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AIRTHREAD ACQUISITION

Revenue Projections: Service Revenue Service Revenue Growth

Operating Assumptions

2008 4,194.3 14.0%

2009 4,781.5 14.0%

2010 5,379.2 12.5%

2011 5,917.2 10.0%

2012 6,331.4 7.0%

Equipment Revenue Equipment Revenue/Service Revenue (1)

314.8 7.5%

358.8 7.5%

403.7 7.5%

444.1 7.5%

475.2 7.5%

Operating Expenses: System Operating Expenses System Operating Exp./Service Revenue

838.9 20.0%

956.3 20.0%

1,075.8 20.0%

1,183.4 20.0%

1,266.3 20.0%

Cost of Equipment Sold Equipment COGS

755.5 240.0%

861.2 240.0%

968.9 240.0%

1,065.8 240.0%

1,140.4 240.0%

Selling, General & Administrative SG&A/Total Revenue

1,803.6 40.0%

2,056.2 40.0%

2,313.2 40.0%

2,544.5 40.0%

2,722.6 40.0%

Depreciation & Amortization

705.2

804.0

867.4

922.4

952.9

Tax Rate

40.0%

40.0%

40.0%

40.0%

40.0%

41.67x 154.36x 1.38% 35.54x 14.01x 6.85x

41.67x 154.36x 1.38% 35.54x 14.01x 6.85x

41.67x 154.36x 1.38% 35.54x 14.01x 6.85x

41.67x 154.36x 1.38% 35.54x 14.01x 6.85x

41.67x 154.36x 1.38% 35.54x 14.01x 6.85x

631.3 14.0%

719.7 14.0%

867.4 15.0%

970.1 15.3%

1,055.0 15.5%

Working Capital Assumptions (1): Accounts Receivable Days Sales Equip. Rev. Prepaid Expenses Accounts Payable Deferred Serv. Revenue Accrued Liabilities Capital Expenditures (2): Capital Expenditures Cap-x/Total Revenue

(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

AIRTHREAD ACQUISITION

Licensing Agreemts

Total Consolidated Markets: Region Population Customers Penetration Central US 65,096 3,846 5.9% Mid-Atlantic 11,677 1,180 10.1% New England 2,830 518 18.3% Northwest 2,287 431 18.8% New York 481 147 30.6% Total 82,371 6,122 7.4% Total Operating Markets: Region Population Customers Penetration Central US 32,497 3,846 11.8% Mid-Atlantic 7,346 1,180 16.1% New England 2,344 518 22.1% Northwest 2,287 431 18.8% New York 481 147 30.6% Total 44,955 6,122 13.6%

Harvard Business Publishing

AIRTHREAD ACQUISITION

Customer Data: Net Customer Additions Cost Per Customer Addition Cost of New Customer Additions Cost of Equipment Sold/Equipment Revenue

Monthly Churn Rate

Revenue Per Minute Monthly ARPU Customer Minutes Per Month Revenue Per Minute

Customer Operating Data

2005 301 372 111,972

2006 310 385 119,350

2007 477 487 232,299

251.3%

219.9%

239.8%

2.1%

2.1%

1.7%

2005 45.24 625 0.0724

2006 47.23 704 0.0671

2007 51.13 859 0.0595

Harvard Business Publishing

AIRTHREAD ACQUISITION

Income Statement

Historical Operating Results

Operating Results: Service Revenue Plus: Equipment Sales Total Revenue Less: System Operating Expenses Less: Cost of Equipment Sold Less: Selling, General & Administrative EBITDA Less: Depreciation & Amortization EBIT Less: Interest Expense Plus: Equity in Earnings of Affiliates Plus: Gains (Losses) on Investments Plus: Other Income EBT Less: Taxes Income Before Minority Interest Less: Minority Interest Net Income

2005 2,827.0 203.7 3,030.8 604.1 511.9 1,217.7 697.0 490.1 206.9 84.9 66.7 18.1 54.5 261.3 95.9 165.5 10.5 155.0

2006 3,214.4 258.7 3,473.2 639.7 568.9 1,399.6 865.0 555.5 309.5 93.7 93.1 50.8 (46.6) 313.1 120.6 192.5 13.0 179.5

2007 3,679.2 267.0 3,946.3 717.1 640.2 1,555.6 1,033.3 582.3 451.1 84.7 90.0 83.1 7.0 546.5 216.7 329.8 15.1 314.7

Harvard Business Publishing

AIRTHREAD ACQUISITION

Assets: Cash & Cash Equivalents Marketable Securities Accounts Receivable Inventory Prepaid Expenses Deferred Taxes Other Current Assets Total Current Assets Property, Plan & Equipment Licenses Customer Lists Marketable Equity Securities Investments in Affiliated Entities Long Term Note Receivable Goodwill Other Long Term Assets Total Assets Liabilities & Owners' Equity: Accounts Payable Deferred Revenue & Deposits Accrued Liabilities Taxes Payable Deferred Taxes Note Payable Forward Contract Derivative Liability Other Current Liabilities Total Current Liabilities Long Term Debt Forward Contracts Derivative Liability Deferred Tax Liability Asset Retirement Obligation Other Deferred Liabilities Minority Interest Common Stock & Paid-In Capital Retained Earnings Total Liabilities & Owners' Equity

Balance Sheet

2005 29.0 0.0 362.4 92.7 32.1 8.2 15.5 539.9

2006 32.9 249.0 407.4 117.2 35.0 0.0 13.4 854.9

2007 204.5 16.4 435.5 101.0 41.6 18.6 16.2 833.8

2,553.0 1,362.3 47.6 225.4 172.1 4.7 481.2 30.0 5,416.2

2,628.8 1,494.3 26.2 4.9 150.3 4.5 485.5 31.1 5,680.6

2,595.1 1,482.4 15.4 0.0 157.7 4.4 491.3 31.8 5,611.9

254.1 111.4 42.9 36.7 0.0 135.0 0.0 0.0 82.6 662.7

254.9 123.3 47.8 26.9 26.3 35.0 159.9 88.8 93.7 856.7

260.8 143.4 59.2 43.1 0.0 0.0 0.0 0.0 97.7 604.2

1,001.4 159.9 25.8 647.1 90.2 46.2

1,001.8 0.0 0.0 601.5 127.6 62.9

1,002.3 0.0 0.0 554.4 126.8 84.5

41.9

36.7

43.4

1,375.0 1,366.0 5,416.2

1,378.9 1,614.4 5,680.6

1,404.1 1,792.1 5,611.9

Harvard Business Publishing

AIRTHREAD ACQUISITION

Amortization Schedule

Term Loan Amortization

Date: 1/31/2008 2/28/2008 3/31/2008 4/30/2008 5/31/2008 6/30/2008 7/31/2008 8/31/2008 9/30/2008 10/31/2008 11/30/2008 12/31/2008 1/31/2009 2/28/2009 3/31/2009 4/30/2009 5/31/2009 6/30/2009 7/31/2009 8/31/2009 9/30/2009 10/31/2009 11/30/2009 12/31/2009 1/31/2010 2/28/2010 3/31/2010 4/30/2010 5/31/2010 6/30/2010 7/31/2010 8/31/2010 9/30/2010 10/31/2010 11/30/2010 12/31/2010 1/31/2011 2/28/2011 3/31/2011 4/30/2011 5/31/2011

Payment 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41

Annual Interest 5.50% 17 17 17 17 17 17 17 16 16 16 16 16 16 16 16 16 15 15 15 15 15 15 15 15 14 14 14 14 14 14 14 14 14 13 13 13 13 13 13 13 12

Principal 24 24 24 24 24 24 24 24 24 25 25 25 25 25 25 25 25 25 26 26 26 26 26 26 26 26 27 27 27 27 27 27 27 27 28 28 28 28 28 28 28

Amortization Balance Period 3,758 120 3,734 1 3,710 2 3,687 3 3,663 4 3,639 5 3,615 6 3,590 7 3,566 8 3,542 9 3,517 10 3,492 11 3,468 12 3,443 13 3,418 14 3,393 15 3,367 16 3,342 17 3,317 18 3,291 19 3,265 20 3,239 21 3,214 22 3,188 23 3,161 24 3,135 25 3,109 26 3,082 27 3,055 28 3,029 29 3,002 30 2,975 31 2,948 32 2,920 33 2,893 34 2,865 35 2,838 36 2,810 37 2,782 38 2,754 39 2,726 40 2,698 41

Date: 6/30/2011 7/31/2011 8/31/2011 9/30/2011 10/31/2011 11/30/2011 12/31/2011 1/31/2012 2/28/2012 3/31/2012 4/30/2012 5/31/2012 6/30/2012 7/31/2012 8/31/2012 9/30/2012 10/31/2012 11/30/2012 12/31/2012

Payment 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 41 2,176

Annual Interest 5.50% 12 12 12 12 12 12 12 11 11 11 11 11 11 11 10 10 10 10 10

Principal 28 29 29 29 29 29 29 29 29 30 30 30 30 30 30 30 31 31 2,166

Amortization Balance Period 2,698 84 2,669 42 2,641 43 2,612 44 2,583 45 2,554 46 2,525 47 2,496 48 2,467 49 2,437 50 2,408 51 2,378 52 2,348 53 2,318 54 2,288 55 2,257 56 2,227 57 2,196 58 2,166 59 0 60

Harvard Business Publishing

Harvard Business Publishing

AIRTHREAD ACQUISITION

Wireless Comparables

Tax rate

Equity Comparable Companies: Market Value Universal Mobile 118,497 Neuberger Wireless 189,470 Agile Connections 21,079 Big Country Communications 26,285 Rocky Mountain Wireless 7,360 Average

Net Debt 69,130 79,351 5,080 8,335 3,268

Debt/ Value 36.8% 29.5% 19.4% 24.1% 30.7% 28.1%

Debt/ Equity 58.3% 41.9% 24.1% 31.7% 44.4% 40.1%

Equity Beta1 0.86 0.89 1.17 0.97 1.13 1.00

Revenue 43,882 42,684 34,698 38,896 4,064

EBIT EBITDA 11,795 16,949 7,020 14,099 1,631 9,914 6,702 12,614 510 1,028

Net Income 3,794 4,103 (30) 3,384 240

Unlevered beta 0.64 0.71 1.02 0.81 0.89 0.81

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

mparables

40%

s Publishing

Service Revenue Equipment Revenue Total Revenue Operating Expenses: System Operating Expenses Cost of Equipment Sold Selling, General & Administrative Total cash expenses Depreciation & Amortization EBIT Tax PAT Capital Expenditures Change in NWC FCFF

2008 2009 2010 2011 2012 1 2 3 4 5 4194.33 4781.536 5379.228 5917.151 6331.352 314.7732 358.8414 403.6966 444.0662 475.1509 4509.103 5140.378 5782.925 6361.218 6806.503 838.866 956.3073 1075.846 1183.43 1266.27 755.4556 861.2193 968.8718 1065.759 1140.362 1,803.6 2,056.2 2,313.2 2,544.5 2,722.6 3,398.0 3,873.7 4,357.9 4,793.7 5,129.2 705.2 804.0 867.4 922.4 952.9 405.9 462.7 557.6 645.2 724.4 162.3644 185.0955 223.0395 258.0659 289.7435 243.5466 277.6432 334.5593 387.0989 434.6153 631.2745 719.6529 867.4388 970.0857 1055.008 25.39 19.67 20.02 18.02 13.87 292.11 342.28 314.54 321.37 318.64

Tax Rate

40.0%

Working Capital Assumptions (1): Accounts Receivable Days Sales Equip. Rev. Prepaid Expenses Accounts Payable Deferred Serv. Revenue Accrued Liabilities NWC

2007

2008

2009

2010

2011

2012

ng Capital Assumptions (1):

Sales Equip. Rev.

red Serv. Revenue

436 101 42.00 261 143 59 115.10

521.90x 594.96x 669.33x 736.26x 787.80x 134.97x 153.86x 173.10x 190.41x 203.73x 46.91 53.48 60.17 66.19 70.82 335.42 382.38 430.18 473.20 506.32 163.2542 186.1098 209.3736 230.3109 246.4327 64.61x 73.65x 82.86x 91.15x 97.53x 140.49 160.16 180.18 198.20 212.07

Balance Sheet 2005

2006

2007

29.003 0 362.359 92.748 32.068 8.218 15.489 539.885

32.912 249.039 407.438 117.189 34.955 0 13.385 854.918

204.533 16.352 435.497 100.99 41.588 18.566 16.227 833.753

87.06 16.35 521.90 134.97 46.91 18.57 16.23 841.98

13.22 16.35 594.96 153.86 53.48 18.57 16.23 866.68

16.35 669.33 173.10 60.17 18.57 16.23 953.74

16.35 736.26 190.41 66.19 18.57 16.23 1,044.00

16.35 787.80 203.73 70.82 18.57 16.23 1,113.50

2553.029 2628.848 2595.096 1362.263 1494.327 1482.446 47.649 26.196 15.375 225.387 4.873 0 172.093 150.325 157.693 4.707 4.541 4.422 481.235 485.452 491.316 29.985 31.136 31.773 5416.233 5680.616 5611.874

2521.14 1482.446 15.375 0 157.693 4.422 491.316 31.773 5546.15

2436.83 1482.446 15.375 0 157.693 4.422 491.316 31.773 5486.53

2436.83 1482.446 15.375 0 157.693 4.422 491.316 31.773 5573.60

2484.54 1482.446 15.375 0 157.693 4.422 491.316 31.773 5711.57

2586.64 1482.446 15.375 0 157.693 4.422 491.316 31.773 5883.16

260.791 143.445 59.224 43.105 0 0 0 0 97.678 604.243

335.42 163.25 64.61 43.105 0 0 0 0 97.678 704.07

382.38 186.11 73.65 0 0 0 0 0 0 642.14

430.18 209.37 82.86 0 0 0 0 0 0 722.41

473.20 230.31 91.15 0 0 0 0 0 0 794.65

506.32 246.43 97.53 0 0 0 0 0 0 850.28

Long Term Debt Forward Contracts Derivative Liability Deferred Tax Liability Asset Retirement Obligation Other Deferred Liabilities

1001.385 1001.839 1002.293 159.856 0 0 25.818 0 0 647.086 601.535 554.412 90.224 127.639 126.844 46.234 62.914 84.53

3,468 0 0 554.412 126.844 84.53

3,161 0 0 554.412 126.844 84.53

2,933 0 0 554.412 126.844 84.53

2,700 0 0 554.412 126.844 84.53

2,458.54 0 0 554.412 126.844 84.53

Minority Interest Total Liabilities Common Stock & Paid-In Capital Retained Earnings Total Liabilities & Owners' Equity Debt+Equity

41.871 2675.195 1375.016 1366.022 5416.233

FCFF ob cash Principal Interest Interest tax shield Net cash balance Assets: Cash & Cash Equivalents Marketable Securities Accounts Receivable Inventory Prepaid Expenses Deferred Taxes Other Current Assets Total Current Assets Property, Plan & Equipment Licenses Customer Lists Marketable Equity Securities Investments in Affiliated Entities Long Term Note Receivable Goodwill Other Long Term Assets Total Assets Liabilities & Owners' Equity: Accounts Payable Deferred Revenue & Deposits Accrued Liabilities Taxes Payable Deferred Taxes Note Payable Forward Contract Derivative Liability Other Current Liabilities Total Current Liabilities

Growth Rate

254.116 111.407 42.865 36.748 0 135 0 0 82.585 662.721

2.75%

254.871 123.344 47.842 26.913 26.326 35 159.856 88.84 93.718 856.71

36.7 2687.337 1378.881 1614.398 5680.616

2008 2009 2010 2011 2012 292.11 342.28 314.54 321.37 318.64 204.533 87.06 13.22 (95.27) (204.23) 290 306 324 342 2,496 199 183 166 148 128 79.77158335 73.230033 66.319487 59.019132 51.30698 87.06 13.22 (95.27) (204.23) (2,458.54)

43.396 43.40 43.40 43.40 43.40 43.40 2415.718 4980.873112 4612.6741 4464.6587 4304.0572 4117.9997 1404.094 565.28 873.86 1108.94 1407.51 1765.16 1792.062 5611.874 5546.15 5486.53 5573.60 5711.57 5883.16 4,032.90 4,035.21 4,042.00 4,107.73 4,223.70

Tax rate

40%

P/E ratio

19.1

FCFF PV(FCFF) TV PV(TV) Base Case value of the firm

2008 2009 2010 2011 2012 1 2 3 4 5 292.1082 342.2827 314.539 321.3715 318.6437 269.7296 291.8464 247.6446 233.6396 213.909 6756.732 4535.869 5792.638

Interest tax shield PV (tax shield) PV (tax shield)

79.77158 73.23003 66.31949 59.01913 51.30698 75.61288 65.7937 56.47858 47.64123 39.25673 284.7831

PV(Firm) Value of Inoperative assets TOTAL VALUE

6077.421 1940.515 8017.937

In Case of Synergies

FCFF PV(FCFF) TV PV(TV) Base Case value of the firm

2008 2009 2010 2011 2012 1 2 3 4 5 292.1082 342.2827 314.539 321.3715 318.6437 268.7005 289.6238 244.8209 230.0943 209.8595 6388.272 4207.331 5450.43

Interest tax shield PV (tax shield) PV (tax shield)

79.77158 73.23003 66.31949 59.01913 51.30698 75.61288 65.7937 56.47858 47.64123 39.25673 284.7831

PV(Firm) Value of Inoperative assets TOTAL VALUE

5735.213 1940.515 7675.728

Q1

In the initial years, neither the debt to equity ratio nor the debt is constant and WACC cannot be used. Hence it is advisable to use the APV met However, after 2012 the D/E ratio becomes constant and hence WACC method can be used to calculate the termainal value of the firm in 2012. The free cash flows and terminal value can then be discounted at the unlevered cost of equity 8.30% to obtain the base case value of the firm. Present values of interest tax shields which are discounted at cost of debt are then added to the base value along with the value of Inoperative a

Q2

The unlevered cost of equity of 8.30% should be used to discount the unlevered FCF as neither the nor the D/E ratio are constant in the initial y However in the long run, the D/E ratio will become constant and hence WACC method taking into account the growth rate is used to calculate t

Q3

The long term growth rate comes out to be 2.75%. Using this rate, the terminal value of the firm is $6756.73 million and the present value of the

Q4

The Total value of AirThread before considering any synergies is $8017.94 million. The synergies can be achieved due to: a) Increase in revenue due to increased service offerings b) Reduced operating expenses Assuming Zhang's estimates of synergies are accurate, the total value of AirThread is $7675.73 million

Tax rate Growth rate

40% 2.75%

Using average values of 2012 Equity market risk premium Risk free rate Unlevered beta Cost of equity(unlevered)

5% 4.25% 0.81 8.30%

D/E ratio Cost of debt Levered beta Cost of equiy (levered) WACC

Using values of Rocky Mountain Wireless 2012 Equity market risk premium Risk free rate Unlevered beta Cost of equity(unlevered) D/E ratio Cost of debt Levered beta Cost of equiy (levered) WACC

40.09% 5.50% 1.004 9.27% 7.59%

5% 4.25% 0.89 8.71% 44.40% 5.50% 1.130 9.90% 7.87%

t is advisable to use the APV method upto 2012. mainal value of the firm in 2012. he base case value of the firm. g with the value of Inoperative assets to obtain the total value.

ratio are constant in the initial years . growth rate is used to calculate the terminal value.

llion and the present value of the going concern is $4535.87 million