Paul, The debt does need to be considered in the shareholder valuation.
AT&T paid $0.9 B in cash and stock, and assumed $0.6 B in debt. As far as AT&T is concerned, they had to pay $1.6 B to buy the subscribers and network, or $2400/sub. The Vanguard shareholder are the ones who netted $1440/sub.
To ratio for Nextel "gross" worth (assets), use the $2400/sub * ARPU ratio * subs. >>> 2400 * 69/40 * about 2.5 M subs = $10.3 B. So, based on this simple calculation, a buyer would pay $10.3 B for Nextel, which includes the debt (I think around $6 B). Nextel shareholder would net about $4.3 B; at 350 M diluted shares, that $12.2 / share.
Two comments on the above simplified analysis:
1) Vanguard would probably not get the $1.5 B in today's market. To explain that comment - negotiations for the Vanguard / AT&T deal must have begun months before this announcement, under more favorable market conditions and multiples. So, in today's market, the sale price would be lower, and Nextel shares would pro-rate to, say, $10 / share.
2) Nextel shares command a premium to the $10 figure. This indicates a factor not included in the derivation of the $10. That factor is largely the growth potential for Nextel when compared to Vanguard. Investors (the "big" money and analysts) make financial projections for a company's revenue / earnings stream, which must include a guess as to how subscriber base will grow with time. Then, that money is discounted back to present value and share price. The problem / opportunity with valuing a company like Nextel is the guess as to how the subscriber base, ARPU, expenses, etc. will change with time.
Comments, John or Paul?,
Rob |
