Introducing Analysys Mason. Expertise and experience in litigation support

Transcription

1 Introducing Analysys Mason Expertise and experience in litigation support

2 Analysys Mason expertise Analysys Mason has unrivalled sector expertise, which has generated an outstanding track record in litigation support 2 Analysys Mason expertise We provide a broad portfolio of consulting services to the telecommunications, media and IT industries Our sector focus, breadth of knowledge and analytical skills allow us to deliver highquality litigation support We can provide assistance to a wide variety of clients and disputes We have developed modeling methodologies for calculating damages and building winning cases Analysis Mason experience Our consultants and analysts have worked with public bodies and private companies from around the world We work with our clients on a wide range of real-world issues such as regulation, licensing, pricing, bankruptcy and M&A Annex: Case studies in litigation support

3 Analysys Mason expertise We provide a broad portfolio of consulting services to the telecommunications, media and IT industries 3 Key sectors Strategic focus Core consulting services Fixed, broadband and nextgeneration networks (NGN) Finance Financial transaction support Pricing strategy Economic analysis Mobile telecommunications Regulation Spectrum management and pricing Regulation Satellite telecommunications Digital media Strategy Interconnect Strategy and business planning Scenario planning STEM business-modelling software Litigation support is underpinned by a broad portfolio of consulting services

4 Analysys Mason expertise Our sector focus, breadth of knowledge and analytical skills allow us to deliver high-quality litigation support 4 Capability in litigation support Sector focus: Our consultants possess world-leading expertise in the specific fields of telecommunications, media and IT Breadth of knowledge: We undertake projects of all forms for all types of market players in the sector, given us a knowledge base of unparalleled breadth and depth Analytical skills: Our modelling tools are recognised for their utility, flexibility and transparency to the user

5 Analysys Mason expertise We can provide assistance to a wide variety of clients and disputes 5 Litigation Support Expertise We work with our clients on real-world issues: Regulator impact National roaming agreements Liberalisation policy Bankruptcy We apply our knowledge and expertise to help clients solve real-world problems: Supply chain disputes Operator/government arbitration Operating licence termination Regulator imposed rate reduction Anti-competitive behaviour Roaming charges negotiation M&A transaction arbitration Our consultants work with a variety of public and private organisations: Law firms Operators and carriers Regulators Government bodies We have developed methodologies and modelling tools for litigation support: Market development scenario modelling Regulatory regime review Economic argument construction Business viability assessment Negotiation strategy development Damages assessment Competition and pricing analysis Analysys Mason provides leading industry commentary and opinion across the telecoms sector

6 Analysys Mason expertise We have developed modeling methodologies for calculating damages and building winning cases 6 Valuations Optimisation problems Analysys Mason has extensive experience in the valuation of companies and assets for financial transactions: Modelling sets of market and strategy scenarios Benchmarking of equivalent transactions Our in-house expertise in optimisation allows our clients to consider particularly complex problems: Even if they cannot be solved directly, the properties of effective solutions can be understood We build structured, upgradeable tools employing multiple algorithms Costs and tariffs Demand and scarcity We have built models to understand both demand and scarcity: We take care to define: the precise objectives and scope key drivers and calculation flows between them appropriate scenarios Our modular LRIC template has been used for numerous telecoms operator business cases: Our models are flexible and robust built with clear understanding of how they will be used for policy and regulatory purposes Further details of our modelling capabilities are available on request

7 Analysys Mason experience Our consultants and analysts have worked with public bodies and private companies from around the world [1] 7 Cambridge Dublin Edinburgh London Madrid Manchester Washington DC Milan Paris Dubai Singapore Key Assignments completed Analysys Mason office We are trusted by organisations worldwide for our expertise, impartiality and ability to get the best results for our clients

8 Analysys Mason experience Our consultants and analysts have worked with public bodies and private companies from around the world [2] 8 Our achievements Country/region Client type Project type Project scope We reviewed and analysed internal company information, market history and forecasts to create a detailed discounted cashflow (DCF) model to assess damages due to the client. We also addressed a number of market development and regulatory hypotheses to assess damages incurred under a number of potential market development scenarios. We provided a summary for submission to the tribunal, as well as extensive supporting documentation CIS Mobile Network Operator Expert witness Provision of expert witness services in an arbitration case between the former owners of a mobile network operator in a CIS state and the government of that state We assessed and modelled the financial damages resulting from the incumbent's anticompetitive behaviour in the ADSL market. Our findings were summarised in a report to be used by the client as part of their legal action Western Europe Fixed Network Operator Assessment of damages Support to a Western European alternative operator in a legal dispute with the incumbent We provided economic (revenue projection, financial modelling) and market assessment advice in support of a successful response to the complaint. We subsequently provided ad hoc support on various implementation planning matters United Kingdom Government Complaint response support Provision of economic, business case and litigation support advice for a Regional Development Agency programme in response to a complaint made to DG Competition in Brussels We modelled how the company might have performed under a different strategy and assessed the suitability of the original strategy, given the market trends and competitive situation at the time. The client praised our understanding of the market and the quantitative analysis that backed up our conclusions. The work was submitted as an expert opinion to the tribunal Eastern Europe Law Firm Expert Witness Provision of an expert opinion on a dispute regarding the sale of a leading Internet Service Provider in an Eastern European country

9 Analysys Mason experience Our consultants and analysts have worked with public bodies and private companies from around the world [3] 9 Our achievements Country/region Client type Project type Project scope We assessed the operator's losses arising from the government's non-compliance with its contractual obligations Middle East Mobile Network Operator Assessment of damages Provision of technical expertise for arbitration in a dispute between a government and a mobile phone operator We assessed the valuation of a fixed network operator and certain elements of the contractual descriptions given during an acquisition process. The client was subsequently awarded significant compensation. In a second stage of the project, we provided independent analysis of the parlous financial condition of a major telecoms company, enabling the client to argue successfully in court for a freeze of assets United States Law Firm Expert Witness Provision of an expert witness report and testimony for a claimant in an international arbitration hearing in New York We undertook a detailed assessment of the loss faced by the operator as a consequence of liberalising the market earlier than agreed under the operator s licence conditions. We benchmarked this situation against other precedents resulting in a settlement in the region of USD500 million for our client Singapore Fixed/ Mobile Operator Assessment of damages Assistance to an alternative operator with its claim for compensation against the government following a decision to bring forward full liberalisation of the market

10 Analysys Mason experience We work with our clients on a wide range of real-world issues such as regulation, licensing, pricing, bankruptcy and M&A 10 The following case studies are expanded in more detail in the annex: Case Study Country/ Region Client type Project type Project summary Case study 1 Western Europe Mobile Network operator Assessment of damages Assessment of the economic impact of the glide path imposed by the regulator on mobile termination rates (MTRs) to network operators Case study 2 Trinidad and Tobago Mobile Network Operator Expert Witness Provision of expert opinion and written statements to an arbitration panel hearing on a mobile termination interconnection dispute between two network operators Case study 3 Western Europe Mobile Network Operator Negotiation support Support to a major European new entrant mobile operator in negotiations with an existing player on the charges for a national roaming agreement on the host's GSM network Case study 4 United States Government Expert Witness Provision of Expert Witness service to the United States Department of Justice (DoJ) in the US Bankruptcy Court litigation between the United States Federal Communications Commission and a fixed-wireless systems manufacturer

11 11 Annex: Case studies in litigation support 1. Impact of regulator-imposed glide path on Mobile Termination Rates 2. Arbitration of mobile termination interconnect dispute between two network operators 3. Support to negotiation of national roaming agreement charges 4. Assessment of future viability of Nextwave for US Bankruptcy Court

12 Annex: Case studies Case study 1: Impact of regulator-imposed glide path on Mobile Termination Rates 12 Business challenge Our client felt disadvantaged by an impending regulatory change regarding mobile termination rates (MTRs) We had to estimate the economic impact of the regulator-imposed glide path imposed by the regulator on mobile termination rates (MTRs), and show why this would be contrary to the principles of cost orientation in some cases We subsequently assessed the impact on the competitive positioning of various players in the market Approach We developed a high-level market model for traffic flows between the various national mobile network operators (MNO), including the impact of MVNOs. This model was based on historical data for the last 3 years and included a forecast for the glide path period. The model and our understanding of MTR costing methodologies allowed us to estimate the gap between the proposed glide path and the termination rate costs of MNO in the market We also estimated the payment flows associated to the interconnection costs, and calculated the impact the revised MTR would have on the profit levels of the various MNOs Finally, we linked the disproportionate worsening of our client s financial performance (in terms of investment capacity and competitive positioning) to likely market developments. Benefits and results The study concluded that our client s EBITDA margin was most negatively affected by the imposed glide path, which in turn could have a negative impact on its market share and investment capacity. Our documentation was in the form of a technical annex to be presented by our client in court Differences in EBITDA from operators EBITDA (EUR Millions) M difference with MNO M difference with MNO M difference with MNO M difference with MNO 2 MNO 1 MNO 2 Client

13 Annex: Case studies Case study 2: Arbitration of mobile termination interconnect dispute between two network operators 13 Business challenge Two network operators in Trinidad and Tobago, Digicel and TSTT, were in dispute over the rates, terms and other aspects of voice and SMS interconnection between their respective networks Cost models had been developed and put forward by each party to an independent arbitration panel, which was tasked with resolving the dispute Expert witness testimony was used by both parties to support their cost modelling, and the broader economic aspects of their argument Approach We provided our independent professional opinion on the suitability of Digicel s cost model for measuring its termination costs during its first few years of operation We focussed on the parametric inputs to the cost model (such as market share, cost allocation factors, depreciation lifetimes) in order to assess whether they were reasonable We examined the mechanical calculations of the model to ascertain whether the calculations conformed to international best practice standards of cost modelling We delivered a detailed expert opinion report on the model, as well as our view of related mobile termination regulatory issues such as network externalities and handset subsidies Benefits and results Review of capital expenditure profile Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Our client benefited from our world-leading expert advice before, during and after the presentation of witnesses at the arbitration hearing During the proceedings, Analysys Mason consultants twice appeared before the arbitration panel to give oral evidence under cross-examination We were able to defend our findings in front of the arbitration panel in order that they could appreciate the breadth of Analysys Mason expertise in mobile termination cost modelling, and take into account our opinion on the suitability of Digicel s cost model Capex (USD millions) Not included (year 5 replacements) 15 year capex 7 year capex 5 year capex

14 Annex: Case studies Case study 3: Support to negotiation of national roaming agreement charges 14 Business challenge A major European new entrant mobile operator was preparing to renegotiate its national roaming charges with its host operator As a major part of its traffic load and crucial to its nationwide operation, national roaming charges (per minute, SMS and Mbyte) have a direct impact on the operator s EBITDA margin and financial performance The new entrant operator would have recourse to raise a regulatory dispute in the event that it considered the agreement on national roaming charges could not be met Approach We reviewed the relevant economic arguments underpinning the national roaming charges agreement, and considered the likely approach of the regulator in resolving a dispute (if one were to be raised) We calculated retail-minus and cost-plus based charges for national roaming services which should be acceptable to the host network and regulator We examined the retail pricing structure of the host operator to derive particular retail pricing measures. These were used to provide support for the level of national roaming charges which could be negotiated between the parties Average revenue per GPRS Mbyte in July 2002 and March 2003 Average revenue per Mbyte (GBP) Average Mbytes per month Mar-03 Jul-02 Benefits and results As a result of our work, the new entrant operator was able to prepare a negotiation strategy which was favorable to itself, yet also reasonable for the host network or acceptable to a regulator in the event of a dispute Analysys Mason provided ongoing assistance to the operator over a number of months, assisting with its dispute preparations and subsequent negotiations

15 Annex: Case studies Case study 4: Assessment of future viability of Nextwave for US Bankruptcy Court 15 Business challenge Nextwave won two spectrum licences in 1996, but due to alleged devaluing by subsequent auctions, refused to pay for them and sought bankruptcy protection The United States Federal Communications Commission confiscated the licences and resold them, but was found to have violated bankruptcy law by the supreme court The dispute lasted 8 years, during which the focus shifted away from the Bankruptcy Court towards brokering a deal Approach We provided Expert Witness service to the United States Department of Justice (DoJ) in the US Bankruptcy Court litigation between the United States Federal Communications Commission and Nextwave We assessed and testified to the viability of the manufacturer as an ongoing business We undertook a detailed review of historic wireless market development and analysed the viability of the proposed business strategy in the evolving US wireless market We worked on cash out (NPV) and note (loan) scenarios, which formed a key driver in the deal strategy We performed some initial work on the deal structure/value, while maintaining independence in case the deal fell through Benefits and results The work was used to support the DoJ's case in the Chapter 11 bankruptcy hearing An agreement was reached in which the government got back 75% of the licences and Nextwave retained licences for some lucrative markets The DoJ achieved their three goals: put spectrum back into use; removal of spectrum from Nextwave; achieved an acceptable financial deal Overcrowded US airwaves received a welcome relief, with more capacity leading to fewer dropped calls

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