Slide 1: PSAM's Compelling Case Against the MetroPCS/T-Mobile Transaction
PSAM's Compelling Case Against the MetroPCS/T-Mobile Transaction April 4, 2013
Slide 2: Introduction
Introduction
Slide 3: Key Reasons for Voting AGAINST the Proposed Transaction
Key Reasons for Voting AGAINST the Proposed Transaction Introduction 1. Proposed transaction is highly risky and unfair to PCS shareholders . Pro forma Combined Company is over-levered . No change of control premium to PCS shareholders . Highly problematic equity split . Sub-optimal sale process by
Slide 4: PCS was Down as Much as 31% After the Proposed Transaction was Announced
PCS was Down as Much as 31% After the Proposed Transaction was Announced Introduction $14.00 MetroPCS (NYSE:PCS) Current (4/1/2013) $11.05 52-wk High (10/2/2012) $14.51 52-wk Low (6/26/2012) $5.53 (10/2/2012) Deutsche Telekom confirms it is in talks with one prior to $12.00 $13.00 PCS one-day announ
Slide 5: Standalone Alternative
Standalone Alternative
Slide 6: PCS Standalone is Worth $13 – $14 per Share
PCS Standalone is Worth $13 – $14 per Share Standalone Alternative Multiple Ways to Create Network The Transition to LTE Creates PCS Has Better Operating PCS Has a Valuable Capacity Strategic Options Benchmarks than T-Mobile USA Distribution Platform Service Revenue Growth 1 Buy Spectrum 1 Lower Chu
Slide 7: PSAM's Forecasts for PCS are Consistent with Management's Forecasts
PSAM’s Forecasts for PCS are Consistent with Management’s Forecasts Standalone Alternative . PCS has demonstrated an impressive conversion of 26% subscribers to Long-Term Evolution services (“LTE”) by the end of 2012 . We expect average revenue per user (“ARPU”) for LTE to be at least $50 We believe
Slide 8: PCS Has a Valuable Distribution Platform
PCS Has a Valuable Distribution Platform Standalone Alternative T-Mobile T-Mobile Profitability per Subscriber Comparison MetroPCS Monthly 4G Post Paid ARPU $40.63 $42.00 $56.75 Less: Cash Cost Per User (CCU) (20.38) (19.89) (29.49) Gross Cash Flow Per Subscriber $20.25 $22.11 $27.26 Churn 3.4% 3.9%
Slide 9: A Standalone Company is a Viable and Attractive Alternative
A Standalone Company is a Viable and Attractive Alternative Standalone Alternative Discounted Cash Flow Analysis Market Multiples Analysis Voting down the proposed deal, even without a revised offer from DT or another buyer surfacing, still yields superior value to PCS shareholders – with or without
Slide 10: We Believe Standalone Risk is Significantly Mitigated by Spectrum Values
We Believe Standalone Risk is Significantly Mitigated by Spectrum Values Standalone Alternative $0.68 $0.63 $7.52 700 / 800 MHz Band ($ per MHz-Pop) AWS / PCS Band (1.7 / 2.1 GHz) ($ per MHz-Pop) Recent Notable Spectrum Transactions $0.54 $0.55 $1.28 $1.54 $4.21 FCC Auction 66 (Sep-2006) Verizon / S
Slide 11: Transaction Issues
Transaction Issues
Slide 12: The Pro Forma Combined Company is Over-Levered
The Pro Forma Combined Company is Over-Levered Transaction Issues 3.6x Net Debt / 2013E EBITDA 2.0x 1.6x 1.6x 1.2x Combined Company (Standalone) (1) Sources: Public filings and Bloomberg consensus estimates (1) Pro forma for SoftBank and Clearwire transactions
Slide 13: Revised Capital Structure is a Win / Win
Revised Capital Structure is a Win / Win Transaction Issues Reducing overall leverage and adjusting for market interest rates on DT Notes has significant benefits . Reduction of interest expense of approximately $498 million annually assuming a $4.0 billion reduction in DT Notes and interest rate in
Slide 14: PCS Multiple Depressed Due to T-Mobile Transaction
PCS Multiple Depressed Due to T-Mobile Transaction Transaction Issues 7.9x Enterprise Value / LTM (12/31/2012) EBITDA 7.2x 6.5x 5.4x 5.3x Mean: 6.0x Median: 4.9x 4.6x 4.1x 5.4x Sprint Verizon AT&T Leap NTELOS Atlantic Tele- Network US Cellular MetroPCS (1) (2) (standalone) Note: Pricing as of April
Slide 15: Debt Reduction and Market Interest Rates Has Direct Benefits to All Stakeholders
Debt Reduction and Market Interest Rates Has Direct Benefits to All Stakeholders Transaction Issues Notes Reducing DT Notes and Adjusting Interest Rate Benefits All Stakeholders ($ in millions, except per share amounts) Reducing total debt and adjusting the interest rate results in value accretion f
Slide 16: Proposed Equity Split is Aligned with Revised Capital Structure
Proposed Equity Split is Aligned with Revised Capital Structure Transaction Issues . Reducing total debt by $4.0 billion and adjusting interest rates on DT Notes results in a more appropriate equity split, before accounting for a control premium Implied Equity Split Based on Actual 2012 EBITDA ($ in
Slide 17: Closing Remarks
Closing Remarks
Slide 18: Questions
Questions P. Schoenfeld Asset Management LP Moderator: Peter Schoenfeld 04-04-2013/10:30 a.m. P. Schoenfeld Asset Management LP Moderator: Peter Schoenfeld April 4, 2013 10:30 a.m. ET Operator: Welcome to PSAM’s presentation of the Compelling Case Against the MetroPCS/T-Mobile Transaction. Today’s p