Submitted By,

Faded Flames
Member
Name

Email ID

Contact No.

Abhijeet Patil

abhijeet.patil@sib.ac.in

9689529525

Shahan Tamboli Shahan.tamboli@sib.ac.i 8007377773

Abhishek Gupta n
abhishek.gupta@sib.ac.in 9130081141

Executive Summary

Current Situation

US Telco, has its primary business in property operations of leasing tower space and service operations relating to
tower services

It has a strong asset base and well established customer base both domestic and international

Organic Expansion within US

Strategic Objectives
Inorganic growth both in the domestic and international markets
Expansion into related Services

Recommendations
Long term:
Provide support for OFDMA multi-carrier transmission
from the current spread spectrum radio technology so as
to be able to support 4G technologies

Short term: Small cell or Femto cells

4G connections are expected to grow at a 28%
compound annual growth rate between 2013-2018, while
2G and 3G are projected to decline
Need access to new technology to accommodate 4G
services
Multiple Antenna Mounting Scenarios
Provide complete support to Pre 4G technologies like
the 3GPP Long Term Evolution or 4G-LTE

Growth Avenues

Targets

Buying Price

Risks and
considerations

Recommendations

Distributed Antenna systems and Managed roof tops

Indoor Distributed Antenna systems

Outdoor Distributed Antenna systems

Managed Rooftops

Provides coverage in indoor venues, where

signals from towers are insufficient

Street level DAS can provide a very efficient

solution for large urban regeneration projects
which require dense coverage

Predominantly located in dense urban areas

where towers cannot be installed

Neutral-host networks are readily accessible to

collocation

Allows for multiple carriers to leverage single

installation

Used in combination with DAS and Wi-Fi to

provide coverage to concentrated user base

Mobile WiMAX Technologies

Re-development
Capital spending to increase capacity of towers (e.g. height extension, foundation strengthening, etc.)

Provides wider coverage for hundreds of users

at a time with very high speed data

The best advantage of WiMAX vendor

technology is lack of history within mobile
industry for protection

Provides a low cost network substitute to

internet services offered via ADSL, modem or
local area network.

Cost is typically shared with the tenant and investment payback period on net capex is typically one to
two years

Growth of voice calls demands higher signal density which means the existing towers can be upgraded
to meet the growing demand

Wi-fi is not efficient in rural and sub-urban spaces as the %ge area covered under them is greater. Most
countries have a far greater %ge of their population in these areas

Growth Avenues

Targets

Risks and
considerations

Buying Price

Recommendations

BBA Africa Limited, Namibia

ASA Towers Inc., Argentina

ASA is in its introduction phase with a huge headroom for growth

BBA is in its growth phase with earnings growth rate of 155%

in next 5 years.

Products and services

Provides customized colocation services, High speed network
deployment, Distributed antenna systems, which are the areas that US
Telco is looking to expand in.
Provides various wireless communication services which can be an area
of un-related diversification
In addition to that it has its primary operations in renting tower space
similar to US Telco, making it easier for the merger

Products and services

It provides distributed antenna systems that is one of the areas that
US Telco wants to expand in
It provides corporate enterprise internet infrastructure solutions
which will help US Telco penetrate into this niche segment
Provides various wireless communication services in addition to
leasing space to telecommunication companies

Threat of New entrants

TeleMo

5.2%

BBA
Existing Rivalry among competitors

Bargaining Power of buyers

3
4

25.1%

ASA
Nzone
US Telco

Revenue growth rate

46.9%
7.1%
9.2%

Growth
Avenues

Targets

Buying Price

Risks and
considerations

Recommendatio
ns

NPV Value
NZone Communications, Inc.
Geography: New York, United States
EV of the firm:$723mn
Price range:650-867
Range:0.9x to 1.2x

ASA Towers, Inc.

Geography: Argentina, SA
EV of the firm:$(19.03)mn
Price range:(7-10)
Range:0.9x to 1.2x

34%

35%

5%
1%

US Telco
Nzone
ASA
BBA
TeleMo

25%

US Telco Ltd
Geography:United States
NPV of the firm:$998mn
Synergies:
BBA Africa Limited
Geography: Namibia, Africa
EV of the firm:$138.92mn
Price range:128 -170
Range:0.9x to 1.2x

TeleMo Networks Limited

Geography: Czech Republic
EV of the firm:$1,030.45
Price range:927-1236
Range:0.9x to 1.2x

-High potential Market penetration

-Fairly regulated and legally protected environment
-Extending geographical reach
-Expanding services segment to developing markets
-Access to employees with experience and skills
necessary to deploy new technologies
-Exposure to market with less competitive intensity

Growth
Avenues

Targets

Assumptions for BBA Forecasting

Tax rate: Varies according to country in which

target is located
Long term Cash flow growth rate: according to
the trend of revenue growth percentages(ref table
2)
WACC : Risk premium for country risk and Beta for
telecom industry according to the country in order
to reduce credit risk for target company(ref table
no.1)
Beta: In some cases used proxy according to the
credit rating of country(ref table no.1)
Terminal value: FCF(1+g)/(WACC-g)
Depreciation :assumed as 0

Buying Price

Risks and
considerations

Recommendatio
ns

Assumptions for Price

For BBA Africa Limited:

-we have projected cash flows till 2025 in order to get a positive EV
-Revenue growth rate projected taking average of last 3 years
-Operating expense as percentage of revenue from 2021 to 2025 has been kept
constant
-EBITDA projected as percentage of revenue from 2021 to 2025 has been kept
constant
-Capital expenditure is taken as percentage of revenue as constant as previous
year from 2021 to 2025
-Change in working capital kept as constant from 2021 to 2025 as per previous
year
-Tax rate assumed to be constant
-Long term cash flow growth rate :considering the growth potential

Growth Avenues

Targets

Buying Price

Risks and
considerations

Recommendations

Integration Risk

Considerations

Risk of Cultural Differences

Cultural differences

Conduct a detailed analysis of the

existing company policies for ASA
towers Inc., BBA Africa Ltd and modify
policies keeping the relevant culture in
mind

There are several dissimilarities in the business culture of US,

Argentina and Namibia

Defining synergies is complicated given

that both the companies are in their
nascent stages
4G and other high-speed services are
achieved by using different technologies
across geographical borders
Demand for high-level security needs
will increase per-tower installation costs
thereby directly reducing synergies

Initial focus on upgrading of existing

infrastructure post-acquisition

The second highest reason for the failures of Mergers and

acquisitions is reported to be cultural differences
Culture at US Telco located in USA is more direct with small
talk, the negotiations are fast and punctuality is of primary
concern
Argentina, has a slow negotiation culture with multiple
meetings to seal a deal, they tend to stay more relaxed in
meetings
Namibia, schedule meetings well in advance and tend to
adhere to it rather than coming up with an emergency meeting
thereby leading to slow negotiations

Appendix:

Table 1
Target
Nzone

Country
US
Argentin
ASA
a
BBA
Namibia
Czeck
TeleMo Republic

Beta
1.17

Risk
Disc.rat
premium
Rf
e
6.00%
10% 17.02%

Country credit
rating
AAA

Proxy

1
1.14

15.00%
9.00%

10% 25.00%
10% 20.26%

B
Baa3

India

0.65

7.28%

10% 14.73%

AA-

China

Table 2
Target
Nzone
ASA
BBA
TeleMo

NPV Value
723.13
-19.03
138.92
1,030.45

LEGEND
0 - No threat to the business
1 - Insignificant threat to the
business
2 - Low threat to the
business
3 - Moderate threat to the
business
4 - Significant threat to the
business
5 - High threat to the
Porters
five
business

Price Range
650-867
(7)-(10)
128-170
927-1236

EV multiple
0.9x-1.2x
0.9x-1.2x
0.9x-1.2x
0.9x-1.2x

Long term
growth rate
1.5%
20.0%
5.0%
5.0%

SWOT Analysis
Strengths

Strengths

Threats

Weakness

Oppurtunities

Opportunities
Huge growth Opportunities in
developing economies like India,
Nigeria, Brazil, South Africa
ASA Towers Inc. is in its growth
phase with revenue growth of 155%
over the next 5 years
Lack of
a lot of competition in
Argentina will help US Teclo grab a
major chunk of the market share
(roughly around 75% )
Availability of expert employees who
have set up new technologies like the
managed hosting; cloud services,
such as computing, storage, backup,
recovery, and application platforms

It has a strong asset base and well

established customer base both
domestic and international

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

Weakness

Lack of diversification into related

internet services segment

Have not yet switched to efficient,

latest and power-saving technologies

Threats
Lack of strong legal and regulatory
framework and protection
More chances of fraud
Government might cap FDI
Moving
profits
from
the
target
companies to the parent company might

Resume

Abhijeet Patil
Finance Specialization (Internship at Aditya Birla
Money Mart,Pune)
Past work experience: Viraj Profiles limited,
Thane(13 Months)

Shahan Tamboli
Finance Specialization (Internship at Phillip Capital
India Pvt. Ltd.)
Past work experience: Software Engineer Accenture
(39 months)

Abhishek Gupta
Finance Specialization (Internship at HDFC)
Past work experience: Software Engineer at TCS (44
Months)