Ref: 5445-66 Overview of upcoming M&A opportunities in the TMT space in Asia Amrish Kacker, Lim Chuan Wei February 2010.

Ref: 5445-66

Overview of upcoming M&A opportunities in the TMT space in Asia

Amrish Kacker, Lim Chuan Wei

February 2010

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Contents

Introduction

About Analysys Mason

M&A opportunities in the Asia–Pacific region

Our general methodology

Our due diligence expertise

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Introduction

With the thawing of capital markets in the wake of the financial crisis, M&A activity worldwide, including in Asia, is expected to pick up in 2010

Within the TMT sectors, M&A opportunities – both new and those postponed previously due to the crisis – should emerge or resurface quickly in the immediate period

This brief presents Analysys Mason’s perspectives and insights into the M&A opportunities for the TMT sectors in Asia

The remainder of this document is structured as follows:

About Analysys Mason – a short introduction on who we are and what we do

M&A opportunities in the Asia–Pacific region – our views on what M&A opportunities may be available, why they would interest financial institutions, and which are the most attractive to pursue

Our general methodology – our analytical methods for supporting such opportunities

Our due diligence expertise – our capabilities and experience in transactional support and due diligence

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Introduction





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Analysys Mason is the world’s premier adviser in telecoms, IT and media

Analysys Mason officeAssignments completed

Market intelligence

Strategy

Planning

ImplementationReview

Through our global presence, we deliver strategy advice, operations support and market intelligence to leading operators, regulators, financial institutions, broadcasters, vendors and enterprises in over 80 countries

Our people have had a major influence on the industry for more than 20 years:

led the liberalisation of telecoms across Europe and Asia and mediated in policy issues for operators and regulators

supported several hundred transactions and licence acquisition processes for operators and financial institutions

provided strategic and operational support to major operators in the roll-out and expansion of businesses across the sector, enhancing enterprise value

Global presence and experience Integrated service offering


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Our consulting advice is valued across all sectors

Enterprise users

Helping to maximise

returns from investment in ICT

Financial institutions

Supporting vendors, sellers and financiers

of industry transactions

Publicsector

Providing ICT and procurement advice

for emergency services and public

bodies

Mobile operators

Delivering value through strategy

planning and implementation

Fixed operators

Defining new strategies,

optimising service portfolios and

supporting policy development

Media companies

Helping to maximise revenue

in converging markets

Regulators

Establishing and implementing

policy frameworks in telecoms and media markets

In particular, we have provided commercial and technical due diligence services to financial

institutions and mobile and fixed operators worldwide


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Our success is built upon a deep and rigorous understanding of key sector issues

ICT consolidation and cost optimisation Service fulfilment and assurance OSS/BSS legacy migration

RAN sharing and other cost reduction strategies

OSS/BSS optimisation Evaluating advertising opportunities

Mobile

Broadband

ICT infrastructure

Regulation

Impact of mobile broadband WiMAX – threat or opportunity? Revenue-maximising pricing propositions

Content distribution strategies in a converging market

Creation and distribution of ‘three-screen’ services

Maximising value of advertising inventory

Media

Delivery of end-user experience Regulation for a converged industry Assessing the impact of media players

entering the telecoms market

Next-generation access strategies: FTTx versus wireless

Wholesale product definition in NGNs Strategies for fixed–mobile convergence

Value migration from infrastructure to services and content

Efficient NGN procurement processes OSS/BSS and customer support

Capitalising on the digital dividend Regulatory environments to deliver NGA

and NGN TV regulation in a converging market

Effective spectrum management strategies

Licence allocation and acquisition processes

OSS/BSS process optimisation WAN acceleration Construction, location and optimisation of

contact centres and control rooms


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We have an established track record of working with the major financial institutions

Analysys Mason has undertaken over 100 due diligence assignments since 2002

We have undertaken a similar number of projects in support of vendor financing, M&A and private placements

We have worked with a wide range of operators, investment banks, private equity firms, strategic investors and governments

Selection of businesses on which we have undertaken due diligence

BTC, Bahamas (2009) • JTL, Kenya (2009) • Avea, Turkey (2008) • Aktel, Bangladesh (2008) • MTN, Africa (2008) • ONI, Portugal (2008)

PCCW, Hong Kong (2008) • Zain, Nigeria (2008) • Excelcomindo, Indonesia (2007) • Safaricom, Kenya (2007) • Lattelecom, Latvia (2007)

ONE, Austria (2007) • Camtel, Cameroon (2007) • MTC, Saudi Arabia (2007) • National Grid Wireless, UK (2007) • Vivatel, Bulgaria (2007)

TIM, Greece (2006) • Magticom, Georgia (2006) • Bite, Lithuania, Latvia (2006) • Armentel, Armenia (2006)

Selection of financial institutions that have chosen Analysys Mason for due diligence assignments

ABN AMRO • Apax Partners • Bank of Ireland • BBVA • BC Partners • BNP Paribas • Capital Partners • Carlyle • CDC Group Citigroup

Credit Suisse • Deutsche Bank • EBRD • Export Development Canada • Eurazeo • Finnvera • GE Capital • HSBC • ING • JP Morgan

Kohlberg Kravis Roberts • Lazard • Lloyds TSB Bank • NM Rothschild & Sons • The Royal Bank of Scotland Group • SACE

Société Générale • Standard Bank • TecCapital Investments • TD Bank Financial Group • UniCredit Banca Mobiliare

WestLB • World Bank Group

Selection of operators that have chosen Analysys Mason for due diligence assignments

Telkom South Africa • Telstra Europe • Zain Nigeria • Bahamas Telecommunications Company • Cable & Wireless UK • ONI Portugal

Mauritius Telecom • Reliance • National Grid • Safaricom • Etisalat • Vodafone Australia • Thus


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We have in-depth market experience in the Asia–Pacific region to help financial institutions evaluate opportunities …

Mobile Broadband Fixed Media Regulatory ICT

East Asia

China & Mongolia

Japan & South Korea

Hong Kong & Macau

Taiwan

South Asia

India

Pakistan

Bangladesh

Sri Lanka

South-East Asia

Indonesia

Thailand

Cambodia, Laos & Vietnam

Philippines

Malaysia & Brunei

Singapore

Oceania

Australia

New Zealand

Company experience Additional project experience of core Singapore team

Project experience in the Asia–Pacific region by sector


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… having worked on a variety of projects across the region

Development of a detailed cost accounting system

Estimation of revenue forecast in China for mobile broadband services

Comprehensive mobile LRIC cost study for a mobile operator, to calculate

termination

(a) Several studies for a mobile operator, including assessment of

telematics and FMC. (b) For a content player, devised an entry strategy

into the European market.

Review of strategic rationale for proposed merger between two operators

(a) Assessed a mobile operator’s business model to evaluate a 3G

opportunity. (b) Due diligence of integrated telecoms and media operator.

Due diligence of cellular operator

(a) Due diligence of an integrated wireline and wireless operator. (b)

Supported an integrated operator in growing its international voice

business.

Study of regulation and competition in the wireless local loop market

Business planning for WiMAX new entrant

A range of projects for a mobile operator, including business planning,

compensation negotiation and 3G licence support

(a) Evaluated the 3G opportunity and alternate business structures for a

mobile operator. (b) Mobile operator’s MVNO strategy and wholesale

pricing. (c) WiMAX business planning for new entrant

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(a) Pricing strategies for an incumbent operator. (b) Due diligence of CDMA WLL operator / WiMAX licence holder

(a) Due diligence of a mobile operator. (b) Assessed strategic options in infrastructure sharing / MVNOs for new 3G operator. (c) WiMAX business plan for a new entrant

For Vodafone Australia, undertook a critical review of a bottom-up mobile network cost model developed on behalf of the regulator.

Provided expert advice on the TSLRIC for both LLU and co-location services.

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Assignments completed

213 4

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56

78

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16

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Selected projects in the Asia–Pacific region


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Introduction





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M&A activity is widely expected to heat up in 2010

Effective M&A deal value in Asia-Pacific, by quarter (USD billion)

With the thawing of capital markets in the second half of 2009, M&A activity has begun to pick up

There was reportedly a 32% increase in number of worldwide M&A transactions in 4Q 2009

M&A activity is expected to continue heating up into 2010

“The future looks encouraging for M&A with strong indicators in the last quarter…we anticipate deal activity to increase in 2010…”

Neil Masterson, Global Managing Director of Investment Banking, Thomson Reuters

“Global M&A activity would rise as much as 35% in 2010 as improving economic conditions bolster dealmaking…”

Research firm Sanford C. Bernstein

"The relatively high volume of deals recorded in the fourth quarter of 2009 hints at a resurgence of M&A activity for the new year…"

Research firm Dealogic

Quotations from industry

155

104

9286

156

47

58 61

0

20

40

60

80

100

120

140

160

180

4Q 2

007

1Q 2

008

2Q 2

008

3Q 2

008

4Q 2

008

1Q 2

009

2Q 2

009

3Q 2

009

De

al v

alu

e (

US

D b

illio

n)

+30%

Source: Thomson SDC, press releases, Analysys Mason


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Current macro-trends in the TMT sectors, in particular, present opportunities for M&A

Maturing markets In some markets, especially developed

ones, the telecoms industry has reached substantial maturity

Operators in these markets tend to have relatively stable cash-flows, low debt, and are in possession of significant assets, making them potentially attractive LBO targets

Industry consolidation In more fragmented sectors and

across sectors, there is a move towards consolidation, e.g.: fragmented telecom markets between telcos and media players between fixed and mobile operators between telcos and ICT players

New technologies Technological trends present further

opportunities for M&A activity, as operators make strategic shifts in response

Key trends include: WiMAX IPTV fixed-mobile convergence

Opportunities for M&A


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At a regional level, there are several trends further fuelling M&A activity


Regional operators are consolidating down the value chain in enterprise services

Some technologies have the potential for a regional play

Some telcos are moving into the ICT space to better serve enterprise clients

These players have sought acquisitions of system integrators, software/application companies and other service providers down the value chain to bridge capability gaps and provide end-to-end solutions

WiMAX is being explored as a regional proposition for wireless broadband in parts of Asia

DTH players have gone regional in the Middle East, and can potentially do so in Asia (barring regulatory issues)

Operators are seeking greater cost economies by regionalising network outsourcing, call centres

Regional operators continue to be a source of M&A activity in emerging markets

Operators with multi-market presence are consolidating their cost centres (e.g. network operations, customer service operations)

These efforts are helping to drive regional ambitions

Regional operators such as NTT, SingTel, Axiata, etc. continue to be amongst the more visible players in the M&A space, as they pursue investment opportunities in emerging markets within Asia

Other regional players from outside the Asia–Pacific (e.g. Etisalat) are seeking to increase their presence in Asia

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We see a number of market-specific opportunities requiring financing, and potentially an equity injection


South Asia

India’s mobile market remains fragmented and poised for further consolidation…

…particularly with the onset of 3G and opportunities for national expansion

Players in Bangladesh are still seeking external funding support

South-East Asia

Consolidation is expected in Indonesia’s mobile sector

In Thailand, operators are preparing to push more strongly into data services

In Singapore and Malaysia, operators are making forays into convergence

In Vietnam, there is strong interest for foreign investment in the mobile space

East Asia

China has entered into 3G, and operators are consolidating their presence in the content/VAS space

In Hong Kong, there is potential for restructuring plays in the telecoms and media sectors

Fragmented subsectors in Taiwan and Korea are likely to see more consolidation, though this might be marginal

Oceania

Government pressure on Telstra for restructuring opens the possibility of a divestment of its fixed and broadband assets

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In East Asia, some opportunities are more interesting than others

Assessment of opportunities in East Asia

Opportunity Market

Restructuring of PCCW Hong Kong

Spin-off of handset manufacturing operations of Huawei and/or ZTE

China

Consolidation and/or acquisition of mobile VAS providers

China

Sale of Shaw Brothers’ stake in TVB Hong Kong

Buyout of i-cable Hong Kong

Buyout of ATV Hong Kong

Buyout of Vibo Telecom Taiwan

Marginal consolidation of cable operators Taiwan

Consolidation of pay TV operators Korea

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PossibilityLow High

Low

Po

ten

tia

l va

lue

High

HIGH

ATTRACTIVENESS

MEDIUM

ATTRACTIVENESS

MEDIUM

ATTRACTIVENESS

1

2

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5

6

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If you are interested in discusssing any of these opportunities further, please contact Amrish at [email protected] or Chuan Wei at [email protected]


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The possible restructuring of PCCW remains an opportunity to watch

What is happening?

PCCW has been exploring potential restructuring options for sale of its assets, but has not been successful

Most recently, PCCW dropped a privatisation bid in April 2009 after regulators blocked the plan due to allegations of shareholder manipulation

It remains possible that PCCW will renew such efforts in the wake of a pick-up of activity in capital markets

Why this is of interest

A deal could present an opportunity for the acquisition of a stake in PCCW

PCCW could be an attractive target, given its:

stable revenue and cash flow

potentially higher valuation through cost-cutting measures or management change

How Analysys Mason can provide support

We are able to provide commercial and technical pre-due diligence, and due diligence services in support of this opportunity

These include:

review of the Hong Kong telecoms market

review of the competitive environment

review of business plan and growth prospects

review of network assets

review of potential synergies between fixed, mobile and pay-TV assets

valuation of stake and review of bid


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In South Asia, the most compelling opportunities are in India

Assessment of opportunities in South Asia

Opportunity Market

Consolidation/ regional expansion of mobile operators in India

India

Consolidation of towers India

Merger/acquisition between Africa-Indian operators

India

Consolidation of cable / satellite TV broadcasters

India

Divestment of SingTel’s stake in PBTL Bangladesh

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PossibilityLow High

Low

Po

ten

tia

l va

lue

HighHIGH

ATTRACTIVENESS

MEDIUM

ATTRACTIVENESS

MEDIUM

ATTRACTIVENESS

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Growing consolidation activity in the tower market in India should be of interest

What is happening?

As demand for towers grows in tandem with the mobile market in India, medium-sized tower companies are embarking on a consolidation spree to accelerate roll-outs and compete more effectively

in January 2009, Tata Teleservices entered into a joint tower venture with Quippo after selling a 49% stake of its tower arm

in March 2009, American Tower Corp acquired Indian tower firm Xcel Telecom


Increasingly, tower companies will be looking actively for partners to fund their expansion

There could also be short-term opportunities from acquiring still-undervalued tower companies that could be targets for acquisition by other companies


We are able to provide commercial and technical pre-due diligence, and due diligence services in support of potential acquisitions in the tower market

These services include:

review of the Indian telecoms market and its implications for tower demand

review of the Indian regulatory environment


review of the technology landscape and implications for target

benchmarking of best practices in tower mergers

review of target’s business plan, growth prospects and opportunities

valuation of target and review of bid


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In South-East Asia, the main opportunities stem from operators looking externally for capital injection

Assessment of opportunities in South-East Asia

Opportunity Market

Strategic investment into TRUE Move Thailand

Privatisation of mobile operators Vietnam

Consolidation of towers Indonesia

Strategic investment into Sun Cellular Philippines

WiMAX consolidation in Indonesia Indonesia

Acquisition/expansion of broadband operations by mobile operators

Malaysia, Philippines, Singapore

Consolidation of pay TV operators Indonesia

Consolidation of mobile operators Indonesia

Buyout of Jasmine Thailand

Buyout of u-mobile Malaysia

Consolidation of alternative pay-TV operators Thailand

Merger of Astro and Maxis Malaysia

Divestment of towers by incumbents Thailand

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PossibilityLow High

Low

Po

ten

tia

l va

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HighHIGH

ATTRACTIVENESS

MEDIUM

ATTRACTIVENESS

MEDIUM

ATTRACTIVENESS

12

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8

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There is strong interest for greater foreign investment into Vietnam’s mobile sector, especially with privatisation

What is happening?

All three of Vietnam’s major mobile operators (Viettel, Vinaphone and Mobifone) are still state-owned

In 2005, the Vietnam government approved the privatisation of Vinaphone and Mobifone, but this has yet to happen, even though several foreign operators have expressed interest

3G licences were issued in 2009, and all three operators are now rolling out 3G services


The liberalisation of the mobile sector presents opportunities for foreign investors to take a stake in the growing Vietnam mobile market, in which each major operator holds approximately a one-third share

The roll-out of 3G networks and services means that Vietnamese operators will be in need of capital and 3G-related expertise more so than ever


We are able to provide commercial and technical pre-due diligence, and due diligence services in support of potential investments in Vietnam

These services include:

review of the Vietnam mobile market

review of the Vietnam regulatory environment


assessment of new entrant threat

review of the technology landscape, including 3G, and implications for target

review of target’s business plan and growth prospects, especially with 3G

valuation of target and review of bid


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Introduction





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Our focus has made us the adviser of choice for due diligences of companies within the TMT sectors

Our assignments cover all sectors of the TMT market

we have undertaken due diligence on numerous mobile, fixed and cable network operators, carriers, equipment vendors, broadcast operators, tower companies and solutions providers

We have significant experience in working on both the buy-side and sell-side of due diligence

We have a comprehensive knowledge of technologies, networks and operations throughout the various sub-sectors of the telecoms market

Our structured methodology, supported by rigorous research, ensures that:

we address all key issues, for example, cross-checking business model revenue forecasts with a top-down, macroeconomic affordability analysis

we meet tight deadlines, and can deliver a red-flag report two weeks into a project, to provide early warning of any critical issues

Our broad international project experience and access to in-house benchmarks, combined with proprietary tools and proven techniques, provide a framework for robust forecasting of key telecoms indicators, identifying and assessing sensitivities, covenant setting and monitoring

We have in-house network design and operations consultants who can provide:

high-level network designs to test network capability and capex projections aligned with business and market plans

the ability to deliver telecoms services on a timely basis and to optimise the customer experience while minimising opex and assuring revenue

Fixed Wireless Cable

Carriers ISP

Application

Satellite

Equipment Virtual


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With our structured approach, we address all the commercial and technical issues efficiently and robustly

Commercial environment & strategy

Regulatory environment

Company revenues and margins

Review of operations and opex

Technology and capital expenditure

Service portfolio

Pricing policy, risks and price positioning

Marketing strategy: subscriber acquisition, distribution, advertising

Competitive landscape:

profiling of competitors

market shares and new entrant scenarios

fixed-line market convergence and substitution offers

Assessment of opportunities and threats

Recent and expected developments in:

interconnect regime

operator licensing

spectrum licensing

numbering

universal service

price controls

National regulator’s activity and agenda, dispute resolutions

Licences held and specific obligations

Achievability of market share in view of commercial and network strategy and competitive landscape

Review of the subscriber base segmentation

Achievability of revenue and pricing

Tariffs and structures, in view of market prices and affordability

Expected gross margins: bottom-up assessment and benchmarking

OSS/BSS, network management, customer care and enterprise IT

Retention, acquisition & marketing expenses

Cost of services and interconnection

Staffing levels versus subscriber forecasts and reorganisation plans

G&A and bad debt expenses

Procurement and quality assurance

Board, management, agent and supplier activities

Network capability and technological roadmap

Capex breakdown and timing of expenditure:

subscriber and capacity forecasts

subscribers geo-dispersion and coverage

licence obligations

network service strategy, availability of technology

Benchmarking of capex

Equipment allocation of network expenditure based on contract prices versus estimates


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Analysys Mason can tailor its approach to the specific needs of a due diligence

Potential deliverables High-level red-flag report based on interviews and information

available from the data room

Short report focusing on key questions already identified during the first phases

Review of management’s assumptions and key market and profitability drivers

Full review of the management’s detailed operational plan

Development of company’s business plan

based on public information integrating information from the data room integrating inputs from other due diligence workstreams

(e.g, accounting, legal) consistent with data from management interviews and with

the regulatory horizon including sensitivities on key parameters highlighting critical

inputs

Comprehensive strategic review of the company going forward

Complementary and comprehensive technical due diligence report, drawing on our expert technical and operations consultants

Due diligence documentation including bid book, information memoranda, presentations to investors, market and business models

Illustrative timeline of a due diligence

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T F S S M T W T F S S M T W T F S S M T W T F

Due diligenceManagement presentationData roomOne-on-one <----------------Site visits (on request)

Submission deadline

DeliverablesDue diligence reports <------------Business plan validation <------------Preliminary valuation <------------Final Board presentationBoard meetingFinal documentation

Financing

Finalise financing caseProposal to credit committeeCredit committee approval

On-site presence

Indicative range of

deliverables


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Our commercial due diligence approach systematically identifies the opportunities and threats to a business …

Commercial due diligence approach

Review of market environment

Review of regulatory environment

Review of competitive environment

Review of business plan and financial

model

What is the current and anticipated market growth?

What are the key growth drivers and opportunities?

Are there peripheral or adjacent markets that are relevant?

What are potential risks to the market?

What are the key regulatory issues and their implications for the business?

Are there any anticipated developments?

Who are the key players in the regulatory environment?

How well is the business positioned to address regulatory issues?

What is the distribution of market share?

Who are the key competitors for the business and what is their threat?

Are new entrants expected?

What is the relative positioning of the different players, and what are the opportunities?

What are the revenue projections? Are they reasonable?

What are the opex and capex projections? Are they reasonable?

What is the current valuation of the business? Is it over- or under-valued?

Fo

cus

Key

qu

esti

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s


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… while our technical due diligence identifies and addresses investment risk in technology and operations

Technical due diligence provides a substantiated capex and opex position, highlighting and quantifying potential risks and unrealised benefits to help develop a robust business plan

Telecommunications networks and operations require significant investment, up to the order of billions of pounds

From a cost point of view, the business case for a telecommunications service, or portfolio of services, is driven by network and operations capex and opex

Under-investment, or untimely investment, can lead to:

not being able to meet market demand

not being able to maximise revenue and profit

poor services, poor customer experience, high churn, a poor brand and, ultimately, low customer acquisition/market share

Over-investment, or investment in sub-optimal technology, can lead to stranded assets, an inefficient operation, and therefore an unprofitable business

When investing in telecommunications networks and operations, the investor must be confident that the budgeted capex and opex is optimised to support the business and market plan


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Our technical due diligence process delivers key benefits that help ensure a successful business plan

In particular, the benefits that we have identified in previous projects include:

ensuring that the network and operations can deliver the market plan from a capability, timing and budget point of view

placing a focus on leveraging technical and operational synergies, and mitigating against future risk

optimising the value of major financial investment

clearly defining the required network/systems, operational strategy and technology roadmap

preventing stranded technical assets

clearly identifying material risk, and providing an appropriate actionable mitigation plan

financially quantifying material business risk

driving towards an efficient operation

developing a robust business case supported by realistic, optimised and benchmarked capex and opex


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A rigorous methodology is key to delivering value, often in short timescales and complex environments

Issue request for information (RFI) document

Undertake interviews of key personnel

Visit and examine key operational sites

Walk through key processes with operational staff

High-level review of key documents

Analysis of key financial and operational benchmarks

Initial identification of major risks to be examined in more detail, potentially by all parties in the due diligence project

Review and document current network, systems and operations:

technology

design

dimensioning

processes

capex

opex

Driven by the business and market plan

Determine required technology road map to deliver services

Determine network/ systems, high-level design and dimensioning

Determine required capex and opex budget

Determine incremental technology strategy, network and systems plan

Quantify investment required for current business

Quantify investment required to meet future network and operations to deliver market plan

Information gathering

High-level review and

red-flag report

‘As is’ review

‘To be’ requirements

definition

Gap analysis and

recommendations

A key challenge to delivering a due diligence project is obtaining the required information in a short period of time

As well as focusing on key documentation, if it is available, our highly experienced technical consultants are able to ask critical questions, the answers to which have significant business impact


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We create value for clients through our independence, in-depth experience and multi-disciplined consultants


(*) This is done anonymously to maintain strict commercial confidentiality

Independence and experience Multi-disciplined specialists Benchmark data

We are completely independent of any equipment providers or other professional service providers

We have successfully provided advice to our clients for over 20 years

We have delivered hundreds of due diligence and other related projects

We also provide technical and operational strategy, network design and procurement services, therefore maintaining our best-in-class network and operations knowledge

All of our consultants are TMT specialists

We have significant experience in many types of TMT businesses

We are able to review all layers of the network and operations from the physical infrastructure, through the active layers, BSS/OSS to the customer care systems

Our consultants are very used to working in multi-disciplined, multi-party due diligence teams

We are able to benchmark equipment and application costs gathered from many projects*

We are able to benchmark financial investment ratios against other business plans

We also procure networks on behalf of clients, therefore providing us with post-negotiated pricing and technology roadmaps to ensure a solid, realistically costed, technology strategy

We also undertake organisational and operational reviews providing us with associated benchmark data for efficient processes and organisational structures

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Introduction





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Transaction support in Africa

Other Analysys Mason projects

Starman (2007)

NMT (2006)

tele.ring (2005)

RCS (2006)

ONO/Auna (2005)

ONE (2007)

On Telecom (2006)

Numericable (2006)

VTH (2001)

Zapp (2004)

Voxtel (2004)

Turk Telecom (2005)

Tunisie Telecom (2006)

Thus (2005)

Telekom Srpkse (2004)

Telekom Slovenije (2007)

Mobilkom (2004)

Europe

Eircom (2006)

Monaco Telecom (2004)

LycaTel (2009)

Lattelekom (2007)

GTS (2007)

Globul (2002)

Fastweb (2007)

EMKTV (2004)

Cinven (2009)

Cesky Telecom (2002)

Cabovisao (2004)

BTC (2007)

BSkyB (2008)

BITE (2007)

Baltkom (2007)

Avea (2006)

Astelit (2005)

Armentel (2006)

Altice (2005)

Albtelecom (2007)

Asia

Swan Telecom (2008)

Sky Mobile (2007)

PTCL (2005)

PacketONE (2008)

Excelcomindo (2007)

Etisalat (2008)

AKTEL (2008)

Calyon (2009)

Africa

Telecel de Loteny (2004)

Safaricom (2007)

Nitel (2005)

Multilinks (2007)

MTN (2007)

Maroc Connect (2006)

Magticom (2007)

Libertis (2005)

Cell C (2006)

Camtel (2007)

Atlantique (2004)

Transaction support in Asia

Transaction support in Europe

We have extensive due diligence experience across Asia, Africa and Europe


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We support debt and equity financing of the telecoms sectorOur due diligence expertise

Recent client successes

We have provided IPO support in respect of:

Safaricom Zain, Saudi Arabia (2008)

We have supported the following M&As:

Lattelekom (2007) ONE, Austria (2007) Casema, Netherlands Mobilkom, Bulgaria (2004) Excelmindo, Indonesia (2007) Monaco Telecom (2004)

We have supported the privatisations of:

Telekom Slovenia (2007) Camtel, Cameroon (2007) BTC (2007) Tunisie Telecom (2006) Nitel, Nigeria (2005) Türk Telecom (2005)

We have provided lender due diligence in support of:

Etisalat, Egypt (2007) Zain, Saudi Arabia (2007)

Focus

We have an extensive track record in telecoms finance, undertaking rigorous, structured due diligence and business planning in support of vendors, purchasers and lenders. We are the partner of choice for many leading investors and debt financiers

Our extensive portfolio of work spans Europe, Asia, Africa, Middle East and the Americas

We continue to support investors in wireline, wireless, facilities and media-based businesses

Skill set

Technical and commercial due diligence on behalf ofpurchasers and debt financiers

Vendor due diligence

Covenant setting and monitoring

Preparation of information memoranda

Valuation in support of M&A

Joint-venture structuring

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We support operators/vendors in fulfilling M&A opportunities …

… and support operators with ‘fast-close’ financial reporting


Focus Skill set

We undertake work focusing on support for large-scale, operator-centric transactions (typically USD billions)

In addition, we apply of our robust methodologies, detailed knowledge of relevant markets and value chains to support M&A/equity financing of SIs, OSS/BSS vendors and application developers, with transaction values typically in the range of USD10 million to 100 million

Buy- and sell-side support

Transaction management and negotiation support

Synergy appraisals

Valuation

Focus Skill set

We apply robust methodologies to support the world’s leading telecoms operators in their financial reporting, bringing particular expertise to support requirements

Our ability to work to extremely tight timetables enables our clients to meet their challenging reporting requirements

IFRS3 purchase price allocation:

fair value appraisal of tangible assets

fair value appraisal of intangible assets

Value in use appraisals and asset impairment reviews

Valuation of options

IFRIC12 concession accounting

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Project focus Client What we achieved

Due diligence for acquisition Regional operator Commercial and technical due diligence of a mobile operator in Sri Lanka. This involved analysis of primary data, third-party data and face-to-face interviews with management in order to support an assessment of the value of the target operator to our client. Our work highlighted the risks and opportunities of the potential acquisition and produced a detailed ten-year business plan, which was used as the primary input to the discounted cash flow valuation. As a result, our client decided to submit an offer for the target operator, and is currently in the negotiation phase of the acquisition

Due diligence for acquisition Private company For a company looking to acquire a new entrant broadband operator in China, we provided a thorough review of the key issues involved in the investment, and an initial valuation of the deal. This included a detailed review of the broadband market potential in China, including market forecasts, a review of the technology involved, a detailed analysis of the competitive landscape, and advice on the potential regulatory issues involved

Due diligence for investment Private equity firm We supported a private equity firm during the due diligence process of a major integrated (fixed, mobile and pay-TV) operator in South-East Asia. This involved attending management presentations and site visits. We carried out a detailed review of the management’s forecasts for each of the areas of the business and supported the client’s financial advisers in the development of a revised case for valuation

Due diligence for merger Private equity firm For a private equity firm, we carried out a red-flag review of the strategic rationale and potential synergies for the proposed merger of a two operators in South-East Asia. During the project, we examined the potential revenue upsides that the combined entity may benefit from through bundling of services, cross-selling and the introduction of new products with reference to international case studies. We also commented on cost synergies that may be generated through the deal

Due diligence for acquisition Investment bank Due diligence for a minority stake in a South-East Asian mobile operator. This involved management meetings and site visits. We performed a detailed analysis of the market considering issues such as the threat of CDMA fixed wireless access operators, likely market consolidation and subscriber price-usage elasticity. We developed a business model that was used to support the client's financial advisers in the valuation process


Selection of our due diligence work in Asia [1/3]

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Due diligence for investment WiMAX operator We provided an external evaluation of a WiMAX business plan that an operator had developed for a new market opportunity in a South-East Asian country. The client used our evaluation to refine the business plan and inform the decision of whether or not to pursue the investment opportunity

Due diligence for acquisition Regional operator We conducted a commercial due diligence for a client interested in acquiring a minority stake in a South-East Asian mobile operator. This involved management meetings and site visits. We performed a detailed analysis of the market considering issues such as the threat of CDMA fixed wireless access operators, likely market consolidation and subscriber price-usage elasticity. We developed a business model that was used to support the client's financial advisers in the valuation process

Due diligence for financing Commercial bank We assessed the competitive position of a submarine cable operator in Asia. We compiled detailed profiles of the operator’s major competitors, including assessment of their relative strengths and weaknesses. In addition, we identified major market trends, and conducted an analysis of the drivers of change in the Asian submarine cable market in the medium term

Due diligence for acquisition Investment bank Due diligence of an incumbent telecoms operator in a developing Asian country. Analysys Mason assessed the market potential of the target, its current operations and its business plan. We carried out a valuation of the stake that was being offered for sale by the government

Due diligence for acquisition Asset management group seeking to invest in India

We assessed the business plan of a convergent service provider. The project reviewed the key assumptions used in the business plan and provided the client with an indicative valuation of the business. We drew on our international expertise and experience in assessing the opportunity of the data centre business, and our analysis helped the client in understanding the business and key drivers of the business

Due diligence for stock exchange regulation

Stock exchange Production of valuation certificate for an Asian wireless local loop operator. Working with a investment bank, we produced a comprehensive discounted cash flow model and filed our assumptions and opinion with the exchange authorities


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Due diligence for investment Private equity firm We supported a private equity group in a high-level review of the business model for a South Asian CDMA WLL operator. The operator was competing in a rapidly growing mobile market and was focusing on delivering fixed services. The review highlighted the opportunities and risks to the business

Due diligence for investment Venture capital company

We supported a venture capital company in undertaking a high-level commercial due diligence of a South Asian WLL and national long-distance operator. Our project assessed the development of the market with a particular focus on the role of WLL-based versus GSM-based mobility. We also assessed the regulatory environment to evaluate the mobility options that the WLL licence provided. Based on the results of our project, the client entered into a more detailed due diligence exercise


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Selection of our experience undertaking due diligences of major mobile operators [1/3]


Due diligence for acquisition Investment bank We developed a business plan for the valuation of a mobile operator in a Baltic state on the behalf of a Western Europe investment bank. Our cash flow model helped to inform our client’s decision on the acquisition of the target. Our work was praised for its consistency and timely delivery

Due diligence for acquisition Fixed operator We helped a Nigerian fixed operator to acquire a fixed and mobile licence by bidding for an operator in sub-Saharan Africa. We co-ordinated inputs from in-house experts and developed a common, but detailed, view on the market, company revenues, and costs of services over the full length of the licence (15 years) owned by the target. Our client used our model to inform its valuation of the target and develop the best possible strategy for the company in preliminary negotiations with a potential bidding partner with strategic interests

Due diligence for financing Financial institution On behalf of the leading arranger of a large debt facility, we carried out a due diligence of a new mobile entrant in the Middle East. In addition to reviewing in detail the market context and the company’s operations, we carried out a thorough due diligence of the company’s business plans, developed a revised banking case and conducted sensitivity analysis. We presented our findings to a panel of more than 70 bankers during the loan syndication phase of the transaction and provided support in answering questions from potential financiers. We also presented our findings to a credit agency responsible for guaranteeing vendor financing. Our client succeeded in raising the debt funding it required

Due diligence for financing Mobile operator Due diligence assignment on an African mobile operator as part of a refinancing process. We undertook a detailed review of the company’s business plan, examining the evolution of both revenues and costs, and involved on-site visit. Our work highlighted some key risks at a critical time in the evolution of the competitive environment and quantified additional upsides. We developed a revised investment case for our client, which used our report to support its investment decision


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Due diligence for financing Consortium of banks We acted as market consultant of the lenders and global co-ordinators to the re-financing of a Turkish mobile operator. We assessed the operator’s revised business plan, reviewing the main assumptions and expressed our overall opinion of the plan. Subsequently, we supported the lenders in considering the implications for a lenders’ base case and associated sensitivities

Due diligence for acquisition Mobile operator We supported an operator in its bid for a minority stake in a South-East Asian mobile operator. This involved management meetings and site visits. We performed a detailed analysis of the market and the target company preparing a full technical and commercial due diligence report. We developed a detailed business model that was used to support the client's financial advisers in the valuation process

Due diligence for merger Consortium of banks We carried out a due diligence on the merger of two mobile operators, with a transaction value in excess of USD1 billion. We reviewed the business plan, interviewed the senior management and recommended a number of modifications to the plan. We also supported the lenders during the development of the lenders' case and facilitated key financing meetings between the company, its shareholders and the lenders

Due diligence for financing Consortium of banks Due diligence on an Eastern European mobile operator for a consortium of North American and European lenders in support of a transaction in excess of USD100 million. We undertook a detailed assessment of the operator's marketing strategy, network technology, business plan and management team. Our work led to several major revisions being made to the operator's business model and financing structure

Due diligence for acquisition Investment bank We undertook a due diligence of a Scandinavian CDMA 450 operator, on behalf of an investment bank. Our work included an assessment of the company’s strategy, marketing plan, operations strategy and business model (revenue and cost projections). The results of the study were used by our client to develop the financial projections for its lenders case


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Due diligence for acquisition Investment bank We performed a market and technical due diligence of both the fixed and mobile operations of a European operator, conducting interviews with the management team and undertaking physical network inspections. We reviewed the business plan assumptions on revenues, direct costs, operating expenditure and capital expenditure in light of the company’s current position and expected commercial and regulatory developments in the telecoms sector

Due diligence for financing Investment bank Support to an investment bank in the financing of an African mobile operator for its initial launch. We carried out a due diligence of the plan and of the overall strategy of the operator. We also prepared a business plan which was benchmarked against other plans

Due diligence for acquisition Investment bank Due diligence of an international mobile operator with several operations in Western Africa. For each operation, we reviewed the market, regulatory and technical background, and examined benchmarks of similar operations in comparable countries to provide an opinion on the reasonableness of the business plans under review for each market

Due diligence for financing Commercial bank A due diligence in support of a syndicated loan transaction of a mobile operator in the Middle East. We reviewed the company's plans for network expansion and developed a view on the market to assess the potential demand for advanced mobile services in the country, taking into account technology, customer preference and economic conditions

Due diligence for financing Investment bank and government export credit group

Due diligence for a multi-billion-dollar financing. We assessed the potential demand for mobile services, taking into account subscriber affordability, technology deployment, the prevailing regulatory environment and in-country economic conditions. We reviewed planned network deployment costs to assess whether the plan had allocated sufficient capital for investments, and the capacity and quality of the network. We reviewed the key business processes to ensure that they supported the planned business strategy. From this analysis we identified the key risks to the plan and quantified the impact of these risks


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Selection of our wireless infrastructure projects and due diligence assignments [1/2]


Mobile tower business Infrastructure company

For a French highway company, we analysed its business of renting sites and towers to telecoms operators, and recommended a new tariff policy. The project also advised on the negotiation of existing contracts with mobile operators

Mobile tower business: commercial due diligence

Private equity firm We supported a private equity buyer in developing a bid for a spin-off of a diverse business consisting of broadcasting/mobile towers and media services. The project involved building a detailed independent business model which required an understanding of the key changes in the market including DTT switch-over, evolution of requirements for mobile towers. Based on our business model, our client developed a valuation for the business

Mobile tower business: commercial due diligence

Consortium of investors

We assisted investors in evaluating a mobile tower business in Europe. Following our initial development of market and financial models, we were retained to value a specific acquisition opportunity in southern Europe and to support negotiations during the formation of a bidding consortium. Our staff worked on site with the client's staff to maximise flexibility and speed of response

Technical due diligence of tower company

Private equity firm We provided an independent view of the vendor’s capability to deliver its stated business plan. This involved reviewing the physical assets, people and processes, as well as the forecast capex and opex needed to support the business

Due diligence mobile sites Investment bank We undertook a review of the business plan, market conditions and potential of a UK mobile site provider


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Selection of our wireless infrastructure projects and due diligence assignments [2/2]


Cell site acquisition Private equity firm We conducted a focused review of a cell site acquisition company’s business plan. The review placed particular emphasis on the key uncertainties in the plan and served to confirm the business plan’s assumptions

Mobile infrastructure market review Private equity firm We provided a high-level review of the market opportunity for mobile infrastructure provision in a number of European markets. The size of the market opportunity was assessed, and the revenue model associated with the infrastructure provider opportunity explored

Assessment of investment opportunities in mobile infrastructure

Investment bank We analysed the conditions for investment in mobile communications infrastructure in an East Asian country. This information was then extrapolated to the country in question. The client was then able to advise potential investors on opportunities for investment

Mobile network outsourcing Equipment investor We conducted a focused review of the requirements for mobile network outsourcing in Europe. The review placed particular emphasis upon the capabilities that would be required to ensure that the outsourcing services business would prove credible in the marketplace


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Selection of due diligences of major fixed, integrated, backbone and broadband operators [1/2]


Internal due diligence Network operator Cable & Wireless (C&W) UK wished to invest in a next-generation network, and required an internal business case to be developed for approval by the C&W Board. We conducted an independent technical due diligence on the internally developed investment case and ratified the high-level NGN architecture and technology roadmap and migration plan. The C&W Board approved the GBP200 million investment in C&W’s NGN

Due diligence for acquisition Fixed operator We undertook the market and technical due diligence of the fixed and mobile networks of the Nigerian incumbent Nitel on behalf of a large network operator. Indications of the expected value of the sale were in excess of USD1 billion. Based on our identification of significant technical and operational risks, our client decided not to invest in Nitel, and has since invested in an alternative operator

Due diligence for financing Consortium of investment banks

For a consortium of European investment banks, we reviewed the strategy and business plan of a fibre-based carriers’ carrier. We examined the company’s strategy, interviewed key management, and reviewed the planned revenues and costs. The final report formed an important input to the consortium’s financing decision

Due diligence for acquisition Investment bank A due diligence investigation of a WLL and DSL operator in Germany. The project assessed the market opportunity for the company in voice, Internet and leased line services, in the context of the competitive environment faced by the company in its target regions. We delivered an analysis of the major issues in the company's business plan and prepared a revised base case plan

Due diligence for acquisition Private equity fund specialising in emerging markets

Due diligence on the incumbent fixed and mobile operator in a South Asian country. The work included a detailed assessment of the market environment, including competitor interviews, a technical assessment of the network and an in-depth appraisal of the company’s business plans


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Selection of due diligences of major fixed, integrated, backbone and broadband operators [2/2]


Due diligence for acquisition Private equity fund We supported Babcock & Brown Capital Management in their successful acquisition of eircom. During this process, we performed a market and technical due diligence of both the fixed and mobile operations, conducting interviews with the management team and undertaking physical network inspections. We reviewed the business plan assumptions on revenues, direct costs, operating expenditure and capital expenditure in light of the company's current position and expected commercial and regulatory developments in the Irish telecoms sector

Due diligence for financing Consortium of investment banks

Due diligence on a fixed operator in Central and Eastern Europe as a part of a EUR350 million debt refinancing. This involved an assessment of the market including size, growth opportunities, regulation and competition, as well as an investigation into the costs allocated in the plan and whether these were sufficient

Due diligence for financing Financial institution We supported a financial institution in evaluating the funding application by a recently established fixed wireless access (FWA) operator in Nigeria and its future business potential. We evaluated the radio, transmission and core networks and associated performance, and then developed a five-year expansion plan, delivering both capacity and coverage enhancement requirements. We also created a five-year technical roll-out plan based on current traffic analysis and projected growth, and a five-year investment plan. Our work resulted in approved funding for the operator


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Analysys Mason Pte Ltd

8 Temasek Boulevard

Penthouse Level

Suntec Tower Three

Singapore 038988

Tel: +65 6866 3203

Fax: + 65 6866 3838

www.analysysmason.com

Amrish Kacker

[email protected]

Lim Chuan Wei

[email protected]

Ref: 5445-66 Overview of upcoming M&A opportunities in the TMT space in Asia Amrish Kacker, Lim Chuan Wei February 2010.

Documents

analysys mason slide

w ma opportunities

opportunities w

diligence slide

financial institutions

diligence expertise

ict financial institutions

major operators