Valuation of Airthread Brief

2 February 2017

Define the problem Problem that both ACC and ATC faced Problem for American Cable Communication (ACC) 1. The most severe problem for ACC is the increasing in competitors with the trend toward bundle of services. Recently, Incumbent local exchange carriers (ILEC’s) which is the firm that normally provide wireless service are expanding its products. ILEC’s is growing their video offerings which is the major product of ACC.

We believe that this problem require very quick response from Robert Zimmerman, senior vice president of business development, as the technology is continue developing all the time, so ACC should acquire ATC to provide and develop more services. 2. In addition, ACC saw a looming competitive threat from advance wireless networks based on 802. 16n standard for mobile WiMAX. Those networks are expected to offer not only wireless telephony but also internet service which is also the main product of ACC.

Valuation of Airthread Brief Essay Example

Problem for AirThread Connections (ATC) 1. ATC faced a cost disadvantage relative to its main wireless competitors owned by ILEC’s. High operating cost is resulted from moving traffic from cell towers to central switching offices using either landlines leased from competitors or technically cumbersome microwave equipment. This is the most critical problem for ATC, according to Michael Balistreri, the company’s CFO, he said “In a commoditized industry, it is usually the low-cost producer that survives and thrives”. . Moreover, ATC’s competitors offer more products apart from wireless service which are landline, videos, and internet service. These lead to higher customer acquisition and retention costs, plus slower growth. Assumptions from ACC’s acquisition 1. Both companies could help each other compete in an intensely competitive industry that requires more and more bundle service offerings so the revenue of both companies will be increased. 2.

A study done by Rubinstein & Ross estimated that ATC can save about 20% in backhaul cost by using ACC fiber lines instead of leasing landlines from other companies. However, Ms. Zhang believes that the cost savings would be gradual. Therefore, she estimated the total system operating cost saving to be 6% realized over four years beginning in 2009. 3. By acquisition, both companies will expand the business market which could have increased the stability and reliability of the company’s revenues. Moreover, each firm will increase its network utilization and increase cost efficiency as a result.

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