Equity Net Debt/ Debt/ Equity Asset Assumptions:

Comparable Companies: Market Value Debt Value Equity Beta Beta Marginal Tax Rate 40.0%
Universal Mobile 118,497 69,130 36.8% 58.3% 0.86 0.64 Debt Beta 0.00
Neuberger Wireless 189,470 79,351 29.5% 41.9% 0.89 0.71
Agile Connections 21,079 5,080 19.4% 24.1% 1.17 1.02 Market Risk Premium 5.00%
Big Country Communication 26,285 8,335 24.1% 31.7% 0.97 0.81 Risk-Free Rate 4.25%
Rocky Mountain Wireless 7,360 3,268 30.7% 44.4% 1.13 0.89
Average 28.1% 40.1% 1.00 0.82 Cost of Debt 5.50%

Debt/ Debt/ Asset Equity Cost of Cost of

Value Equity Beta Beta Equity Debt WACC
0.0% 0.0% 0.82 0.82 8.33% 5.50% 8.33%
5.0% 5.3% 0.82 0.86 8.54% 5.50% 8.28%
10.0% 11.1% 0.82 0.91 8.78% 5.50% 8.23%
15.0% 17.6% 0.82 0.96 9.05% 5.50% 8.19%
20.0% 25.0% 0.82 1.02 9.35% 5.50% 8.14%
25.0% 33.3% 0.82 1.09 9.69% 5.50% 8.09%
28.1% 39.1% 0.82 1.13 9.92% 5.50% 8.06%
35.0% 53.8% 0.82 1.25 10.52% 5.50% 8.00%
40.0% 66.7% 0.82 1.36 11.05% 5.50% 7.95%
45.0% 81.8% 0.82 1.48 11.66% 5.50% 7.90%
47.0% 88.7% 0.82 1.54 11.94% 5.50% 7.88%
50.0% 100.0% 0.82 1.63 12.41% 5.50% 7.85%
 AirThread Debt Capacity:
Pre-Synergy Est. 2007 EBITDA 1,033 Total Borrowing 3,758
Interest Coverage Ratio 5.00x Amortization Period 10 Years
Maximum Interest Expense 207 Payments Per Year 12
Interest Rate 5.50% Monthly Payment 40.78 0.0046 92
Est. Debt Capacity 3,758 Corporate Tax rate 40% 40.78

Excludes Synergies:
Excess Cash: 2008 2009 2010 2011 2012
Un-Levered Free Cash Flow 261.5 337.9 310.1 317.4 315.6
Less: After-Tax Interest Expsnse 119.7 109.8 99.5 88.5 77.0
Less: Scheduled Principal Paymen 289.9 306.3 323.6 341.8 2,496.0
Excess Cash (148.1) (78.2) (112.9) (112.9) (2,257.4)

Cash on Balance Sheet 86.6 12.7 (95.8) (204.7) (2,459.0)

Includes Synergies:
Excess Cash: 2008 2009 2010 2011 2012
Un-Levered Free Cash Flow 260.7 338.0 310.1 317.4 315.6
Less: After-Tax Interest Expsnse 119.7 109.8 99.5 88.5 77.0
Less: Scheduled Principal Paymen 289.9 306.3 323.6 341.8 2,496.0
Excess Cash (148.9) (78.2) (112.9) (112.9) (2,257.4)

Cash on Balance Sheet 55.6 (22.5) (135.4) (248.4) (2,505.7)

Cash Reconciliation: 2008

Beginning Cash Balance 204.5
Plus: Cash From Operations 261.5
Less: Aft-Tax Interest Exp. 119.7
Less: Principal Payments 289.9
Ending Cash Balance 56.5
#REF!
Interest Tax Shields: 2008 2009 2010 2011 2012
Interest Expense 199.4 183.1 165.8 147.5 128.3
Tax Rate 40.0% 40.0% 40.0% 40.0% 40.0%
Tax Shield 79.8 73.2 66.3 59.0 51.3
Interest Rate 5.50%
PV of Intermediate Tax Shields 284.8 75.6 65.8 56.5 47.6 39.3
#REF!
Wireless Business Subscribers: 2008 2009 2010 2011 2012
Average Monthly Subscribers (in MM's) 0.30 0.50 0.70 1.00 1.20
Average Monthly Minutes 859 885 911 939 967
Total Monthly Minutes 258 442 638 939 1,160
Revenue Per Minute 0.0506 0.0506 0.0506 0.0506 0.0506
Annual Business Revenue Increase 156 269 387 570 704

Backhaul Savings: 2008 2009 2010 2011 2012

System Operating Expenses 838.9 956.3 1,075.8 1,183.4 1,266.3
Backhaul Percentage 20.0% 20.0% 20.0% 20.0% 20.0%
Estimated Backhaul Costs 167.8 191.3 215.2 236.7 253.3
Reduction in Backhaul Costs 0.0% 7.0% 12.0% 22.2% 30.0%
Backhaul Savings 0.0 13.4 25.8 52.5 76.0
#REF!
Term Loan A Amortization

Annual Amortization Annual Amortization

Payment Interest Principal Balance Period Payment Interest Principal Balance Period
Date: 41 5.50% 3,758 120 Date: 41 5.50% 2,698 84
1/31/2008 40.78 17.22 23.56 3,734 1 6/30/2011 41 12 28 2,669 42
2/28/2008 40.78 17.11 23.67 3,710 2 7/31/2011 41 12 29 2,641 43
3/31/2008 40.78 17.01 23.77 3,687 3 8/31/2011 41 12 29 2,612 44
4/30/2008 40.78 16.90 23.88 3,663 4 9/30/2011 41 12 29 2,583 45
5/31/2008 40.78 16.79 23.99 3,639 5 10/31/2011 41 12 29 2,554 46
6/30/2008 40.78 16.68 24.10 3,615 6 11/30/2011 41 12 29 2,525 47
7/31/2008 40.78 16.57 24.21 3,590 7 12/31/2011 41 12 29 2,496 48
8/31/2008 40.78 16.46 24.32 3,566 8 1/31/2012 41 11 29 2,467 49
9/30/2008 40.78 16.34 24.43 3,542 9 2/28/2012 41 11 29 2,437 50
10/31/2008 40.78 16.23 24.55 3,517 10 3/31/2012 41 11 30 2,408 51
11/30/2008 40.78 16.12 24.66 3,492 11 4/30/2012 41 11 30 2,378 52
12/31/2008 40.78 16.01 24.77 3,468 12 5/31/2012 41 11 30 2,348 53
1/31/2009 40.78 15.89 24.89 3,443 13 6/30/2012 41 11 30 2,318 54
2/28/2009 40.78 15.78 25.00 3,418 14 7/31/2012 41 11 30 2,288 55
3/31/2009 40.78 15.66 25.11 3,393 15 8/31/2012 41 10 30 2,257 56
4/30/2009 40.78 15.55 25.23 3,367 16 9/30/2012 41 10 30 2,227 57
5/31/2009 40.78 15.43 25.35 3,342 17 10/31/2012 41 10 31 2,196 58
6/30/2009 40.78 15.32 25.46 3,317 18 11/30/2012 41 10 31 2,166 59
7/31/2009 40.78 15.20 25.58 3,291 19 12/31/2012 2,176 10 2,166 0 60
8/31/2009 40.78 15.08 25.70 3,265 20
9/30/2009 40.78 14.97 25.81 3,239 21
10/31/2009 40.78 14.85 25.93 3,214 22
11/30/2009 40.78 14.73 26.05 3,188 23
12/31/2009 40.78 14.61 26.17 3,161 24
1/31/2010 40.78 14.49 26.29 3,135 25
2/28/2010 40.78 14.37 26.41 3,109 26
3/31/2010 40.78 14.25 26.53 3,082 27
4/30/2010 40.78 14.13 26.65 3,055 28
5/31/2010 40.78 14.00 26.78 3,029 29
6/30/2010 40.78 13.88 26.90 3,002 30
7/31/2010 40.78 13.76 27.02 2,975 31
8/31/2010 40.78 13.63 27.14 2,948 32
9/30/2010 40.78 13.51 27.27 2,920 33
10/31/2010 40.78 13.38 27.39 2,893 34
11/30/2010 40.78 13.26 27.52 2,865 35
12/31/2010 40.78 13.13 27.65 2,838 36
1/31/2011 40.78 13.01 27.77 2,810 37
2/28/2011 40.78 12.88 27.90 2,782 38
3/31/2011 40.78 12.75 28.03 2,754 39
4/30/2011 40.78 12.62 28.16 2,726 40
5/31/2011 40.78 12.49 28.29 2,698 41
 #REF!
#REF! #REF! ###
Term Loan B Amortization
#REF!
 604
1,002
554
130
85
43
1,404
1,792
5,615
17.85%
Post
Long-Term Growth Rate: 2012
NOPAT 434.6
Invested Capital 5,883.2
ROI 7.4%

Net Reinvestment 119.0

NOPAT 434.6
Reinvestment Rate 27.4%

Est. EBIT Growth Rate 2.0%

#REF!
Projected Income Statements

Operating Results: 2008 2009 2010 2011 2012 Synergy Switches:

Service Revenue (g given below) 4,194 4,782 5,379 5,917 6,331 Bus. Revenue Synergy: 2
Plus: Equipment Sales (% of rev given below) 315 359 404 444 475 755 Include Synergy 1
Plus: Synergy Related Business Revenue 0 0 0 0 0 Exclude Synergy 2
Total Revenue 4,509 5,140 5,783 6,361 6,807
Less: System Operating Expenses (1- gross m 839 956 1,076 1,183 1,266 Reduction in Backhaul: 2
Plus: Backhaul Synergy Savings 0 0 0 0 0 Include Synergy 1
Less: Cost of Equipment Sold (1- the margin) 755 861 969 1,066 1,140 revenue draining but necessary (airside servic Exclude Synergy 2
Less: Selling, General & Administrative (% of 1,804 2,056 2,313 2,544 2,723
EBITDA 1,111 1,267 1,425 1,568 1,677
Less: Depreciation & Amortization 705 804 867 922 953
EBIT 406 463 558 645 724
Less: Interest Expense 199 183 166 148 128
EBT 206 280 392 498 596
Less: Taxes (40%) 83 112 157 199 238
Net Income 124 168 235 299 358

Un-Levered Free Cash Flow:

NOPAT 244 278 335 387 435
Plus: Depreciation & Amortization 705 804 867 922 953
Less: Changes in Working Capital 57 24 24 22 17
Less: Capital Expenditures 631 720 867 970 1,055
Un-Levered Free Cash Flow 261 338 310 317 316
fcfe
Operating Margins:
Service Revenue Growth 14.0% 14.0% 12.5% 10.0% 7.0%
Equipment Sales/Service Revenue 7.5% 7.5% 7.5% 7.5% 7.5%
Total Revenue Growth 18.2% 15.9% 14.1% 12.3% 8.4%
Wireless Service Gross Profit Margin 80.0% 80.0% 80.0% 80.0% 80.0%
Equipment Sales Gross Profit -140.0% -140.0% -140.0% -140.0% -140.0%
Selling, General & Administrative 40.0% 40.0% 40.0% 40.0% 40.0%
EBITDA 25.8% 26.6% 27.3% 28.3% 29.0%
EBIT 10.2% 11.0% 12.3% 13.8% 15.0%
Effective Tax Rate 40.0% 40.0% 40.0% 40.0% 40.0%
Cap-x/Revenue 14.0% 14.0% 15.0% 15.3% 15.5%
Projected Balance Sheets

Assets: 2007 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
Cash & Cash Equivalents 205 56 (23) (135) (248) 0
Marketable Securities 16 16 16 16 16 16
Accounts Receivable (DSR/360)*total rev 435 522 595 669 736 788
Inventory (only for hardware) so (DSI/360)*Eq 101 135 154 173 190 204
Prepaid Expenses (1.38% of total expenses) 42 47 53 60 66 71
Deferred Taxes (held constant) 19 19 19 19 19 19
Other Current Assets (held constant) 16 16 16 16 16 16
Total Current Assets 834 811 831 818 796 1,114

Property, Plan & Equipment 2,595 2,521 2,437 2,437 2,485 2,587
Licenses 1,482 1,482 1,482 1,482 1,482 1,482
Customer Lists 15 15 15 15 15 15
Investments in Affiliated Entities 158 158 158 158 158 158
Long Term Note Receivable 4 4 4 4 4 4
Goodwill 491 491 491 491 491 491
Other Long Term Assets 32 32 32 32 32 32
Total Assets 5,612 5,515 5,451 5,438 5,463 5,883

Liabilities & Owners' Equity:

Accounts Payable (DSO/360)*Total costs includ 261 335 382 430 473 506
Deferred Revenue & Deposits (%of a years ex 143 132 151 170 187 200
Accrued Liabilities (%of a years exp)*total ex 59 65 74 83 91 98
Taxes Payable (held constant) 43 43 43 43 43 43
Other Current Liabilities (held constant) 98 98 98 98 98 98
Total Current Liabilities 604 673 748 824 892 944

Long Term Debt 1,002 3,468 3,161 2,838 2,496 2,506

Deferred Tax Liability 554 554 554 554 554 554
Asset Retirement Obligation 127 127 127 127 127 127
Other Deferred Liabilities 85 85 85 85 85 85

Minority Interest 43 43 43 43 43 43
0 0
Total Equity 3,196 565 733 968 1,266 1,624
Total Liabilities & Owners' Equity 5,612 5,515 5,451 5,438 5,463 5,883
0.55 7.50
Beginning Cash 205 56 (23) (135) (248)
Plus: Un-Levered Free Cash Flow 261 338 310 317 316
Less: After-Tax Interest Expense 120 110 99 89 77
all three
cells put
together is
nothing
but FCFE
 all three
cells put
together is
nothing
Less: Principal Payments but FCFE 290 306 324 342 2,496
Ending Cash 56 (23) (135) (248) (2,506)
FCFE -148.90 -78.17 -112.90 -112.93
see cash balance is not your fcfe!!!
Changes in Working Capital: 2007 2008 2009 2010 2011 2012
Accounts Receivable 435.5 521.9 595.0 669.4 736.3 787.9
Plus: Inventory 101.0 135.0 153.9 173.1 190.4 203.7
Plus: Prepaid Expenses 41.6 46.9 53.5 60.1 66.2 70.8
Less: Deferred Revenue 143.4 132.2 150.8 169.6 186.6 199.6
Less: Accounts Payable 260.8 335.5 382.4 430.2 473.2 506.4
Less: Accrued Liabilities 59.2 64.7 73.7 82.9 91.2 97.6
Net Working Capital 114.6 171.4 195.4 219.9 241.9 258.8
115 57 24 24 22 17
Terminal Value With Lon-Term D/V of 25%

Un-Levered Free Cash Flows: 2008 2009 2010 2011 2012

NOPAT 243.5 277.6 334.6 387.1 434.6
Plus: Depreciation & Amortization 705.2 804.0 867.4 922.4 952.9
Less: Changes in Working Capital 56.8 24.0 24.4 22.0 16.9
Less: Capital Expenditures 631.3 719.7 867.4 970.1 1,055.0
Un-Levered Free Cash Flow 260.7 338.0 310.1 317.4 315.6

PV of FCFKa 1,214.6 240.6 288.0 244.0 230.5 211.6

8.33% 1,214.63
Interest Tax Shields 79.8 73.2 66.3 59.0 51.3
PV of Interest Tax Shields 284.8 75.6 65.8 56.5 47.6 39.3
Total Intermediate Term Value 1,499.4

TV Growth Rate 2.0%

TV WACC Cash Flow 5,333.0 46.986%

ITS Fin Rule 2

TV unlev 5106.998
PV of TV unlev 3423.47867
TV ITS fin rule 2 226.0 5,074.4
PV TV ITS fin Rule 2 151.487326
APV with int ITS@Kd Perp ITS@Ka and
Firm value 1 5,074.4
Vul i.e. int CFs @ Ka and Perp CF @ Ka
Firm vlaue 2 intermittent $1,222.40
PV TV@W 3614.41424
$4,836.82 Firm valuation @ WACC 4,638.10895985837

Ka 8.33%
Kd 5.50%
L(D/V) 25%
Tax 40%
K* 7.76%

Firm Value 3
firm TV @ ME 5609.48
PV pf TV @ ME
ITS ME 502.48
PV TV ITS ME 345.76
Int CFs @ Ka 1214.63 ME based valuation.. Intermittent
Int ITS @kd 284.78 ITS @ Kd, Perpetual ITS@Kme and
PVTV unlev 3423.48 Vul i.e. intermittent CFs @Ka and
5268.65 Perp CF @ Ka

1,214.6