Summary of Financial Analyses
In connection with rendering its opinion, PJT Partners performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, PJT Partners did not ascribe a specific range of values to the shares of T-Mobile common stock but rather made its determination that, from a financial point of view, the exchange ratio pursuant to the business combination agreement was fair to T-Mobile on the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.
In arriving at its opinion, PJT Partners did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the merger transactions. Accordingly, PJT Partners believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.
The following is a summary of the material financial analyses used by PJT Partners in preparing its opinion to the T-Mobile board of directors. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by PJT Partners, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. In performing its analyses, PJT Partners made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of T-Mobile or any other parties to the merger transactions. None of T-Mobile, PJT Partners, or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the businesses do not purport to be appraisals or reflect the prices at which the businesses may actually be sold. The financial analyses summarized below were based on the forecasts, the estimated synergies, the NOL forecasts, the estimated capitalization, the estimated transaction expenses and other financial information prepared and furnished to PJT Partners by or on behalf of the management of T-Mobile. The following summary does not purport to be a complete description of the financial analyses performed by PJT Partners. The following quantitative information, to the extent that it is based on market data, is based on market data as it existed, for T-Mobile and Sprint, on April 26, 2018 (and with respect to market data for the last “unaffected” trading day for shares of T-Mobile common stock and Sprint common stock, April 9, 2018, prior to an article published in The Wall Street Journal on April 10, 2018 reporting that T-Mobile and Sprint had recommenced negotiations regarding a possible business combination transaction ), and is not necessarily indicative of current or future market conditions. Fully diluted share numbers for T-Mobile and Sprint used below were provided by, and used at the direction of, the management of T-Mobile.
Selected Comparable Company Analysis
In order to assess how the public market values shares of similar publicly traded companies and to provide a range of relative implied equity values per share of Sprint common stock and T-Mobile common stock by reference to these companies, which could then be used to calculate implied exchange ratio ranges, PJT Partners reviewed and compared specific financial and operating data relating to Sprint and T-Mobile with selected companies that PJT Partners deemed comparable to Sprint and T-Mobile. The selected comparable companies were AT&T Inc. (which we refer to as “AT&T”) and Verizon Communications Inc. (which we refer to as “Verizon”).
PJT Partners calculated and compared various implied financial multiples and ratios of Sprint, T-Mobile and the selected comparable companies. As part of its selected comparable company analysis, PJT Partners calculated
and analyzed total adjusted enterprise value (calculated as the equity value based on fully diluted shares outstanding using the treasury stock method, assuming, in the case of Sprint, the cash settlement of warrants owned by SoftBank, (1) plus debt and less cash, each as of March 31, 2018, after giving effect to certain adjustments, (2) less the present value of net operating losses discounted to March 31, 2018, (3) plus tax-affected unfunded pension and other post-retirement liabilities, (4) plus certain adjustments for minority interests and investments in affiliates) (which we refer to in this section entitled “—Opinion of PJT Partners” as “adjusted TEV”) as a multiple of 2018 calendar year estimated (which we refer to in this section entitled “—Opinion of PJT Partners” as “2018E”) cash adjusted EBITDA (post-SBC). “Cash adjusted EBITDA (post-SBC)” is calculated as (a) EBITDA (as described in “The Merger Transactions—T-Mobile Unaudited Prospective Financial Information” and “The Merger Transactions—Sprint Unaudited Prospective Financial Information”) less (b) leasing revenue. All of these calculations were performed and based on publicly available financial data and (i) for T-Mobile, on T-Mobile’s closing unaffected share price as of April 9, 2018 and closing share price as of April 26, 2018, (ii) for Sprint, on Sprint’s closing unaffected share price as of April 9, 2018 and closing share price as of April 26, 2018, and at the exchange ratio pursuant to the business combination agreement as of April 9, 2018 and April 26, 2018, (iii) for AT&T, on AT&T’s closing share price as of April 26, 2018 (reflecting the pro forma impact of the pending Time Warner Inc. acquisition) and (iv) for Verizon, on Verizon’s closing share price as of April 26, 2018. The results of this selected comparable company analysis are summarized below:
Selected Comparable Companies
| T-Mobile1 | Sprint2 | Verizon | AT&T | |||||||||||||||||||||||||||||
| Unaffected as of 4/9/18 |
At Market as of 4/26/18 |
Unaffected as of 4/9/18 |
At Market as of 4/26/18 |
At 0.10256x exchange ratio |
At Market as of 4/26/18 |
At Market as of 4/26/18 |
||||||||||||||||||||||||||
| as of 4/9/18 | as of 4/26/18 | |||||||||||||||||||||||||||||||
| Adjusted TEV/2018E cash adjusted EBITDA (post-SBC) |
7.8x | 8.1x | 6.7x | 7.2x | 7.3x | 7.5x | 7.3x | 7.2x | ||||||||||||||||||||||||
| 1 | Based on T-Mobile management T-Mobile forecasts. |
| 2 | Based on T-Mobile management Sprint forecasts. |
PJT Partners, based on its professional judgment, selected the comparable companies listed above because PJT Partners believed their businesses and operating profiles are reasonably similar to that of Sprint and T-Mobile, as applicable. However, because of the inherent differences between the businesses, operations and prospects of Sprint and T-Mobile, as applicable, and those of the selected comparable companies, PJT Partners believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, PJT Partners also made qualitative judgments concerning the differences between the businesses, financial and operating characteristics and prospects of Sprint, T-Mobile and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, profitability levels and degree of operational risk between Sprint, T-Mobile and the companies included in the selected company analysis.
Selected Comparable Company Analysis—Sprint
With respect to Sprint, based upon these judgments, PJT Partners selected an adjusted TEV to 2018E cash adjusted EBITDA (post-SBC) multiple range of 6.75x to 7.25x and applied such range to Sprint’s 2018E cash adjusted EBITDA (post-SBC) based on the T-Mobile management Sprint forecasts to calculate a range of implied prices per share of Sprint common stock based on the fully diluted number of shares of Sprint common stock as of April 26, 2018. The following summarizes the results of these calculations:
| Implied Prices per Share of Sprint Common Stock | ||
| T-Mobile management Sprint forecasts |
$5.20 – $6.08 |
PJT Partners then compared this range to (1) the implied value per share of Sprint common stock of $6.57 based on the closing share price of T-Mobile common stock of $64.10 as of April 26, 2018 and the exchange ratio pursuant to the business combination agreement and (2) the unaffected closing share price of Sprint common stock of $5.14 as of April 9, 2018.
Selected Comparable Company Analysis—T-Mobile
With respect to T-Mobile, based upon these judgments, PJT Partners selected an adjusted TEV to 2018E cash adjusted EBITDA (post-SBC) multiple range of 7.5x to 8.0x and applied such range to T-Mobile’s 2018E cash adjusted EBITDA (post-SBC) based on the T-Mobile management T-Mobile forecasts to calculate a range of implied prices per share of T-Mobile common stock based on the fully diluted number of shares of T-Mobile common stock as of April 26, 2018. The following summarizes the results of these calculations:
| Implied Prices per Share of T-Mobile Common Stock | ||
| T-Mobile management T-Mobile forecasts |
$56.59 – $62.57 |
PJT Partners then compared this range to (1) the closing share price of T-Mobile common stock of $64.10 as of April 26, 2018 and (2) the unaffected closing share price of T-Mobile common stock of $59.74 as of April 9, 2018.
Implied Exchange Ratio
Based on the range of implied equity value per share for Sprint and the range of implied equity value per share for T-Mobile that were calculated by PJT Partners in its comparable company analyses, PJT Partners calculated a range of implied exchange ratios for T-Mobile common stock per share of Sprint common stock. PJT Partners calculated the high end of the implied exchange ratio range by dividing the high value of the Sprint implied equity values per share reference range by the high value of the T-Mobile implied equity values per share reference range. PJT Partners calculated the low end of the implied exchange ratio range by dividing the low value of the Sprint implied equity values per share reference range by the low value of the T-Mobile implied equity values per share reference range. The result of this analysis, as compared to the exchange ratio pursuant to the business combination agreement, was an implied exchange ratio range of 0.09192x – 0.09715x.
Selected Precedent Transaction Analysis
PJT Partners reviewed, to the extent publicly available, and analyzed the valuation and financial metrics relating to the following fourteen selected transactions since 2004 involving companies in the U.S. wireless industry, which PJT Partners, in its professional judgment, considered generally relevant for comparative purposes. For each precedent transaction, PJT Partners reviewed the transaction total enterprise value implied for each target company based on the consideration payable in the applicable selected transaction as a multiple of the target company’s trailing EBITDA and the target company’s forward EBITDA. The following summarizes the results of these calculations:
| Month and Year Announced |
Acquirer |
Target |
Transaction Total Enterprise Value ($ in billions) |
Transaction Total Enterprise Value / EBITDA |
||||||||||||
| Trailing | Forward | |||||||||||||||
| September 2013 |
Verizon Communications Inc. | Vodafone Group Plc’s 45% stake in Cellco Partnership, Inc. | $ | 130.0 | 8.9x | 8.4x | ||||||||||
| July 2013 |
AT&T Inc. | Leap Wireless International, Inc. | 4.1 | 8.7x | 8.7x | |||||||||||
| June 2013 |
SoftBank Corp. | Sprint Corporation | 47.3 | 8.9x | 6.9x | |||||||||||
| October 2012 |
T-Mobile US, Inc. | MetroPCS Communications, Inc. | 8.3 | 6.3x | 6.1x | |||||||||||
| March 2011 |
AT&T Inc. | T-Mobile US, Inc. | 39.0 | 7.1x | 7.0x | |||||||||||
| November 2008 |
AT&T Inc. | Centennial Communications Corp. | 2.8 | 7.0x | 6.9x | |||||||||||
| June 2008 |
Verizon Wireless Inc. | Alltel Corporation | 28.1 | 8.7x | 8.3x | |||||||||||
| September 2007 |
T-Mobile US, Inc. | SunCom Wireless Holdings, Inc. | 2.4 | 14.2x | 11.9x | |||||||||||
| July 2007 |
Verizon Wireless Inc. | Rural Cellular Corporation | 2.7 | 11.4x | 10.1x | |||||||||||
| June 2007 |
AT&T Inc. | Dobson Communications Corporation | 5.1 | 10.4x | 9.8x | |||||||||||
| May 2007 |
TPG Partners V, L.P. and Goldman Sachs Capital Partners VI, L.P. | Alltel Corporation | 27.2 | 9.9x | 9.1x | |||||||||||
| January 2005 |
Alltel Corporation | Western Wireless Corporation | 5.8 | 9.4x | 8.6x | |||||||||||
| December 2004 |
Sprint Corporation | Nextel Communications, Inc. | 42.3 | 8.5x | 7.5x | |||||||||||
| February 2004 |
Cingular Wireless LLC | AT&T Wireless Services, Inc. | 47.3 | 9.9x | 9.9x | |||||||||||
The reasons for and the circumstances surrounding each of the selected precedent transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of Sprint and the companies included in the selected precedent transaction analysis. Accordingly, PJT Partners believed that a purely quantitative selected precedent transaction analysis would not be particularly meaningful in the context of considering the merger transactions. PJT Partners therefore made qualitative judgments concerning the differences between the characteristics of the selected precedent transactions and the merger transaction that would affect the acquisition values of the selected target companies and Sprint.
Based upon these judgments, after reviewing the above analysis, PJT Partners selected an adjusted TEV to 2018E cash adjusted EBITDA (post-SBC) multiple range of 7.5x to 8.5x and applied such range to Sprint’s 2018E cash adjusted EBITDA (post-SBC) based on the T-Mobile management Sprint forecasts to calculate a range of implied enterprise values for Sprint. PJT Partners then calculated a range of implied prices per share of Sprint common stock. The following summarizes the result of these calculations:
| Precedent M&A Transactions |
Implied Prices per Share of Sprint Common Stock | |
| T-Mobile management Sprint forecasts |
$6.52 – $8.27 |
PJT Partners then compared this range to (1) the implied value per share of Sprint common stock of $6.57 based on the closing share price of T-Mobile common stock of $64.10 as of April 26, 2018 and the exchange
ratio pursuant to the business combination agreement and (2) the unaffected closing share price of Sprint common stock of $5.14 as of April 9, 2018.
Discounted Cash Flow Analysis
Sprint Standalone
In order to estimate the present value of Sprint common stock as of March 31, 2018, PJT Partners performed discounted cash flow (which we refer to in this section entitled “—Opinion of PJT Partners” as “DCF”) analyses of Sprint using both the T-Mobile management Sprint forecasts and the Sprint management Sprint forecasts. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows generated by the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.
8.75 Year DCF Analysis—T-Mobile Management Sprint Forecasts
With respect to the discounted cash flow analysis based on the T-Mobile management Sprint forecasts, to calculate the estimated enterprise value of Sprint using the discounted cash flow method, PJT Partners added (1) Sprint’s projected after-tax unlevered free cash flows for the nine months ended December 31, 2018 and the calendar years 2019 through 2026 (which we refer to in this section entitled “—Opinion of PJT Partners” as the “8.75 year DCF analysis”) based on the T-Mobile management Sprint forecasts to (2) ranges of “terminal values” of Sprint as of December 31, 2026, and discounted such amount to its present value as of March 31, 2018 using a range of selected discount rates. The residual value of Sprint at the end of the projection period, or “terminal value,” was estimated by applying the exit multiple range of 6.5x to 7.5x to Sprint’s 2026 calendar year estimated (which we refer to in this section entitled “—Opinion of PJT Partners” as “2026E”) cash adjusted EBITDA (post-SBC) from the T-Mobile management Sprint projections. The after-tax unlevered free cash flows and terminal values were then discounted to present value as of March 31, 2018 using discount rates ranging from 6.75% to 7.75%. This range of discount rates was selected based on PJT Partners’ analysis of Sprint’s weighted average cost of capital. PJT Partners then calculated a range of implied equity values per share of Sprint common stock by subtracting debt, as of March 31, 2018, from, and adding cash, as of March 31, 2018, and the present value of certain net operating losses of approximately $4.5 billion as of March 31, 2018 based on the NOL forecasts as calculated by PJT Partners using a discount rate of 7.875% to, the estimated enterprise value derived using the discounted cash flow method and dividing such amounts by the fully diluted number of shares of Sprint common stock as of April 26, 2018. The following summarizes the results of these calculations:
| Sprint Standalone 8.75 Year DCF Analysis |
Implied Prices per Share of Sprint Common Stock | |
| T-Mobile management Sprint forecasts |
$5.92 – $8.21 |
PJT Partners then compared this range to (1) the implied value per share of Sprint common stock of $6.57 based on the closing share price of T-Mobile common stock of $64.10 as of April 26, 2018 and the exchange ratio pursuant to the business combination agreement and (2) the unaffected closing share price of Sprint common stock of $5.14 as of April 9, 2018.
4.75 Year DCF Analysis—Sprint Management Sprint Forecasts
With respect to the discounted cash flow analysis based on the Sprint management Sprint forecasts, to calculate the estimated enterprise value of Sprint using the discounted cash flow method, PJT Partners added (1) Sprint’s projected after-tax unlevered free cash flows for the nine months ended December 31, 2018 and the calendar years 2019 through 2022 (which we refer to in this section entitled “—Opinion of PJT Partners” as the “4.75 year DCF analysis”) based on the Sprint management Sprint forecasts to (2) ranges of “terminal values” of
Sprint as of December 31, 2022, and discounted such amount to its present value as of March 31, 2018 using a range of selected discount rates. PJT Partners applied the same exit multiple range of 6.5x to 7.5x to Sprint’s 2022 calendar year estimated cash adjusted EBITDA (post-SBC) from the Sprint management Sprint forecasts. The after-tax unlevered free cash flows and terminal values were similarly discounted to present value as of March 31, 2018 using discount rates ranging from 6.75% to 7.75%, determined based on PJT Partners’ analysis of Sprint’s weighted average cost of capital. The following summarizes the results of these calculations:
| Sprint Standalone 4.75 Year DCF Analysis |
Implied Prices per Share of Sprint Common Stock | |
| Sprint management Sprint forecasts |
$7.52 – $10.07 |
PJT Partners then compared this range to (1) the implied value per share of Sprint common stock of $6.57 based on the closing share price of T-Mobile common stock of $64.10 as of April 26, 2018 and the exchange ratio pursuant to the business combination agreement and (2) the unaffected closing share price of Sprint common stock of $5.14 as of April 9, 2018.
T-Mobile Standalone—8.75 Year DCF Analysis, T-Mobile Management T-Mobile Forecasts
In order to estimate the present value of T-Mobile common stock as of March 31, 2018, PJT Partners performed a discounted cash flow analysis of T-Mobile.
To calculate the estimated enterprise value of T-Mobile on a standalone basis using the discounted cash flow method, PJT Partners added (1) T-Mobile’s projected after-tax unlevered free cash flows for the 8.75 year DCF analysis period based on the T-Mobile management T-Mobile forecasts to (2) ranges of “terminal values” of T-Mobile as of December 31, 2026, and discounted such amount to its present value as of March 31, 2018 using a range of selected discount rates. The residual value of T-Mobile at the end of the projection period, or “terminal value,” was estimated by applying the exit multiple range of 7.0x to 8.0x to T-Mobile’s 2026E cash adjusted EBITDA (post-SBC) from the T-Mobile management T-Mobile forecasts. The after-tax unlevered free cash flows and terminal values were then discounted to present value as of March 31, 2018 using discount rates ranging from 6.25% to 7.25%. This range of discount rates was selected based on PJT Partners’ analysis of T-Mobile’s weighted average cost of capital. PJT Partners then calculated a range of implied equity values per share of T-Mobile common stock by subtracting debt, as of March 31, 2018, from, and adding cash, as of March 31, 2018, and the present value of certain net operating losses of approximately $1.8 billion as of March 31, 2018 based on the NOL forecasts as calculated by PJT Partners using a discount rate of 5.75% to, the estimated enterprise value derived using the discounted cash flow method and dividing such amounts by the fully diluted number of shares of T-Mobile common stock as of April 26, 2018. The following summarizes the results of these calculations:
| T-Mobile Standalone 8.75 Year DCF Analysis |
Implied Prices per Share of T-Mobile Common Stock | |
| T-Mobile management T-Mobile forecasts |
$67.96 – $84.70 |
PJT Partners then compared this range to (1) the closing share price of T-Mobile common stock of $64.10 as of April 26, 2018 and (2) the unaffected closing share price of T-Mobile common stock of $59.74 as of April 9, 2018.
Implied Exchange Ratio Without and With Synergies—8.75 Year DCF Analysis
Based on the range of implied equity values per share for Sprint and the range of implied equity values per share for T-Mobile that were calculated by PJT Partners in its respective 8.75 year DCF analyses, PJT Partners calculated a range of implied exchange ratios for T-Mobile common stock per share of Sprint common stock. PJT Partners calculated the high end of the implied exchange ratio range by dividing the high value of the Sprint implied equity values per share from the 8.75 year DCF analysis by the high value of the T-Mobile implied
equity values per share from the 8.75 year DCF analysis. PJT Partners calculated the low end of the implied exchange ratio range by dividing the low value of the Sprint implied equity values per share from the 8.75 year DCF analysis by the low value of the T-Mobile implied equity values per share from the 8.75 year DCF analysis. The result of this analysis, as compared to the exchange ratio pursuant to the business combination agreement, was an implied exchange ratio range of 0.08716x – 0.09687x.
In respect of the 8.75 year DCF analyses for T-Mobile and Sprint, PJT also calculated a range of implied exchange ratios for Sprint common stock per share of T-Mobile common stock, for purposes of which the value of Sprint based on a merger with T-Mobile included a net present value of $43.6 billion of net synergies based upon the estimated synergies (net of any costs to achieve the estimated synergies), as directed by T-Mobile’s management. The result of this analysis, as compared to the exchange ratio pursuant to the business combination agreement, was an implied exchange ratio range of 0.22018x – 0.24083x.
Contribution Analysis
PJT Partners also performed a contribution analysis in which it reviewed and compared Sprint’s and T-Mobile’s respective cumulative levered free cash flows in terms of their contribution to the combined company. PJT Partners calculated Sprint’s and T-Mobile’s respective cumulative levered free cash flows (after giving effect to stock-based compensation expense) for the 2019 through 2023 calendar years (which we refer to in this section entitled “—Opinion of PJT Partners” as “2019E–2023E cumulative levered FCF (post-SBC)”) and for the 2019 through 2026 calendar years (which we refer to in this section entitled “—Opinion of PJT Partners” as “2019E–2026E cumulative levered FCF (post-SBC)”) based on the T-Mobile management Sprint forecasts and the T-Mobile management T-Mobile forecasts, as applicable, to derive Sprint’s and T-Mobile’s implied equity ownership split in the combined company. Based on the implied ownership percentages for Sprint stockholders and T-Mobile stockholders, PJT Partners then calculated an implied exchange ratio for T-Mobile common stock per share of Sprint common stock of (1) 0.06692x based on 2019E–2023E cumulative levered FCF (post-SBC) and (2) 0.08829x based on 2019E–2026E cumulative levered FCF (post-SBC).
“Has / Gets” Analysis
PJT Partners performed a “Has / Gets” analysis in order to compare (1) the standalone DCF-based per share value of T-Mobile to (2) the DCF-based per share value of the combined company, giving effect to the completion of the merger transactions, in each case from the perspective of the holders of T-Mobile common stock. For purposes of the “Has / Gets” analysis, PJT Partners calculated the DCF-based standalone value of T-Mobile based on PJT Partners’ 8.75 year DCF analysis for T-Mobile at the mid-point of the discount rates and exit multiples used in such analysis. For purposes of the “Has / Gets” analysis, PJT Partners calculated the DCF-based value of the combined company, giving effect to the completion of the merger transactions, to the holders of shares of T-Mobile common stock based on (a) their implied ownership percentage in the combined company at the exchange ratio pursuant to the business combination agreement and (b) the DCF-based value of the combined company calculated based on PJT Partners’ discounted cash flow analysis for the combined company, as described below, at the mid-points of discount rates and exit multiples used in such analysis. PJT Partners calculated the estimated enterprise value of the combined company on a pro forma basis using the discounted cash flow method utilized by PJT Partners with respect to Sprint and T-Mobile described above (i) based on (A) each of Sprint’s and T-Mobile’s projected after-tax unlevered free cash flows for the nine months ended December 31, 2018 based on the T-Mobile management Sprint forecasts and the T-Mobile management T-Mobile forecasts, respectively, and (B) the combined company’s projected after-tax unlevered free cash flows for the calendar years 2019 through 2026 based on the combined company forecasts (which reflected the estimated synergies, as directed by T-Mobile’s management) and (ii) (A) applying an exit multiple range of 7.0x to 8.0x to the combined company’s 2026E cash adjusted EBITDA (post-SBC) from the combined company projections and (B) discount rates ranging from 6.50% to 7.50%. PJT Partners then calculated a range of implied equity values per share of T-Mobile common stock, giving effect to the completion of the merger transactions, by subtracting estimated debt for the combined company (including estimated transaction expenses,
as directed by T-Mobile’s management), as of March 31, 2018, from and adding estimated cash for the combined company, as of March 31, 2018, and the present value of certain estimated net operating losses of the combined company of approximately $7.2 billion as of March 31, 2018 based on the NOL forecasts as calculated by PJT Partners using a discount rate of 7.00% to, the estimated enterprise value derived using the discounted cash flow method and dividing such amounts by the pro forma share count of T-Mobile common stock, giving effect to the completion of the merger transactions, at the exchange ratio pursuant to the business combination agreement. The result of PJT Partners’ analysis for the DCF-based standalone value of T-Mobile was an implied price of $76.06 per share of T-Mobile common stock. The result of PJT Partners’ analysis for the DCF-based value of the combined company was an implied price of $107.98 per share of T-Mobile common stock, giving effect to the completion of the merger transactions, representing an increase in DCF-based value of approximately 42% in respect of a share of T-Mobile common stock.
Other Information
PJT Partners also observed the additional factors described below, which were not considered part of its financial analyses in connection with rendering its opinion, but were referenced solely for informational purposes:
| • | Historical Stock Price Trading Analysis: PJT Partners reviewed the historical trading prices of Sprint common stock and T-Mobile common stock during the 52-week period ending April 26, 2018, which indicated (1) low and high prices of Sprint common stock during such 52-week period of $4.81 to $9.22 and (2) low and high prices of T-Mobile common stock during such period of $54.60 to $68.88; |
| • | Discounted Analyst Price Target Analysis: PJT Partners reviewed publicly available Wall Street research analysts’ standalone share price targets in the next 12 months for each of Sprint common stock and T-Mobile common stock. After excluding each of the highest and lowest standalone share price targets for each of Sprint common stock and T-Mobile common stock, the remaining share price targets indicated (1) a target share price range for Sprint common stock of $4.20 to $6.40 (reflecting the discounting of such price targets to March 31, 2018 using Sprint’s estimated cost of equity of 9.25% and rounding to the nearest $0.05) and (2) a target share price range for T-Mobile common stock of $64.85 to $71.15 (reflecting the discounting of such price targets to March 31, 2018 using T-Mobile’s estimated cost of equity of 8.00% and rounding to the nearest $0.05); and |
| • | Discounted Analyst Price Target Analysis—Implied Exchange Ratio: Based on the publicly available Wall Street research analysts’ target share price range of implied equity values per share for Sprint and T-Mobile that were reviewed by PJT Partners, PJT Partners calculated a range of implied exchange ratios for T-Mobile common stock per share of Sprint common stock. PJT Partners calculated the high end of the implied exchange ratio range by dividing the high value of the Sprint implied equity values per share from the discounted analyst price targets by the high value of the T-Mobile implied equity values per share from the discounted analyst price targets. PJT Partners calculated the low end of the implied exchange ratio range by dividing the low value of the Sprint implied equity values per share from the discounted analyst price targets by the low value of the T-Mobile implied equity values per share from the discounted analyst price targets. The result of this analysis, as compared to the exchange ratio pursuant to the business combination agreement, was an implied exchange ratio range of 0.06476x – 0.08995x. |
General
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying PJT Partners’ opinion. In arriving at its fairness determination, PJT Partners considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, PJT Partners made its
