T-mobile Us, Inc. · NASDAQ:TMUS
T-mobile Us — Metropcs Communications — Merger or Acquisition (March 2013)
45 slides from T-mobile Us's merger presentation, Mar 18, 2013
Slide 1: MetroPCS Investor Presentation March 2013
m> PCS INVESTOR PRESENTATION MARCH 2013
Slide 2: Cautionary Statements
Cautionary Statements form Act of 190 ded, Inc, (PCS") and T-Mobile USA, Inc. (T-Mobile" and, together wth DT and PCS, "we" or “our) sions, svat J “anticipate,” “expect, “suggests.” could,” "may," “become,” Yorecas,” and other similar expressions. These forward-looking Telekom AG (‘DT"), “views,” ‘p
Slide 3: Additional Information and Where to Find It
eta Information and Where to Find It his document relates to a proposed transaction between PCS and DT. In connection wath ie e propased transaction Pcs he filed with the (SEC) pro? PCS’ inves and security nalts are ges toread cart the amended definitive proxy statement, an al roherfelvart cocuments
Slide 4: Board concluded combination with T-Mobile was best strategic alternative
After conducting a thorough and extensive multi-year process, PCS’ Board of Directors and Special Committee, with the assistance of their independent financial and legal advisors, concluded the combination with T-Mobile was the best strategic alternative for the company and its stockholders: Economi
Slide 5: T-Mobile / PCS Combination is More Attractive than Stand-alone Case
T-Mobile / PCS Combination is More Attractive t the PCS Stand-alone Case PCS stockholders to ae cash, 26% owners! y (vs. jone PCS) and an attra Agreed upon 26% ownership for PCS stockholders represents a premium to the current stock price (") Aless favorable ownership stake of between 17% (*) - 24%
Slide 6: Significant and well-positioned presence in no-contract services space
= Significant and well-positioned presence in industry's fast growing no-contract (i services space prepaid) = Greater customer value and choice = More robust spectrum position, \d greater network capacity = Deeper LTE network deployment with path to at least 20x20 MHz in approximately 90% of top 25
Slide 7: Misperception vs. Reality
Misperception Reality NewCo leverage is too high The DT debt terms are unreasonable NewCo should issue secured debt The 26% / 74% ownership split is unfair at multiple parity » » » ) S&P’s BB rating highlights NewCo’s sustainable capital structure and credit profile; leverage is appropriate for NewC
Slide 8: Robust Process to Maximize Value Led to T-Mobile / PCS Combination
m> ROBUST PROCESS TO MAXIMIZE VALUE LED TO T-MOBILE / PCS COMBINATION
Slide 9: Spectrum Position, Size and Resources Create Competitive Disadvantage for PCS Stand-alone
Spectrum Position, Size and Resources Create Competitive mm: Disadvantage for PCS Stand-alone PCS Board and management regularly ieee and assess industry developments, competitive position, growth strategies and opportuni In evaluating PCS’ competitive position, the Board and management determined t
Slide 10: PCS Has Considerably Less Spectrum Than Its Larger National Competitors
PCS Has Considerably Less Spectrum Than Its Larger National Competitors ‘Average MHz in Top 25 Major Metro Areas, MHz 1 More AWS spectrum | | evan oer car | i oF Verizon AT&T NewCo T-Mobile Sprint (PF Clearwire)" 1 PCS 4 700 MHz Cellular / SMR mPcs mAWS [Clearwire (BRS) bese Spectrum in PCS Core Met
Slide 11: Extensive exploration of spectrum opportunities since 2007
Began extensively exploring spectrum opportunities in early 2007 both within existing licensed areas and in new metropolitan areas as appropriate Participated in significant FCC auctions of spectrum with disappointing results Engaged in discussions with all major spectrum holders and strategic parti
Slide 12: PCS Stockholders Ownership
26% 74% PCS Stockholders Ownership Ownership NewCo (T-Mobile & PCS) Reverse acquisition of T-Mobile by Pcs = PCS recapitalization with 1 for 2 PCS stockholders receive 26% $15Bn Notes PCS and DT to nominate Board — PCS initially to designate 2 directors Selected consent rights for DT Limitations on
Slide 13: Strong financial position with direct access to capital markets
y Strong financial position with direct access to capital markets i il UTE in areas by 2014+ of top 25 metro selection of Cp postpaid) and Deeper Mobile and PCS combination Expansion of PC: tropolit toaT- Realize ig ownership stake () opportunity to benefit from future growth $6-7 billion NPV © of m
Slide 14: Creating the Value Leader in Wireless
m> CREATING THE VALUE LEADER IN WIRELESS
Slide 15: (1) Free Cash
(1) Free Cash (@) 2012-2017
Slide 16: ...Stay Tuned...
...Stay Tuned... PCS Integration and Expansion — Leader in No-contra Apple Partnership 100% Value Plans - Simple, Transparent, Flexible T-Mobile Brand Re-launch Faster High-Speed Network Than AT&T in New York, Chicago, and Many Other Cities 4G LTE Network — 100M LTE Pops Mid-year, 200M Year End Enha
Slide 17: Post-Transaction Spectrum Depth (MHz)
Post-Transaction Spectrum Depth (MHz) ‘Average Spectrum in Top 100 Major Metro Areas, MH2 ( Post-Transaction LTE Spectrum (MHz) 2 1" 74 8 63 60 54 36 40 20 Esebie sat epechiny Takete 'uGrOPS! News (Dec 2011) VZW Spectrum (Oct 2012) PCS Spectrum mM AWS Spectrum (1), Totals do not reconcile due to rou
Slide 18: 4G Network Coverage: Accelerated LTE
4G Network Coverage: Accelerated LTE (MM POPs) 250 225 225 225 200 200 200 150 100 50 2013 2013 YE 4G LTE m4G HSPA PCS m4G HSPA AWS Improved coverage, reliability and faster speeds enhanced by bile’s $4Bn network modernization program already underway
Slide 19: Key Enablers: Migration Plan
Key Enablers Migration Plan T-Mobile's network has the capacity to support customer migration PCS LTE customers will be able to use the T- Mobile LTE network for LTE service without changing handsets PCS customers will be offered HSPA/LTE handsets, leveraging GSM price point advantages Historical PC
Slide 20: Best Value in the U.S.
Best Value in the U.S. Contract Services ‘T - -Mobile- ‘Mobiles metroPCS. | Partner Brands (MVNO) > Consumer B2B > Consumer > M2M = National / Direct = National / Indirect = Local / Indirect | SS i f dis in ~7,500 branded doors / ~10,000 3"-party doors 0,000 national retailer doors 4G network with L
Slide 21: Boldly Moving to 100% Value in Contract: Simple, Transparent, Flexible
Boldly Moving to 100% Value iin Contract: Simple, my: Transparent, and Flexible Industry Norm Myriad of plans High service price to subsidize the device Long contract term to subsidize the device Subsidized No financing Upgrade eligibility based on tenure Simple menu of options Service and device pr
Slide 22: Benefits to NewCo Customers
Benefits to NewCo Customers T - ‘Mobile: metroPCs. ™ Better service and faster speeds driven by: Network — Increased network density Coverage — Broader coverage area — Additional capacity in major metro areas Greatly expands on-net domestic coverage International roaming options Faster, broader, hig
Slide 23: North America Industry Growth
North America Industry Growth % Subscribers CAGR (2012-2017) Branded No-contract Subscribers") Q4-2012, Millions Branded No-contract Revenue (12) 4.2012, $n Total No-Contract Contract (1), Facities-based caries exclude wholesale @ Service revenue 9% - 10% TRACFONE 22.4 Sprint > 15.6 a Not Reported ‘
Slide 24: NewCo's Spectrum and Network Allow NewCo to Expand PCS' Brand to New Areas
NewCo’s Spectrum and Network Allow NewCo to Expand PCS’ Brand to New Areas Hl PCS Network T-Mobile Network PCS Addressable POPs coverage increases from 103MM to more 280MM 24 >
Slide 25: Total Subscribers and Wireless Capital Expenditures
Total Subscribers in MM, As of 4011 125 115 100 a7 50 25 Cy) Verizon") ATaT ‘T-Mobile Wireless Capital Expenditures in $Bn, As of 2012 AT&T Verizon Sprint NewCo” I T-Mobile” 1 PCS ot Leap ‘Source Public Flings and Wall Svoet Research 2 > ” (@) Capex excludes spectium purchases:
Slide 26: T-Mobile's existing network capacity accelerates PCS customer transition
= T-Mobile's existing network capacity accelerates PCS customer transition ® Highly complementary spectrum allows for deployment using greater LTE bandwidth ® Rapid handset upgrade cycle facilitates customer migration ™ Decommission redundant sites and retain selected PCS network assets ® Realize ef
Slide 27: Strong Financials and Capital Structure
m> STRONG FINANCIALS AND CAPITAL STRUCTURE
Slide 28: NewCo Target 5-Year CAGR Growth
NewCo Target 5-Year CAGR Growth 2012 ~ 20176 Principal iets Sources of NewCo Revenue Gro) Revenue EBITDA Free Cash Flow (") 15% - 20% Target Profitability % of Service Revenue EBITDA Margin 34% - 36% ” No-contract services: 80 — 90% of growth Focused geographic expansion of PCS brand: 10 — 20% of gr
Slide 29: Projected Cost Synergies Yield ~$6-$7 Billion NPV
Projected Cost Synergies Yield ~$6-$7 Billion Npv® IMi> Network ($MM) One ime Non - Network ($MM) Reduction in operating expenses related to tower, eet and Savings in Rear and decommissioning a iSite cost advantage rer Cl Procurement and back Customer transition and business integration 29
Slide 30: Total Revenue, Adj. EBITDA, Capex, Free Cash Flow
Total Revenue “ Adj. EBITDA @ $Bn, 2012 $Bn, 2012 $6.1 : T $15 $6.4 6 TMobile MetroPCS Combined T-Mobile MetroPCS Combined Capital Expenditure Free Cash Flow ‘$Bn, 2012 $Bn, 2012 6 4 4 $0.8 $3.7 3 $0.7 $2.7 $2.9 $2.0 = 2 = 2 » 0 Tue MetroPCS Combined TMobile MetroPCS Combined (1) Presented as US (2)
Slide 31: NewCo capital structure allows for meaningful participation by PCS stockholders
NewCo capital structure allows for meaningful participation by PCS stockholders in significant equity upside potential Provides significant flexibility for deployment of future FCF NewCo projects a liquidity position of ~$2.3Bn at closing (consisting of $1.8Bn cash and $0.5Bn undrawn revolver) DT to
Slide 32: NewCo Debt Maturity Profile (Pro Forma for the Transaction)
NewCo Debt Maturity Profile (Pro Forma for the Transaction) “) $MM 5,000 4,000 3,000 2,000 1,000 2013 «201420152016 = 2017-2018 = 2019 = 20202021 2022 20232024 MDT Notes Ml MetroPCS 7.875% Notes Due 2018 MetroPCS 6.625% Notes Due 2020 ™ MetroPCS 6.250% Notes Due 2021 MetroPCS 6.625% Notes Due 2023 c
Slide 33: DT Financing
DT Financing xe012 oO Capital Structure $Bn) EBITDA® = $15Bn of new senior unsecured notes to refinance T- Mobile intercompany debt DT Revolving Credit Facility ($0.58n) $0.0 = $0.5Bn revolving credit facility (senior unsecured) +O a DT Financing $15.0 Projected weighted average yield of ~7% Rate to
Slide 34: Understanding the Transaction
m> UNDERSTANDING THE TRANSACTION
Slide 35: Historical LTM Leverage for Wireless Peers
Leap PF Sprint — 1 NewCo Metropcs® T-Mobile) ‘S&P Rating: B- B+ BB B+ NA Historical LTM Leverage for Wireless Peers 6.0x ‘Average of Peers\®) ‘ im E 1 ‘Average MetroPCS Gross Leverage Net Leverage <1 $1.88 Cash for Spectrum ‘Based on latest reported financials, New0o is addon of T-Matile and POS Bas
Slide 36: 2013E is a trough year for EBITDA
ally and 2013E is a trough year for EBITDA > Post integration, Apple products related expenses, and network modernization, NewCo will generate significant FCF NewCo capex is expected to decrease to $3Bn by 2014 — T-Mobile has targeted annual cost savings of at least $500MM Apple products projected t
Slide 37: The DT debt's market-based terms represent a favorable deal for NewCo
The DT debt’s market-based terms represent a favorable deal for NewCo Oy) > A$21Bn \) commitment not available at time of the deal or today — Dell received $13.75Bn in bank commitments yet required an additional $2Bn of third-party financing from Microsoft Heinz received $14.1Bn in bank commitments
Slide 38: The DT debt's market-based terms represent a favorable deal for NewCo
The DT debt’s market-based terms represent a favorable deal for NewCo ee > DT financing allows NewCo to focus on the business day 1 post close — With bridge financing, securing permanent financing would be a significant distraction and risk LQ) > The DT senior unsecured notes provide for no near ter
Slide 39: No secured debt provides NewCo with flexibility for the future
lo secured debt provides NewCo with fle: for the future, and was a key DT requirement and ne leration > > Secured debt would have more restrictive financial covenants Secured debt would make the junior capital portion of NewCo’s capital structure more expensive, thus reducing the benefit v vu DT’s c
Slide 40: Misperception #4: The 26% / 74% Ownership Split Is Unfair at Multiple Parity
Misperception #4: The 26% / 74% Ownership Split Is Unfair at Multiple Parity PCS cash reserved for spectrum and $1.51 {ses favorsbi ownership stake of bolwean 1777) 24%% just Bn 3h payment as Clacioeod WinB PCS anended connie proxy statement sult after appr m> istments fo! PCS T-Mobile PCS T-Mobile
Slide 41: Misperception #4: Ownership Split Is Unfair at Multiple Parity (Cont'd)
Misperception #4: The 26% / 74% Ownership Split Is Unfair at Multiple Parity (Coni’d) T 1 1 1 Firm Value / EBITDA 50x 50x 50x | 50x 20195 Pro Foma EBITDA $5,883 $5918 ot os ‘0° se | $1,359 Pro Forma Firm Value $29,590 i tasnioes (21,400) (21,800) 50) bey 300) 4 ime can Pe for Spectrum - 4 Pro Form:
Slide 42: PCS Share Price Prior to T-Mobile / PCS Deal Announcement
S Share Price Prior to le Mobile / PCS Deal Announcement 011 20 LTM PC: Indexed Performance (Oct 1, 2 Oct 1 (s) 13.50 11.50 MetroPCS Avg. Share Price ($) 60 Period Since Aernatve 829 7.90 | 7.50 Since THUS TPCS Leaked 799 993 5.50 Alternative Deal for MetroPCS not completed MetroPCS 1012 Earnings Re
Slide 43: Combination with T-Mobile results in significantly more value for PCS stockholders
Reality: Combination with T-Mobile results in significantly more value for PCS stockholders vs. stant Discounted Cash Flow Analysis “ -forma Implied Share Price Based on 26% Ownership Split $30 Premiums ( $20.11 520, . $17.90 $15.31 $10 $9.19 Average Undiscounted Price ‘Status-Quo No Synergies (50%)
Slide 44: Conclusion
m> CONCLUSION
Slide 45: Significant and well-positioned presence in industry's fast growing no-contract services space
Significant and well-positioned presence in industry's fast growing no-contract services space Greater customer value and choice More robust spectrum position, broader network coverage and greater network capacity Deeper LTE network deployment with path to at least 20x20 MHz in approximately 90% of
Metropcs Communications — Merger or Acquisition (March 2013) on 6ix