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Deloitte Maverick: A Study and

Analysis of the US Telco Case


Team: Ramanujans Mowglis

Growth Avenues
Proper asset utilization is also one important aspect to increase revenues. The real estate at these
tower locations can be used for new business opportunities. The space can be rented for ATMs,
internet kiosks etc. as the other infrastructure needed for these is already present: Security, power,
air conditioning etc.
One more missed opportunity for the tower companies is to cash in on any new technologies the
telecom companies are bringing in. A company who gives 3G services and leases your tower and
when later brings in 4G services also should pay the tower companies(US Telco in our case)

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There is a big boom as far consumption of data is concerned in developing countries. With
3G and 4G services coming in force and expanding at a very high rate, the requirement for
telecom operators to provide services in wide areas is increasing. The telecom operators in
these countries do not want to build and operate telecom towers as they require huge capital
expenditure which they think would be more profitable to invest in expending the range and
quality of their services. So investing in these countries to acquire or build towers with multi
tenancy offerings is a big possibility to generate revenues and profit.

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In developed markets the focus is more on innovation, new technologies and the efficient use of these technologies. Also as new services based on technologies such as wifi, optical fiber, lifi etc. start gaining popularity, the dependability on
the normal telecom towers is only going to decrease. In such circumstances, it makes more sense to invest in equipment and infrastructure that can be leveraged by these emerging technologies.
Also important for these telecom towers are the increasing concerns in developed countries over the pollution done by these operational cell tower. It has also become important to invest in technologies that would encourage the green
initiative which is eventually beneficial for the telecom operators. The running cost of the cell towers are directly forwarded to the telecom operators and any initiatives which decreases this cost is going to be encouraged by them. (e.g:
solar powered towers, wind powered etc.)
.

Price
BBA Africa
Limited,
Namibia

We have valued the company $292.4 M using the Discounted Cash Flow
Method.
We have taken a Country Risk Premium of 3.4% for Namibia over the
given WACC of 10% (according to NYU Stern Data)
For calculating the terminal value of the firm, we have taken a growth rate
of 11.65% (Calculated as average of average YOY growth rates of Telco,
NZone, BBA Africa and Telemo)
We want to value the target as low as possible. Hence we have taken
NPV Multiple of 4.2.

$1.23 B
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ASA Towers
Inc. Argentina

We have valued the company $9.7 M using the Discounted Cash Flow
Method.
We have taken a Country Risk Premium of 11.58% for Namibia over
the given WACC of 10% (according to NYU Stern Data)
For calculating the terminal value of the firm, we have taken a growth
rate of 18.7% (Calculated as average of average YOY growth rates of
Telco, NZone, ASA, BBA Africa and Telemo)
We want to value the target as low as possible. Hence we have taken
NPV Multiple of 4.2.

$40.7 M

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High Average
YOY Growth
rate of 47%.
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Good Average YOY Growth rate of 25%


Good reinvestment (CAPEX)
High GDP Growth of 5.1%
Medium Competitive Intensity. Also as it is a developing country and
a lot of voice and data being consumed which is ever increasing, this
looks a very bright aspect.
Stable and pragmatic business friendly government
Simple and Competitive tax system
Moving into the telecommunication sector as BBA Africa is also a
telecom provider.
If the move into telecommunication sector works out, this can be
replicated into the second target country as well.

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Our Targets

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The company is in nascent stage and can be acquired at


a low price and promises better yields in future.
Low competitive intensity
Early mover advantage
According to Innovattel (tower company in Argentina),
operators in Argentina can barely handle the very high
demand for extra capacity and new coverage and tower
companies are the answer to the problem.
One of the crucial issues that will ease the entrance of
new tower company in the country is the improvement
and simplification of the regulatory and permitting
landscape. And according to companies in Argentina,
authorities have been very open to do this.
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of service, it is likely that change in the attitude of local
government bodies towards permits and greenfield
projects will force on.

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Low Average
YOY Growth
of 5%
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Low Average YOY Growth of 7%


Low Reinvestment (CAPEX)
High Competitive intensity & Regulatory environment: And thus if you
are not a market leader or one of the big companies, it is extremely
difficult to come up. Also the kind of forecasts are there in terms of
growth figures and qualitative reasons the future looks a bit bleak.
GDP growth rate of only 2.2%.
US Market is already saturated. Also keeping in mind the future
predictions rather than investing in Nzone in US, investment can be
done on new technologies, as the emergence of new technologies
will negatively impact mobile subscriptions and subsequently the
tower industry.

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Very low reinvestment.


GDP growth rate of -0.7% leading to decreased spending
by the people
Company is in mature phase and so further growth sans
innovation does not look like a good prospect.

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Integration with BBA Africa, Namibia

BBAs Operating expenses are high as compared to its Revenues. So, Telco would have a tough task managing BBAs Operating Expenses.

Power shortages in Namibia can also be a hurdle for doing business in the country

The laws are not stringent and comprehensive in Namibia. So, Telco will have to anticipate all the legal issues that they could face in Namibia and attain legal protection before entering into
any kind of deal with BBA.

Currently, the regulatory environment is weak and Telco will have to prepare itself for future stronger regulations.

The tax system in Namibia is very competitive and Telco will have a tough task incorporating a new tax structure.

The are many cultural differences between US and Namibia and Telco will have to tackle the cultural issues.

Namibia has an ease of doing business rank of 101.

Telco would have to take debts to acquire BBA. This can disturb the balance of Telco.

Integration with ASA Towers, Argentina

Argentina has an ease of doing business rank of 121.

The issues of cultural differences and tax structures are applicable here too.

The regulatory environment and legal protection is only slightly better compared to Namibia.

The low valuation will have to be justified.

Currently, ASA is making losses.

Since there is dearth of big players in Argentina, the outcome of integration with ASA cannot be predicted.

Implementation Plan

30 day implementations:

1. One of the most important thing for tower companies is operational excellence. And cutting costs is a big part of it as also is using that the real estate and infrastructure in a much
more effective way. Energy costs have to be reduced and so is the maintenance of the already existing towers.
2. Also conduct a study on the culture and workforce of the countries of the interested companies. This will help in post acquisition integrations as a lot of times companies have not
been able to do well due to this reason.

180 days implementations:

1. Invest in new technology. Analyze the upcoming new technologies in the market and the future growth possibilities of them. Invest in such lucrative technologies in US>
2. Once we acquire the company in Namibia we have an opportunity to go into the telecommunications sector as well. As we will own the towers also in that country, it will be a good
prospect. We can experiment with being telecom service provider and thus can be a lucrative diversification.
3. Also in US, the places where we have towers we can find blind spots for telecom providers. These telecom companies then can be pursued to be a part of our services.

CVs

Adobe Acrobat
Document

Ketav Patel

Adobe Acrobat
Document

Nikhil Sharma

Microsoft Word
Document
Piyush Dargopatil

Appendix

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