Campus Maverick_US Telco Ltd

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Campus Maverick_US Telco Ltd | Table of contents

Table of contents

CompanyBackground 2
Data Sheet Additional Information 7
Questions 9

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Campus Maverick_US Telco Ltd | CompanyBackground

CompanyBackground
US Telco Limited is a holding company that operates as a real estate
investment trust (REIT) which owns, operates, and develops multitenant
communications real estate. US Telcos major presence is in the United States
with some presence in Canada and EU through its fully owned subsidiaries. Its
primary business is property operations, which includes the leasing of space on
communications sites to wireless service providers, radio and television
broadcast companies, wireless data providers, government agencies and
municipalities, and tenants in various other industries. Its US property segment
includes operations in the United States, and its services segment offers tower-
related services in the United States.

In addition to leasing space on towers to wireless communications companies,

US Telco plans to expand its services segment in other regions and provide
customized colocation solutions through in-building systems, distributed
antenna systems and other right-of-way options, managed rooftops, and
services that increase the speed of network deployment.

The company has a strong asset base that can cater to new tenants and new
equipment for existing tenants on its sites. The company's communications real
estate portfolio consisted of 85,000 communications sites, including 35,000
domestic communications towers and 50,000 international communications
towers. The company has a well-established domestic and international tenant
base. Around 65% of domestic revenues come from five clients and 45% of
international revenues come from four established global clients in India (two
clients with 25% of international revenue) and Nigeria (two government
agencies with 20% of international revenue).

As part of its growth strategy, the company is currently looking at various

organic and inorganic opportunities that will facilitate strong growth and
increased presence in both the national and international market. US Telco has
also identified four preliminary targets in case it decides to grow inorganically.

In order to achieve the above-mentioned goals, the management has

approached Deloitte to provide its expert opinion on various growth options.

Industry Trends
The global wireless network infrastructure market stood at $52 billion
in 2014
Global Long-Term Evolution (LTE) revenue is up 9 percent year-over-year,
totaling $6.1 billion
Significant economic incentive exists for carriers to choose a colocation
model over building their own site
Approximately 63% of sites in the US are on owned land or have a ground
lease with at least 20 years until renewal

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Campus Maverick_US Telco Ltd | CompanyBackground

Geographic Benchmarks

Country-wise benchmarks (2015)

GDP Growth Telecom Competitive Regulatory Legal Protection
Rate (%) Penetration Intensity Environment
(%)

US 2.2% 80%

Argentina 2.9% 83%

Namibia 5.1% 110%

Czech Republic -0.7% 75%

Potential M&A Targets

NZone Communications, Inc.

Geography: New York, United States
Geography: New York, United States

Background: NZone Communications Inc., through its subsidiaries, provides

communications, information, and entertainment products and services to
consumers, businesses, and governmental agencies worldwide. Its Wireless
segment offers wireless voice and data services; messaging services; wireless
Internet access services on notebook computers and tablets; multimedia access
services; business-focused services; location-based services; global data
services; home phone connect services; high-speed Internet service; and
network access and value-added services to support wireless connections for
the Internet of Things (IoT). This segment also provides IoT services that
support devices used in health monitoring, education, manufacturing, utilities,
distribution, and consumer products markets, as well as wireless devices,
including smartphones and basic phones, tablets, and other Internet access
devices.

ASA Towers, Inc.

Geography: Argentina, SA
Geography: Argentina, South America

Background: ASA Towers, Inc., through its subsidiaries, is primarily engaged in

the operation and renting out of telecommunications towers in Argentina and
internationally. The company was founded in 2012 and specializes in leasing
space to wireless communications companies, providing customized colocation
solutions, high-speed network deployment, and distributed antenna systems.
The companys Wireline segment provides high-speed Internet, voice services,
such as local exchange, regional and long-distance calling, and voice messaging
services, as well as VoIP services; network products and solutions comprising
private Internet protocol (IP), public Internet, Ethernet, and optical networking
services; IT infrastructure services, including managed hosting; cloud services,
such as computing, storage, backup, recovery, and application platforms; and
business communications services.

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Campus Maverick_US Telco Ltd | CompanyBackground

BBA Africa Limited

Geography: Namibia, Africa
Geography: Namibia, Africa

Background: BBA Africa Limited provides mobile telecommunication services.

The company offers personal and business plans, including prepaid and
postpaid services, mobile enterprise products, and SMS and fax services. The
company also provides 3.75 generation (3G) services, which enable consumers
to access mobile broadband and Internet access, watch live TV, download
music, make video calls, and send and receive emails using enabled devices. It
offers its services through a network of shops and dealers. The company was
founded in 2000 and is based in Namibia. Apart from leasing space to
telecommunication companies, it provides corporate enterprise Internet
infrastructure solutions and distributed antenna systems.

TeleMo Networks Limited

Geography: Czech Republic
Geography: Czech Republic

Background: TeleMo Networks Limited, a telecommunications infrastructure

company, builds, rents, operates, and manages telecommunication towers for
telecom service providers in Czech Republic. Its telecom towers include self-
supporting latticed towers, monopoles, and rapid deployment towers. The
company also provides integrated data solutions and in-building solutions.

Exhibit AFinancials of US Telco Limited.

Particulars (Figures in Millions) 2015 2016 2017 2018 2019 2020

Revenue 383 425 480 525 567 595
Revenue Growth 11% 13% 9% 8% 5%
Operating Expenses 287 319 360 394 425 446
As a % of revenue 75% 75% 75% 75% 75% 75%
EBITDA 115 128 144 157 170 179
EBITDA Margin 30% 30% 30% 30% 30% 30%
Capital Expenditures (73.0) (93.7) (96.5) (30.8) (33.4) (32.8)
Change in Working Capital (0.9) (0.8) (1.1) (0.9) (0.8) (0.6)
WACC: 10; Tax Rate: 30%

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Campus Maverick_US Telco Ltd | CompanyBackground

Exhibit BFinancials of NZone Communications, Inc.

Particulars (Figures in Millions) 2015 2016 2017 2018 2019 2020

Revenue 297 336 366 391 407 419
Revenue Growth 13% 9% 7% 4% 3%
Operating Expenses 202 228 249 266 277 285
As a % of revenue 68% 68% 68% 68% 68% 68%
EBITDA 104 117 128 137 142 147
EBITDA Margin 35% 35% 35% 35% 35% 35%
Capital Expenditures (20.8) (23.5) (25.6) (27.4) (28.5) (29.4)
Change in Working Capital (0.8) (0.5) (0.4) (0.4) (0.2) (0.2)

Exhibit CFinancials of ASA Towers, Inc.

Particulars (Figures in Millions) 2015 2016 2017 2018 2019 2020

Revenue 12 16 23 36 51 82
Revenue Growth 30% 47% 58% 42% 60%
Operating Expenses 16 22 29 40 50 80
As a % of revenue 134% 140% 126% 111% 98% 97%
EBITDA (3) (2) (3) (1) 10 19
EBITDA Margin -23% -11% -14% -3% 19% 23%
Capital Expenditures (4.1) (3.9) (8.3) (11.6) (8.7) (9.9)
Change in Working Capital (1.2) (0.1) (0.3) (0.5) (0.6) (1.2)

Exhibit DFinancials of BBA Africa Limited

Particulars (Figures in Millions) 2015 2016 2017 2018 2019 2020

Revenue 79 97 125 164 207 242
Revenue Growth 23% 29% 31% 26% 17%
Operating Expenses 65 85 99 133 176 194
As a % of revenue 82% 87% 79% 81% 85% 80%
EBITDA 36 42 45 66 87 109
EBITDA Margin 46% 43% 36% 40% 42% 45%
Capital Expenditures (19.0) (17.5) (20.1) (27.9) (26.9) (21.8)
Change in Working Capital (1.5) (0.6) (0.8) (0.9) (1.0) (0.8)

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Campus Maverick_US Telco Ltd | CompanyBackground

Exhibit EFinancials of TeleMo Networks Limited

Particulars (Figures in Millions) 2015 2016 2017 2018 2019 2020

Revenue 421 459 491 511 526 542
Revenue Growth 9% 7% 4% 3% 3%
Operating Expenses 278 303 324 337 347 358
As a % of revenue 66% 66% 66% 66% 66% 66%
EBITDA 177 193 206 214 221 228
EBITDA Margin 42% 42% 42% 42% 42% 42%
Capital Expenditures (8.4) (9.2) (9.8) (10.2) (10.5) (10.8)
Change in Working Capital (0.5) (0.2) (0.2) (0.1) (0.1) (0.1)

Exhibit F Recent Deal Multiples in the Industry

Key Rations EBITDA Multiple EV Multiple NPV Multiple

Deal 1 10.20x 0.90x 4.20x
Deal 2 10.30x 1.20x 3.80x
Deal 3 11.50x 1.60x 4.80x
Deal 4 20.50x 0.90x 5.70x
Deal 5 12.00x 1.50x 9.60x

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Campus Maverick_US Telco Ltd | Data Sheet
Additional Information

Data Sheet
Additional Information
From 2011 to 2016, industry revenue declined at an annualized rate of 4.6% to
$25 billion. In 2016, revenue is expected to grow by 3.9%.

Demand from the Wireless Telecommunications Carriers industry is expected to

steadily rise, while demand from the Radio Broadcasting industry and Television
Broadcasting industry is also anticipated to somewhat increase over the next
five years. From 2016 to 2021, industry revenue is expected to recover at an
average annual rate of 1.6% to $2 7.1 billion.

The mobile phone market in the US has reached nearly saturation levels.
Smartphone penetration in the country is about 77.1%. Accordingly, mobile
phone subscription growth will be negatively impacted. As the wireless industry
continues to mature, future wireless growth will increasingly depend on the
carriers' ability to offer innovative data services to customers, which in turn,
will depend on the availability of additional spectrum.

The telecom sector in the United States is witnessing significant spectrum and
capacity constraints on the wireless network in certain markets. Such
constraints will limit the carriers' ability to increase and expand to additional
markets in the coming years. The impending saturation and unavailability of
spectrum will impact wireless growth prospects in the United States.

Customer demand for communication real estate could be adversely affected by

the emergence and growth of new technologies, which could make it possible
for wireless carriers to increase the capacity and efficiency of their existing
networks. The increased use of spectrally efficient technologies could
potentially reduce the demand for tower-based antenna space.

Additionally, certain complementary network technologies, such as femtocells

and wireless fidelity (Wi-Fi), could reduce the dependency on tower-based
networks and also reduce the need for carriers to add more equipment at
certain communications sites. In addition, any increase in the use of network
sharing, roaming, or resale arrangements by wireless service providers could
adversely affect customer demand for tower space.

Consolidation among wireless carriers could impact customer demand for the
communications sites, because the existing networks of wireless carriers often
overlap. In addition, if wireless carriers share their sites or permit equipment
location swapping on their sites with other carriers to a significant degree, it
could reduce demand for communications sites.

Consumers demand for broadband technologies and the speed at which they
shift to 4G technologies will influence capital expenditure on wireless
infrastructure beyond 2016. To effectively compete in a market for products

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Campus Maverick_US Telco Ltd | Data Sheet
Additional Information

that enable consumers to move to 4G networks, equipment manufacturers will

need to have access to requisite technologies, while employees must possess
the experience and skills necessary to deploy these technologies.

Wi-Fi operates in unlicensed free radio bands, and communications service

providers are building base stations, also known as hot spots, to facilitate
wireless access outside users homes. Despite generating demand for the
industrys Wi-Fi-capable devices and base station equipment, the technology
may also adversely affect cellular 3G-network use and deployment. Moreover,
new networks that incorporate Mobile WiMax technologies, for which demand is
greater than that for Wi-Fi, will negatively affect 3G-network and Wi-Fi use.

In the five years to 2021, consumer spending is forecast to increase at an

average annual rate of 2.8%.

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Campus Maverick_US Telco Ltd | Questions

Questions
Question 1: Given the current business/industry situation, what are the some
of the growth avenues that US Telco should look at and why?

Question 2: From the list of preliminary targets identified by US Telco, what

are the two most attractive targets and why?

Question 3: For the two targets identified, what buying price would you
recommend to US Telco?

Question 4a: What would be the key integration risks and considerations
that US Telco will have to consider to integrate successfully with your
chosen target?

Question 4b: Please provide recommendations that US Telco will have to

execute in the short term (30 days) and long term (180 days)

Note: Please state any assumptions you make very clearly

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Campus Maverick_US Telco Ltd | Questions

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Copyright 2016 Deloitte Development LLC. All rights reserved.

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