Duff&Phelps Case competion, Discounted Cash Flow.

1. Teldar’s Potential Buyers

2. Table of Contents Strategic Buyer Option1: Sprint Nextel Strategic Buyer Option2: Cricket Private Equity BuyerOption Conclusion Unknown Legal Matters Takeaway

3. Sprint Nextel and Cricket would be the best companies to buy Teldar. Sprint Nextel would buy Teldar between ~ mean of ~ with the control premium of ~. Cricket would buy Teldar between ~ mean of ~ with the control premium of ~. Private equity firm is willing to buy between ~ mean of ~; however, private equity firm won’t pay higher price than two strategic buyers because it is not expecting any synergy, Knowing the unknown legal matter ahead of times would not affect the decisions of strategic buyers significantly because the current spectrum capacity of Teldar is only 2% of Sprint’s current capacity. However, if Teldar is still independent, this legal issue can be significantly impacting the value of Teldar.

4. Strategic Buyer Option1: Sprint Nextel Sprint Nextel is a third largest service in Big 4. Sprint Nextel would be interested in buying Teldar because The market capitalization is similar to Teldar compared to other Big 4, so the high growth of Teldar will impact significantly (see figure1). Sprint has been aggressively expanding its business into pre-paid services.

5. The Price that Sprint Nextel would pay The enterprise value of Teldar in Sprint Nex-tels view Is $713.2 million, which is 30% premium over the current price of $5.21 of Teldar. We used WACC of 9.9% with the exit multiple of x4.3. WACC includes 12.5% CAPM using 5.1% market risk premium

6. Assumptions for DCF model We want to be conservative our analysis due to the slow recovery of economy and the matured industry. Revenue growth Since Teldar is a growing company penetrating the pre-paid market, we believe that the management’s expected growth rates of 2011, 2012, and 2013 are reasonable assumptions compared to its historical growth rate of 23.3%(2009) and 16.7%(2010). In 2014, and 2015, we used two assumptions and the second assumption has a negative growth rate because by five years, like the post-paid services, the pre-paid market can be matured.

7. Assumptions continued COGS’s percentage of sales We believe that the acquisition with Sprint Nextel will decrease the percentage of COGS because both Sprint’s COGS has been less than 50% of its sale. We believe that the learning curve and the strategic buyer’s experience will help Talder to reduce its rate close to 63%. However, the first year would have the higher COGS than what the management expect due to the process of acquisition.

8. To calculate WACC, we used 5.1% of market risk premium. The number is from the market risk premium used in 2010 by analysts and companies of 2,400 answers. US’s 5.1% is in between 5.0% of Europe and 5.2% of UK.. We used 3.4% of 10-year treasury rate as our risk free rate. We believe that 10 years would be sufficient to our analysis.

9. We used the EBITA multiple for the terminal value. We have sensitivity analysis using different EBITDA multiples but, median is x 4.3 because what the telecommunication companies have been paying for the acquisition historically from 2007~2010. The lowest multiple was x3.04 targeting Rural Cellular Corporation acquired by Verizon (August 7, 2008) and the highest multiple was x4.34 targeting Virgin by Sprint Nextel. Sprint also paid x4.33 for iPCS in 2009. Since, Teldar is a fast growing pre-paid company, which is attractive to Sprint, we believe that x4.3 would be a good assumption.

10. New customers growth: we used the same assumptions with the revenue growth for the new customers growth in 2014 and 2015 Synergies: CCPU cost reductions ($0.25 ) and improving Churn rate (Sprint Nextel’s churn rate is 7%) ARPU increase: expected to increase in CAPEX because both Sprint and Cricket have a good infrastructure established, which can be shared.

14. With the assumption 2 growth rateSensitivity Analysis of Cricket

15. The Price that a private equity firm would pay The enterprise value of Teldar in a private equity firm’s view is $617.5 million, which is 5% premium over the current price of $5.21 of Teldar. We used WACC of 9.9% with the exit multiple of x4 because of no synergy can be created from this acquisition. WACC includes 12.5% CAPM using 5.1% market risk premium. There is no synergy to reduce COGS except the learning curve from the company. Therefore, the future COGS are calculated from the learning curve equation.

16. Assumptions Less growth rate(no synergy is expected) COGS percentages are calculated from the learning curve of Teldar from 2006 to 2013 that the management expects.

17. Unknown Legal Matter Maintaining 100% of the current licenses Win 1-α Trial in two years Lose Losing 50% of the current licenses α If Teldar looses in the trial, there is a possibility of owning only 10 MHz of PCS spectrum instead of 20 MHz, which Teldar currently owns. There is a cost associate with a trial and some marketing, which would affect the percentage of COGS.

18. If the buyer knows about this issue before… However, the effect of this issue varies depending on the characteristics of buyers. Strategic buyers such as the Big 4 wouldn’t be affected by losing 50% of licenses because it is losing less than 1.5% of its total capacity. Financial buyers will be affected by this issue because a private equity firm doesn’t have any capacity besides what Teldar currently owns. If 10 MHz cannot fully cover the demand of voice and data services, the additional costs will occur. In this case, consumer behaviors can be affected by the less capacity, and the revenue growth can be affected. Additional costs regarding to marketing and trials It depends on whether Teldar loses the trial.

19. Considerable Factors The percentage of winning and losing (α) for the case will matter for the future cost of good sold. Effects of losing 50% of 20 MHz spectrum licenses for the financial buyer. In this case, this trial can affect the stock price of Teldar.

20. Sensitivity Analysis of Alpha Revenue Increases For post-paid carriers: Depends on the capacity of the acquired company Auction price Independent verse acquisition environment Only supports Sensitivity analysis of alpha