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Valuation of Air Thread Connections
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Exhibit 1AIRTHREAD ACQUISITIONOperating Assumptions
Project:AIRTHREAD ACQUISITIONAnalysis:Operating AssumptionsDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONOperating Assumptions
Revenue Projections:20082009201020112012Service Revenue4,194.34,781.55,379.25,917.26,331.4Service Revenue Growth14.0%14.0%12.5%10.0%7.0%Equipment Revenue314.8358.8403.7444.1475.2Equipment Revenue/Service Revenue (1)7.5%7.5%7.5%7.5%7.5%Operating Expenses:System Operating Expenses838.9956.31,075.81,183.41,266.3System Operating Exp./Service Revenue20.0%20.0%20.0%20.0%20.0%Cost of Equipment Sold755.5861.2968.91,065.81,140.4Equipment COGS240.0%240.0%240.0%240.0%240.0%Selling, General & Administrative1,803.62,056.22,313.22,544.52,722.6SG&A/Total Revenue40.0%40.0%40.0%40.0%40.0%Depreciation & Amortization705.2804.0867.4922.4952.9Tax Rate40.0%40.0%40.0%40.0%40.0%Working Capital Assumptions (1):Accounts Receivable41.67x41.67x41.67x41.67x41.67xDays Sales Equip. Rev.154.36x154.36x154.36x154.36x154.36xPrepaid Expenses1.38%1.38%1.38%1.38%1.38%Accounts Payable35.54x35.54x35.54x35.54x35.54xDeferred Serv. Revenue14.01x14.01x14.01x14.01x14.01xAccrued Liabilities6.85x6.85x6.85x6.85x6.85xCapital Expenditures (2):Capital Expenditures631.3719.7867.4970.11,055.0Cap-x/Total Revenue14.0%14.0%15.0%15.3%15.5%(1) Based on a 360-day year. Days Payable, Deferred Service Revenue, and Days Accrued Liabilities are based on total cash operating expenses.(2) Includes investments in property, plant & equipment, as well as licenses and customer lists.Harvard Business Publishing
Exhibit 2AIRTHREAD ACQUISITIONLicensing Agreemts
Project:AIRTHREAD ACQUISITIONAnalysis:Licensing AgreemtsDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONLicensing Agreemts
Total Consolidated Markets:RegionPopulationCustomersPenetrationCentral US65,0963,8465.9%Mid-Atlantic11,6771,18010.1%New England2,83051818.3%Northwest2,28743118.8%New York48114730.6%Total82,3716,1227.4%Total Operating Markets:RegionPopulationCustomersPenetrationCentral US32,4973,84611.8%Mid-Atlantic7,3461,18016.1%New England2,34451822.1%Northwest2,28743118.8%New York48114730.6%Total44,9556,12213.6%Harvard Business Publishing
Exhibit 3AIRTHREAD ACQUISITIONCustomer Operating Data
Project:AIRTHREAD ACQUISITIONAnalysis:Customer Operating DataDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONCustomer Operating Data
Customer Data:200520062007Net Customer Additions301310477Cost Per Customer Addition372385487Cost of New Customer Additions111,972119,350232,299Cost of Equipment Sold/Equipment Revenue251.3%219.9%239.8%Monthly Churn Rate2.1%2.1%1.7%Revenue Per Minute200520062007Monthly ARPU45.2447.2351.13Customer Minutes Per Month625704859Revenue Per Minute0.07240.06710.0595Harvard Business Publishing
Exhibit 4AIRTHREAD ACQUISITIONIncome Statement
Project:AIRTHREAD ACQUISITIONAnalysis:Income StatementDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONIncome Statement
Historical Operating ResultsOperating Results:200520062007Service Revenue2,827.03,214.43,679.2Plus: Equipment Sales203.7258.7267.0Total Revenue3,030.83,473.23,946.3Less: System Operating Expenses604.1639.7717.1Less: Cost of Equipment Sold511.9568.9640.2Less: Selling, General & Administrative1,217.71,399.61,555.6EBITDA697.0865.01,033.3Less: Depreciation & Amortization490.1555.5582.3EBIT206.9309.5451.1Less: Interest Expense84.993.784.7Plus: Equity in Earnings of Affiliates66.793.190.0Plus: Gains (Losses) on Investments18.150.883.1Plus: Other Income54.5(46.6)7.0EBT261.3313.1546.5Less: Taxes95.9120.6216.7Income Before Minority Interest165.5192.5329.8Less: Minority Interest10.513.015.1Net Income155.0179.5314.7Harvard Business Publishing
Exhibit 5AIRTHREAD ACQUISITIONBalance Sheet
Project:AIRTHREAD ACQUISITIONAnalysis:Balance SheetDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONBalance Sheet
Assets:200520062007Cash & Cash Equivalents29.032.9204.5Marketable Securities0.0249.016.4Accounts Receivable362.4407.4435.5Inventory92.7117.2101.0Prepaid Expenses32.135.041.6Deferred Taxes8.20.018.6Other Current Assets15.513.416.2Total Current Assets539.9854.9833.8
Property, Plan & Equipment2,553.02,628.82,595.1Licenses1,362.31,494.31,482.4Customer Lists47.626.215.4Marketable Equity Securities225.44.90.0Investments in Affiliated Entities172.1150.3157.7Long Term Note Receivable4.74.54.4Goodwill481.2485.5491.3Other Long Term Assets30.031.131.8Total Assets5,416.25,680.65,611.9
Liabilities & Owners' Equity:Accounts Payable254.1254.9260.8Deferred Revenue & Deposits111.4123.3143.4Accrued Liabilities42.947.859.2Taxes Payable36.726.943.1Deferred Taxes0.026.30.0Note Payable135.035.00.0Forward Contract0.0159.90.0Derivative Liability0.088.80.0Other Current Liabilities82.693.797.7Total Current Liabilities662.7856.7604.2
Long Term Debt1,001.41,001.81,002.3Forward Contracts159.90.00.0Derivative Liability25.80.00.0Deferred Tax Liability647.1601.5554.4Asset Retirement Obligation90.2127.6126.8Other Deferred Liabilities46.262.984.5
Minority Interest41.936.743.4
Common Stock & Paid-In Capital1,375.01,378.91,404.1Retained Earnings1,366.01,614.41,792.1Total Liabilities & Owners' Equity5,416.25,680.65,611.9Harvard Business Publishing
Exhibit 6AIRTHREAD ACQUISITIONAmortization Schedule
Project:AIRTHREAD ACQUISITIONAnalysis:Amortization ScheduleDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONAmortization Schedule
Term Loan AmortizationAnnualAmortizationAnnualAmortizationPaymentInterestPrincipalBalancePeriodPaymentInterestPrincipalBalancePeriodDate:415.50%3,758120Date:415.50%2,698841/31/084117243,73416/30/114112282,669422/28/084117243,71027/31/114112292,641433/31/084117243,68738/31/114112292,612444/30/084117243,66349/30/114112292,583455/31/084117243,639510/31/114112292,554466/30/084117243,615611/30/114112292,525477/31/084117243,590712/31/114112292,496488/31/084116243,56681/31/124111292,467499/30/084116243,54292/28/124111292,4375010/31/084116253,517103/31/124111302,4085111/30/084116253,492114/30/124111302,3785212/31/084116253,468125/31/124111302,348531/31/094116253,443136/30/124111302,318542/28/094116253,418147/31/124111302,288553/31/094116253,393158/31/124110302,257564/30/094116253,367169/30/124110302,227575/31/094115253,3421710/31/124110312,196586/30/094115253,3171811/30/124110312,166597/31/094115263,2911912/31/122,176102,1660608/31/094115263,265209/30/094115263,2392110/31/094115263,2142211/30/094115263,1882312/31/094115263,161241/31/104114263,135252/28/104114263,109263/31/104114273,082274/30/104114273,055285/31/104114273,029296/30/104114273,002307/31/104114272,975318/31/104114272,948329/30/104114272,9203310/31/104113272,8933411/30/104113282,8653512/31/104113282,838361/31/114113282,810372/28/114113282,782383/31/114113282,754394/30/114113282,726405/31/114112282,69841Harvard Business Publishing
Harvard Business Publishing
Exhibit 7AIRTHREAD ACQUISITIONWireless Comparables
Project:AIRTHREAD ACQUISITIONAnalysis:Wireless ComparablesDraft:nFooter:Harvard Business Publishing
Size Factor100.0%
Harvard Business PublishingAIRTHREAD ACQUISITIONWireless Comparables
EquityNetDebt/Debt/EquityNetComparable Companies:Market ValueDebtValueEquityBeta1RevenueEBITEBITDAIncomeUniversal Mobile118,49769,13036.8%58.3%0.8643,88211,79516,9493,794Neuberger Wireless189,47079,35129.5%41.9%0.8942,6847,02014,0994,103Agile Connections21,0795,08019.4%24.1%1.1734,6981,6319,914(30)Big Country Communications26,2858,33524.1%31.7%0.9738,8966,70212,6143,384Rocky Mountain Wireless7,3603,26830.7%44.4%1.134,0645101,028240Average28.1%40.1%1.00
1) Equity betas were estimated on a weekly based on weekly stock returns over a three year period.Note: The current industry and competitor leverage ratios reflect the historical averages that existed over the past three years.
Harvard Business Publishing