Telecom Project Finance & Valuations

Course Overview This three-day workshop will increase participants' understanding of the process leading to the creation of a suitable financial structure for various types of cross-border telecom projects and transactions. From wireless/mobile to submarine cable and other technologies. Lessons and examples are drawn from around the world. Emphasis is placed upon understanding the objectives of the various participants in these deals and how their goals may vary over time. The viewpoint of bank lenders and other credit providers, like vendors or bondholders that have historically proven to be ready sources of attractive funding, are examined. Credit enhancement techniques are also very important. Traditional Export Credit Agency, Multi- and Bi- lateral Agency support, as well as tailored private sector political and commercial shifting mechanisms and programs are explained. The hands-on workshop nature of this program will allow participants to develop a framework for recognizing, and analyzing qualitative and quantitative project risks in telecom projects. They will examine the ways in which project responsibilities and rewards are allocated among various participants, experiment with different financial structures, and model project outcomes. Day three’s sessions look explicitly at investor considerations in valuing telecommunications deals, both for license acquisition purposes and to estimate values of on-going operations and companies as they begin to trade in volatile markets. You will cover: Structuring Cross-Border Telecom Projects Accessing the Most Competitive Funding Financing Wireless/Mobile and Submarine Cable and Other Projects Key Regulatory and Legal Issues Working with Export Credit Agencies and Multilateral Institutions Vendor Financing for Projects Cross-Border Equipment Leasing and Islamic Finance Investor Considerations in Valuing Telecommunications Licenses Estimating Value of On-going Operations in Volatile Markets How Acquisition Strategies Affect Valuations Who should attend? Telecom Operators Equipment Vendors Investment Bankers Corporate Banking Officers Project Finance Managers Financial Analysts Business Development Managers Financial Consultants Investment Managers Legal Advisors Venture Capitalists
Day 1 Themes - Allocating risks in transactions; Searching for efficient financing alternatives; Financing a mobile start-up; Refinancing mature companies International project finance and the telecom sector Telecommunications transactions Industrialized and countries in transition Nigerian telecoms players: outlooks and objectives Phases in of a project and capital formation Examples of different types of projects - Wire-line, wireless/mobile, cables, satellites Lessons of 3G? Prospects for emerging 4G technologies? Telecoms projects: risk identification and allocation License and/or concession acquisition: - Understanding the allocation process Financing approaches and issues through start-up - Build out delays/cost overruns - Penetration levels/revenue per line - Increased competition - Technology changes Secondary sources of repayment Foreign exchange exposure Political risks Sources of finance: a financing checklist Workshop: cash flow modeling and credit assessment Building cash flow models: forecasting techniques and limitations Perspective of the investors vs. creditors Sensitivity analysis vs. Monte carlo simulations Examples Case study: Participants will break into small groups to prepare a case study concerned with built-out and operation of a mobile telecom and data system. A cash flow simulation model will be used in assessing market risk Day 2 Themes - Legal issues in telecom finance; Bank, Capital markets and Other Sources of Funds Discussion: Mobitel S.A. Key legal considerations in financing telecommunications projects Considering legal climate Dispute resolution alternatives Structuring considerations Important inter-creditor issues What can go wrong? Sources of finance: domestic and international bank loans Bank participation in the sector through club loans and syndication What security do banks need? - Offshore accounts and trustees - Mortgages on fixed assets/contract assignments Bridge-financing projects Financing in capital markets Capital markets access for telecom projects Rating agency criteria Emerging markets examples: telecom receivables securitization Credit enhancement Leasing Structures and advantages Market participants Cost considerations Comparing lease costs to alternative forms of financing Case study: Financing Equipment Sales Islamic Finance and Telecoms Financing Submarine Cables How they differ from mobile networks Landing agreements Backhaul and restoration Operations and maintenance agreements Capacity sales agreements Marketing agreements Case study: Financing fiber optic cable - participants break into small groups to negotiate terms of a project refinancing Day 3 Theme - Political and other risk support for telecoms projects; Telecommunications’ valuations approaches Political risk support and credit enhancement Export credit techniques - Agency guarantees and insurance - Funding and Interest equalization - Bank incentives inherent in ECA programmes - Costs and availability Development Banks and their programmes - Supporting debt and equity - Investment funds - Private sector insurers and risk support Telecommunication projects from the investor standpoint Overview of alternative valuation approaches: - DCF – discounted cash flows - EVA – economic value added - APV – adjusted present value Considering multiples: P/E ratios, EBITDA, etc. Common mistakes in applying different models Special factors for telecommunications Debt and leverage considerations Survey of who uses what tools and why What techniques will future business activity in telecoms demand? Discounted cashflow valuation of a wireless companies Forecasting cashflows based on key operating parameters - ARPUs, churn, customer adds - Penetration rates - Estimating a suitable cost of capital - Country risk - WACC, levered and delevered beta - Cost of debt - CAPM Transactional issues impacting valuation - Control premia - Marketability discounts Sensitivity analysis Real option theory to evaluate “event upside” Assessing “data-centric” cash flows for future broadband services Comparable multiple analysis of a wireless company Traded multiples of comparable companies - Multiples of revenue, EBIT, EBITDA - Free cash flow - Subscribers, POPs, etc. “Change of control” multiples Case study: Participants will look at a mobile operator’s business model, and use an Excel-based model to estimate value under different scenarios Course summary and close