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.
On behalf of Sonera, ARC Associates contacted numerous strategic and financial investors potentially interested in the consolidation of U.S. GSM. When Sonera's focus was narrowed down to individual negotiations with several parties, ARC Associates continued to advise Sonera throughout the various negotiations and performed detailed due diligence, valuation and transaction structure analyses until the resulting transactions were achieved.
The Transaction
On 20 September 1999, Sonera announced that it had approved the merger of Aerial with VoiceStream Wireless Corporation ("VoiceStream"). This merger effectively consolidates three of the four publicly traded U.S. GSM regional wireless operators into one company, as VoiceStream is also currently in the process of merging with Omnipoint Corporation ("Omnipoint"). Prior to the announcement, Sonera held the equivalent of an 18% shareholding in Aerial.
In addition to agreeing to exchange its existing Aerial shares into VoiceStream shares, with a deal price valuation of $305 million at the time of the announcement, Sonera has agreed to invest an additional $230 million into Aerial prior to completion. Sonera has additionally agreed to invest $500 million into VoiceStream at the completion of the merger of VoiceStream and Omnipoint. As a result of these transactions, Sonera will own 8% of the newly enlarged VoiceStream.