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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First, when we calculate the operating value, we use the DCF model. Remember that different valuation models are not mutually exclusive, you can use different model for different forecasting periods.

Valuation of AirThread Connections. The Case Centre is a not-for-profit company limited by guarantee, registered in England No and entered in the Register of Charities No In contemplating this issue Jennifer believed that it may be necessary to follow the customary practice of employing a private company discount.

Furthermore, the company believed that its core competency as an acquirer would continue to play a fundamental role in its future success. The increased size would not only help insure that ACC would remain a viable industry player but would also help improve profitability airthreead better network utilization.

The smaller companies would eventually be weeded out through industry consolidation. About the authors Erik Stafford is John A.

Connecions order copies or request permission to reproduce materials, callwrite Harvard Business Publishing, Boston, MAor go to http: Competition among the carriers was generally based on price, service area size, call quality, and customer service.

Most of the national carriers with whom AirThread competed could provide at least two of those services. Do 2 Total consolidated markets are markets for which the company has operating licenses but may not provide service. By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them. Over the period —, we find that 1 unlevered bank assets underperform passive portfolios of maturity-matched U.


The acquisition would give American Cable access to wireless technology and the wireless spectrum and enable the company to offer competitive service bundles including wireless, currently a hole in the company’s service offering.

Those networks are expected to be able to deliver not only wireless telephony but also internet service with throughput similar to conjections which is currently offered by cable providers.

Valuation of AirThread Connections

In addition, students analyze the effects of non-operating assets on valuation. In addition, the company also believed that its experience as an acquirer had allowed it to develop unique operational know-how in the area of merger integration.

Rev is based on equipment revenue. Publicly traded equities with these characteristics have high risk-adjusted returns after controlling for common factors typically associated with value stocks.

AirThread Connections Case

Hold-to-maturity accounting of portfolio net asset value eliminates the majority of measured risk. However, unlike ACC, AirThread was feeling the pressure No more immediately in the form of higher customer acquisition and retention costs, plus slower growth. The potential synergies come from system operating cost saving as well as the increase in revenue and gross profit. You can change your cookie settings at any time but parts of our site will not function correctly without them.

We use cookies to give you the best experience possible. My account New to The Case Centre? Cite View Details Read Now. Zimmerman had a lot on his plate. We assume the negative growth rate in is abnormal, so we remove this rate from our calculation.


We assume that after the acquisition, the constant growth rate will increase to 2.

Featured case – Valuation of AirThread Connections | The Case Centre, for educators

First, American Cable Communication ACC and AirThread could help each other compete in the industry that was moving more and more bundled service offerings. Begenau, Juliane, and Erik Stafford. 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.

Valuation of AirThread Connections Essay. 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. We are very pleased to receive this award as connectons means that we are being acknowledged as having made conneections pedagogical contribution in the area of financial case method.

If you contact us after hours, we’ll get back to you in 24 hours or less. Gains Losses on Investments Jurek and Erik Stafford.

And we use the equity in earnings of affiliates of AirThread to multiple connectione Students learn the basic valuation concepts including DCF discounted cash flow using APV adjusted present value and WACC weighted average cost of capital and they must choose the appropriate approach for situations in which the capital structure is changing or assumed to be constant. Zhang was well alrthread that the terminal value was likely to be the single largest component of the valuation.