U.S. Communications Service Provider Quarterly

Transcription

1 FOCUS Telecom Technology and Group U.S. Service Provider Quarterly Spring 2015 Report Vol. 4, No. 2 In this Issue Seasoned, Systematic, Successful SM Investment Banking and Advisory FOCUS Investment Banking LLC is a leading investment bank with specialized telecom technology and services expertise, concentrating on providing four highly-tailored services to emerging middle market and larger organizations in this sector: Sellside Assignments Buyside Engagements Capital Formation Valuation and Fairness Options 2 Introduction and Sub Sector Definitions 3 Summary Comments: Public Markets 4 Public Market Summary Charts Summary Comments: M&A M&A Summary Charts M&A Announced Transactions 7 M&A Announced Transactions with Revenue Multiples 8 Sub Sector Analysis: Large Cap Charts Sub Sector Analysis: Alternative Telecom Charts Sub Sector Analysis: Hosted and Managed Charts Sub Sector Analysis: ILEC and Diversified ILEC Charts Sub Sector Analysis: Cable and Video Charts FOCUS Telecom Technology and Team

2 U.S. Service Provider Quarterly By Richard Pierce, FOCUS Managing Director and Telecom Technology and Team Leader FOCUS believes that the need for communications services has never been greater. Large enterprises, small and medium sized businesses, and individuals have all come to rely upon ubiquitous access to voice, video, and data services to run their day-to-day activities. Furthermore, the importance of Service Providers (CSPs) appears poised to increase further as they begin to enable a variety of new services ranging from hosted PBX and videoconferencing platforms to in-home security and energy management solutions. Access to capital and the benefits of scale will mean that a small number of large companies will continue to dominate certain areas such as mobile wireless and video. However, FOCUS continues to see opportunities for middle market CSPs. While not as large as the industry giants, they continue to thrive by developing innovative business models that share one or more characteristics such as capital efficiency, customer responsiveness, an advanced technology platform and a focus on an underserved industry vertical or geography. Furthermore, it often is the middle market CSPs that point the direction for the future of the industry. FOCUS is proud of its commitment to the CSP sector and we are excited about the prospects for middle market companies in this space. The FOCUS Telecom Technology and group consists of four professionals with a mix of backgrounds that include both C-level operating expertise and experience at leading middle market investment banks. The FOCUS Telecom team is uniquely qualified to help middle market clients reach their strategic objectives because the group: Devotes significant senior level resources to executing transactions for lower middle market clients, Has a breadth of knowledge that covers most segments of the telecom industry, Has bankers with C-level operating experience in the telecom industry, Has a proven transaction methodology for delivering results, Is equally comfortable with buy side and sell side M&A, Leverages an experienced team of research professionals, and Has a national presence with coverage of both east and west coasts. Sub Sector Definitions Large Cap: Large, diversified communications service providers that control a significant number of former RBOC access lines and/or have a nationwide wireless operation. Alternative Telecom: Competitive carriers that primarily provide basic voice, data and transport services to businesses and other telecom service providers. Hosted and Managed : Companies that provide hosted VoIP telecom services as well as additional hosted offerings such as audio and video conferencing. ILEC and Diversified ILEC: Non-RBOC incumbent carriers, many of which have branched out into other sectors of communications services. Cable and Video: Incumbent cable service providers, satellite video providers, and competitive video providers whose core business is providing video services to residential customers. 2

3 Summary Comments Public Markets The FOCUS Service Provider Index (CSPI) experienced a second straight reporting period with a modest loss. After the -0.2% loss in our Winter reporting period, the CSPI dropped another 0.9% this Spring. This underperformed both the 0.4% gain in the S&P 500 and the 3.5% gain in the NASDAQ over this same reporting period. For the 12-month period, the CSP is up 4.2%. Once again, this trails the broader indices, each of which posted double digit gains over the past year. Multiples for the past year have been flat to increasing. The sector revenue multiple remained steady at 2.3x, while the sector EBITDA multiple increased from 6.4x to 8.1x. Large Cap The Large Cap sub sector remained unchanged over this past three months. Of the four stocks in the index, two posted positive returns and two negative. On the positive side, Sprint rebounded nicely from its dismal performance in our most recent reporting period to post a strong gain of 14.2%. Verizon also had a respectable gain of 4.0%. On the negative side, AT&T dropped 2.8% while CenturyLink gave up a large portion of its 2014 gains with a drop of 12.7%. Multiples for the Large Cap sub sector now stand at 2.1x revenue and 7.8x EBITDA. The sub sector revenue multiple is down slightly from the 2.2x we saw 12 months ago, but the sub sector EBITDA multiple is up sharply from 5.7x. The sub sector s higher EBITDA multiple is primarily the result of improving multiples at both AT&T and Verizon. Alternative Telecom The Alternative Telecom sub sector continued on its recent tear with a 3.4% gain for this three-month period. This was good enough to make it the top performing sub sector for the period. Global Telecom and Technology was far and away the best performing stock in the sub sector with a gain of more than 40% in the past three months. However, Level 3 (up 9.0%) and Towerstream (up 16.8%) also turned in strong performances. The Alternative Telecom sub sector also is the top performer for the 12-month period with a gain of nearly 30%. Once again, Global Telecom and Technology and Level 3 played major roles in this increase, as did EarthLink. Not surprisingly, given the sub sector s strong stock price performance, sub sector multiples are up significantly from the year-ago period. The sub sector revenue multiple went from 2.5x to 4.3x, while the sub sector EBITDA multiple grew from 10.5x to 15.4x. Hosted and Managed The Hosted and Managed sub sector was the only other sub sector in positive territory for this Spring reporting period. The sub sector gained 1.7% in the past three months. The sub sector was evenly split between gainers and losers for the period, but increases at j2 Global, RingCentral, and West Corporation managed to outweigh losses at the other companies in our index. The sub sector s year-over-year performance also remains strong with a gain of 14.4% over this time frame. However, these gains were not broad-based with only j2 Global and West Corporation in positive territory. Sub sector multiples are up meaningfully over the pat year. The sub sector revenue and EBITDA multiples now stand at 3.1x and 12.5x, respectively. This compares to a revenue multiple of 2.6x and an EBITDA multiple of 11.1x for the sub sector at this same time last year. ILEC and Diversified ILEC The ILEC and Diversified ILEC sub sector had its second straight reporting period in negative territory. The sub sector dropped 3.0% for the three-month period, making it the worst performing sub sector in the CSPI for the second straight reporting period. Consolidated dragged the index down with a loss of more than 25%, but Alaska, Lumos Networks, and Windstream all were significantly negative as well. The main bright spot for the period was Cincinnati Bell, which gained 10.7% as the company continued to post strong gains in its fiber-to-the-home initiative. On other positive notes, the sub sector still remains in positive territory for the 12-month period with a gain of 4.8% and sub sector multiples continue to climb. The sub sector revenue multiple went from 2.1x a year ago to 2.2x currently, while the sub sector EBITDA multiple increased from 6.0x to 7.2x. Cable and Video The Cable and Video sub sector was unable to build on the momentum from our last reporting period and instead suffered a loss of 1.5% for the three-month period. Five of the seven stocks in the index were in negative territory over this time frame. The most noteworthy exception was Charter. Charter benefited from both a strong earnings release where it reported subscriber growth along all its major lines of business as well as from its announcement that it would acquire fellow cable operator Bright House Networks. Sub sector performance looks significantly better when measured over the past year. When viewed over this time frame, the sub sector is up 14.3% and every single company in the index boasts a positive return. Sub sector multiples continue to rise. The revenue multiple is now 2.6x (compared to 2.5x a year ago) and the sub sector EBITDA multiple is 8.6x (compared to 8.2x a year ago). 3

4 U.S. Service Provider Sector: Public Market Summary Twelve Month Index Returns Sector and Sub Sector Returns Month 3 Month Service Provider 4.2% -0.9% Large Cap -1.8% 0.0% Alternative Telecom 29.1% 3.4% Hosted and Managed 14.4% 1.7% ILEC and Diversified ILEC 4.8% -3.0% Cable and Video 14.3% -1.5% S&P % 0.4% NASDAQ 16.7% 3.5% Service Provider S&P 500 Index NASDAQ Index Revenue Multiple Trends Sector and Sub Sector Revenue Multiples 2.5x Service Provider 2.3x 2.3x Large Cap 2.1x 2.2x Alternative Telecom 4.3x 2.5x Hosted and Managed 3.1x 2.6x ILEC and Diversified ILEC 2.2x 2.1x Cable and Video 2.6x 2.5x Enterprise Value/Revenue EBITDA Multiple Trends Sector and Sub Sector EBITDA Multiples 1 8.0x 6.0x 4.0x Service Provider 8.1x 6.4x Large Cap 7.8x 5.7x Alternative Telecom 15.4x 10.5x Hosted and Managed 12.5x 11.1x ILEC and Diversified ILEC 7.2x 6.0x Cable and Video 8.6x 8.2x Enterprise Value/EBITDA Source: Capital IQ 4

5 Summary Comments M & A The number of Service Provider M&A transactions moderated slightly in our Spring reporting period. We counted 16 total transactions, which is certainly a respectable figure, but not as high as the elevated levels we have seen in our last few reporting periods. However, the dollar volume of activity remained extremely high with slightly more than $21 billion in total announced transaction dollar volume. This was more dollar volume than we saw in two of the last four full-year reporting periods, so clearly, the sector is off to a strong start in 2015 in terms of large dollar value transactions. Alternative Telecom There were seven total transactions in the Alternative Telecom sub sector for this reporting period. The largest of these was Megapath s divestment of its managed services business unit to Global Telecom and Technology. The move enables Megapath to focus on higher value unified communications and cloud solutions. Global Telecom and Technology, on the other hand, has been an active acquirer of network connectivity businesses so this appears to be a good fit with their overall strategy. In other notable deals for the period, cable and media company Schurz purchased Midwestern-provider Long Lines, while we also saw a new platform company emerge in the space as NewSpring Capital purchased Seattle-based X5 Solutions. Hosted and Managed The Hosted and Managed sub sector remained active for the second straight reporting period with four total transactions. Vonage continued to build its presence in the cloud communications market with the acquisition of SimpleSignal. This builds on Vonage s earlier acquisitions of Vocalocity and TeleSphere. In addition, it also is noteworthy to see hosted communications provider Jive make a pair of acquisitions of smaller cloud communications providers. Finally, MeetingSense Software acquired web-based conferencing provider OneSmart Conference. The acquisition enables Meeting- Sense to provide customers with a single, integrated platform for managing the entire meeting lifecycle. ILEC and Diversified ILEC Once again, the main driver of M&A activity in the ILEC and Diversified ILEC sub sector was the divestiture of access lines in secondary markets by a large incumbent. In this case, Verizon sold operations serving markets in California, Florida, and Texas to Frontier for $10.5 billion. While history has shown these transactions can be challenging to execute, Frontier already has succeeded in integrating Verizon s West Virginia operations and doubtless believes it can have a similar level of success in this situation. The sub sector s second transaction was also a divestiture, but on a much smaller scale. In this instance, fellow rural ILEC Wilkes acquired three properties in North Carolina from Telephone and Data Systems. Cable and Video The Cable and Video sub sector had the period s other large M&A transaction. This was the Charter acquisition of Bright House Networks for continued on page 6 U.S. Communication Service Provider Sector: M&A Summary M&A Activity: Number of Transactions M&A Activity ($ Value of Transactions in Millions) $200,000.0 $150,000.0 $151, $100, $50,000.0 $9,043.2 $24,225.5 $6,686.5 $21, Through 3/31/2015 $ Through 3/31/2015 5

6 more than $10 billion. Bright House has long been one of the larger independent operators in the cable space. The acquisition certainly helps Charter continue to build scale, both in its residential and business service offerings. The other two sub sector transactions in the period were much smaller. These involved hospitality-focused service provider MyStay, which was acquired by Select-TV, and rural and gated community provider WWA Group, which was purchased by Genie Gateway. Transactions with Announced Multiples We had four transactions with announced transaction multiples this reporting period. For the period s two large transactions, Frontier acquired the Verizon properties for 1.8x revenue and 6.6x EBITDA. In comparison, the Charter /Bright House Networks transaction had even higher multiples of 2.7x revenue and 7.5x EBITDA. This is consistent with the general market premium we see for cable properties compared to their counterparts in incumbent telecom. For the period s smaller transactions, SimpleSignal received a multiple of 1.5x revenue in its sale to Vonage, while Megapath received multiples of 1.2x revenue and 7.6x EBITDA in the sale of its managed services business to Global Telecom and Technology. M&A Announced Transactions (10/1/14 3/31/15) Acquiror Target Date Announced Sector Purchase Price Description Charter Bright House Networks 3/31/15 Cable and Video $10,439.0 Operates cables systems in the U.S. and offers video, high-speed data, home security and a portfolio of business solutions. Vonage SimpleSignal 3/16/15 $25.5 Provides cloud-based unified communications and collaboration services. Select-TV MyStay 3/12/15 Cable and Video NA Delivers media solutions to the hospitality industry. NNRF Spectrumlink 2/24/15 Alternative Telecom NA High speed Internet and VoIP phone services for businesses utilizing fixed wireless and fiber optic networks. Global Telecom and Technology Megapath (Managed Business Unit) 2/19/15 Alternative Telecom $152.5 NewSpring Capital X5 Solutions 2/18/15 Alternative Telecom NA MeetingSense Software OneSmart Conference 2/15/15 Broadvoice Frontier IKANO (DSL Extreme Business) Verizon (Wireline Assets in California, Florida and Texas) NA 2/11/15 Alternative Telecom NA Private networking, access services and managed security services for large enterprise clients. Suite of custom telecommunications solutions including voice, data, SIP trunking, Ethernet and hosted communications. Web-based conferencing solutions and support for individuals and businesses. DSL provider offering high-speed Internet and communication services nationwide. 2/5/15 Diversified ILEC $10,540.0 Incumbent wireline assets serving markets in California, Florida and Texas. Genie Gateway WWA Group 1/26/15 Cable and Video NA Multi-system operator providing cable television, broadband and telephony services to rural and gated communities in the U.S. Schurz Long Lines 1/20/15 Alternative Telecom NA Provides telecommunications services to residents and businesses in Iowa, Nebraska, Minnesota and South Dakota. Thing5 Innflux 1/20/15 Alternative Telecom NA Provides guest Internet services for the hotel industry. Jab Wireless OneWave Networks 1/16/15 Alternative Telecom NA Fixed wireless provider with operations in Boise and Twin Falls, Idaho. Wilkes Telephone & Data Systems (Three ILEC Properties) 1/14/15 Diversified ILEC NA Three incumbent local exchange carrier properties in North Carolina. Jive Comvoice 1/12/15 Jive Vocalnet 1/12/15 NA NA Provides hosted VoIP communications services and distributes business telephone systems for businesses in the U.S. Provides hosted VoIP and IP PBX communications services and distributes business telephone systems for businesses in the U.S. Voice Onyx WonderLink 12/31/14 Alternative Telecom NA VoIP, Internet fax and other related Internet services in Florida. Spirit SCANA 12/16/14 Alternative Telecom $157.1 Operates long haul and metro fiber optic networks in South Carolina and North Carolina. Tucows Blue Ridge Networks 12/16/14 Alternative Telecom NA Provides high speed Internet access and Internet hosting to customers in Central Virginia. Liberty Global Choice Cable TV 12/10/14 Cable and Video $272.5 Offers cable television and cable modem services in Puerto Rico. Zayo Group IdeaTek Systems (Carrier and Enterprise Segment) Arkadin AccuConference 12/1/14 SpeedConnect CommSpeed, Swift Wireless and esedona Internet 12/4/14 Alternative Telecom NA NA Fiber provider with 1,800 route miles in Kansas, including a dense metro footprint in Wichita, Kansas. Hosted web, video and audio conferencing services for businesses. 11/24/14 Alternative Telecom NA Provides wireless broadband Internet services in Northern Arizona. 6

7 M&A Announced Transactions (10/1/14 3/31/15) continued Acquiror Target Date Announced Vonage TeleSphere 11/5/14 Fusion Telecommunications PingTone 11/3/14 Sector Purchase Price $114.0 Description Provides Unified -as-a-service solutions to larger enterprises in the small and medium business sector. $10.1 Provides hosted VoIP services to corporate, government and military customers. Phoenix Internet Last Mile 10/28/14 Alternative Telecom NA Fixed wireless broadband services for customers in Arizona. CommZoom Reach Broadband 10/24/14 Cable and Video NA Cable television operator serving 10 markets in South Texas. CommZoom Reveille Broadband 10/24/14 Cable and Video NA Cable televison operator serving the Bandera, Texas market. Hargray Kennedy Cablevision 10/23/14 Cable and Video NA Cable television operator serving the Reidsville, Georgia market. Single Digits Spectra Access 10/21/14 Alternative Telecom NA Fixed wireless broadband solutions to commercial office buildings and tenants. 123.Net Michigan Network 10/9/14 Alternative Telecom NA Provides fixed wireless, voice and data services. DSCI Unified Technologies 10/9/14 BHT Holdings Global Telecom and Technology Tri-County Telephone Association NA VoIP, cloud computing, enterprise network design, server virtualization and storage and telepresence solutions. 10/2/14 Diversified ILEC $46.0 Cooperative telephone company serving rural markets in Wyoming. UNSI 10/1/14 Alternative Telecom $37.8 Windstream Business Only Broadband 10/1/14 Alternative Telecom NA Internet and private networking solutions for enterprise businesses, small-tomidsize businesses and service providers. High-bandwidth, enterprise-class Ethernet and networking solutions using fixed wireless technology. M&A Announced Transactions with Revenue Multiples (10/1/14 3/31/15) Acquiror Charter Target Date Announced Sector Purchase Price Revenue Multiple Bright House Networks 3/31/15 Cable and Video $10, x 7.5 x Vonage SimpleSignal 3/16/15 Global Telecom and Technology Frontier Megapath (Managed Business Unit) Verizon (Wireline Assets in California, Florida and Texas) Vonage TeleSphere 11/5/14 Fusion Telecommunications Global Telecom and Technology Tolt Solutions Consolidated Level 3 Clarity Telecom PingTone 11/3/14 $ x NA 2/19/15 Alternative Telecom $ x 7.6 x 2/5/15 Diversified ILEC $10, x 6.6 x $ x NA $ x 4.8 x UNSI 10/1/14 Alternative Telecom $ x NA ipass (Unity Network Division) 7/1/14 Alternative Telecom $ x NA Enventis 6/30/14 Diversified ILEC $ x 7.6 x EBITDA Multiple TW Telecom 6/16/14 Alternative Telecom $7, x 13.9 x Wide Open West (South Dakota Operations) 6/12/14 Cable and Video $ x 8.2 x AT&T DirecTV 5/18/14 Cable and Video $65, x 8.1 x Telephone & Data Systems Birch Bend Broadband 5/1/14 Cable and Video $ x NA Cbeyond 4/21/14 $ x 4.5 x Description Operates cables systems in the U.S. and offers video, high-speed data, home security and a portfolio of business solutions. Provides cloud-based unified communications and collaboration services. Private networking, access services and managed security services for large enterprise clients. Incumbent wireline assets serving markets in California, Florida and Texas. Provides Unified -as-a-service solutions to larger enterprises in the small and medium business sector. Provides hosted VoIP services to corporate, government and military customers. Internet and private networking solutions for enterprise businesses, small-to-midsize businesses and service providers. Provider of retail and distributed managed network and security services to retail customers. Provides integrated communication services to business and residential customers in the upper midwest. Managed network services in the United States including business Ethernet, data networking and IP-based communications. Broadband communication, Internet and cable systems serving Rapid City and Sioux Falls, South Dakota. Provides digital television entertainment services in the United States and Latin America. Provides high-speed Internet, fiber connectivity, cable and digital television and telephone services in Central Oregon. Cloud-based services, communications services and network connectivity to small and medium business customers. 7

8 Sub Sector Analysis: Large Cap Twelve Month Index Returns Company Returns Month 3 Month Large Cap Index -1.8% 0.0% AT&T -6.9% -2.8% CenturyLink 5.2% -12.7% Sprint -48.4% 14.2% Verizon 2.2% 4.0% 0.00 Large Cap Revenue Multiple Trends Company Revenue Multiples 3.0x Large Cap Index 2.1x 2.2x AT&T 1.8x CenturyLink 2.2x 2.2x 1.0x Sprint 1.4x 1.7x Verizon 2.4x 2.4x Enterprise Value/Revenue EBITDA Multiple Trends Company EBITDA Multiples 1 8.0x 6.0x 4.0x Large Cap Index 7.8x 5.7x AT&T 7.9x 5.4x CenturyLink 5.8x 5.5x Sprint 5.8x 8.3x Verizon 8.5x 5.9x Enterprise Value/EBITDA Source: Capital IQ 8

9 Sub Sector Analysis: Alternative Telecom Twelve Month Index Returns Company Returns 12 Month 3 Month Alternative Telecom Index 29.1% 3.4% Boingo 11.2% -1.7% Cogent -0.6% -0.2% EarthLink 23.0% 1.1% Global Telecom and Technology 79.3% 42.7% Inteliquent 8.3% -19.8% Level % 9.0% Towerstream -8.1% 16.8% Zayo Group NA -8.5% Alternative Telecom 5.0x 4.0x 3.0x 1.0x Revenue Multiple Trends Company Revenue Multiples Alternative Telecom Index 4.3x 2.5x Boingo 2.3x 1.6x Cogent 5.2x 5.3x EarthLink 0.8x 0.7x Global Telecom and Technology 3.5x 1.9x Inteliquent 1.9x 1.9x Level 3 4.3x 2.7x Towerstream 4.2x 3.9x Zayo Group 7.9x NM Enterprise Value/Revenue x 1 5.0x EBITDA Multiple Trends Company EBITDA Multiples Alternative Telecom Index 15.4x 10.5x Boingo 17.8x 10.1x Cogent 17.5x 16.6x EarthLink 4.6x 4.0x Global Telecom and Technology 21.3x 12.2x Inteliquent 5.3x 5.6x Level x 10.3x Towerstream NM NM Zayo Group 2 NM Enterprise Value/EBITDA Source: Capital IQ 9

10 Sub Sector Analysis: Hosted and Managed Twelve Month Index Returns Company Returns Month 3 Month Index 14.4% 1.7% 8x8-22.3% -8.3% Glowpoint -45.9% -17.4% j2 Global 31.2% 5.9% Premiere Global -20.7% -10.0% RingCentral -15.3% 2.7% West Corporation 41.0% 2.2% 0.00 Revenue Multiple Trends Company Revenue Multiples 4.0x 3.0x 1.0x Index 3.1x 2.6x 8x8 3.6x 6.0x Glowpoint 1.3x 2.1x j2 Global 5.4x 4.3x Premiere Global 1.3x 1.5x RingCentral 4.3x 6.2x West Corporation 2.9x Enterprise Value/Revenue EBITDA Multiple Trends Company EBITDA Multiples 15.0x 1 9.0x 6.0x 3.0x Index 12.5x 11.1x 8x8 61.1x 91.4x Glowpoint 12.1x 21.8x j2 Global 13.0x 10.2x Premiere Global 9.8x 11.3x RingCentral NM NM West Corporation 9.8x 7.7x Enterprise Value/EBITDA Source: Capital IQ 10

11 Sub Sector Analysis: ILEC and Diversified ILEC Twelve Month Index Returns Company Returns Month 3 Month ILEC & Diversified ILEC Index 4.8% -3.0% Alaska Systems -13.0% -6.1% Alteva -12.8% 2.7% Consolidated 1.9% -26.7% Cincinnati Bell 2.0% 10.7% Frontier 23.6% 5.7% Lumos Networks 14.1% -9.3% Otelco -1.2% 2.5% Telephone & Data Systems -5.0% -1.4% Windstream -10.2% -10.2% ILEC & Diversified ILEC 3.0x 1.0x Revenue Multiple Trends Enterprise Value/Revenue Company Revenue Multiples ILEC & Diversified ILEC Index 2.2x 2.1x Alaska Systems 1.5x 1.5x Alteva 0.7x Consolidated 3.8x 3.4x Cincinnati Bell 2.5x Frontier 3.4x 2.8x Lumos Networks 3.4x 3.0x Otelco 1.7x 1.8x Telephone & Data Systems 0.9x 0.9x Windstream 2.3x 2.3x EBITDA Multiple Trends Company EBITDA Multiples 8.0x 6.0x 4.0x Enterprise Value/EBITDA ILEC & Diversified ILEC Index 7.2x 6.0x Alaska Systems 15.0x 9.3x Alteva NM NM Consolidated 9.5x 8.4x Cincinnati Bell 7.3x 8.2x Frontier 7.7x 6.0x Lumos Networks 7.2x 7.2x Otelco 4.5x 4.5x Telephone & Data Systems 7.5x 6.9x Windstream 6.7x 5.9x Source: Capital IQ 11

12 Sub Sector Analysis: Cable and Video Twelve Month Index Returns Company Returns Month 3 Month Cable & Video Index 14.3% -1.5% Cablevision 8.5% -11.3% Charter 56.7% 15.9% Comcast 12.8% -2.7% DirecTV 11.4% -1.8% Dish Network 12.6% -3.9% General Communication 38.1% 14.6% Time Warner Cable 9.3% -1.4% Cable & Video Revenue Multiple Trends Company Revenue Multiples 3.0x 1.0x Cable & Video Index 2.6x 2.5x Cablevision 2.1x 2.2x Charter 4.7x 3.3x Comcast 2.7x 2.6x DirecTV 1.8x 1.8x Dish Network 2.6x 2.3x General Communication 2.2x 2.2x Time Warner Cable 2.9x 2.8x Enterprise Value/Revenue EBITDA Multiple Trends Company EBITDA Multiples 1 8.0x 6.0x 4.0x Cable & Video Index 8.6x 8.2x Cablevision 7.8x 7.9x Charter 13.6x 9.5x Comcast 8.1x 7.9x DirecTV 7.4x 7.1x Dish Network 12.9x 11.2x General Communication 6.5x 6.7x Time Warner Cable 8.2x 8.0x Enterprise Value/EBITDA Source: Capital IQ 12

13 FOCUS Telecom Technology and Team Richard H. Pierce Managing Director and Telecom Technology and Team Leader, Washington, DC Rich Pierce has more than ten years of investment banking experience advising middle market clients on a variety of mergers and acquisitions and capital raising transactions. During that time, Mr. Pierce s primary emphasis has been on serving clients in the telecommunications industry including providers of network related hardware and software products, wireless, and wireline telecommunications service providers and network engineering and construction companies. John T. Bradshaw Partner, Bend, Oregon john.bradshaw@focusbankers.com John Bradshaw has over 30 years experience in sales, marketing, manufacturing, finance, and systems engineering with corporations specializing in technology-driven business products and services. Mr. Bradshaw has been a successful senior executive and manager in both large and small organizations, and has spent the last 15 years working with entrepreneurial companies. Mr. Bradshaw has particular expertise in enterprise communications and contact center related technology. David Freeland Principal, San Francisco, California david.freeland@focusbankers.com David Freeland, a FOCUS Principal, has more than fifteen years of experience providing investment banking and management consulting services to a variety of corporate clients, ranging from the Fortune 500 to start-up businesses. He has been an investment banker since 2003, advising clients on mergers and acquisitions and capital raising transactions. Mr. Freeland has broad experience in the telecom and technology industry and has significant experience with data center companies. Eric M. Oganesoff Managing Director, Washington, DC eric.oganesoff@focusbankers.com Eric Oganesoff has conducted over forty M&A, debt, and capital raise transactions with an aggregate value of over $300 million and has served as the CEO or President of several companies. Mr. Oganesoff has over twenty years of senior executive level experience in leading businesses ranging from wireless solutions, software, and RFID services to manufacturing, industrial products, energy, and environmental products and government contracting. 13

14 About FOCUS Investment Banking LLC FOCUS Investment Banking LLC provides a range of middle market investment banking services with an emphasis on mergers, acquisitions, divestitures and corporate finance. FOCUS is a national firm serving clients from offices in major cities across the United States. FOCUS specializes in business units with transactions or revenues in the $5-300 million range, serving entrepreneurs, corporate owners and various types of investors across a broad range of industries, throughout the U.S. and worldwide. FOCUS bankers are seasoned operating and financial executives with extensive transaction experience. Securities transactions conducted by FOCUS Securities LLC, an affiliated company, registered Broker/Dealer and member FINRA/SIPC. For more information on FOCUS, visit FOCUS Investment Banking LLC Mid-Atlantic Region Southeast Region Western Region FOCUS Investment Banking LLC FOCUS Investment Banking LLC FOCUS Investment Banking LLC Headquarters Atlanta Office Los Angeles Office th Street, NW 3353 Peachtree Road, NE 355 South Grand Avenue Suite 200 Suite 1160 Suite 2450 Washington, DC Atlanta, GA Los Angeles, CA (fax) (fax) (fax) Securities transactions conducted by FOCUS Securities LLC, an affiliated company, registered Broker Dealer member FINRA/SIPC.