterra takeprivate transaction rulemaking they specifically called out AT&T andVerizon for limits on the amount of traffic they were allowed on the system,all in the name of preserving competition. No wonder AT&T expects the

process to take a year, or perhaps more.

But, as we said above this is a different day and the Federal governmentsdesire to accelerate mobile broadband penetration and the tens of billionsof dollars of required investment may make some previously impossibletransactions quite conceivable. So, at least for the sake of discussion,what if they do get it approved? Then what?

For AT&T, as they outlined so well in their release, the combination makesa lot of sense. AT&T and T-Mobile use the same basic technology for their3G networks, which will help ease integration issues. In contrast, all the

other independent cellular carriers use the same CDMA standard thatVerizon and Sprint use making them difficult for AT&T to digest. Inaddition, T-Mobile controls substantial traffic that can be backhauled overAT&Ts terrestrial network, leading to substantial savings through verticalintegration. Consolidating tower equipment offers additional capex andopex savings.

We expectwithering scrutinyfrom theDepartment ofJustice andfrom the FederalCommunicationsCommission

the Federalgovernmentsdesire toaccelerate mobilebroadbandpenetration maymake somepreviouslyimpossibletransactions quiteconceivable


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AT&T swings for the fences (cont.)

From T-Mobiles perspective, its heads we win and tails we win anyway.If the deal is approved, T-Mobile gets a rich (7x EBITDA) valuation for itsshareholder not bad considering that T-Mobile was considered one ofthe weaker players heretofore. But, given the regulatory risk, T-Mobileinsisted on some fairly rich breakup provisions ($3 billion plus a measureof 1.4 GHz spectrum) as a precondition to accepting AT&Ts embrace.

So, even if the deal founders on regulatory shoals, T-Mobile wins anyway with a very big pile of cash plus the spectrum it needs to roll out real 4Gservices (as opposed to the HSPA service theyre currently pawning off onsubscribers as 4G but thats another story).

For the other carriers, a supercharged AT&T/T-Mobile cant be goodnews. With its strong brand, substantial financial heft, the new iPhone andthe best spectrum portfolio of the majors, Verizon is perhaps bestpositioned to receive the onslaught. Sprint is entirely another matter.While the carrier has been improving its results of late, it still remains alower margin outfit with a highly levered balance sheet. With its

constrained capital structure, Sprint is poorly equipped to compete withVerizon and AT&T on network upgrades and thus has relied on its majorityowned (though not controlled, due to the voting stock structure) Clearwireaffiliate to do the heavy lifting to build out a 4G network.

Unfortunately, Clearwire itself is rapidly depleting its cash reserves. Todate, Clearwire has supplemented Sprints capital with strategicinvestments from cable companies looking for a quadruple play (e.g.Comcast, Time Warner) and hardware companies (i.e. Intel) looking tobolster the WiMax standard and even Google. Given the weakeningposition of WiMax vs. LTE, we think that Intel is likely to refrain from

further investment, and given the poor take-up of the rebranded Clearwireservice with cable customers, that too seems an unlikely source offunding. If approved, this deal also effectively eliminates T-Mobile as aClearwire customer. Thus, we think (despite their protests to the contrary)the most likely funding source for Clearwire is Sprint which is likely todrive a pretty hard bargain. Even so, this is going to constrain Sprintsability to do acquisitions of the remaining carriers.

And, speaking of the remaining carriers (i.e. MetroPCS, Leap Wireless,U.S. Cellular and Cellular South), how does this affect their fortunes?Here the sword has two edges as noted above AT&T is going to be a

tougher competitor for all of them if this deal succeeds. But, if AT&T canget approval for T-Mobile, then the relatively smaller Verizon certainly isgoing to have a strong case that it should be permitted to buy up one ormore of these independents all of which use the same CDMA standardthat Verizon (and Sprint) use. Thus, we were not surprised to see positiveresponses in the stock prices for these carriers.

even if the dealfounders onregulatory shoals,T-Mobile winsanyway with avery big pile ofcash plus thespectrum it needsto roll out real 4G

services

if AT&T can getapproval for T-Mobile, then therelatively smallerVerizon certainly isgoing to have a

strong case that itshould bepermitted to buyup one or more oftheseindependents


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AT&T swings for the fences (cont.)

Going a bit deeper into the ecosystem, what about LightSquared? Herethe news is bad all around combining AT&T and T-Mobile will allow therespective networks to share spectrum, reducing their overall need. If thedeal fails, T-Mobile (which has the weakest spectrum portfolio of the bigfour) gets a pile of spectrum from AT&T which should go far towardsaddressing its expansion needs, making LightSquared redundant.

Granted, in this case there is a potential silver lining for LightSquared fromAT&Ts correspondingly reduced spectrum portfolio, but even there theFCCs restrictions on the amount of capacity that LightSquared is allowedto provide to AT&T/Verizon limit the upside. Finally, regardless of whathappens over the next year or so that the deal is in limbo, both AT&T andT-Mobile are going to pretty much be self absorbed and unlikely to doanything with LightSquared just when LightSquared is in the market tofund their buildout. Thank heavens LightSquared was able to announcetheir deal with Leap Wireless or it would have been a dark week indeed.

Elsewhere in the ecosystem, the tower companies and other

spectrum/backhaul plays such as Crown Castle, Fibertower, Nextwaveand others all appear to be losers, at least for as long as the deal ispending. Consolidation of the networks reduces demand for their services,vertically integrating T-Mobiles backhaul into AT&Ts terrestrial networkreduces their need for alternative backhaul solutions and consolidation oftheir customer increases its relative market power when approaching themfor services. While the tower companies are well funded and still sportimpressive valuation multiples, some of these smaller players are likely tofeel significant pain as they continue to seek funding.

With the epic Comcast/NBC Universal transaction now in the history

books, its exciting to see a deal of similar scale on the docket. As wevediscussed above, a lot of people (and smaller deals) are going to behanging on what happens next.

By John StoneNear Earth LLC

Consolidation ofthe networksreduces demandfor their services,verticallyintegrating T-Mobiles backhaulinto AT&Ts

terrestrial networkreduces their needfor alternativebackhaul solutions


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2020 Foresight

At Satellite 2011, one of the Audience Response System questions posedto attendees was what the Big Four Panel would look like in 2020.Possible answers included (i) no change, meaning the big four FSScompanies would still be driving the industry forward, (ii) an entirely new

set of panelists made up of entities like ViaSat, Avanti, O3B, or perhapseven the new EchoStar/Hughes combination, suggesting a revolutionaryswitch from broadcasting to point-to-point service providers, or (iii) a mix ofold and new. The preferred answer, by a good margin, was a mix of oldand new. Now at first this might seem like no big deal, after all this is anindustry of innovation and constant change run by visionaries and spaceage entrepreneurs. However, had this question been asked in 2002 about2011, the dominant answer would probably have been the big FSScompanies, plus or minus some consolidation, and the audience wouldhave been correct.

To us, the attendees answer is an increasing recognition that our satelliteindustry is at the early stages of its next evolution in primary applicationand growth driver; the first stage being international trunking fortelecommunications and the second stage being video broadcasting whichhas dominated industry economics for the last two decades. The thirdstage is no secret. It involves connectivity of various sorts (e.g.residential/enterprise broadband, cellular backhaul, content delivery formobile broadband networks) and has been around for some time,especially in the form of VSAT networks everywhere and satellitebroadband in the more developed markets. What appears to betriggering the emergence of this secondary set of applications to primary

status is the advent of 100 Gigabit high throughput satellites (HTSs)employing spot beam technology for frequency reuse. What the world isbeginning to recognize is that HTSs can offer decent broadband qualityservices at affordable monthly subscriber rates.

Still at an early stage of adoption and market penetration, there seems tobe a growing consensus expectation that these new connectivityapplications could be huge, in the same way that DTH was huge. Andnone of this is lost on the FSS incumbents. Eutelsat has its Ka-Sat, whichis said to be doing well enough to create rumors of a second bird in theworks, SES invested in O3B, and Telesat recently acquired the Canadian

Ka-band payload of ViaSat-1. It will no doubt take many years for satelliteconnectivity applications to grow to a point where they pass broadcastingin industry importance, but the relative growth rates will clearly, in ourminds, favor connectivity over broadcasting going forward.

This by no means suggests that we believe broadcasting is played out,mature and awaiting an imminent decline. It is not. However, we dobelieve growth in global video channels will abate at some point due to

our satelliteindustry is at theearly stages of itsnext evolution inprimary applicationand growth driver

there seems to bea growingconsensusexpectation thatthese newconnectivityapplications could

be huge, in thesame way thatDTH was huge


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2020 Foresight (cont.)

market saturation and constraints on subscriber ARPU and viewing time.The same can be said for the forward looking growth rate for new DTHsystems fed by FSS capacity. However for the next decade we do expectthere will be many markets seeking more satellite transported video, DTHproviders interested in increasing their channel offerings and lots of SD tobe converted to HD, or 3D or ultra-HD. Yet these broadcasting growth

drivers are in full force today and generating only single digit growth ratesfor the major FSS operators. We do not see anything on the broadcastinghorizon to suggest that these single digit growth rates will jump. Fordouble digit growth rates it is probably time to focus more (and investmore) on the emerging third stage of FSS.

But is this really a new third stage or just a likely future spin-off from FSSin the same way that the DBS / DTH industry was incubated by the FSSindustry before becoming its own separate business (e.g. C-band servicesto Ku-band dishes)? Today, the DBS/DTH industry has aggregate globalrevenues in excess of the non-DTH FSS industry itself. Whats more, the

DBS/DTH guys really dont see themselves primarily as satellitecompanies, but as media companies. Same with satellite radio. Satellite2011 is, at its core, an infrastructure conference, not a media conference.In the same way as with DTH, FSS can be seen as incubating the satellitebroadband connectivity industry for a future spin off. And most likely, aswith DBS/DTH, once firmly established the satellite broadband companieswill be focused more on broadband conferences than satellite conferencesand looking to hybrid terrestrial / satellite models to serve their growingbase of customers.

Whether connectivity becomes a stage 3 of the FSS industry or just

another industry spun-off from FSS will ultimately depend on the businessmodels financed and deployed. If providers mostly follow the DBS modeland go direct to end users with company owned capacity then it will be anew industry versus a 3rd stage of FSS. ViaSat (WildBlue) and EchoStar(Hughes) are examples of this evolutionary path. If, on the other hand,connectivity providers mostly act as infrastructure owners wholesalingcapacity to resellers, then it could usher in a new stage 3 to the satelliteinfrastructure industry. Avanti and O3B are examples of this evolution. Fordeveloping regions, a wholesale model with incumbent Telecos providingend user services and regulatory clearance (e.g. landing rights in eachcountry covered) may make more sense and involve less market risk and

financial exposure. Our bet would be primarily direct to consumerbusiness models in the developed world and a mix of initially wholesalemodels followed by direct to consumer models for the rest of the world, somostly or eventually a new spun-off industry versus a 3 rd stage of FSS.

But stage 3 is about more than just broadband connectivity. It is alsoabout other connectivity applications like wireless backhaul and supportingmobile broadband markets. These applications may make up the real

stage 3 is aboutmore than justbroadbandconnectivity. It isalso about otherapplications likewireless backhauland supportingmobile broadband

markets

once firmlyestablished thesatellite broadbandcompanies will befocused more onbroadbandconferences thansatelliteconferences


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stage 3 for the satellite infrastructure industry, especially as smart phonesand tablet computers continue on their consumer rampage.

In the recent article, Cisco Visual Networking Index: Global Mobile DataTraffic Forecast Update, 2010-2015, Cisco reports that global mobile datatraffic grew by 159% in 2010 and represented three times the entire global

Internet traffic of 2000. Hows that for growth? This growth is being drivenby the proliferation of data hungry devices and applications. For instance,smart phones, which generate on average 24 times the traffic of a regularcell phone, doubled in 2010, yet still represent only 13% of globalhandsets. In 2010, 3 million tablet computers were in mobile use, eachgenerating roughly 5 times the traffic of a smart phone (122 times a cellphone). There are also 94 million laptops on the mobile networkgenerating roughly 22 times more traffic than a smart phone (515 times acell phone).

You can see where this is going. Cisco expects 7.1 billion mobile-

connected devices by 2015 or almost one device per person on Earth. By2015, global mobile data traffic is expected to be 26 times larger than in2010 or a compound annual growth rate of 92%. How do those singledigit video broadcasting growth rates seem now? Perhaps of morepotential relevance to the satellite industry, the mobile-only universe ofusers, is predicted by Cisco to grow 56-fold by 2015 to 788 million people.It is these users who are most likely to benefit from some form of satelliteconnectivity. Cisco also predicts that by 2015, four regions (SoutheastAsia, South Asia, Sub-Sahara Africa and the Middle East) and 40countries (including India, Indonesia and Nigeria) will break the electricitybarrier, meaning people will have mobile network access but not electricity

in their homes. If there is an evolution to a stage 3 of FSS, supportingmobile connectivity may be what it is all about.

Wireless backhaul from remote towers is one obvious application, butdelivering broadband content to the wireless network may become anequally important market for satellite. We may even see high speedsatellite broadband delivery and connectivity directly to the mobileconsumer eventually. Already today we have new MSS systems capableof providing medium bandwidth to handsets and Inmarsat is leading theway with three new Boeing-made HTSs to support the demand growth ofits mobile customers. In fact, MSS and FSS are becoming increasingly

overlapping businesses as mobile bandwidth needs exceed what L-bandand S-band systems can generally provide and new smaller, cheapertracking antennas bring FSS frequencies into the mobile marketplace. Wealso note, for instance, the recent U.S. Department of Defense contract toHughes Network Systems to study both on-board processing architectureslike that of Spaceway-3 and Ka-band transponded architectures like onthe new Jupiter platform for future military tactical communications-on-the-move (COTM). Just as with the aeronautical and maritime markets, some

four regions and40 countries willbreak theelectricity barrier,meaning people

will have mobilenetwork accessbut not electricityin their homes

that globalmobile data trafficgrew by 159% in2010 andrepresented threetimes the entireglobal Internettraffic of 2000.

Hows that forgrowth?


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technologies developed for military applications eventually work their wayinto the enterprise and then consumer markets as technologies mature,unit production volumes increase and price points drop.

What types of content will drive this growth in mobile bandwidth demand?In particular, we note that Cisco believes video will go from roughly half of

all mobile data traffic today to two-thirds of all mobile data traffic by 2015.Much of this video traffic will be short-form and non-linear in naturewhether professionally or user-generated. It will be unscheduled, ondemand, mobile, time shifted and often peer-to-peer or socially networked.Basically, what we see happening to video is the same thing that hasalready happened to music. If you have a teenager, ask them how manyCDs they intend to buy this year. If they look at you like you are adinosaur, you will get what we mean. They may still listen on occasion to afew radio stations, but generally focus on their own play list or customgenerate Internet radio stations (e.g. Pandora, Slacker). Music isbecoming all-digital, online and a la carte, requiring less and less fixed

distribution, whether radio towers or retail stores (both have single digit ornegative growth). If you like a song, you go online and download it to yourmobile device, often from your mobile device.

Do we really think this generation or the next will treat video anydifferently? The days of charging subscribers monthly fees for bundles of100s of mostly unwatched and unwanted video channels cannot lastforever. HD and DVRs may have delayed the inevitable, but a la cartevideo, once a dream of customers and regulators a like, may finally begetting the technology and infrastructure it needs to thrive. As statedabove, we do not expect this change to be a quick or revolutionary one,

but a steady evolution to a world where the standard multi-channeltelevision offering grabs a much lower percentage of consumer hourscompared to a mix of a la carte video, social networking, other mobileapplications, Internet usage and gaming.

If this connectivity and mobility driven growth is the brave new stage 3 ofthe satellite industry then who will be the major players? Cant wait to findout, but as the audience predicted, we probably already know the namesof some of the 2020 Big Four panelists; some of the todays major FSSplayers. This is evolution after all, not revolution. Others may already beknown entities in the satellite industry like Echostar or O3B, while still

others may not even have been formed yet. Some may be terrestrialcarriers like Global Crossing, Level 3 or AT&T to get an overlay capability.Lastly, some may turn out to have odd names like Google.

By Hoyt DavidsonNear Earth LLC

The days ofchargingsubscribersmonthly fees for

bundles of 100s ofmostly unwatchedand unwantedvideo channelscannot last forever

Much of this videotraffic will be short-form and non-

linear in nature It will beunscheduled, ondemand, mobile,time shifted andoften peer-to-peeror sociallynetworked.


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Building Blocks of the Future

1998 just called, and it wants its technology frenzy back. All of a sudden,the valuation and growth of the latest wave of digital media startups havebeen going through the roof unlike any time since before the dot.com bust.Multi-billion dollar revenue-run rates, stock appreciation and glamorous

movie portrayals of tech startups means that venture capitalists have goneback to pouring $41 million into pre-revenue, pre-launch startups, a factthat should delight those who remember the good old days of about adozen years ago. This time around, however, a big part of the story is howmuch of the activity is not just located in Silicon Valley, but located here inNew York, an indicator of how much this latest wave is linked to this citysstrengths commerce and media. Nowadays, its possible in just a spanof a few weeks to witness dozens of startup pitches and tech demos inany number and variety of meetups, workshops and conferencesdedicated to the black arts of entrepreneurship and venture investing.Many of these startups and demos are hopping onto the latest wave of

digital and social media. Being in the midst of it all is certainly a gratifyingand educational experience, as long as it continues to last.

Ask entrepreneurs, VCs and angel investors about what is driving thisfrenzy and they will invariably cite a new mode of entrepreneurshipsweeping the digital world. Start-ups have become much cheaper to fundand they now scale virally through social networks - some even garneringmillions of users in a matter of weeks. Successful start-ups now achieverelatively quick exits due to the hyperactivity of the M&A departments ofabout two dozen or so of the top tech companies. Those in the mood toopine about the macro trends in technology will cite the emergence and

convergence of a holy trifecta of mobile, social and local. App-enabledsmartphones connected on the Facebook / LinkedIn / Twitter social graphenabled by GPS and the craze for check-ins is creating a whole new setof angles from which to harness commerce and social attention.

While its hard to disagree with any of that, its equally noteworthy to pointout the role that hardware has played in all of this. Without the greatadvancements in storage capacity, processing power and bandwidth overthe last decade, many of these achievements would be unimaginable. Thelargest datacenters of the late 1990s could never have handled anywherenear the data that YouTube, Facebook, Hulu and other sites now demand,

let alone the very many cloud-based applications built along with them.Modern commodity servers and an enormous datacenter infrastructuremake this happen. Modern smartphones too, depend on the advancementof technology. Without abundant supplies of affordable high-capacitymemory, high-powered processors, thin capacitive touch-screens, high-density Lithium-Ion batteries, as well as cheap baseband and GPSchipsets, mere cell phones could hardly have supported so many newground-breaking applications as they would not be smart enough.

valuation andgrowth of the latestwave of digitalmedia startupshave been goingthrough the roofunlike any timesince before thedot.com bust

Without the greatadvancements instorage capacity,processing powerand bandwidthover the lastdecade, many oftheseachievements

would beunimaginable.


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Building Blocks of the Future (cont.)

Not just technology but economic organization has made powerful newhardware cheap and available in mass quantities. The rise of ElectronicManufacturing Service (EMS) providers, enormous confederations ofmostly Asian-based electronics manufacturing facilities, has helpedWestern design companies such as Apple, Motorola, Amazon, HP andmany others to turn visions and revisions of new designs intotheir millions

of units of the latest and greatest gadgets delivered to eagerly awaitingcustomers latest and greatest gadgets out of mostly commoditizedhardware components. Even bookstores can now offer their own e-readerand tablet designs and products because of the EMSs. Economic nativistsmay object that manufacturing has left America to go overseas, but itshard to argue with the value proposition. Apple, the industrial design andmarketing company, is far more profitable than any of its contractmanufacturers. Add the hundreds of billions of dollars in value added bythe latest wave of digital media giants (Facebook, Groupon, Zynga,Foursquare, Twitter, etc) and one cannot escape the conclusion thattheres more value in being the designer, brander and app programmer

than it is to be the hardware maker.

Or is it? Perhaps building things shouldnt just be the domain of enormousEMSs in far-off lands and perhaps hardware manufacturing should be anintegral part of the digital/social revolution, not just a supporting pillar of it.Weve talked a lot about machine-to-machine communications in thesepages in the past, often about how the desire to connect anything,anywhere is driving more and more traffic onto the worlds wirelessnetworks. But just as interesting as bandwidth demands are the multiplicityof devices needed to connect this everything. Large hardware developerscan only meet the needs of only the broadest of markets but the world is

filled with things of every imaginable size, shape, velocity and personality.If the Internet of Things is to really take off, it must leverage the marketsimagination to enable user-generated hardware just as much as modernsocial media leverages user-generated content. We are seeing thebeginning of this, as cheap, programmable and readily availablesmartphones, enabled by custom apps are enabling sensing, tracking andlocating functions, but that is just the beginning.

Ever wondered how the U.S. Air Force processes and sorts through thetorrents of geospatial information coming down from cameras mounted ontheir multitude of unmanned aerial vehicles? Well, we have, at least. A

recent article about the Air Force Research lab in Rome, NY discussedhow researchers had created one of the worlds largest, fastest and,astoundingly, cheapest supercomputers to process all that data. Theirsecret? Over 1700 Playstation-3 game consoles linked together, the samedevices that anyone can buy off a shelf, only strung together with customdesign. It has all the power of a supercomputer at a tenth of the cost. Howabout how a father and son in Brooklyn builtding a weather balloonwithcraft to take HD video payload to take pictures of the Earth from

economicorganization hasmade hardwarecheap andavailable in massquantities

Internet ofThings mustleverage themarketsimagination toenable user-generated

hardware just asmuch as modernsocial medialeverages user-generated content


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110,000 thousand feet? This family achievement was eEnabled by highdefinition cameras, transmitters and GPS devices found in hobby shopsand put together by athe do-it-yourself ethic.

This isnt just limited to building cheap supercomputers, homemadesatellites or custom sprinkler systems but is good for tracking devices,

home automation equipment, smart grid applications, security devices andany number of other machines that only the collective creativity of severalbillion human minds can imagine. For more power users, there isbeginning to emerge a class of Open Source Hardware enabled by cheap,customizable microcontrollers and modules. Here in New York, a youngventure-backed startup named Bug Labs (www.buglabs.net) is developinga line of interchangeable modules to allow universal hardwarecustomization. They are surely not the only part of this movement. Incolleges and home garages, hobbyists and entrepreneurs have beendiscovering the versatility of ready to use and programmablemicrocontrollers. Arduino (www.arduino.cc) boards, pictured below, were

the creation of a student team in Italy in 2005 in an effort to makehardware creation easier for all - not just to hobbyist electronics engineers,but to the millions of software engineers. They have since shipped tens ofthousands of boards and spawned dozens of variants and extensions. Forthose who want their projects to have instant connectivity, another NewYork-based startup has introduced the Netduino (www.netduino.com), anArduino variant with built in .NET extensions ready to be programmed. Nota programmer and want a piece of the action? Were sure someone,somewhere is working on an interface that makes it as easy to make yourown device as it is to grow your own FarmVille.

The Arduino board cheap, simple, powerful and adaptable

What if users were able to make any item or device exactly how they

want, when they want, and in as small a quantity as they want? As far as itmay seems that we are from achieving thisat goal, note that one of themost interesting devices to come down the line recently are 3D printers,devices built on the same principles as modern 2D printers, but designedto build objects upwards from defined digital designs. Originally conceivedas rapid prototyping machines for engineers, architects and otherprofessions, their rapidly decreasing price and increasing capabilities areallowing amateurs to build miniature factories. Although there are a

In colleges andhome garages,hobbyists andentrepreneurshave beendiscovering theversatility of readyto use andprogrammablemicrocontrollers

rapidlydecreasing priceand increasingcapabilities areallowing amateursto build miniaturefactories


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number of players in the sector offering a wide variety of 3D printingsolutions, how could we resist mentioning (and showing below) yetanother New York-based startup MakerBot (www.makerbot.com), whooffers wood-paneled (!) 3D printers for only a couple thousand dollars?Decades since it stopped being a center of production and became aprofessional services hub, is this a new beginning for manufacturing in the

Big Apple? As both inhabitants and watchers of technology trends, wecertainly hope so.

The MakerBot Thing-O-Matic

Investment and adoption of new forms of media (including this latest waveof digital/social media) are ultimately a play on the value generated fromoptimizing human social and commercial interactions. Although we hardlybelieve that the efficiency of human interactions will reach a maximum

anytime soon, advancements have a habit of coming in waves, usuallyfollowing the introduction of a disruptive technology. While there should beenough energy in the current frenzy of digital/social media activity to lastat least another couple of years, the astute and far-seeing venture investorshould ask themselves what comes next. Although they say thatprediction-making is hard, especially about the future, we think theres aninteresting lesson to be drawn from the last decade and a half.

The dot.com boom of the late 90s was one of the greatest love affairsinvestors had ever had with virtuality. It wasnt enough that the securitiesthemselves were representations of a future potential for wealth (an

inherent unreality) but that the underlying properties were as virtual as theinvesting public had ever seen, often being little more than websites insearch of a business model. When the dot.com asset inflation edificecollapsed, investors went in search of tangibility. How better to invest intangibility than to buy land, houses and other real estate? We saw wherethat tangible investing frenzy went. Now virtuality is back in fashion anddigital media startups are the hottest thing on the investing circuit. Thependulum could swing all the way back, but why should it? The logical end

When the dot.comasset inflationedifice collapsed,investors went insearch oftangibility Nowvirtuality is back infashion


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of thesis and antithesis is not a return to thesis but to synthesis. Opensource hardware is a means to a new wave of value creation, where thedigital/social media revolution crossed with accessible commodityhardware is creating a new wave of devices.

Frequent readers of this newsletter will know that we are big believers in a

collection of sectors that many have long viewed as capital intensive andthus underappreciated as private investment opportunities these includesatellite services, emerging wireless, geospatial systems, unmannedsystems and commercial spaceflight as well as and the intersectionsbetween them. While there will always be some part of these sectors thatwill be capital intensive, the collective influence of commercial-off-the-shelfand open source hardware, rapid prototyping and a lean entrepreneurialmindset ought to drive more capital-efficient, high value solutions in everyone of these sectors. We think that investors ought to view the ability toleverage these components as a key aspect to success. After all, how canyou win the future if you arent using its building blocks?

By Ian FichtenbaumNear Earth LLC

the collectiveinfluence of

commercial-off-the-shelf and opensource hardware,rapid prototypingand a leanentrepreneurialmindset ought todrive more capital-efficient, highvalue solutions


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NEAR EARTH ANALYSIS: MARKET COMPARABLES

Public Market Valuation Analysis of Selected Companies in the NEAR EARTH INDEX($ in millions, except per share data) Stock Price: Enterprise Value as a Multiple of: Price as a Multiple of:

3/28/11

Market

Value of

Equity

Enterprise

Value (a)

LTM

Sales

LTM

EBITDA

LTM

EBIT

LTM

EPS

Trailing

EPS (b)

Forward

EPS (b)

Fixed Satellite Services (FSS)

ETL.PA Eutelsat Communicat ions ( c ) 27.77 $8,618.32 $11,928.31 7.6x 9.6x 14.7x 19.2x 26.5x 24.5x

SESG.PA SES Global S.A. ( c) 18.12 $10,232.89 $15,548.03 6.3x 8.5x 13.8x 13.8x 19.1x 17.7x

LORL Loral Space & Comm. Inc. 77.49 $2,358.02 $2,192.85 1.9x 19.0x 27.2x 13.7x 17.9x 9.7x

SATS EchoStar Corporation 37.03$ $5,055.90 $4,337.89 1.8x 11.7x 30.5x 21.8x n/m n/m

Mean 4.4x 12.2x 21.5x 17.1x 21.2x 17.3x

Mobile Satellite Services (MSS)ISAT.L Inmarsat (f) 6.02 $4,440.48 $5,558.28 4.7x 8.0x 12.0x 16.9x 8.4x 8.4x

IRDM Iri di um Communic at ions Inc . 8. 85$ $621.71 $524.00 1.5x 4.1x 14.0x n/m 12.6x 11.3x

ORBC ORBCOMM Inc. 3.20$ $136.38 $52.28 1.4x 5.6x 10.3x n/m n/m n/m

GSAT Globalstar Inc. 1.29$ $396.47 $964.52 14.3x n/m n/m n/m n/m n/m

Mean 5.5x 5.9x 12.1x 16.9x 10.5x 9.9x

Satellite Ground Segment

CMTL Comtech Telecommunications 26.72$ $715.83 $322.49 0.4x 2.2x 2.5x 9.3x 13.0x 24.3x

GCOM Globecomm Systems Inc. 11.70$ $260.33 $230.88 0.9x 9.7x 15.0x 27.0x 21.7x 16.0x

GILT Gilat Satellite Networks 5.17$ $210.11 $216.77 0.9x 15.3x n/m n/m n/m 32.3x

HUGH Hughes Communicat ions , Inc . 59.77$ $1,304.78 $1,879.95 1.8x 9.4x 22.0x n/m 24.6x 18.4x

ISYS Integral Systems Inc. 11.92$ $210.51 $241.07 1.3x n/m n/m n/m n/m n/a

VSAT ViaSat Inc. 39.55$ $1,642.91 $1,922.47 2.4x 13.7x n/m n/m 28.5x 33.0x

Mean 1.3x 10.1x 13.2x 18.2x 21.9x 24.8x

Satellite Space Segment

ORB Orbital Sciences 18.41$ $1,072.20 $945.32 0.7x 9.4x 12.7x 22.0x 20.5x 16.1x

CDV .TO COM DEV International (d) 2. 15$ $167.92 $175.66 0.8x 10.0x 28.8x n/m 12.6x 8.0x

MDA.TO McDonald Dettwiler and Associates (d) 51.36$ $2,155.93 $1,348.03 1.9x 7.7x 13.5x 33.4x 20.6x 18.7x

OHB.DE OHB Technologies (c ) 13.02 $320.18 $284.84 0.4x 6.0x 8.9x 23.5x 20.7x 16.6x

Mean 1.0x 8.3x 16.0x 26.3x 18.6x 14.9xTowers

AMT American Tower 50.00$ $19,935.00 $24,595.11 12.4x 19.8x 31.4x n/m n/m 38.5x

CCI Crown Castle 40.44$ $11,761.17 $18,743.74 10.0x 16.6x 31.7x n/m n/m n/m

SBAC SBA Communications 38.77$ $4,457.00 $7,216.18 11.5x 19.6x n/m n/m n/m n/m

Mean 11.3x 18.6x 31.5x n/m n/m n/m

General Telecom

S Sprint Nextel Corporation 4.78$ $14,282.64 $29,000.64 0.9x 5.0x n/m n/m n/m n/m

T AT&T 29.36$ $173,549.60 $238,582.60 1.9x 6.0x 11.6x 8.8x 12.3x 11.5x

VZ Veri zon Communicat ions , Inc . 37. 75$ $106,710.95 $201,872.95 1.9x 6.2x 13.8x n/m 16.9x 14.4x

Mean 1.6x 5.7x 12.7x 8.8x 14.6x 12.9x

Satellite Broadcast (DBS and DARS)

BSY. L B ritish Sky Broadc as ting (f) 8. 39 $23,536.68 $25,495.19 2.5x 8.5x 17.2x 18.5x 33.8x 28.0x

DISH Dish Network Corp 24.17$ $10,712.87 $14,287.92 1.1x 4.5x 6.6x 9.5x 9.2x 9.1x

DTV DirecTV Group Inc. 46.16$ $37,318.05 $46,512.05 1.9x 7.3x 11.9x 17.2x 14.9x 11.3x

SIRI Sirius XM Radio 1.72$ $6,765.10 $9,395.99 3.3x 11.7x 17.8x 32.3x n/m 34.4x

Mean 2.2x 8.0x 13.4x 19.4x 19.3x 20.7x

Cable Television

CMCSA Comcast Corporation 24.43$ $67,829.90 $93,402.90 2.5x 6.4x 11.7x 18.6x 15.7x 13.3x

TWC Time Warner Cable Inc. 69.91$ $24,349.65 $44,730.65 2.4x 6.5x 12.0x 18.3x 15.6x 12.6x

CVC Cablevision Systems Corp 34.35$ $10,307.40 $22,521.12 3.1x 8.9x 14.7x 23.6x 18.1x 13.9x

Mean 2.6x 7.3x 12.8x 20.2x 16.4x 13.3x

Machine-to Machine Communications

DGII Digi International Inc. 10.36$ $260.86 $169.26 0.9x 8.4x 16.4x 28.5x 23.5x 17.9x

SWIR Sierra W ireles s Inc orporat ed 10. 89$ $338.68 $230.02 0.4x 16.0x n/m n/m 16.5x 11.3x

NVTL Novatel Wireless Inc. 5.49$ $173.70 $104.99 0.3x n/m n/m n/m n/m 18.9x

NMRX Numerex Corp 9.42$ $142.43 $132.60 2.3x n/m n/m n/m 30.4x 23.0x

TCM. L Tel it Communic at ions pl c (f) 0. 83 $102.19 $122.62 1.1x 20.3x n/m n/m 23.7x 9.2x

Mean 1.0x 14.9x 16.4x 28.5x 23.5x 16.1x

New Media

MSFT Microsoft Corporation 25.41$ $213,520.23 $181,939.23 2.7x 6.3x 6.9x 10.4x 10.0x 9.2x

AAPL Apple Inc. 350.44$ $322,769.26 $263,062.26 3.4x 11.7x 12.2x 19. 4x 15.3x 13.3x

YHOO Yahoo! Inc. 16.58$ $21,700.57 $18,997.56 3.0x 12.9x 24.1x 22. 0x 22.1x 18.2x

GOOG Google Inc. 575.36$ $184,863.17 $153,353.17 5.2x 13.0x 14.8x 21. 7x 25.1x 21.8x

ERTS Electronic Arts Inc. 19.71$ $6,583.14 $4,612.14 1.3x n/m n/m n/m 2 9.4x 22.9x

Mean 3.1x 11.0x 14.5x 18.4x 20.4x 17.1x

Satellite Imagery

GEOY GeoEye 39.64$ $876.44 $1,051.24 3.2x 6.2x 10.0x 32.9x 20.3x 16.5x

DGI DigitalGlobe Inc. 28.73$ $1,309.23 $1,466.83 4.6x 8.7x 29.9x n/m n/m 28.7x

Mean 3.9x 7.5x 20.0x 32.9x 20.3x 22.6x

OVERALL INDEX

High 14.3x 20.3x 31.7x 33.4x 33.8x 38.5x

Mean 3.1x 10.0x 16.3x 20.1x 19.3x 18.1x

Low 0.3x 2.2x 2.5x 8.8x 8.4x 8.0x

(b) EPS estimates from Thompson First Call. Near Earth does not estimate EPS and does not condone or v alidate these estimates. n/m Not Meaningful.

(c ) Converted to US $ from Euro at an exchange rate of 1.4133 US $ per Euro. n/a Not Available

(d ) Converted to US $ from C$ at an exc hange rate of 1.0255 US $ per C$.

(f) Conv erted to US $ from British Pound at an exchange rate of 1.6014 US $ per British Pound.

Member of NEAR EARTH SATELLITE INDEX


18/20



NEAR EARTH ANALYSIS: M&A TRANSACTIONSSelected Satellite, Telecom, Media & Aerospace T ransactions(US$ in millions unless noted)

Transaction Value/

Date

Announced Acquiror Target

Equity

Value (a)

Transaction

Value (b)

LTM

Sales

LTM

EBITDA

Satellite Operators

12/05/06 Abertis Telecom EutelSat (32% share) 1,000.0 1,838.0 7.3x 9.7x

12/18/06 Telesat (new) Telesat/Skynet Combined 3,491.0 3,990.0 7.1x 13.4x

06/19/07 BC Partners Intelsat 5,000.0 16,400.0 7.7x 11.3x

08/02/07 Abertis Telecom Hispasat (28.4% share) 199.0 199.0 5.8x 7.9x

09/23/09 GHL Acquisition Corp Iridium Satellite LLC 500.0 517.3 1.6x 5.6x

10/01/09 ViaSat, Inc WildBlue Coimmunications, Inc. 568.0 500.0 2.4x 6.6xMean 5.3x 9.1x

Ground Equipment & Systems Integrators

05/12/08 Comtech Telecommunications Co Radyne 201.9 223.6 1.5x 16.0x

05/09/09 Rockwell Collins Datapath, Inc. 130.0 130.0 0.5x n/d

03/05/10 Integral Systems CVG-Avtec Systems, Inc. 34.7 34.7 1.0x n/d

06/16/10 Teledyne Technologies, Inc. Intelek plc 28.0 35.0 0.9x 6.0x

10/13/10 Gilat Satellite Networks Wavestream Corporation 130.0 130.0 1.9x 10.6x

11/26/10 Veritas Capital CPI International, Inc. 393.1 545.2 1.5x 14.1x

Mean 0.6x 11.7x

Satellite Managed Network Services

03/19/07 CIP Canada Inves tment Inc . S tratos Global Corporat ion 293.3 621.5 1.2x 6.3x

06/01/ 09 Globec omm Sys tems Inc. Telaurus Communic at ions LLC 7.6 7.6 0.6x n/d

11/23/09 Inmarsat plc Segovia, Inc. 110.0 110.0 1.6x n/d

03/08/ 10 Globec omm Sys tems Inc. Carrier to Carrier Telec om BV 15.0 15.0 0.8x n/d

05/21/10 Harris Corporation CapRock Communications 525.0 525.0 1.5x 9.7x

11/08/10 Harris Corporation Schlumberger GCS 347.5 347.5 2.0x 8.5x

Mean 0.6x 6.1x

Aerospace and Defense

05/12/08 Finmeccanica SPA DRS Technologies Inc 3,358.0 4,930.0 1.4x 11.0x

05/13/08 Cobham plc M/A-COM 425.0 425.0 0.9x 6.8x

06/04/08 Cobham plc Sparta Inc 416.0 416.0 1.4x 12.1x

12/16/08 Sierra Nevada Corporation SpaceDev, Inc. 31.7 26.6 0.7x 23.3x

12/23/09 OM Group EaglePicher Technologies LLC 171.9 171.9 1.4x n/d

03/05/10 Orbital Sciences Corp. GD Advanced Informat ion Sys tems 55.0 55.0 1.1x n/d

06/30/10 The Boeing Company Argon ST, Inc 807.1 765.4 2.5x 31.4x

10/13/10 Veritas Capital Lockheed Martin EIG 815.0 815.0 1.3x n/d

12/08/10 GeoEye, Inc. SPADAC Inc. 46.0 46.0 1.7x n/d

12/20/ 10 Ray theon Company Applied S ignal Technology, Inc. 539.0 505.5 2.2x 17.3x

Mean 1.3x 17.0x

Video Distribution

04/23/07 Motorola Terayon Communication Systems Inc. 139.7 127.2 1.9x n/m

12/07/07 Macrovision Corp Gemstar-TV Guide Intl Inc 2,842.1 2,325.1 3.7x 21.9x

03/12/09 Harmonic Inc. Scopus Video Networks 78.3 47.6 0.8x n/m

10/01/09 Cisco Systems Inc. TANDBERG ASA 3,322.0 3,622.0 4.0x 18.7x

05/06/10 Harmonic Inc. Omneon, Inc. 274.0 274.0 2.6x n/d

Mean 2.6x 20.3x

Towers03/17/06 Crown Castle Trintel Communications 145.0 145.0 10.1x n/d

03/17/06 SBA Communicat ions Corp AAT Communicat ions Corp 1,002.0 1,002.0 12.0x 17.9x

05/08/06 Crown Castle Mountain Union Telecom LLC 309.0 309.0 11.9x n/d

10/06/06 Crown Castle Global Signal 4,000.0 5,800.0 12.1x 26.6x

07/21/08 SBA Communications Corp Optasite Towers 253.2 428.2 14.8x n/m

Mean 12.2x 22.2x

General Telecom (Wireless)

03/06/06 AT&T (new) Bell South 67,000.0 89,000.0 4.3x 10.7x

08/07/08 Verizon Wireless Rural Cellular Corp 728.0 2,757.0 4.1x 9.7x

01/10/09 Verizon Wireless Alltel Wireless 5,900.0 28,100.0 2.9x 8.3x

12/24/09 Sprint Nextel Corp. Virgin Mobile USA 348.0 509.0 0.4x 4.4x

Mean 2.9x 8.3x

Machine-to-Machine Communications

11/21/08 EMS Technologies Inc. Satamatics Global Ltd. 30.67 30.67 3.0x 6.9x

12/02/08 Sierra Wireless Inc. Wavecom SA 306.0 271.0 2.3x n/m

07/01/09 Inmarsat plc SkyWave Mobile (19%) 113.2 113.2 2.8x 7.5x

01/22/10 Francisco Partners Cybit 22.85 22.91 1.0x 3.9x

06/29/10 Gemalto NV Cinterion Wireless Modules GmbH 163.0 163.0 1.1x 8.2x11/08/10 Novatel Wireless, Inc. Enfora Inc. 64.5 64.5 1.1x n/d

Mean 1.9x 6.6x

Radio

07/29/ 08 S irius Satellite Radio Inc. XM Satellite Radio Holdings Inc. 2, 301.7 3,957.7 3. 4x n/ m

07/30/08 Bain Capital Clear Channel 17,923.8 23,724.1 3.5x 10.8x

05/29/09 Cox Enterprises, Inc Cox Radio 381.5 704.3 1.8x 6.2x

Mean 2.9x 8.5x

(a) When Equity Value was not disclosed, Transaction Value was used

(b) Calculated as Value of Equity plus interest bearing liabilities and preferred stock, less cash & equivalents n/d Not Disclosed

n/m Not Meaningful


19/20



ABOUT NEAR EARTH LLC

Near Earth is a specialized Investment Bank which brings the highest quality senior levelattention to companies in the greater commercial satellite/space, telecom, aerospace andtechnology industries.

Near Earth provides a full range of capital raising, advisory and consulting services tocompanies and their Boards. We also provide financial advisory services, valuation, structuring,and due diligence support to private equity, hedge and distressed debt funds. Please contact us

if you would like our assistance with a contemplated satellite, telecom or aerospace investmentor portfolio divestment.

For more information about our current assignments or about Near Earth LLC, please visit ourwebsite at www.nearearthllc.com or contact us at our location below:

Headquarters250 Park Avenue, 7th Floor

New York, NY 10177Telephone (212) 551-7960


20/20


IMPORTANT DISCLOSURES AND INFORMATION ABOUT THE USE OF THIS DOCUMENT:

Near Earth, LLC ("Near Earth") has published this report solely for informational purposes. Thereport is aimed at institutional investors and investment professionals, and satellite, media andtelecom industry professionals. This report is not to be construed as a recommendation orsolicitation to buy or sell securities. The report was written without regard for the investmentobjectives, financial situation, or particular needs of any specific recipient, and it should not beregarded by recipients as a substitute for the exercise of their own judgment. The contentcontained herein is based on information obtained from sources believed to be reliable, but is

not guaranteed as being accurate, nor is it a complete statement or summary of any of themarkets or developments mentioned.

The authors of this report are employees of Near Earth, LLC, which is a member of FINRA. Theopinions expressed in this report accurately reflect the personal views of the authors but do notnecessarily reflect the opinions of Near Earth itself or its other officers, directors, or employees.

The portions of this report produced by non-Near Earth employees are provided simply as anaccommodation to readers. Near Earth is under no obligation to confirm the accuracy ofstatements written by others and reproduced within this report.

Near Earth and/or its directors, officers and employees may have, or have had, interests in thesecurities or other investment opportunities related to the companies or industries discussedherein. Employees and/or directors of Near Earth may serve or have served as officers ordirectors of companies mentioned in the report. Near Earth does, and seeks to do, businesswith companies mentioned in this report. As a result, Near Earth may have conflicts of interestthat could affect the objectivity of this report.

This report is subject to change without notice and Near Earth assumes no responsibility toupdate or keep current the information contained herein.

Near Earth accepts no liability whatsoever for any loss or damage of any kind arising out of theuse of all or any part of this report.

No part of this report may be reproduced or distributed in any manner, via the Internet orotherwise, without the specific written permission of Near Earth. Near Earth accepts no liabilitywhatsoever for the actions of third parties in this respect.

Documents

From the Ground Up - March_2011