Deloitte Maverick Case Study 2016 - US Telco Case

1. US Telco
Case Study

2. Services Offered
Space leasing
(on communications sites)
Tower & Network deployment services
(in US property segment)
Industry
Telecom – Real Estate
Geo presence
Global
(Primarily US, Canada & EU)
Key Customers
Wireless Service Providers
Radio & Television broadcast companies
Wireless data providers
Government & Municipality agencies
Tenants in other industries
Scale of Operations
85K+ sites globally
(35K+ domestic, 50K+ International)
Revenue source
Diversified clientele
(large clients across US, Nigeria & India)
FAST FACTS
Growth Strategy – Objectives
Top line impact Access to new Geos Increased Market share Expand Co-location & DAS* Market Diversification of services
US Telco estimates revenue of $ 600Mn by 2020 at a
healthy CAGR of 9.2% owing to Organic & Inorganic foray
Industry Challenges
Saturated US
Market
Growth of complementary
networks
Space & Cost efficient
technologies
Continuous demand for
reskilling & Capex
New engagement constructs
(e.g. site-sharing, equipment location swapping)
DAS* – Distributed Antenna System
US Telco – Search of Quantum Leap
As a part of growth strategy, US Telco is exploring Organic & Inorganic opportunities for a sustainable & strong growth as well as increased
presence in National & International Markets

3. Growth Avenues through Inorganic foray
With an objective to expand services in other regions and provide colocation solutions to increase speed of network deployment, 4
new Targets have been identified with varied strengths & growth potentials
Growth Avenues by Products & Services
Tower Engineering & Management services – Backward & Vertical integration
Industry revenue is expected to grow at an average annual rate of 1.6% in the period
2016-21 (2015 - $25Bn; 2021 – 27.1Bn)
Access to leading technologies in Colocation & Network deployment space
Access to industry leading technologies like network products, integrated data solutions &
enterprise Internet infrastructure solutions
Direct access to Target’s Clients and Geographies, enabling Top line growth
Revenue growth through the Joint GTM activities by cross selling & upselling
opportunities
Improved Profitability through Cost Synergies
Improved cost savings through synergy activities and consolidation of back-office
operations to target’s location for improved cost savings
Wireless technologies & services (data & voice)
Continuous improvement and shift in Technologies from 3G to LTE driven by the increase
in consumer spending
Access to high growth & high potential future technologies– IT Infrastructure
As per IDC, Cloud IT Infrastructure spending is expected to grow at 15% CAGR and will
reach $53.1 Bn by 2019
Global Telecommunication Market
Growing Industry Segments
Wireless Telecom Carriers Industry
Radio & Television Broadcasting industry
Consumer demand for 4
Mobile WiMax & WiFi Capable devices
Declining Industry Segments
Tower based-Antenna space demand
Demand for 3G & WiFi services
Communication Real estate
Demand for Tower based networks

4. Strategic Fit Evaluation - Opportunity Assessment
Service offerings and outlook of ASA Towers & TeleMo Networks are aligned to the growth objectives of US Telco, enabling forward and
backward integration of services in Telecom industry across geographies
NZone Communications ASA Towers BBA Africa Limited TeleMo Networks Limited
Region New York, United States Argentina, South America Namibia, Africa Czech Republic
GDP Growth Rate 2.2% 2.9% 5.1% -0.7%
Competition
Intensity
Regulatory
Environment
Service Offerings
Wireless & Multimedia Access Services Leasing, Co-location & DAS* Leasing & DAS* End to End telecom tower management
Internet & Voice Services Rapid network deployment towers
Home Phone Connect services Mobile Telecom Services (3G)
Internet & Global Data services Network products & solutions Integrated Data Solutions
Enterprise Internet Infrastructure
IoT & Location based services IT Infrastructure services In-Building solutions
Target Markets Worldwide Worldwide Namibia only Czech Republic only
Financial
Performance
Deal Drivers
IoT Services Expertise in Leasing, Co-location & DAS* GDP Growth & new Geo location access Tower engineering & managed services
Diversified client base Low Competition Intensity 4G opportunity Expertise in Leasing, Co-location & DAS*
Large spectrum of services in telecom IT Infrastructure & telecom services Access to new Geo location (EU)
DAS* – Distributed Antenna System

5. Strategic Fit Evaluation – Risk vs Reward
Qualitative as well as Quantitative evaluation reveal that TeleMo Networks & ASA Towers strategically fit into the objectives of US Telco in
the Inorganic foray
US Telco NZone Communications ASA Towers BBA Africa Limited TeleMo Networks Limited
Revenue (2015) $ Mn 383 297 12 79 421
Revenue CAGR (2015-20) 9.2% 7.1% 46.9% 25.1% 5.2%
EBITDA (2015) $ Mn 115 104 -3 36 177
EBITDA (% of Revenue) 30% 35% -23% 46% 42%
Telecom Penetration Rate 80% 80% 83% 110% 75%
Ease of Doing Business 7 7 124 88 44
WACC Rate 10% 10% 14.7% 9% 6.87%
Tax Rate 30% 30% 30% 32% 19%
Aligned
competency
TeleMo builds, rents, operates & manages telecom towers, enabling technology & expertise transfer
ASA specializes in leasing, co-location, high-speed network deployment & DAS
Product &
Services
US Telco can leverage off the shelf products from portfolio of TeleMo including Rapid deployment towers
IT Infrastructure services market is expected to grow @ 15% CAGR till 2019, also offered by ASA
High Growth
Potential
TeleMo is expected to be consistently profitable through out the forecast period @ 42% EBITDA
ASA is expected to witness a steep rise in revenue @ 47% CAGR through the forecast period
Global
Footprint
TeleMo primarily operates in Czech Republic, geographical expansion to EU
ASA Towers has dominant presence in Argentina as well as significant presence globally
Cost Saving
Offshoring of operations like FP&A, Contract management & Account management to Czech/Argentina
Czech & Argentina has been ranked 33 & 38 respectively by AT Kearney (2014) among global outsourcing
locations on cost, talent and business environment
TeleMo Networks & ASA Towers - Synergy Benefits
Ranking in Strategic Fit framework was determined through
weighted mean of ranks of multiple parameters including
Services offered, macroeconomic factors & growth outlook

6. SCENARIOS TeleMo Networks Limited ASA Towers, Inc.
BASE
SCENARIO
EBITDA
MULTIPLIER
(12.9x)
NPV
MULTIPLIER
(5.6x)
EV
MULTIPLIER
(1.2x)
BUYING
PRICE $ 4.3Bn – $ 55.6Bn $ 5.2Mn – $ 164Mn
TeleMo Networks & ASA Towers – Valuation
Buying prices of TeleMo & ASA vary between $4 - 56Bn & $5 - 165Mn respectively, owing to the Financial Analysis across multiple scenarios
US Telco -
Financial Analysis

7. Employee attrition
Ringfencing of critical employees for
retention through retention bonus pay-outs
and presenting a clear glide path for career
avenues
Loss of Employee Morale
Townhalls by CXOs to establish a connect
with employees navigating all the employee
speculations to resolution
Career Scepticism
Communicating employees about the
detailed HR initiatives, reskilling and career
opportunities for a lasting career with US
Telco
Cultural differences
Organisational culture and work styles tend
to change across borders and organisation,
hence an amalgamated culture to be
deployed
Dissimilar Compensation & Incentive structure
Unified compensation & incentive structure
to be communicated with communication
plan & concern resolution
Change in Organisational structure:
Differences in organisational structure for
information flow, work flow and performance
management
Limited expertise in Project management & integration
Prioritizing efforts based on their impact to the overall
business
Lack of M&A experience
Failure to clearly establish new reporting relationships,
which could lead to confusion and a decline in
productivity
Lack of defined timeline
Lack of a pre-defined timeline for the post merger
integration activity
Limited resource capacity
Limited resource capacities to manage steering
committee, integration and project incentives
Overestimating synergies
Maintaining a conservative stance on
synergy estimation
Lack of Communication plan :
Communication plan to be charted before
signing
Adverse affects of debts
Leverage & debt service obligation may
materially and adversely affect the
company’s synergy goals
PEOPLE CULTURE SYNERGY
PROJECT
Integration Risks – Potential Deal breakers
A concrete Integration plan and a detailed communication plan are the key drivers for the successful integration of firms; hence an effective risk
mitigation plan is a necessity to address the post merger concerns

8. Focus on CORE Business
End to End
TELECOM INFRASTRUCTURE
MANAGEMENT
Leveraging IT INFRASTRUCTURE &
WIRELESS SERVICES integration
A B C
STEP A
Develop, optimise & lease telecom real estate and
Customised Co-location solution increasing speed of
network deployment
Leverage revenue, cost & services synergy through
integration of ASA & TeleMo
STEP B
Manufacture, lease, operate & manage telecom towers
through Backward integration of TeleMo in value chain
of US Telco
STEP C
Embrace Digital transformation in telecom Industry
powered by IT (Cloud Infrastructure) Services in
telecom would enable improved cost savings & CX
Forward integration of Wireless services
3-PRONGED STRATEGY FOR SUSTAINABLE GROWTH
Step A-B-C Strategy focuses on the approach to market and capability growth, while Roadmap 2020 focuses on the Go to Market strategies for
a sustainable growth & increased presence in National & International Markets

9. Sources
• WACC - http://www.waccexpert.com/
• Ease of Doing Business - https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB15-Full-Report.pdf
• Global Location Index by AT Kearney - https://www.kearney.com/documents/20152/912800/2014-GSLI_A-Wealth-of-Choices.pdf/2b1d0002-be11-
1fbe-8b8b-9387cc842687
• IT Infrastructure - https://www.businesswire.com/news/home/20151005005423/en/IDC-Forecasts-Worldwide-Cloud-IT-Infrastructure-Market-to-
Grow-24-Year-Over-Year-in-2015-Driven-by-Public-Cloud-Datacenter-Expansion
US Telco -
Financial Analysis
US Telco
Summary
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