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Financial Modeling:Financial Modeling:Network Operator Network Operator Business CaseBusiness Case

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Making Broadband Wireless Reality

Business CaseBusiness Case

Telesystem InnovationsTelesystem Innovations

����Overview of Financial Modeling

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����The Process for Financial Modeling – Step 1

> Network Architecture

– Number of Sites/Cells

> Coverage constraints (link budget, propagation model)

> Capacity constraints (subscriber profile and distribution, traffic model)

– Site configuration

> Omni, sectored

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> Omni, sectored

> Frequency plan

– Backhaul and Backbone Connection

> Backhaul from sites to central office

> Connection to communication backbones

Result: Determine main components of capital expenses incurred by an

operator – i.e. Capex Model

����The Process for Financial Modeling – Step 2

> Operational Assumptions

– Staffing Requirements

– Peering bandwidth, backhaul expenses

– Site leasing expenses (antenna & leasehold space)

– Equipment maintenance costs

– Spectrum license expenses

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– Billing expenses

– Marketing expenses

– Other expenses

Result: Determine main components of operational expenses – i.e.

Opex Model

����The Process for Financial Modeling – Step 3

> Market Assumptions

– Total Addressable Market (TAM)

> Adoption rate of new technology

> Ability of operator to sign-up new clients

– Subscriber Profile

> Business vs. residential

> Voice vs. data

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> Voice vs. data

> Usage rates

– Pricing

Result: Determine main revenue drivers – i.e. Revenue Model

����The Process for Financial Modeling – Step 4

> Output

– Annual revenue (revenue model)

– Annual cash flows (revenue, opex and capex models)

– Net present value

– Breakeven period

– Ratio analysis – key metrics of profitability

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> Scenario Analysis

– What-if…?

> Sensitivity Analysis

– Stress-test key assumptions

– Monte-Carlo simulation for statistical analysis of output

����TSI Advantage

> Experience– Years of Service Provider

experience in international markets - familiarity with actual operational challenges and cost models

– Vendor experience – developed 4G base stations, UEs/CPEs, ASN/Gateways and designed complete end-to-end networks

> Accuracy

Equipment Description Cost Comment

Backhaul Equipment 10,500$ Data Backhaul from POP to Super POP

802.16 Cell Site 64,500$ 6-Sector cell at $10,000/sector + $4500 Aggregation switch

Equipment Installation 5,000$ Installation cost per POP and Super POP

Peering Point Routers 19,500$ 1 PPR required at Super POP

Aggregation Switch 4,500$ 1 Aggregation switch required at super POP

Backbone Switch 10,000$ 1 Backbone switch required at super POP

Network Mgt. System 250,000$ 1 NMS required for networkCapital Expenditure Year 1 Year 2 Year 3 Year 4 Year 5

Total Annual CPE Cost 3,920,000$ 3,528,000$ 3,616,200$ 1,926,846$ 1,051,584$ Total Annual POP/Super POP

Equipment Cost1,098,500$ -$ 483,500$ 127,500$ 120,000$

Total CAPEX 5,018,500$ 3,528,000$ 4,099,700$ 2,054,346$ 1,171,584$

Operational Costs Year 1 Year 2 Year 3 Year 4 Year 5

NOC Costs 200,740 205,759 210,902 216,175 221,579

Roof Rights 72,000 72,000 86,400 100,800 115,200

Peering bandwidth 505,774 1,036,837 2,125,516 2,995,649 3,628,820

Backhaul bandwidth 611,520 705,600 1,128,960 2,069,760 2,352,000

Operating Budget 3,294,840 3,385,172 4,352,042 4,768,722 5,128,323

Total OPEX 4,684,874 5,405,367 7,903,820 10,151,106 11,445,922

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> Accuracy– Integration of advanced

technical (link budgets, capacity plans) and financial models to generate accurate business cases

> Reliability– Experience and accuracy allows

TSI to provide reliable solutions which enables our customers to make the right decisions

$(10,000,000)

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

1 2 3 4 5

Year of Operation

Do

llars

($)

Revenue Operating Profit Cash Flow

Total OPEX 4,684,874 5,405,367 7,903,820 10,151,106 11,445,922

Total OPEX as % of Net Revenue 62% 30% 21% 20% 19%

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