one of the largest cable operators in the U.S., prepared to acquire the AirThread. Connections (ATC), a large regional cellular provider. Although this acquisition. By early , Zimmerman was considering the possibility of acquiring AirThread Connections, one of the largest wireless companies in the United States. This case can be used as a capstone valuation exercise for first-year MBA students in an introductory finance course. A senior associate in the business.

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The Case Centre is dedicated to advancing the case method worldwide, sharing knowledge, wisdom and experience to inspire and transform business education across the globe. In order to effectively attract and retain customers, the firm had to offer superior customer yo service and aggressive pricing packages in terms of monthly service fees and equipment conjections. Given the projected synergy and financing method, what is the value of AirThread as a merger target?

Valuation of AirThread Connections Essay.

Heilprin Erik and Joel explain what winning this award means and offer some case writing advice. Sorry, but copying text is forbidden on this website. During that meeting, Elliot Bianco pitched the idea of op American Cable buying out AirThread Connections, a large regional cellular provider. Zhang was well aware that the terminal value was likely to be the single largest component of the valuation.

Zimmerman had a lot on his plate. To order copies or request permission to conncetions materials, callwrite Harvard Business Publishing, Boston, MAor connectionns to http: First, American Cable and AirThread could help each other compete in an industry that was moving more and more toward bundled service offerings.

This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. However, she also estimated that the revenue per minute for business customers would be less than that charged to connectoins subscribers. Connectoins, the acquisition could help both companies expand into the business market. The decline in the service revenue growth rate reflected continued deterioration in the revenue per minute of airtime as well as the continued maturation of cellular telephony.


Those networks are expected to be able to deliver not only wireless telephony but also internet service with throughput similar to that which is currently offered by cable providers. The estimated revenue and gross profit for new wireless subscribers is shown in Table 5.

AirThread Connections Case

First of all, we calculate the NPV. Gains Losses on Investments View a full list of featured cases. We’ll occasionally send you account related and promo emails. Cost of Equipment Sold Hold-to-maturity accounting of portfolio net asset value eliminates the majority of measured risk. We will write a custom sample essay on Valuation of AirThread Connections specifically for you. Juliane Begenau and Erik Stafford.

Article Journal of Finance. Overview of Cable Industry Dynamics op Arthread cable industry had been rapidly transforming over the last decade as a result of advances in technology, changes in regulation, and shifts in competitive dynamics.

Leave your email and we will send you an example after 24 hours About the Author Erik Stafford. Besides the three advantages we mentioned before, after calculation, we find that the value of AirThread as a merger target is higher than the stand-alone value of AirThread. In turn, these forces had been driving large investments in network infrastructure that require commensurate increases in the customer connecgions to effectively utilize the new capacity.

Valuation of AirThread Connection by Ivan Ng on Prezi

Zhang believed that the combined company would be able to attract business customers now that wireless, wire line, and internet service could be offered by the same provider.

Finally, because most businesses required reliable high-speed internet and landline telephony service, the recent trend toward bundled services had, to a large extent, frozen ATC out of the op business market. The wider debate is about how and when certain valuation methodologies should be employed. He was well aware of several connectiojs profile takeovers that ended in either eventual bankruptcy or considerable loss of shareholder value, and overpaying for a target company was one of the quickest ways to achieve disaster.


We are very pleased to receive this award as it means that we are being acknowledged as having made a pedagogical contribution in the area of financial case method. In order to move wireless traffic from a cell tower to a central switching office required either leasing telephone lines from the local carrier or investing in very expensive rP microwave transmission equipment, which was oftentimes technically difficult to employ due to line of site requirements.

Help Center Find new research papers in: Erik Stafford is John A. This presented two problems. With the rapidly increasing costs of acquiring new customers and the high penetration rates in video and high speed internet, the group surmised that the only way to achieve meaningful customer growth would be through additional acquisitions.

Valuation of AirThread Connections Essay

Finance General Management Marketing. The basic premise of the AirThread acquisition was threefold. How to cite this page Choose cite format: Download the case Educators can login to view a free educator preview copy of this case. The very strong investment performance of passive maturity transformation strategies over this period may mask the underperformance of the specialized bank activities.

In turn, this connectione a limiting factor for future growth and increased network utilization. Go to advanced search. Tax ID No We assume the equity as the average equity of the industry, which is 0. The goal was to use a tax-efficient structure that maximizes investor returns by minimizing the amount of up-front equity invested in the deal. As a result, Jennifer believed that the investments could be valued using a market multiple approach3. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without ocnnections permission of Harvard Business School.