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1989 1990

Revenues
Cellular 446,503 830,497
Broadcast 0 116,820
RCC and Other 57,635 90,136
Net Revenue 504,138 1,037,453

Expenses:
Operating 437,745 715,288
Corporate 14,254 20,860
Depreciation 65,059 103,288
Amortization of Intangibles 127,312 149,637
Subtotal 644,370 989,073

Operating Income (140,232) 48,380

Other Income
Interest Expense (245,523) (496,602)
Interest Income 54,097 45,612
Net gain on assets sold 28,204 1,172,896
Equity in income of unconsolidated investees 6,885 16,752
Nonrecurring benefit (Charge) (16,621)

Profit before tax (296,569) 770,417


Taxes (760) (314,505)
Profit after tax (297,329) 455,912
Minority Interest
Loss(Income) of consolidated subsidiaries 8,790 (32,165)
Provision of pref. stock dividend to subsidiary (52,348)
Income tax benefit of prior year's losses 190,919
Net Income (288,539) 562,318

Weighted avg shares outstanding 148,157,863 182,414,174


Proportionate subscribers 434,000 687,000
Proportionate POPS 52,066,000 55,900,000
YTD
1991 1992

1,135,240
129,481
100,850
1,365,571 1,249,102

888,419 767,679
16,514 15,522
143,231 129,928
201,376 154,767
1,249,540 1,067,896

116,031 181,206

(577,992) (377,955)
30,072 13,979
249,479 2,589
22,874 38,258
6,241

(153,295) (141,923)
(49,486) (23,062)
(202,781) (164,985)

(14,000) (16,439)
(134,300) (100,725)

(351,081) (282,149)

181,487,060 182,499,000
1,252,000 1,252,000
57,400,000 58,500,000
McCaw's Cost of Equity
%
Rf 10 Year Treasury Bond 6.47%
Rm S&P 500 Index Performance 15.360%
Beta McCaw 1.75

Cost of Equity Rf 22.028%

McCaw's Cost of Debt (Long Term)


Debt Rate Due
Senior Notes of McCaw 12.75% 1994
Senior Subordinated Note 13.00% 1996
Senior Subordinated Debe 12.95% 1999
Senior Subordinated Debe 14.00% 1998
Convertible Senior Subor 8.00% 2008

Cost of Debt 12.82%

Calculation of WACC for McCaw


Market D/V ratio 0.49
Market D/E ratio 0.95
Market E/V ratio 0.51
Leveraged Beta 1.75
Risk free rate 6.47%
Risk premium 8.89%
Return on Equity Re 22.03%
Interest Rate Rd 11.12%
WACC 14.76%
Notes
As of closing ( 9/25/92)
Taking average of annual performance from - 1989 - Sept- 1992
As of 1991

(As of 1991)
Amount Ratio
123.4 0.09
146.4 0.11
528.1 0.40
396.1 0.30
114.2 0.09
1308.2

McCaw's Cost of Debt (Long Term)


$ Mn
Total Long Term Debt (31st Dec,1991) 5198838
Total Interest Expense (31st Dec,1991) 577992

Cost of Debt 11.118%

Terminal Growth Rate 1%


DCF Synergy Valuation 10114.90
DCF Valuation 7499.78
Multiple Valuation
Sector Mn $
Cellular 9818.35
Local 2354.66
Long Distance 1388.77

Synergy Valuation
New Terminal Growth Rate 1%
New Cost of Debt(After Merger) 8.2%
New WACC 13.86%
Industry Average Avg Revenue /Subscriber Switch 1
New Marketing Reduction 10%
DCF Synergy Valuation 10114.90
AT&T Debt Rating AA 8.2%
Average Debt Rating 9.7%
Comparable Companies
Revenues ($ MnShare Price $ Shares Outstan
Mc Caw 1366.000 30.000 182.000
Comparable Companies
Cellular
Revenues ($ MnShare Price $ Shares Outstan
Air Touch Cellul 782.0 NA 424.0
US Cellular 99.0 19.8 48.0
Contel Cellular 235.0 23.0 100.0
Vanguard Cellul 89.0 27.0 25.0
Average
Comparable Companies
Local
Revenues ($ MnShare Price $ Shares Outstan
Ameritech 10818.0 31.3 533.0
Centel 1181.0 33.0 85.0
US West 10577.0 38.0 410.0
Bell South 14445.0 25.1 970.0
Bell Atlantic 12280.0 48.6 396.0
Pac Tel 9895.0 42.0 401.0
Average
Comparable Companies
Long Distance
Revenues ($ MnShare Price $ Shares Outstan
ATT Corp. 63089.0 39.0 1309.0
MCI Communica 8433.0 12.4 519.0
Sprint 9780.0 26.4 218.0
Average
le Companies Multiple Valuation
D/E ratio Price/Revenue Multiple Sector Mn $
0.950 3.997 Cellular 9818.35
le Companies Local 2354.66
Long Distance 1388.77
D/E ratio Price/Revenue Multiple
NA
0.200 9.576
0.770 9.787
0.270 2.200
7.188
le Companies

D/E ratio Price/Revenue Multiple


0.300 1.540
0.470 2.375
0.490 1.473
0.320 1.685
0.410 1.567
0.330 1.702
1.724
le Companies

D/E ratio Price/Revenue Multiple


0.170 0.850
0.480 1.150
0.640 1.050
1.017
WACC 14.76%
Terminal Growth Rate 1%

Modeling Assumptions:
Annual Pop Growth rate 1.00%
Annual Penetration Growth 23.50%
Purchase Remainder of LIN in 1995 YES

Date 12/31/91 9/30/92


Direct Costs & Ecxp. (except Mktg) (%Service Rev.) 33.19%
Direct Cost Increment (%) -1.70%
Marketing Expenses (%Service Rev.) 26.43%
Marketing Expense Increment (%) -8%
Depreciation + Amortization (% Service Rev.) 35.24%
D&A Increment (%) -5%
CapEx per Net Subscriber Additions ($) 1147
Net Working Capital (NWC) per Subscriber 198
Tax Rate 36%

McCaw Pops (millions) 45


Penetration (From penetration Growth Factor) 2.12%
McCaw Subscribers 0.94

LIN Pops (millions) 26.4


LIN Penetration 2.38%
LIN Subscribers 0.6
McCaw Share of LIN Subscribers 0.31
McCaw Share of LIN POPs 13.73

Proportionate McCaw POPs 58.728


Proportionate McCaw Subscribers
Beginning Sunscribers (millions) -
Subscribers Added -
Ending Subscribers 1.25
Period Average Subscribers -

Avg. Net Rev./Sub/month ($)


Total Net Service Revenue (millions)
%Growth Net Service Revenue

Direct Costs & Expenses (except mktg)


Marketing
Operating Cash Flow
Depreciation & Amortization (millions)
Cellular Operating Income (millions)

After-Tax Cellular Operating Income (millions)


(+) Depreciation & Amortization
(-) CapEx
(-) Change in NWC
Free Cash Flow
Terminal Value
Year
Present Value
Present Value of Terminal Value

Present Value
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
33% 32.50% 31.90% 31.40% 30.90% 30.30% 29.80% 29.30% 28.80%

25.90% 23.80% 21.90% 20.20% 18.50% 17.10% 15.70% 14.40% 13.30%

34.80% 33.10% 31.40% 29.80% 28.30% 26.90% 25.60% 24.30% 23.10%

1000 850 750 650 575 550 520 500 500


150 60 24 10 4 2 2 2 2

45.11 45.56 46.02 46.48 46.95 47.42 47.89 48.37 48.84


2.24% 2.76% 3.41% 4.21% 5.20% 6.43% 7.94% 9.80% 12.06%
1.01 1.26 1.57 1.96 2.44 3.05 3.8 4.74 5.89

26.47 26.73 27 27.27 27.54 27.82 28.1 28.38 28.65


2.51% 3.10% 3.83% 4.73% 5.84% 7.22% 8.91% 11.01% 13.53%
0.66 0.83 1.03 1.29 1.61 2.01 2.5 3.12 3.88
0.34 0.43 0.54 0.67 1.61 2.01 2.5 3.12 3.88
13.76 13.90 14.04 14.18 27.54 27.82 28.1 28.38 28.65

58.87 59.46 60.06 60.66 74.49 75.24 75.99 76.75 77.49

1.25 1.35 1.68 2.10 2.62 4.04 5.04 6.29 7.85


0.10 0.33 0.42 0.52 1.42 1.00 1.25 1.56 1.90
1.35 1.68 2.10 2.62 4.04 5.04 6.29 7.85 9.75
1.30 1.52 1.89 2.36 3.33 4.54 5.67 7.07 8.80

76 72 68.2 62.35 58.1 50.71 48.47 47.08 46.36


297 1314 1553 1771 2329 2771 3304 4003 4904
18% 14% 32% 19% 19% 21% 23%

-98 -427 -495 -556 -720 -840 -985 -1173 -1412


-77 -313 -340 -358 -431 -474 -519 -576 -652
122 574 717 857 1178 1458 1801 2254 2839
-103 -435 -488 -528 -659 -745 -846 -973 -1133
19 139 230 329 519 712 955 1281 1707

12 89 147 211 332 456 611 820 1092


103 435 488 528 659 745 846 973 1133
-105 -284 -314 -339 -463 -551 -650 -780 -951
- 104 46 22 10 4 -2 -3 -3
10 344 367 422 539 654 805 1010 1271

0 1 2 3 4 5 6 7 8
10.33104 299.8152 278.4582 278.9181 310.4457 328.6176 352.3358 385.0546 422.43234

7499.784
12/31/01 12/31/02
28.30% 27.90%

12.20% 11.20%

21.90% 20.80%

450 450
2 2

49.34 49.84
14.96% 18.48%
7.38 9.21

28.95 29.24
16.80% 20.74%
4.86 6.06
4.86 6.06
28.95 29.24

78.29 79.08

9.75 12.23
2.48 3.03
12.23 15.26
10.99 13.75

45.69 45.06
6034 7439
23% 23%

-1708 -2075
-736 -833
3590 4530
-1321 -1547
2269 2983

1452 1909
1321 1547
-1115 -1363
-4 -6
1654 2087
15168
9 10
479.1316776 526.7611362
3827.4826
WACC 13.86%
Terminal Growth Rate 1%

Modeling Assumptions:
Annual Pop Growth rate 1.00%
Annual Penetration Growth 23.50%
Purchase Remainder of LIN in 199YES

Date 12/31/91 9/30/92


Direct Costs & Ecxp. (except Mktg) (%Service Re 33.19%
Direct Cost Increment (%) -1.70%
New Marketing Expenses (%Service Rev.) 26.43%
Marketing Expense Increment (%) 10%
Depreciation + Amortization (% Service Rev.) 35.24%
D&A Increment (%) -5%
CapEx per Net Subscriber Additions ($) 1147
Net Working Capital (NWC) per Subscriber 198
Tax Rate 36%

McCaw Pops (millions) 45


Penetration (From penetration Growth Factor) 2.12%
McCaw Subscribers 0.94

LIN Pops (millions) 26.4


LIN Penetration 2.38%
LIN Subscribers 0.6
McCaw Share of LIN Subscribers 0.31
McCaw Share of LIN POPs 13.73

Proportionate McCaw POPs 58.728


Proportionate McCaw Subscribers
Beginning Sunscribers (millions) -
Subscribers Added -
Ending Subscribers 1.25
Period Average Subscribers -

Avg. Net Rev./Sub/month ($)


Industry Avg. Net Rev./Sub/month ($)
Total Net Service Revenue (millions)
%Growth Net Service Revenue

Direct Costs & Expenses (except mktg)


Marketing
Operating Cash Flow
Depreciation & Amortization (millions)
Cellular Operating Income (millions)

After-Tax Cellular Operating Income (millions)


(+) Depreciation & Amortization
(-) CapEx
(-) Change in NWC
Free Cash Flow
Terminal Value
Year
Present Value
Present Value of Terminal Value

Present Value
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
33% 32.50% 31.90% 31.40% 30.90% 30.30% 29.80%

25.90% 23.31% 20.98% 18.88% 16.99% 15.29% 13.76%

34.80% 33.10% 31.40% 29.80% 28.30% 26.90% 25.60%

1000 850 750 650 575 550 520


150 60 24 10 4 2 2

45.11 45.56 46.02 46.48 46.95 47.42 47.89


2.24% 2.76% 3.41% 4.21% 5.20% 6.43% 7.94%
1.01 1.26 1.57 1.96 2.44 3.05 3.8

26.47 26.73 27 27.27 27.54 27.82 28.1


2.51% 3.10% 3.83% 4.73% 5.84% 7.22% 8.91%
0.66 0.83 1.03 1.29 1.61 2.01 2.5
0.34 0.43 0.54 0.67 1.61 2.01 2.5
13.76 13.90 14.04 14.18 27.54 27.82 28.1

58.87 59.46 60.06 60.66 74.49 75.24 75.99

1.25 1.35 1.68 2.10 2.62 4.04 5.04


0.10 0.33 0.42 0.52 1.42 1.00 1.25
1.35 1.68 2.10 2.62 4.04 5.04 6.29
1.30 1.52 1.89 2.36 3.33 4.54 5.67

76 72 68.2 62.35 58.1 50.71 48.47


76.89 72.78 68.7 65.18 62.06 59.7 57.53
299.871 1323.1404 1558.116 1845.8976 2479.9176 3252.456 3910.8894
18% 18% 34% 31% 20%

-99 -430 -497 -580 -766 -985 -1165


-78 -308 -327 -349 -421 -497 -538
123 585 734 918 1292 1770 2207
-104 -438 -489 -550 -702 -875 -1001
19 147 245 368 590 895 1206

12 94 157 235 378 573 772


104 438 489 550 702 875 1001
-105 -284 -314 -339 -463 -551 -650
- 104 46 22 10 4 -2
11 352 378 468 627 900 1121

0 1 2 3 4 5 6
11.45 309.04 291.59 317.33 372.88 470.58 514.51

10114.90
12/31/99 12/31/00 12/31/01 12/31/02
29.30% 28.80% 28.30% 27.90%

12.39% 11.15% 10.03% 9.03%

24.30% 23.10% 21.90% 20.80%

500 500 450 450


2 2 2 2

48.37 48.84 49.34 49.84


9.80% 12.06% 14.96% 18.48%
4.74 5.89 7.38 9.21

28.38 28.65 28.95 29.24


11.01% 13.53% 16.80% 20.74%
3.12 3.88 4.86 6.06
3.12 3.88 4.86 6.06
28.38 28.65 28.95 29.24

76.75 77.49 78.29 79.08

6.29 7.85 9.75 12.23


1.56 1.90 2.48 3.03
7.85 9.75 12.23 15.26
7.07 8.80 10.99 13.75

47.08 46.36 45.69 45.06


55.62 53.33 51.1 49.21
4718.8008 5631.648 6739.068 8116.6974
21% 19% 20% 20%

-1383 -1622 -1907 -2265


-585 -628 -676 -733
2752 3382 4156 5119
-1147 -1301 -1476 -1688
1605 2081 2680 3431

1027 1332 1715 2196


1147 1301 1476 1688
-780 -951 -1115 -1363
-3 -3 -4 -6
1391 1679 2072 2515
19558
7 8 9 10
560.67 594.34 644.27 686.85
5341.39
Date 12/31/92 12/31/93
Total Net Ser 299.9 1323.1
Direct Costs (99.0) (430.0)
Marketing (77.7) (308.4)
Operating Cas 123.2 584.7
Depreciation & (104.4) (438.0)
Cellular Opera 18.9 146.7
After-Tax Cell 12.1 93.9
(+) Depreciat 104.4 438.0
(-) CapEx (105.0) (284.0)
(-) Change in - 104.0
Free Cash Flo 11.4 351.9
Terminal Value
Year 0.0 1.0
Present Value 11.4 309.0
Present Value of Terminal Value
Present Value 10114.9
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
1558.1 1845.9 2479.9 3252.5 3910.9 4718.8 5631.6
(497.0) (579.6) (766.3) (985.5) (1165.4) (1382.6) (1621.9)
(326.9) (348.5) (421.4) (497.4) (538.3) (584.6) (627.9)
734.2 917.8 1292.2 1769.5 2207.1 2751.6 3381.9
(489.2) (550.1) (701.8) (874.9) (1001.2) (1146.7) (1300.9)
245.0 367.7 590.4 894.6 1205.9 1605.0 2080.9
156.8 235.3 377.9 572.6 771.8 1027.2 1331.8
489.2 550.1 701.8 874.9 1001.2 1146.7 1300.9
(314.0) (339.0) (463.0) (551.0) (650.0) (780.0) (951.0)
46.0 22.0 10.0 4.0 (2.0) (3.0) (3.0)
378.0 468.4 626.7 900.5 1121.0 1390.8 1678.7

2.0 3.0 4.0 5.0 6.0 7.0 8.0


291.6 317.3 372.9 470.6 514.5 560.7 594.3
12/31/01 12/31/02
6739.1 8116.7
(1907.2) (2264.6)
(676.2) (733.0)
4155.7 5119.1
(1475.9) (1688.3)
2679.8 3430.9
1715.1 2195.8
1475.9 1688.3
(1115.0) (1363.0)
(4.0) (6.0)
2072.0 2515.0
19558.3
9.0 10.0
644.3 686.9
5341.4
Mn
Shares Outstanding
182.499 McCaw 45.62475
AtnT 1329
Conversion Ratio 1

Total Shares Outstanding 1374.62475


Closing Total Value 59096.601405
Average Total Value 52881.841305

Closing New Share Price 42.9910791327


Average New Share Price 38.4700197672

Closing Price Value for McCaw 42.9910791327


Average Price Value for McCaw 38.4700197672

Closing Premium for McCaw 18.6110791327


Average Premium for McCaw 13.6900197672

Closing Premium for ATnT -0.6389208673


Average Premium for ATnT -0.4699802328
DCF-Synergy
Share Price Average Share Price Closing Actual Share Value
24.78 24.38 164.3797299091
38.94 43.63

3.319% Closing Total Value of the Firm 1.961457238


Average Total Valuation 1.755185034

3.3%

McCaw has not


signed an agreement
barring him from
starting a competing
business, and those
who know him say
he may well be eager
to jump back into the
fray.
DCF Synergy Valuation

Closing Total Value 65484.0540821681


Average Total Value 59251.0440821681

Total Shares 1374.62475

Closing New Share Price 47.637767385


Average New Share Price 43.1034317418

Closing Price Value for McCaw 47.637767385


Average Price Value for McCaw 43.1034317418

Closing Premium for McCaw 23.257767385


Average Premium for McCaw 18.3234317418

Closing Premium for ATnT 4.007767385


Average Premium for ATnT 4.1634317418