Question 1 [25 marks] Please, refer to paragraphs 3 and 11, and exhibit 2. 1. Estimate the intrinsic value of each of the global telecommunication service segments, namely, Wireline, Wireless, Mobile Satellite Services (MSS) and Fixed Satellite Services (FSS), using the associated forward-looking cumulative average growth rates (CAGR). Assume the CAGR as perpetual growth rate for segments already starting from 1999. Please, show all your workings, and where necessary, explain why the intrinsic value for certain segments cannot be calculated. (15 marks) Hint: use the middle point of discount rate given the range in paragraph 11. 2. After you calculate the individual intrinsic values for each segment, please, calculate the total intrinsic value using the total numbers from exhibit 2. Please, explain why the sum of the intrinsic values for Wireline and Wireless segments is larger than the total intrinsic value for all segments. (10 marks) Hint: use the same assumptions from above question, where necessary.l 1. Based on similar projections, and an assumed private market discount of 15%. to Z'Vs (only 8.5% of Iridium's shares were publicly traded at the time). four out of ve analysts surveyed had buy recommendations For Iridium: Salomon Smith Barney. CS First Boston, Merrill Lynch. and Lehman Bmthers had price targets of $154!}, $61. $453 and $13. respectively using free cash flow discount rates (i.e.. weighted average costs ol'oapital, WAGES.) ranging from 1?? to 25%. Only CIEC Oppenheimer had a hold recommendation. I" John Coates, the bullish analyst at Salmon Smith Barney. wrote: "Iridium presents a clear investment opportunity. Accordingly, we reiterate our buy rating. maintain our Sol] price target. and offer l reasons to buy the stock immediately."II Exhibit 2 Global Telecommunication Service Segments Segment 1999 Size ($ billions) 1990-1999 CAGR % 2000-2004 Est. CAGR % Wireline 609.0 8.0 8.0 Wireless 206.8 14.2 15,0 Satellites MSS 1.9 21.4 60.3 FSS 17.3 31.7 28.0 Total 835.0 10.2 10.1 Source: Adapted from Mckinsey & CompanyThe Global Telecommunications Market 3. In 1999, the $835 billion market for telecommunications services consisted of three segments based on the mode of transmission. Wireline communication systems utilized terrestrial cable and fiber-optic technology to transmit voice and data signals. In contrast, wireless and satellite systems used radio systems and satellites, respectively, for transmission, along with Wireline infrastructure to route calls. Exhibit 2 provides details on the size, historical growth rates, and expected future growth rates of each segment