Slide 1

1Valuation of AirThread Connections

M&A Case StudyGROUP 3Ashish Chandel11BPradeep Reddy Badaam33BPrasoon Gupta34BPrince Choudhary35BRajesh Gadde32CReedhima Singh39B1Overview of Cable Industry2Overview of ACCAir Thread Connections BusinessProvided service in more than 200 markets in 5 geographic regions2007 revenues were expected to be $3.9 billionThe network covered more than 80 million peopleChallengesWireless communications market was intensely competitiveThe competitors had big pockets when compared with ATCATCs operating costs were approximately 20% higher than its main rivalsIt could not bundle its wireless services with land line, internet or video servicesAvg. revenue per min. decreased from 6.71 to 5.95 cents over the last yearCost of acquiring a new customer increased from $372 in 2005 to $487 in 2007ATC had lower operating and EBITDA margins compared with its primary rivalsThe above challenges made ATCs long-term survival doubtful 3Synergies4Valuation ResultsScenarioValue(in $mn)Enterprise Value without Synergy7669.5Enterprise Value with Synergy11118.15Detailed Valuation showed in excel sheet attached.

6Thank YouCost of CapitalAIRTHREAD ACQUISITIONCost of Capital

Project:AIRTHREAD ACQUISITIONAnalysis:Cost of CapitalDraft:nFooter:Harvard Business Publishing

Size Factor100.0%

EquityNetDebt/Debt/EquityAssetEBITAssumptions:Comparable Companies:Market ValueDebtValueEquityBetaBetaMarginal Tax Rate40.0%Universal Mobile118,49769,13036.8%58.3%0.860.6411,795Debt Beta0.00Neuberger Wireless189,47079,35129.5%41.9%0.890.717,020Agile Connections21,0795,08019.4%24.1%1.171.021,631Market Risk Premium5.00%Big Country Communications26,2858,33524.1%31.7%0.970.816,702Risk-Free Rate4.25%Rocky Mountain Wireless7,3603,26830.7%44.4%1.130.89510Average72,53833,03328.1%40.1%1.000.825,532Cost of Debt5.50%

Equity Beta = Asset Beta (V/E) Debt/Debt/AssetEquityCost ofCost ofBe = Ba*(1/1-(D/V)ValueEquityBetaBetaEquityDebtWACC28.1%39.1%0.821.139.92%5.50%8.06%

Intermediate Operating CFAIRTHREAD ACQUISITIONIntermediate Operating Cash Flows

Project:AIRTHREAD ACQUISITIONAnalysis:Intermediate Operating Cash FlowsDraft:nFooter:Harvard Business Publishing

Operating Results:20082009201020112012Service Revenue4194.330184781.53640525379.228455855917.1513014356331.3518925354Plus: Equipment Sales314.77315358.84139403.69656444.06622475.15085Based on projected cashflows excluding the benefits of Synergy Plus: Synergy Related Business Revenue00000Changes in Working Capital:200720082009201020112012Total Revenue4509.103335140.37779525782.925015856361.2175214356806.5027425354Accounts Receivable435.497521.9287104475594.9987297944669.3735705846736.3109281061787.8526924485Less: System Operating Expenses838.866036956.307281041075.845691171183.4302602871266.2703785071Plus: Inventory100.99134.9677317611153.8632137789173.0961138933190.4057269978203.7341255722Plus: Backhaul Synergy Savings00000Plus: Prepaid Expenses41.58846.891888415653.456752793860.13884689366.152731582370.7834227931Less: Cost of Equipment Sold755.455560573861.2193390532968.87175643481065.75893207831140.3620573238Less: Deferred Revenue143.445163.229349505186.0814584357209.3416407402230.2758048142246.3951111512Less: Selling, General & Administrative1803.64133209552056.15111858892313.17000841252544.48700925372722.6010999015Less: Accounts Payable260.791335.4544513469382.4180745354430.2203338524473.2423672376506.3693329442EBITDA1111.14040133161266.7000565181425.03755983271567.5413198161677.2692068031Less: Accrued Liabilities59.22464.655683503873.707479194482.920914093791.21300550397.5979158882Less: Depreciation & Amortization705.2293197489803.9614245137867.4387531547922.3765408545952.9103849655Net Working Capital114.615140.4488462685160.1116842016180.1256426848198.1382091314212.0078808302EBIT405.9110815827462.7386320043557.598806678645.1647789615724.3588218376Increase in NWC025.833846268519.662837933120.013958483218.012566446613.8696716987Tax @40%162.3644326331185.0954528017223.0395226712258.0659115846289.743528735Un-Levered Free Cash Flow:NOPAT243.5466489496277.6431792026334.5592840068387.0988673769434.6152931026Plus: Depreciation & Amortization705.2293197489803.9614245137867.4387531547922.3765408545952.9103849655Less: Changes in Working Capital25.878265218619.669057130620.020290293618.018261264313.8740611735Less: Capital Expenditures631.2744662334719.6528915061867.4387531547970.0856722781055.0079262118Un-Levered Free Cash Flow291.6232372465342.2826550796314.5389937132321.3714746891318.6436906828PV Intermediate FCF8.06%1264.2290863907269.8715873094293.126421221249.2755042404235.6934279296216.2621456903

Estimanting Debt CapacityAIRTHREAD ACQUISITIONDebt Capacity

Project:AIRTHREAD ACQUISITIONAnalysis:Debt CapacityDraft:nFooter:Harvard Business Publishing

Size Factor100.0%

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:20082009201020112012Cash Reconciliation without synergy:2008Un-Levered Free Cash Flow291.6232372465342.2826550796314.5389937132321.3714746891318.6436906828Beginning Cash Balance204.533Less: After-Tax Interest Expenses119.657375019109.845048940299.47923054288.528698506876.9604703894Plus: Cash From Operations291.6232372465Less: Scheduled Principal Payments289.921948574306.2758253719323.5521893689341.80307609432495.9924151363Less: Aft-Tax Interest Exp.119.657375019Excess Cash-117.9560863465-73.8382192326-108.4924261978-108.960299912-2254.3091948429Less: Principal Payments289.921948574Ending Cash Balance86.58Cash on Balance Sheet86.5812.7386944209-95.7537317769-204.7140316888-2459.0232265318Includes Synergies:Cash Reconciliation with synergy:2008Excess Cash:20082009201020112012Beginning Cash Balance204.533Un-Levered Free Cash Flow324.2756503136416.512981582424.5221374459487.9036311203535.6851211941Plus: Cash From Operations324.2756503136Less: After-Tax Interest Expsnse119.657375019109.845048940299.47923054288.528698506876.9604703894Less: Aft-Tax Interest Exp.119.657375019Less: Scheduled Principal Payments289.921948574306.2758253719323.5521893689341.80307609432495.9924151363Less: Principal Payments289.921948574Excess Cash-85.30367327940.39210726991.490717534957.5718565192-2037.2677643316Ending Cash Balance119.2293267206

Cash on Balance Sheet119.2293267206119.6214339905121.1121515254178.6840080446-1858.5837562869

APV excluding SynergyAIRTHREAD ACQUISITIONAdjusted Present Value

Project:AIRTHREAD ACQUISITIONAnalysis:Adjusted Present ValueDraft:nFooter:Harvard Business Publishing

Size Factor100.0%

Un-Levered Free Cash Flows:20082009201020112012Interest Tax Shields:20082009201020112012NOPAT243.5466489496277.6431792026334.5592840068387.0988673769434.6152931026Interest Expense199.4289583649183.0750815671165.79871757147.5478308447128.267450649Plus: Depreciation & Amortization705.2293197489803.9614245137867.4387531547922.3765408545952.9103849655Tax Rate40.0%40.0%40.0%40.0%40.0%Less: Changes in Working Capital25.878265218619.669057130620.020290293618.018261264313.8740611735Tax Shield79.77158334673.230032626866.31948702859.019132337951.3069802596Less: Capital Expenditures631.2744662334719.6528915061867.4387531547970.0856722781055.0079262118Interest Rate5.50%Un-Levered Free Cash Flow291.6232372465342.2826550796314.5389937132321.3714746891318.6436906828PV of Intermediate Tax Shields284.783121267375.612875209565.793699716456.478581354747.641231798339.2567331885

PV of FCF8.06%1264.2290863907269.8715873094293.126421221249.2755042404235.6934279296216.2621456903Interest Tax Shields79.77158334673.230032626866.31948702859.019132337951.3069802596PV of Interest Tax Shields284.783121267375.612875209565.793699716456.478581354747.641231798339.2567331885Total Intermediate Term Value1549.012207658TV Growth Rate3.0%TV WACC Cash Flow4401.57139560226485.5057453141Average P/E19.10Value of Operating Assets5950.5836032602Value of Non-Operating Assets1719Total Enterprise Value7669.5836032602

Projected CFOperating Results:20082009201020112012Service Revenue4194.34781.55379.25917.26331.4Plus: Equipment Sales314.8358.8403.7444.1475.2Based on projected cashflows including the benefits of Synergy Plus: Synergy Related Business Revenue156.5268.6387.3569.9704.5Changes in Working Capital:200720082009201020112012Total Revenue4665.65409.06170.36931.27511.0Accounts Receivable435.497540.0407426551626.0910518507714.2086993771802.2826169293869.3937004264Less: System Operating Expenses838.9956.31075.81183.41266.3Plus: Inventory100.99134.9677318635153.8632143244173.0961161149190.4057277264203.7341286672Plus: Backhaul Synergy Savings0.0-13.4-25.8-52.5-76.0Plus: Prepaid Expenses41.58847.755632844454.754755496661.920668550768.573743054873.6235587765Less: Cost of Equipment Sold755.5861.2968.91065.81140.4Less: Deferred Revenue143.445163.229349505186.0814584357209.3416407402230.2758048142246.3951111512Less: Selling, General & Administrative1866.22163.62468.12772.53004.4Less: Accounts Payable260.791341.6334926109391.7037057865442.9671015077490.561760903526.6870529222EBITDA1205.01441.31683.31962.12175.9Less: Accrued Liabilities59.22465.846635463875.497197091785.377733408294.5511553794101.5139648992Less: Depreciation & Amortization729.7846.0925.51005.01051.5Net Working Capital114.615152.0546297833181.4266603577211.5390083866245.8733666138272.1552588976EBIT475.3595.3757.7957.01124.4Increase in NWC037.439629783329.372030574330.11234802934.334358227226.2818922838Less: 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:NOPAT285.1940364599357.1708427733454.6344854749574.2217442242674.6314239003Plus: Depreciation & Amortization729.7022714705845.9733249691925.54043115831005.01926094821051.534497276Less: Changes in Working Capital37.439629783329.372030574330.11234802934.334358227226.2818922838Less: Capital Expenditures653.1810278334757.2591555861925.54043115831057.00301582481164.1989076984Un-Levered Free Cash Flow324.2756503136416.512981582424.5221374459487.9036311203535.6851211941Operating 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%40.0%40.0%40.0%40.0%EBITDA25.8%26.6%27.3%28.3%29.0%Depreciation & Amortization15.6%15.6%15.0%14.5%14.0%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%Assets:200720082009201020112012Cash & Cash Equivalents204.533119.2293267206119.6214339905121.1121515254178.68400804460Marketable Securities16.35216.35216.35216.35216.35216.352Accounts Receivable435.497540.0407426551626.0910518507714.2086993771802.2826169293869.3937004264Inventory100.99134.9677318635153.8632143244173.0961161149190.4057277264203.7341286672Prepaid Expenses41.58847.755632844454.754755496661.920668550768.573743054873.6235587765Deferred Taxes18.56618.56618.56618.56618.56618.566Other Current Assets16.22716.22716.22716.22716.22716.227Total Current Assets833.753893.13843408361005.47545566211121.48263556811291.09109575511197.8963878701

Property, Plan & Equipment2595.0962518.5747563632429.860586982429.860586982481.84434185662594.508752279Licenses1482.4461482.4461482.4461482.4461482.4461482.446Customer Lists15.37515.37515.37515.37515.37515.375Investments in Affiliated Entities157.693157.693157.693157.693157.693157.693Long Term Note Receivable4.4224.4224.4224.4224.4224.422Goodwill491.316491.316491.316491.316491.316491.316Other Long Term Assets31.77331.77331.77331.77331.77331.773Total Assets5611.8745594.73819044665618.3610426425734.36822254815955.96043761175975.4301401491Liabilities & Owners' Equity:Accounts Payable260.791341.6334926109391.7037057865442.9671015077490.561760903526.6870529222Deferred Revenue & Deposits143.445163.229349505186.0814584357209.3416407402230.2758048142246.3951111512Accrued Liabilities59.22465.846635463875.497197091785.377733408294.5511553794101.5139648992Taxes Payable43.10543.10543.10543.10543.10543.105Other Current Liabilities97.67897.67897.67897.67897.67897.678Total Current Liabilities604.243711.4924775797794.0653613139878.4694756561956.17172109661015.3791289725

Long Term Debt1002.2933467.62350597143,1612,8382,4961,859Deferred Tax Liability554.412554.412554.412554.412554.412554.412Asset Retirement Obligation126.844126.844126.844126.844126.844126.844Other Deferred Liabilities84.5384.5384.5384.5384.5384.53

Minority Interest43.39643.39643.39643.39643.39643.396

Total Equity3196.156606.4402068955853.76600072861208.92125566141694.61430137882292.2852548897Total Liabilities & Owners' Equity5611.8745594.73819044665618.3610426425734.36822254815955.96043761175975.4301401491Cash BalanceBeginning Cash204.533119.2293267206119.6214339905121.1121515254178.6840080446Plus: Un-Levered Free Cash Flow324.2756503136416.512981582424.5221374459487.9036311203535.6851211941Less: After-Tax Interest Expense119.657375019109.845048940299.47923054288.528698506876.9604703894Less: Principal Payments289.921948574306.2758253719323.5521893689341.80307609432495.9924151363Ending Cash119.2293267206119.6214339905121.1121515254178.6840080446-1858.5837562869

APV including SynergyAIRTHREAD ACQUISITIONAdjusted Present Value

Project:AIRTHREAD ACQUISITIONAnalysis:Adjusted Present ValueDraft:nFooter:Harvard Business Publishing

Size Factor100.0%

Un-Levered Free Cash Flows:20082009201020112012NOPAT285.1940364599357.1708427733454.6344854749574.2217442242674.6314239003Plus: Depreciation & Amortization729.7022714705845.9733249691925.54043115831005.01926094821051.534497276Less: Changes in Working Capital37.439629783329.372030574330.11234802934.334358227226.2818922838Less: Capital Expenditures653.1810278334757.2591555861925.54043115831057.00301582481164.1989076984Un-Levered Free Cash Flow324.2756503136416.512981582424.5221374459487.9036311203535.6851211941Average P/E19.10PV of FCF8.06%1714.6183012515300.0885159297356.6963089463336.4383176273357.8278981645363.5672605838

Interest Tax Shields79.77158334673.230032626866.31948702859.019132337951.3069802596PV of Interest Tax Shields284.783121267375.612875209565.793699716456.478581354747.641231798339.2567331885Total Intermediate Term Value1999.4014225188Discount rate8.06%TV Growth Rate3.0%TV WACC Cash Flow7399.664187436610903.0526345578

Value of Operating Assets9399.0656099554Value of Non-Operating Assets1719Total Enterprise Value with synergy11118.0656099554Total Enterprise Value without synergy7,670

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 Annum6/30/0840.7816.6824.103,614.57611/30/1140.7811.7129.072,525.2047119.657375019109.845048940299.47923054288.528698506876.96047038947/31/0840.7816.5724.213,590.36712/31/1140.7811.5729.212,495.99488/31/0840.7816.4624.323,566.0481/31/1240.7811.4429.342,466.65499/30/0840.7816.3424.433,541.6092/28/1240.7811.3129.472,437.185010/31/0840.7816.2324.553,517.06103/31/1240.7811.1729.612,407.575111/30/0840.7816.1224.663,492.40114/30/1240.7811.0329.742,377.835212/31/0840.7816.0124.773,467.62125/31/1240.7810.9029.882,347.95531/31/0940.7815.8924.893,442.74136/30/1240.7810.7630.022,317.93542/28/0940.7815.7825.003,417.74147/31/1240.7810.6230.162,287.77553/31/0940.7815.6625.113,392.62158/31/1240.7810.4930.292,257.48564/30/0940.7815.5525.233,367.39169/30/1240.7810.3530.432,227.05575/31/0940.7815.4325.353,342.051710/31/1240.7810.2130.572,196.47586/30/0940.7815.3225.463,316.591811/30/1240.7810.0730.712,165.76597/31/0940.7815.2025.583,291.011912/31/122,175.699.932,165.760.00608/31/0940.7815.0825.703,265.31209/30/0940.7814.9725.813,239.502110/31/0940.7814.8525.933,213.572211/30/0940.7814.7326.053,187.522312/31/0940.7814.6126.173,161.35241/31/1040.7814.4926.293,135.06252/28/1040.7814.3726.413,108.65263/31/1040.7814.2526.533,082.12274/30/1040.7814.1326.653,055.46285/31/1040.7814.0026.783,028.69296/30/1040.7813.8826.903,001.79307/31/1040.7813.7627.022,974.77318/31/1040.7813.6327.142,947.62329/30/1040.7813.5127.272,920.363310/31/1040.7813.3827.392,892.963411/30/1040.7813.2627.522,865.443512/31/1040.7813.1327.652,837.80361/31/1140.7813.0127.772,810.02372/28/1140.7812.8827.902,782.12383/31/1140.7812.7528.032,754.09394/30/1140.7812.6228.162,725.94405/31/1140.7812.4928.292,697.6541

Amortization Schedule