Situation
In late 1998, Sonera appointed ARC Associates to analyse Sonera's options regarding its existing $200 million investment in Aerial Communications, Inc. ("Aerial"), which had been adversely affected by the perception that the GSM operators were competitively disadvantaged. This was largely a result of the rapid rollout of nation-wide wireless networks and calling plans by AT&T Wireless and Sprint PCS. Aerial is a regional U.S. GSM wireless operator.
Approach
ARC Associates undertook a comprehensive review of the U.S. wireless market, conducted a valuation of each component of the potential consolidation of the four publicly traded U.S. GSM operators, and calculated the financial requirements associated with the build-out of a nation-wide U.S. GSM wireless network.
As part of its efforts to invest in effectively a nation-wide U.S. GSM network, Sonera entered into discussions with Powertel, Inc. ("Powertel") regarding a potential strategic investment.
ARC Associates advised Sonera throughout the negotiations and performed detailed due diligence, valuation and transaction structure analyses.
The Transaction
On 15 September 1999, Sonera completed the acquisition of Ericsson Inc.'s equivalent 9% shareholding in Powertel, Inc. for $123 million.