exc2.htm

Indexed Share Price Performance Gain/(Loss)

Indexed to 100 %

Sector Trading Update

Last Twelve Months

Project Baseball

Source FactSet

ICOG (67%)

• Over the last twelve months,
share price performance for the
key sector players has been
mixed

– CLWR has outperformed due
to positive news regarding
satellite launches and the
likelihood that incremental
funding is available

– SKYT has rallied from its
lows on the basis of
Harbinger’s funding
commitments

– ICOG has underperformed
as its subsidiary, ICO North
America, filed for Chapter 11
in May 2009

SKYT (24%)

TSTR (23%)

Nasdaq (6%)

CLWR (20%)

SKYT Stock Price Performance

Last Twelve Months

Share Price Volume

$ 000s

Project Baseball

Note

1. Premium to current Harbinger Indicative Proposal of $5

2. 52 week high and low are calculated using intra-day prices

9/22/08

SKYT, ICO Global and
Qualcomm sign
agreement enabling
integration of satellite
communications into
mass market cellular
handsets and devices

11/10/08

SKYT
announces 3Q
results

8/10/09

SKYT announces 2Q
results

5/1/09

SKYT announces 1Q
results

2/25/09

SKYT announces 4Q
results

8/24/09

SKYT applies for $37MM
in broadband stimulus
money

5/27/09

SKYT moves satellite
launch contract from Sea
Launch to International
Launch Services (ISL)

1/1/09

SKYT receives Tranche 1
of $150MM from
Harbinger

Harbinger Indicative
Proposal = $5.00

4/1/09

SKYT receives Tranche 2
of $175MM from
Harbinger

7/1/09

SKYT receives Tranche 3
of $75MM from Harbinger

Premium Analysis

Price

Premium

(1)

Current

$3.40

47%

52-Week High

(2)

5.00

52-Week Low

(2)

0.80

525%

LTM Average

2.83

77%

90 Day Average

3.07

63%

30 Day Average

3.22

56%

10 Day Average

3.18

57%

Valuation at Selected Prices

SKYT Valuation Matrix

Project Baseball

Notes

1. Represents pro forma debt including Boeing deferral and remaining Harbinger funding tranche due in January 2010

2. Represents unconsolidated investment in Terrestar of $8MM

3. Assumes bonds trading at $0.62 and Boeing deferral trades at par

At Market

Analysis at Selected Prices

$MM, unless otherwise noted

$3.40

$4.00

$5.00

$10.00

Premium Over:

Current Stock Price

$3.40

18%

47%

194%

52-Week High

5.00

(32%)

(20%)

100%

52-Week Low

0.80

325%

400%

525%

1150%

Avg. Stock Price

—Last

Trading Days

3.22

24%

55%

210%

TSO

138

Options Dilution

Fully Diluted Shares Outstanding

141

143

144

148

Equity Value

$481

$571

$721

$1,479

Plus: Total Debt

(1)

$1,506

Less: Unconsolidated Investments

(2)

(8)

Aggregate Value for Spectrum Valuation

$1,980

$2,070

$2,219

$2,978

Gross Spectrum (U.S. and Canada)

POPs (MM)

300

MHz-POPs

7,500

Value per MHz-POP (Debt at Book)

$0.26

$0.28

$0.30

$0.40

Illustrative Value per MHz-POP (Debt at Market)

(3)

$0.19

$0.21

$0.23

$0.33

Valuation Summary

$ / Share

SKYT Indicative Valuation

12-Month Trading Range (1)

Trading Comparables - Book (2)

MHz-POP: $0.25 - $0.26

Premiums Paid in Precedent Squeeze-Outs (4)

Squeeze-Out of Majority: 20-30% Premium

(By Existing Minority Owner)

$ / Share

MHz-POP (2)

Notes

1. As of 9/21/09 and trading ranges based on intra-day prices

2. Range based on TSTR current (September 2009) and historical (July 2009) MHz-POP using book value of total debt of approximately $1.3Bn, unconsolidated investments of $5MM,
FDSO of 140MM and MHz-POPs of 7,500

3. Range based on TSTR bank trading levels at par and current (September 2009) and historical (July 2009) bond trading levels of $0.77 and $0.58, respectively

4. Reference range based on cash and stock squeeze-out transactions greater than $100MM since 1/1/90; median premiums paid 4 weeks prior to announcement date

5. $0.13 per MHz-POP calculated under contemplated restructuring plan assuming fully accreted value of the convertible debt of $768MM and 6,000 MHz-POP

6. Assumes annual cash flows are fully taxed at 40% and NOLs valued separately at between $29MM and $50MM depending on discounting assumptions

7. Based on 2010 net debt of $1.6Bn and assumes 2010 funding gap of $184MM funded with equity issued at the current share price of $3.40 for PF FDSO of 196MM

Project Baseball

Clearwire Transaction (May 7, 2008) (2)

MHz-POP: $0.24

Current Share
Price (1)

$3.40

$0.20

ICO NA Bankruptcy (May 15, 2009) (2)

Harbinger

Indicative
Proposal

$5.00

$2.13

$0.32

PUBLIC MARKET

PRIVATE MARKET

Trading Comparables - Market (2)(3)

$0.00

MHz-POP: $0.13 (5)

MHz-POP: $0.15 - $0.21

$3.40

$0.24

$0.28

Squeeze-Out of Minority: 10-20% Premium

(By Existing Majority Owner)

Satellite Business Case (6)(7)

WACC: 20-30%, 8-10x 2020 Exit Multiple

DISCOUNTED CASH FLOW

6-Month Trading Range (1)

Public Market Spectrum Comparables

Project Baseball

Notes

1. Total debt pro forma for Harbinger financing tranche to come in January 2010

2. Total debt pro forma for ICO North America bankruptcy filing; remaining debt represents capital lease obligation

3. Assumes all cash is used for satellite construction and launch

4. Assumes bank trading levels at par and bond trading levels of $0.62 (last traded September 2009) and $0.77 (last traded September 2009) for SKYT and TSTR, respectively

Historical Value per MHz-POP

Spectrum Valuation - Side-by-Side Comparison

12/31/06

12/31/07

12/31/08

Current

SKYT

$0.34

$0.25

$0.22

$0.26

TSTR

0.27

0.23

0.22

0.26

ICOG

0.28

0.22

0.18

Average

$0.29

$0.24

$0.21

$0.26

$MM, unless otherwise noted

SkyTerra

(1)

TerreStar

ICO Global

(2)

Share Price (as of 09/21/09)

$3.40

$1.69

$0.75

FDSO

141

140

211

Equity Value

$481

$236

$158

Plus: Total Debt

1,506

1,322

Less: Unconsolidated Investments

(8)

(5)

Aggregate Value for Spectrum Valuation

(3)

$1,980

$1,554

$176

Population (MM)

300

Assumed Usable Spectrum (MHz)

Population (MM) x Spectrum (MHz)

7,500

6,000

Value per MHz-POP (Debt at Book)

$0.26

Illustrative Value per MHz-POP (Debt at Market)

(4)

$0.19

$0.21

Median Premium Paid to 4 Weeks Prior to Announcement

Premiums Paid Analysis

Completed Cash and Stock Squeeze-Outs Greater than $100MM Since 1990

Project Baseball

# of Deals:

182

107

All Deals

Investor Deals (1)

Note

1. Includes all deals where buyer is a non-strategic buyer (i.e., private equity firm or hedge fund)

16%

18%

12%

31%

25%

10%

15%

20%

25%

30%

35%

30%

All Deals

Ownership>50%

DCF Analysis

Based on 2010E - 2019E Cash Flows per Management Plan

Project Baseball

• Key assumptions:

– Cash on hand sufficient to
fund 2009 cash burn

– Funding gap addressed with
equity raise at current share
price

– Cash flows are fully taxed
and NOLs valued separately
and added to DCF valuation

Notes

1. Assumes cash flows are fully taxed at 40%

2. Based on FDSO of 196MM (54MM new shares issued at $3.40 to address funding gap of $184MM), total debt of $1.6Bn and includes value of NOLs which range from $29-50MM
depending on the discounting assumptions

3. Based on 7,500 MHz-POP

Cash Flow Summary

DCF Senstivity Analysis

$MM

2010E

2011E

2012E

2013E

2014E

2015E

2016E

2017E

2018E

2019E

Revenue

$129

$174

$213

$276

$346

$439

$612

$845

$1,063

$1,222

% Growth

253%

35%

23%

29%

26%

27%

39%

38%

26%

15%

EBITDA

148

220

362

557

739

872

% Growth

28%

-18%

105%

61%

49%

64%

54%

33%

18%

Less: Cash Taxes

(1)

(20)

(49)

(105)

(184)

(256)

(311)

Less: Changes in Working Capital

(13)

(4)

(10)

(15)

(20)

(18)

(15)

Less: Capex

(214)

(112)

(8)

(9)

(15)

(11)

(17)

(13)

(14)

Unlevered Free Cash Flow

(184)

103

151

230

337

452

531

Cumulative Unlevered Free Cash Flow

(184)

(155)

(114)

(35)

218

448

785

1,238

1,769

2020 Exit Multiple

Discount Rate

8.0x

9.0x

10.0x

20%

$0.12

$0.89

$1.67

Share Price

(2)

$0.22

$0.24

$0.26

Implied MHz-POP

(3)

25%

$0.00

$0.14

$0.16

$0.17

30%

$0.00

$0.09

$0.10

$0.11

Pro Forma Ownership Analysis

Pro Forma Ownership Implications

Assumes Transaction as Contemplated by Existing MCSA

Project Baseball

Notes

1. Includes all options and warrants using treasury method based on SKYT offer price of $10

2. Includes 1.6 GHz spectrum share issuance of $103MM and $25MM sponsor fee to Harbinger

3. Excludes Inmarsat convertible of $42MM (owned by Harbinger)

4. Includes Harbinger sponsor fee of $25MM, 1.6 GHz spectrum share issuance of $103MM and transaction-related fees of $100MM

5. Includes estimated change of control premiums of $7MM on debt and make-whole of $72MM for convertible debt

6. Represents 10% premium to current share price as of 9/21/09, which is same premium to current on date of original MCSA

• Assumptions under existing
MCSA:

– 100% cash proposal for
Inmarsat at £5.35

– SKYT share price at $10

– New debt raised limited to
$2.4Bn

– Any additional requirements
financed with 3rd party equity

– $ / £ exchange rate of 1.62

• Assumptions under modified
MCSA

– 100% cash proposal for
Inmarsat raised to £6.06 (6)

SKYT Ownership Under Illustrative Modified MCSA

PF'09E EBITDA

$569

EBITDA Mult.

9.0x

Implied AV

$5,121

MHz - POP Value

$0.20

PF MHz - POPs

13,500

Implied Spectrum Value

$2,700

Total Aggregate Value

$7,821

PF Net Debt

(4,041)

PF Equity Value

$3,780

PF Shares

902

PF Share Price

$4.19

Disc. at Cost of Equity 25%

PV of PF Share Price

$3.35

Pro Forma Trading Analysis

Illustrative Calculation

Based on Modified MCSA: £6.06 ISAT Base Price and $5 SKYT Share Price

Project Baseball

Notes

1. Based on Inmarsat ’09E EBITDA of $569MM per selected Wall Street estimates

2. Based on 13,500 MHz-POPs (25 MHz at 300MM POPs for SKYT and 20 MHz at 300MM POPs for Inmarsat)

3. Based on PF net debt of $4.0Bn (existing SKYT total debt of $1.8Bn which reflects fully accreted value of Harbinger debt, and PF Inmarsat net debt of $2.2Bn)

4. Based on a WACC of 25% discounted 12 months and 902MM PF shares based on revised MCSA prices of $5 per share for SKYT and £6.06 per share for ISAT

FSS Comparable Trading

8.0x

8.7x

9.7x

9.0x

7.8x

7.9x

ISAT

Eutelsat

SES

'09E Mult.

'10E Mult.

Inmarsat

Implied

Spectrum Value (MHz-POP)

'09E EBITDA

Agg.

$0.15

$0.20

$0.25

Multiple

Value

(1)

$2,025

$2,700

$3,375

Implied Spectrum Value

(2)

8.0x

$4,552

$6,577

$7,252

$7,927

PF Aggregate Value

2,536

3,211

3,886

PF Equity Value

(3)

$2.25

$2.85

$3.44

PV of PF Share Price

(4)

(55%)

(43%)

(31%)

Prem. / (Disc.) to Harbinger Offer Price of $5

9.0x

$5,121

$7,146

$7,821

$8,496

3,105

3,780

4,455

$2.75

$3.35

$3.95

(45%)

(33%)

(21%)

10.0x

$5,690

$7,715

$8,390

$9,065

3,674

4,349

5,024

$3.26

$3.86

$4.45

(35%)

(23%)

(11%)

Discussion of SkyTerra Alternatives

Project Baseball

SKYT Alternatives

SKYT Implications

Cash Preservation Scenario

Funding runway is projected to be

exhausted in

Q1’11

under a

cash preservation

scenario that

still enables SkyTerra to meet its regulatory milestones

Likely d

oes not provide sufficient time to complete a transaction

with Inmarsat nor

provide for a sale of the company

to another strategic buyer

Unclear whether debt capital markets will be available

to provide spectrum

based financing in the interim

Unclear ability to secure additional equity

funding

absent a transactio

n with

Inmarsat or a carrier agreement

Sale of the Company

Not likely in advance of

end of base case funding runway through the end of

2010

Capital markets environme

nt and carrier strategic focus / need for near

term

spectrum make

a strategic sale unli

kely

Restructuring of SkyTerra’s Liabilities

Equitizing or otherwise restructuring the cash liabilities associated with the senior

secured and senior unsecured indebtedness

does not provide for enough

extension of funding runway

absent a broader soluti

on for the Boeing liabilities

Must include settlement with Boeing for the 2010 payments

A workable restructuring that materially extends SkyTerra’s funding runway must

also include a

substantial reduction of non

satellite operating expenses

Limited potenti

for an “all

in” restructuring of the secured and unsecured notes

and Boeing liabilities, combined with cost reductions, to provide for funding

runway through the end of 2011

Certain o

ptions to provide for extending funding runway beyond the end of 2011

(absent incremental debt or equity funding)

may have adverse impact on ability to

meet

required regulatory milestones

Cash Forecast at SkyTerra

Based on Management Projections and Assumes Cash Preservation Scenario

Project Baseball

• Under a cash preservation
scenario, SKYT could extend
the funding runway to Q1’11

– Scenario assumes significant
cost reductions in all areas
outside of satellite related
programs while still achieving
regulatory milestones

• SKYT has significant cash
obligations starting in Q4’10

• In 2010 and 2011, cash interest
and Boeing payments account
for ~$348MM or ~53% of
SKYT’s cash obligations

SKYT Cash Forecast

2009E

2010E

2011E

Annual

Q1/10

Q2/10

Q3/10

Q4/10

Annual

Q1/11

Q2/11

Q3/11

Q4/11

Annual

Sources & Uses

Revenue

$40

$10

$38

$31

Harbinger Transaction

Total Sources

440

110

138

Operating Expenses

(221)

(75)

(38)

(52)

(16)

(181)

(80)

(32)

(12)

(14)

(138)

Cash Interest

(53)

(52)

(60)

(52)

(165)

Boeing Payments

Total Uses

($303)

($87)

($49)

($28)

($192)

($356)

($82)

($86)

($74)

($68)

($310)

Cash Position Summary

Beginning Cash Balance

$112

$249

$272

$233

$215

$249

$31

($43)

($121)

($187)

$31

Change in Cash

Ending Cash Balance

$249

$272

$233

$215

$31

($43)

($121)

($187)

($248)

Spectrum Holdings (U.S. Carriers)

Bn MHz-POPs

Sale of Company: Potential Strategic Interest

27.2

29.0

2.9

> 42.0

15.4

3.3

Source SNL Financial Database

Notes

1. Includes spectrum acquired from Aloha Partners

2. Represents T-Mobile USA spectrum ownership

(2)

• Carriers focused on continued
rollout of AWS and 700 MHz
spectrum to improve 2.5G/3G
network coverage

– Broad LTE rollout not
forecast until 2011/2012 or
beyond

– Unclear short-or-medium
term need for additional
spectrum from ATC players

Project Baseball

Near

Term Supply of Spectrum

Block

Size

(MHz)

Source

Band

FCC

AWS

Block

FCC

AWS

Block

FCC

700MHz

Block

SpectrumCo

AWS

MSS

ICO/McCaw

MSS

TerreS

tar/

Ergen

2.8

18.7

24.5

0.1

8.5

4.5

Existing Spectrum

700 MHz Spectrum

Limited Equity Recovery in a SkyTerra Liquidation

Project Baseball

Notes

1. Based on fully accreted value of debt claims

2. Based on 7,500MM MHz-POP (300MM POPs and 25 MHz)

3. Based on current share price of SKYT as of 9/21/09 and FDSO of 141MM

4. Based on on FDSO of 141MM

Illustrative Waterfall Recovery Analysis

Maturity

Claim

$0.05

$0.10

$0.15

$0.20

$0.25

$MM

Date

Amount

(1)

$375

$750

$1,125

$1,500

$1,875

Implied AV

(2)

Boeing Claim

$120

14.0% Sr Sec Disc Notes

4/1/2013

Senior Secured Creditors

$870

43%

86%

100%

Recovery Rate

16.5% Sr Unsec Notes

5/1/2013

280

18.0% Sr Unsec Notes

7/1/2013

Senior Unsecured Creditors

$944

27%

67%

100%

Recovery Rate

Equity Holders

(3)

$481

13%

Recovery Rate

Implied EV Per Share

(4)

$0.00

$0.43

Precedent U.S. Spectrum Prices

ADDITIONAL INFORMATION

Notes

1. Represents auction completion date

2. The FCC exchanged the PCS G Block for Nextel’s lower 800 MHz SMR licenses

3. NextWave sold its spectrum to T-Mobile USA, MetroPCS, ACS Wireless and Atlantic Wireless

Project Baseball

Historical $/MHz-POP Auction Pricing

Spectrum Prices

($)

Source New America Foundation: “The Citizen’s Guide to the Airwaves”; FCC

Bands:

700 MHz

1.9 - 2.0 GHz

1.9 GHz

1.9 - 2.0 GHz

1.7 - 2.1 GHz

1.9 - 2.0 GHz

Date (1):

1/26/01

3/18/08

2/15/05

9/18/06

3/13/95

1/14/97

N/A (2)

2320 - 2345 MHz

12.2 - 17.5 GHz

27.5 - 31.3 GHz

38.6 - 40.0 GHz

5/12/99

5/8/00

4/2/97

1/25/96

Precedent Spectrum
Transactions

Bands:

1.7-2.1 GHz

Date:

7/25/08

700 MHz

10/9/07

(3)

0.54

0.32

0.24

0.15

0.48

0.65

1.29

1.66

2.10

2.77

4.00

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Auction 15

(Satellite Radio)

Auction 35

(PCS C & F)

Auction 8

(Satellite TV)

G Block

Auction 73 (700

MHz)

Auction 58

(Broadband

PCS)

Auction 66

(AWS)

Auction 4 (PCS

A & B)

Auction 11

(PCS D, E, F)

Auction 23

(LMDS)

Auction 30

(39 GHz)

$0.25

$1.06

$0.00

$0.50

$1.00

$1.50

AT&T / Aloha

NextWave /

Various

ADDITIONAL INFORMATION

Inmarsat Stock Price Performance

Last Twelve Months

Share Price

Volume

Project Baseball

1. Premium to £5.35 MCSA Price

7/2/09

Inmarsat completes investment in
SkyWave Mobile Communications

4/24/09

Inmarsat recommends
final dividend of $0.1820
per ordinary share

7/16/09

8/10/2009

Inmarsat reports 2009
interim results

9/11/2009

Premium Analysis

Research Price Targets

9/22/08

Hart-Scott-Rodino waiting period
associated with the SkyTerra / Harbinger
offer expired without any action from the
U.S. Department of Justice. No second
request was issued

Premium to

(1)

BAS-ML (9/10/09)

27%

GS (8/27/09)

7.14

33%

CS (8/26/09)

6.00

12%

JPM (7/31/09)

5.60

UBS (7/3/09)

6.35

19%

(1)

Current

52-Week High

6.14

15%

52-Week Low

3.00

(44%)

LTM Average

4.73

(12%)

90 Day Average

5.32

(1%)

30 Day Average

5.29

(1%)

10 Day Average

5.49

3.00

3.50

4.00

4.50

5.00

5.50

6.00

9/21/08

11/21/08

1/21/09

3/21/09

5/21/09

7/21/09

9/21/09

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Volume

Price

Credit Markets, While Improving, Remain Challenged

ADDITIONAL INFORMATION

Yield Performance

Yield

Source Yield Book, Advantage Data

Source Advantage Data, Yield Book

Notes

1. Index stats since December 2001

2. Current as of September 2009

• Although the high yield market
has recently opened for certain
“B” and “CCC” names, the
focus has been on known and
seasoned issuers

Project Baseball

16-Mar-08

Bear Stearns sold to
JPMorgan

15-Sep-08

Lehman Brothers files
for bankruptcy

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

May-09

Jun-09

Jul-09

Sep-09

BB Index

B Index

CCC Index

Telecom

Yield Stats

(1)

Issue

Current

(2)

High

Low

Avg.

BB Index

8.36

14.61

7.53

9.98

B Index

10.61

20.93

10.16

13.83

CCC Index

15.49

29.49

13.42

19.61

Telecom

15.53

8.53

11.10