Q1> The strategy of US Telco should be:

1.

US Telco should focus on expanding the current customized colocation solutions to

different sectors and regions with additional features (speed of network deployment,
distributed antenna systems, managed rooftops etc.) in order to tap wireless carriers
looking for shared services, better efficiency at lower cost.

2.

With US market reaching near saturation level specially the mobile phone sector; US Telco
should look to expand into other developing market like Africa, Argentina where the
growth prospects are promising.
(GDP growth rate of Namibia & Argentina are 5.1% & 2.9% respectively)

3.

US Telco should expand the current client base by including B2C business models
(Provide 3G,LTE,Hotspot services ) and providing personalized services directly to
consumers ; as the current B2B business model of leasing faces potential risk from
emergence and growth of new technologies in long term.(Consumers spending is forecast to
increase at an annual rate of 2.8%)

Q2> list of preliminary targets identified by US Telco, what are the two most attractive targets and why?
First Reason: First Table
Current Value based on
expected future CFs
Company

Country of
Origin
Value using
EBIDTA
multiple

US Telco
Nzone
ASA Towers
BBA Africa
TeleMo

US
US
Argentina
Namibia
Czech
Republic

Value using EV
multiple

Growth Prospective
Value using
EBIDTA
multiple

Value using EV
multiple

CAGR

CAGR

1355.93
1242.27
102.29
837.48

597.00
571.85
34.50
293.84

0.50%
0.76%
37.78%
15.13%

5.37%
9.92%
19.09%
25.39%

2108.71

995.79

0.71%

14.54%

Target 1- ASA Towers, Argentina: %age Growth EBIDTA of Value over 5 years is the highest with
37.78% and %age Growth EBIDTA of Value over 5 years is the second highest with 19.09%.
Target 2- BBA Africa, Namibia: %age Growth EBIDTA of Value over 5 years is the second highest
with 15.13% and %age Growth EV of Value over 5 years is the second highest with 28.39%.

Second Reason: Second Table

Competitiv
e Intensity
(100Given
Value)
25%
25%
75%
50%
50%

Regulatory
Environme
nt
(100- Given
Value)

Legal
Protectio
n

25%
25%
50%
75%
50%

75%
75%
50%
25%
25%

GDP Growth Rate

Absolut
e
2.20%
2.20%
2.90%
5.10%
-0.70%

Relativ
e
50%
50%
62%
100%
0%

Telecom
Penetration

Absolut
e
80%
80%
83%
110%
75%

Relativ
e
86%
86%
77%
0%
100%

Weighte
d
Average
Score

52%
52%
63%
50%
45%

Based on external factors likely to affect companies growth we have assigned a score to each company.
Based on this we found that NZone and ASA Towers have the highest score with 52% and 63%
respectively, followed by BBA Africa with 50%. Moreover, NZone is based on USA, while other two are
based on Argentina and Namibia and the change in growth for ASA Towers and BBA Africa is more, so we
are considering these two as our targets for acquisition.
Third Reason: First Table (can link with first tablewill add some animations)
As compared to TeleMo and NZone, BBA Africa and ASA Towers have less current evaluation value. So, it
will be cheaper to acquire them as well as growth prospects are high.
Fourth Reason: Technology synergy and stuff
BBA Africa offers personal plans like prepaid/postpaid services. Acquiring this company will add additional
portfolio of services under its umbrella to reduce customers risk and thus increase its client base.
ASA Towers provides customized colocation solutions and according to latest trends companies will look
for shared services which will reduce their expenses and acquiring ASA towers will be an asset for US
Teleco.
Note:
Highlight the important values on excel.
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Q3>For the two targets identified, what buying price would you recommend to US Telco?
Table >> Buying Price

Company

Country of Origin

Buying Price
Current Value
based on
expected future
CFs
Value using
EBIDTA multiple

Nzone
ASA Towers
BBA Africa
TeleMo

US
Argentina
Namibia
Czech Republic

1242.27
102.29
837.48
2108.71

Value inclusive of premium

10%

20%

30%

1366.5
112.5192
921.2326
2319.577

1490.727
122.7483
1004.981
2530.448

1614.954
132.9773
1088.729
2741.319

While evaluating the targets we have considered EBIDTA multiple, as EV/Sales is a crude measure as
sales are rarely a direct value driver for company and EBIDTA multiple is a proxy for free cash flows
available to firm which represents the cash that company is able to generate after laying out the money to
maintain its asset base and is unaffected by depreciation policy.
Considering Premium of 10%-30% as per US scenario, buying price for following companies is calculated
to be:
ASA Towers: 112.519 million USD to 132.977 million USD
BBA Africa: 921.233 million USD to 1088.73 million USD
We have considered a conservative approach and selected premium range in between 10%-30% for the
following reasons:
Its not a distressed sale, so it will probably not be sold without premium.
As per the current US scenario, 20-30% is the premium that is used for deals usually.
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