87253398 Wikler Case Competition Powerpoint
Valuation of
AirThread
Connections
By:
Chris Cruz
Zach Hatoum
Michael Peña
Kevin Reilly
Ali Zaidi
American Cable
Communications (ACC)
48.5 million homes had ACC cable passing through 24.1 million video subscribers
13.2 million high speed internet
4.6 million landline telephone
Expected consolidated revenue of $30.9 billion (2007)
Expected Net Income of $2.6 billion (2007)
AirThread Connections
One of the largest regional wireless companies in the United States
Service more than 200 markets in 5 geographical regions
Firms network covers 80 million people
Expected revenue of $3.9 billion (2007)
Expected Net income of $400 million (2007)
Wireless Communications
Market
Intensely competitive
AirThread competed directly with 3 to 5 major competitors in each market
◦ Includes all national carriers which had greater financial, marketing, sales, and technical resources
Competition based on price, service area size, call quality, and customer service
AirThread Competitive
Challenges
Operating cost disadvantage
Inability to bundle wireless service
Recent trend toward bundled services freezing ATC out of business market
Introduction
1.
2.
3.
3 Reasons for acquisition
Ability to bundle service
Expand Business market
American Cable Communications could increase AirThread Connection’s operations
◦
Could finance with significant leverage
Potential Synergies
Reduction of AirThread’s backhaul costs
◦ Estimated at 20% of company’s system operating expenses ◦ Would still require the use of some leased lines and microwave transmission in many areas
◦ Cost savings would be gradual
◦ Estimated total system operating cost savings would be 6% realized over four years beginning in 2009
Increases in revenue resulting from cross selling and bundling with ACC’s services
◦ Attract business customers by offering services by same provider
Valuation Steps
1.
2.
3.
Projecting operating results
Estimate appropriate cost of capital
AirThread
Connections
By:
Chris Cruz
Zach Hatoum
Michael Peña
Kevin Reilly
Ali Zaidi
American Cable
Communications (ACC)
48.5 million homes had ACC cable passing through 24.1 million video subscribers
13.2 million high speed internet
4.6 million landline telephone
Expected consolidated revenue of $30.9 billion (2007)
Expected Net Income of $2.6 billion (2007)
AirThread Connections
One of the largest regional wireless companies in the United States
Service more than 200 markets in 5 geographical regions
Firms network covers 80 million people
Expected revenue of $3.9 billion (2007)
Expected Net income of $400 million (2007)
Wireless Communications
Market
Intensely competitive
AirThread competed directly with 3 to 5 major competitors in each market
◦ Includes all national carriers which had greater financial, marketing, sales, and technical resources
Competition based on price, service area size, call quality, and customer service
AirThread Competitive
Challenges
Operating cost disadvantage
Inability to bundle wireless service
Recent trend toward bundled services freezing ATC out of business market
Introduction
1.
2.
3.
3 Reasons for acquisition
Ability to bundle service
Expand Business market
American Cable Communications could increase AirThread Connection’s operations
◦
Could finance with significant leverage
Potential Synergies
Reduction of AirThread’s backhaul costs
◦ Estimated at 20% of company’s system operating expenses ◦ Would still require the use of some leased lines and microwave transmission in many areas
◦ Cost savings would be gradual
◦ Estimated total system operating cost savings would be 6% realized over four years beginning in 2009
Increases in revenue resulting from cross selling and bundling with ACC’s services
◦ Attract business customers by offering services by same provider
Valuation Steps
1.
2.
3.
Projecting operating results
Estimate appropriate cost of capital