Hi Juan - this was such an enjoyable read. Can I just ask two quick clarification questions? Firstly, in the prospectus, they mention the fact that upgrading their network to FTTH would require 600mm in capex. How do you think that impacts the valuation of the Netco? I can think of a few ways to think about it (assume the investors just take it out of the valuation bc it's a cost of their investment? And secondly, I wanted to ask about your valuation. You added in the value of the FCF (574mm), but I think the FCF is Levered FCF (pre interest expense because you calculated it as EBITDAal - capex), so won't much of that FCF get consumed in debt service? Wasn't sure if I was missing something in your calcs? Happy to compare offline if easier too?
Eric, thank you very much for your comment. The Netco multiple, which we believe is conservative based on similar transactions, already includes the cost of the upgrade.
Regarding the valuation, as we did in the Liberty thesis, we first make a preliminary valuation and then adjust it slightly in the second part. In fact, in this valuation, we would have to increase the number of shares due to the incentives that have come into play. The FCF calculation is an approximation that starts from NOPAT, so in this way, we try to make a valuation 3 years into the future, calculating an accumulated FCF to the firm, and then we subtract the debt.
But as we indicated, this is just a kind of range, we want to work on a second part with a more precise valuation when we manage to understand the commercial strategy well. I hope this has clarified something for you
Hi Juan - this was such an enjoyable read. Can I just ask two quick clarification questions? Firstly, in the prospectus, they mention the fact that upgrading their network to FTTH would require 600mm in capex. How do you think that impacts the valuation of the Netco? I can think of a few ways to think about it (assume the investors just take it out of the valuation bc it's a cost of their investment? And secondly, I wanted to ask about your valuation. You added in the value of the FCF (574mm), but I think the FCF is Levered FCF (pre interest expense because you calculated it as EBITDAal - capex), so won't much of that FCF get consumed in debt service? Wasn't sure if I was missing something in your calcs? Happy to compare offline if easier too?
Eric, thank you very much for your comment. The Netco multiple, which we believe is conservative based on similar transactions, already includes the cost of the upgrade.
Regarding the valuation, as we did in the Liberty thesis, we first make a preliminary valuation and then adjust it slightly in the second part. In fact, in this valuation, we would have to increase the number of shares due to the incentives that have come into play. The FCF calculation is an approximation that starts from NOPAT, so in this way, we try to make a valuation 3 years into the future, calculating an accumulated FCF to the firm, and then we subtract the debt.
But as we indicated, this is just a kind of range, we want to work on a second part with a more precise valuation when we manage to understand the commercial strategy well. I hope this has clarified something for you
Thank you so much for the thoughtful reply! I appreciate it greatly. Again a really wonderful write up.
I was hoping to read more about this company. Thanks for the write-up!
You're welcome, a pleasure
oye Cocoa man una pregunta, no estás siendo muy muy conservador con la valoración?
Cuando dices esto: -No es casualidad que Zegona haya fichado a Ángel Álvarez, hasta hace poco director comercial de Digi, querias decir LOWI no?