-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LRhoT53GkIS0HvwrCusTmQBQLoPDiY/bMyvWQibmGuRzMCcv7dtfesvNblRvnEd2 7PQGWpUtrM+fqcKqlqiBkg== 0000950123-95-001076.txt : 19950424 0000950123-95-001076.hdr.sgml : 19950424 ACCESSION NUMBER: 0000950123-95-001076 CONFORMED SUBMISSION TYPE: DEF13E3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19950421 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CONTEL CELLULAR INC CENTRAL INDEX KEY: 0000822419 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 581413513 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF13E3 SEC ACT: 1934 Act SEC FILE NUMBER: 005-40226 FILM NUMBER: 95530073 BUSINESS ADDRESS: STREET 1: 245 PERIMETER CENTER PKWY CITY: ATLANTA STATE: GA ZIP: 30346 BUSINESS PHONE: 4048043400 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GTE CORP CENTRAL INDEX KEY: 0000040858 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 131678633 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF13E3 BUSINESS ADDRESS: STREET 1: ONE STAMFORD FORUM CITY: STAMFORD STATE: CT ZIP: 06904 BUSINESS PHONE: 2039652000 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL TELEPHONE & ELECTRONICS CORP DATE OF NAME CHANGE: 19820816 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN INVESTMENT PROGRAMS COMMON STOC DATE OF NAME CHANGE: 19700209 DEF13E3 1 AMENDMENT NO. 3 TO SCHEDULE 13E-3 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 13E-3 (AMENDMENT NO. 3) RULE 13E-3 TRANSACTION STATEMENT (Pursuant to Section 13(e) of the Securities Exchange Act of 1934) CONTEL CELLULAR INC. (Name of Issuer) GTE CORPORATION CONTEL CORPORATION CONTEL CELLULAR ACQUISITION CORPORATION CONTEL CELLULAR INC. (Name of Person(s) Filing Statement) CLASS A COMMON STOCK, $1.00 PAR VALUE (Title of Class of Securities) ------------------------ 210904108 (CUSIP Number of Class of Securities) MARIANNE DROST, ESQ. LAURA E. BINION, ESQ. GTE CORPORATION CONTEL CELLULAR INC. ONE STAMFORD FORUM 245 PERIMETER CENTER PARKWAY STAMFORD, CONNECTICUT 06904 ATLANTA, GEORGIA 30346 (203) 965-2000 (404) 804-3400
(Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) Copies to: JEFFREY J. ROSEN, ESQ. O'MELVENY & MYERS 555 13TH STREET, N.W., SUITE 500 WEST WASHINGTON, D.C. 20004-1109 (202) 383-5300 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 This Amendment No. 3 amends the Rule 13e-3 Transaction Statement (the "Statement") filed jointly on January 30, 1995 by GTE Corporation, a New York corporation ("GTE"), Contel Corporation, a Delaware corporation that has adopted a plan of liquidation and is a wholly owned subsidiary of GTE ("Contel"), Contel Cellular Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Contel ("CCI Acquisition"), and Contel Cellular Inc., a Delaware corporation (the "Company"), which relates to the proposed merger (the "Merger") of CCI Acquisition with and into the Company. In the Merger, (i) each outstanding share of Class A Common Stock, par value $1.00 per share, of the Company (each a "Class A Share") (other than Class A Shares as to which appraisal rights have been properly exercised under the General Corporation Law of the State of Delaware) will be converted into the right to receive $25.50 in cash, without interest, subject to applicable back-up withholding taxes, (ii) each Class A Share held by the Company and each outstanding share of the common stock of CCI Acquisition will be cancelled, and no payment will be made with respect thereto and (iii) each outstanding share of Class B Common Stock, par value $1.00 per share, of the Company will remain outstanding. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Statement. Information contained in the Statement is hereby amended by the filing of a definitive Information Statement on Schedule 14C as a new Exhibit (d)(6) to the Statement (the "Definitive Information Statement"). The information contained in the Definitive Information Statement restates the information contained in the Statement that was incorporated from the preliminary Information Statements filed as Exhibits (d)(1), (d)(4) and (d)(5) to the Statement. The following Cross Reference Sheet shows the location in the Definitive Information Statement of items required by Schedule 13E-3. Information contained in such Definitive Information Statement is incorporated herein by this reference, as indicated in the Cross Reference Sheet. CROSS REFERENCE SHEET Item 1. Issuer and Class of Security Subject to the Transaction. (a) Cover Page. (b) Cover Page; "MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY". (c) "MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY". (d) "MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY". (e) Not applicable. (f) Not applicable. Item 2. Identity and Background. This Schedule 13E-3 is being filed jointly by the Company, as the issuer of the class of equity securities which is the subject of the Rule 13e-3 transaction, and GTE, Contel and CCI Acquisition, as affiliates of the Company as defined in Rule 13e-3(a)(1). (a) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL CELLULAR INC." (b) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL CELLULAR INC." 1 3 (c) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL CELLULAR INC." (d) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL CELLULAR INC." (e) Not applicable. (f) Not applicable. (g) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL CELLULAR INC." Item 3. Past Contacts, Transactions or Negotiations. (a)(1) "RELATED PARTY TRANSACTIONS -- Arrangements and Transactions with Contel and GTE". (a)(2) "SPECIAL FACTORS -- Background of the Merger"; "BUSINESS OF THE COMPANY -- The Company's Cellular Operations -- Cellular Exchange Transaction"; "RELATED PARTY TRANSACTIONS -- Arrangements and Transactions with Contel and GTE -- Cellular Exchange Transaction". (b) Not applicable. Item 4. Terms of the Transaction. (a) Cover Page, "SPECIAL FACTORS -- Introduction; The Merger"; "THE MERGER AGREE-MENT". (b) "RELATED PARTY TRANSACTIONS -- Payments to Optionholders"; "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Directors and Executive Officers of the Company". Item 5. Plans or Proposals of the Issuer or Affiliate. (a) "SPECIAL FACTORS -- Background of the Merger"; "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger -- Plans for the Company". (b) Not applicable. (c) "RELATED PARTY TRANSACTIONS -- Transition Arrangements". (d) None. (e) "SPECIAL FACTORS -- Background of the Merger"; "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger -- Plans for the Company". (f) "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger -- Deregistration and Delisting". (g) "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger -- Deregistration and Delisting". Item 6. Source and Amount of Funds or Other Consideration. (a) "SPECIAL FACTORS -- Merger Consideration". 2 4 (b) It is estimated that the expenses incurred in connection with the Merger through the closing of the Merger will be approximately as set forth below (all of which are payable by GTE or the Company): Investment banking fees and expenses.......................... $1,850,000.00 Legal fees and expenses....................................... $ 705,000.00 Depositary fees and expenses.................................. $ 12,000.00 Filing fees................................................... $ 50,851.86 Printing and mailing fees..................................... $ 290,000.00 Miscellaneous................................................. $ 115,000.00 ------------- $3,022,851.86 ============
(c) "SPECIAL FACTORS -- Merger Consideration". (d) Not applicable. Item 7. Purpose(s), Alternatives, Reasons and Effects. (a) "SPECIAL FACTORS -- Background of the Merger"; "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger -- Plans for the Company". (b) "SPECIAL FACTORS -- Background of the Merger". (c) "SPECIAL FACTORS -- Background of the Merger -- GTE's Determination to Proceed and Discussions Regarding Structure". (d) "SPECIAL FACTORS -- Introduction; The Merger"; "SPECIAL FACTORS -- Background of the Merger -- Purpose of the Merger"; "SPECIAL FACTORS -- Merger Consideration"; "SPECIAL FACTORS -- Accounting Treatment of the Merger"; "SPECIAL FACTORS -- Certain Federal Income Tax Consequences of the Merger"; "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger". Item 8. Fairness of the Transaction. (a) "SPECIAL FACTORS -- Determination of the Special Committee and the Board; Fairness of the Merger"; "SPECIAL FACTORS -- Determination of the Fairness of the Merger by GTE, Contel and CCI Acquisition". (b) "SPECIAL FACTORS -- Determination of the Special Committee and the Board; Fairness of the Merger"; "SPECIAL FACTORS -- Opinion of Financial Advisor to the Special Committee"; "SPECIAL FACTORS -- Determination of the Fairness of the Merger by GTE, Contel and CCI Acquisition". (c) Cover Page; "SPECIAL FACTORS -- Written Consent"; "SPECIAL FACTORS -- Determination of the Special Committee and the Board; Fairness of the Merger". (d) "SPECIAL FACTORS -- Background of the Merger -- Special Committee; Negotiations with GTE Financial Advisors"; "SPECIAL FACTORS -- Determination of the Special Committee and the Board; Fairness of the Merger". (e) "SPECIAL FACTORS -- Determination of the Special Committee and the Board; Fairness of the Merger". (f) Not applicable. Item 9. Reports, Opinions, Appraisals and Certain Negotiations. (a) "SPECIAL FACTORS -- Determination of the Special Committee and the Board; Fairness of the Merger"; "SPECIAL FACTORS -- Opinion of Financial Advisor to the Special Committee"; "SPECIAL FACTORS -- Opinions of Financial Advisors to GTE". 3 5 (b) "SPECIAL FACTORS -- Background of the Merger -- Special Committee; Negotiations with GTE Financial Advisors"; "SPECIAL FACTORS -- Opinion of Financial Advisor to the Special Committee"; "SPECIAL FACTORS -- Opinions of Financial Advisors to GTE"; "RELATED PARTY TRANSACTIONS -- Relationship between GTE Director and PaineWebber". (c) "SPECIAL FACTORS -- Opinion of Financial Advisor to the Special Committee"; "SPECIAL FACTORS -- Opinions of Financial Advisors to GTE". Item 10. Interest in Securities of the Issuer. (a) "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Directors and Executive Officers of the Company"; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Directors and Executive Officers of GTE, Contel and CCI Acquisition". (b) Not applicable. Item 11. Contracts, Arrangements or Understandings With Respect to the Issuer's Securities. "THE MERGER AGREEMENT"; "RELATED PARTY TRANSACTIONS -- Payments to Optionholders". Item 12. Present Intention and Recommendation of Certain Persons With Regard to the Transaction. (a) "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Directors and Executive Officers of the Company". (b) "SPECIAL FACTORS -- Determination of the Special Committee and the Board; Fairness of the Merger". Item 13. Other Provisions of the Transaction. (a) "DISSENTERS' RIGHTS OF APPRAISAL". (b) Not applicable. (c) Not applicable. Item 14. Financial Information. (a) "SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY"; "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE". (b) Not applicable. Item 15. Persons and Assets Employed, Retained or Utilized. (a) Not applicable. (b) Not applicable. Item 16. Additional Information. (a) "PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY". Item 17. Material To Be Filed As Exhibits. (a) Not applicable. *(b)(1) Opinion of Lazard Freres & Co. dated December 30, 1994 included as Exhibit B to the Second Revised Preliminary Information Statement filed as Exhibit (d)(5) hereto. 4 6 *(b)(2) Contel Cellular Inc. Valuation Analysis prepared by Lazard Freres & Co. dated December 22, 1994. *(b)(3) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated dated December 27, 1994 included as Exhibit C-1 to the Preliminary Information Statement filed as Exhibit (d)(1) hereto. *(b)(4) Opinion of PaineWebber Incorporated dated December 27, 1994 included as Exhibit C-2 to the Preliminary Information Statement filed as Exhibit (d)(1) hereto. *(b)(5) Contel Cellular Inc. Preliminary Valuation Analysis prepared by Lazard Freres & Co. dated November 7, 1994. (b)(6) Contel Cellular Inc. Draft Preliminary Analysis prepared by the GTE Financial Advisors. *(c)(1) Agreement and Plan of Merger dated as of December 27, 1994, as amended, included as Exhibit A to the Second Revised Preliminary Information Statement filed as Exhibit (d)(5) hereto. (c)(2) Letter Agreement dated April 21, 1995 issued by the Company to the holders of Options to acquire Class A Shares. *(d)(1) Preliminary Information Statement on Schedule 14C relating to the merger of Contel Cellular Acquisition Corporation with and into Contel Cellular Inc. (d)(2) Letter of Transmittal. (d)(3) Notice of Class Action to be sent to Class A Stockholders. *(d)(4) Revised Preliminary Information Statement on Schedule 14C relating to the merger of Contel Cellular Acquisition Corporation with and into Contel Cellular Inc. *(d)(5) Second Revised Preliminary Information Statement on Schedule 14C relating to the merger of Contel Cellular Acquisition Corporation with and into Contel Cellular Inc. (d)(6) Definitive Information Statement on Schedule 14C relating to the merger of Contel Cellular Acquisition Corporation with and into Contel Cellular Inc. *(e)(1) Delaware General Corporation Law Section 262 included as Exhibit D to the Second Revised Preliminary Information Statement filed as Exhibit (d)(5) hereto. (f) Not applicable. - --------------- * Previously filed. 5 7 SIGNATURE After due inquiry and to the best of the knowledge and belief of the undersigned, the undersigned certify that the information set forth in this statement is true, complete and correct. Date: April 21, 1995 GTE CORPORATION By: /s/ MARIANNE DROST ---------------------- Title: Secretary CONTEL CORPORATION By: /s/ MARIANNE DROST ------------------------ Title: Secretary CONTEL CELLULAR ACQUISITION CORPORATION By: /s/ MARIANNE DROST ----------------------- Title: Secretary CONTEL CELLULAR INC. By: /s/ THEODORE J. CARRIER --------------------------- Title: Treasurer and Chief Financial Officer 6 8 EXHIBIT INDEX -------------- Exhibit No. Description ------ ----------- (a) Not applicable. *(b)(1) Opinion of Lazard Freres & Co. dated December 30, 1994 included as Exhibit B to the Second Revised Preliminary Information Statement filed as Exhibit (d)(5) hereto. *(b)(2) Contel Cellular Inc. Valuation Analysis prepared by Lazard Freres & Co. dated December 22, 1994. *(b)(3) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated dated December 27, 1994 included as Exhibit C-1 to the Preliminary Information Statement filed as Exhibit (d)(1) hereto. *(b)(4) Opinion of PaineWebber Incorporated dated December 27, 1994 included as Exhibit C-2 to the Preliminary Information Statement filed as Exhibit (d)(1) hereto. *(b)(5) Contel Cellular Inc. Preliminary Valuation Analysis prepared by Lazard Freres & Co. dated November 7, 1994. (b)(6) Contel Cellular Inc. Draft Preliminary Analysis prepared by the GTE Financial Advisors. *(c)(1) Agreement and Plan of Merger dated as of December 27, 1994, as amended, included as Exhibit A to the Second Revised Preliminary Information Statement filed as Exhibit (d)(5) hereto. (c)(2) Letter Agreement dated April 21, 1995 issued by the Company to the holders of Options to acquire Class A Shares. *(d)(1) Preliminary Information Statement on Schedule 14C relating to the merger of Contel Cellular Acquisition Corporation with and into Contel Cellular Inc. (d)(2) Letter of Transmittal. (d)(3) Notice of Class Action to be sent to Class A Stockholders. *(d)(4) Revised Preliminary Information Statement on Schedule 14C relating to the merger of Contel Cellular Acquisition Corporation with and into Contel Cellular Inc. *(d)(5) Second Revised Preliminary Information Statement on Schedule 14C relating to the merger of Contel Cellular Acquisition Corporation with and into Contel Cellular Inc. (d)(6) Definitive Information Statement on Schedule 14C relating to the merger of Contel Cellular Acquisition Corporation with and into Contel Cellular Inc. *(e)(1) Delaware General Corporation Law Section 262 included as Exhibit D to the Second Revised Preliminary Information Statement filed as Exhibit (d)(5) hereto. (f) Not applicable. - --------------- * Previously filed. EX-99.B6 2 PREL. ANALYSIS PREPARED BY THE GTE FINANCIAL ADV. 1 Project Forest Background Analysis - -------------------------------------------------- 1) DCF Valuation 2) POP-based Valuation 3) Summary Data Points in Determining Private Market Value 4) Relevant Issues Relating to Acorn Valuation 5) Demographics of Acorn Markets 6) Comparable Analysis a) Public Comparables b) Acquisition Comparables 7) Premium in Minority Squeeze-Outs 8) Stock Price Performance 2 DRAFT CONTEL CELLULAR INC. DISCOUNTED CASH FLOW ANALYSIS TO 1/1/95(a) - -------------------------------------------------------------------------------- (dollars in millions except per share data and as otherwise stated)
Projected ------------------------------------------------------------- Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 1995 1996 1997 1998 1999 -------- ------- -------- -------- -------- CASH FLOWS EBITDA (Consolidated Ops.) & Other Income / (Expense) $652.9 Net Income Attributable to Minority Interest (b) 16.4 Equity in Uncon. Subs (b)(c) 25.0 FREE CASH FLOW ($99.6) $122.1 $254.1 $336.9 $399.3 ======== ======= ======== ======== ======= Present Value of Terminal Value NPV of as a Multiple of 1999 EBITDA Discount Free Cash Flow ------------------------------- Rate 1995-1999 10.0x 11.0x 12.0x -------- -------------- -------- -------- -------- 12.0% $666.6 $3,704.5 $4,074.9 $4,445.4 13.0% 645.1 3,543.5 3,897.8 4,252.1 14.0% 624.5 3,390.7 3,729.8 4,068.9 15.0% 604.7 3,245.9 3,570.4 3,895.0 Incremental Present Value Adjustment for Equity Investments & Minority Interest (Net) Discount ------------------------------------------- Rate 18.0x 20.0x 22.0x -------- ------- ------- ------- 12.0% $88.0 $97.8 $107.6 13.0% 84.2 93.5 102.9 14.0% 80.6 89.5 98.5 15.0% 77.1 85.7 94.3 Total Firm Value Discount Mexican --------------------------------------- Rate Properties(e) 10.0x/18.0x 11.0x/20.0x 12.0x/22.0x -------- ------------- ----------- ----------- ----------- 12.0% $20.0 $4,479.1 $4,859.4 $5,239.6 13.0% 20.0 4,292.8 4,656.5 5,020.2 14.0% 20.0 4,115.8 4,463.8 4,811.9 15.0% 20.0 3,947.7 4,280.8 4,614.0 Implied Equity Value Discount Total ---------------------------------------- Rate Debt(d) 10.0x/18.0x 11.0x/20.0x 12.0x/22.0x -------- -------- ----------- ----------- ----------- 12.0% $2,114.5 $2,364.6 $2,744.9 $3,125.1 13.0% 2,114.5 2,178.3 2,542.0 2,905.7 14.0% 2,114.5 2,001.3 2,349.3 2,697.4 15.0% 2,114.5 1,833.2 2,166.3 2,499.5 --------------------------------------- Implied Equity Value per Share Discount --------------------------------------- Rate 10.0x/18.0x 11.0x/20.0x 12.0x/22.0x -------- ----------- ----------- ----------- 12.0% $23.66 $27.46 $31.27 13.0% 21.79 25.43 29.07 14.0% 20.02 23.51 26.99 15.0% 18.34 21.67 25.01 ---------------------------------------
(a) Based on a mid-year discounting of Free Cash Flow and year-end 1999 discounting of Exit Value. (b) Taxed at assumed 40% rate. (c) Discounted by 30% due to minority position. (d) Estimated balance at 1/1/95. (Current net debt balance as of 6/30/94 is $2,021.9 mm.) (e) Estimated; Represents $48 per net POP. Page 1 of 8 3 DRAFT CONTEL CELLULAR INC. DISCOUNTED CASH FLOW ANALYSIS / ASSUMPTIONS - -------------------------------------------------------------------------------- (dollars in millions except per share data and as otherwise stated)
---------------------------------- Valuation Assumptions ---------------------------------- Total Debt (1/1/95) $2,114.5 Shares Outstanding (mm) 99.95 POP Growth Rate: 1.5% Tax Rate: 40.0% ---------------------------------- Historical Outlook ---------------- ------- Dec 31 Dec 31 Dec 31 1992 1993 1994 ------ ------ ------- OPERATING ASSUMPTIONS EBITDA Margin 17.4% 23.0% 28.7% Consolidated Subscribers (thousands) 328 521 775 Consolidated POPs (mm) 16.2 16.7 16.6 Penetration 2.0% 3.1% 4.7% Avg MOU's / Customer / Month -- 129 136 Svc Rev / Sub / Month $78.4 $71.7 $68.7 Churn 2.3% 2.0% 2.0% Cost per Gross Add $430.4 $432.2 $375.9 INCOME STATEMENT Total Revenues (Incl. Equip Revenue & Data) 287.0 374.0 550.8 EBITDA 49.8 86.1 158.2 Depreciation & Amortization (95.7) (108.2) (126.3) ------ ------ ------ EBIT (45.8) (22.1) 32.0 Minority Interest (pre-tax) 2.4 0.8 (6.5) Other Income / (Expense) 56.0 44.2 101.6 Equity in Income of Uncnsl. Subs. (pre-tax) 29.0 37.4 50.9 Interest Expense (148.1) (162.9) (178.1) ------ ------ ------ Pre-Tax Income (106.5) (102.6) (0.0) Income Tax (33.5) (27.7) 11.9 ------ ------ ------ Net Income ($73.1) ($74.9) ($11.9) FREE CASH FLOW EBITDA (Consolidated Ops.) -- 86.1 158.2 Other Income / (Expense) -- 44.2 101.6 Dividend Related to Minority Interest -- 0.0 (1.2) Cash Dividends from Uncnsl. Subs., net -- 1.9 22.1 Income Tax Expense (Net of Intr. Exp. Ded.) -- (37.4) (83.1) Deferred Income Taxes -- 31.6 30.0 Capital Expenditures -- (152.1) (246.2) Purchase of Cellular Interests -- 0.0 (125.8) Working Capital -- 87.7 (13.8) Other Sources / (Uses) -- 7.4 13.9 ---------------------------------------------------------------------------- Free Cash Flow -- $69.4 ($144.1) ----------------------------------------------------------------------------
4
Terminal Valuation Calculation (1999) -------------------------------------------------------- EBITDA (Consolidated Ops.) (a) $652.9 Net Income Attributable to Minority Interest (b) 16.4 Equity in Uncon. Subs (b) 35.7 Discount for Uncon. Subs 30.0% (10.7) -------------------------------------------------------- Projected ---------------------------------------------------- Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 1995 1996 1997 1998 1999 ------ ------ ------ ------ ------- OPERATING ASSUMPTIONS EBITDA Margin 37.2% 41.6% 44.5% 44.5% 48.7% Consolidated Subscribers (thousands) 1,057 1,345 1,612 1,898 2,089 Consolidated POPs (mm) 16.9 17.1 17.4 17.6 17.9 Penetration 6.3% 7.9% 9.3% 10.8% 11.7% Avg MOU's / Customer / Month 124 116 118 124 124 Svc Rev / Sub/ Month $63.1 $57.3 $53.9 $51.4 $50.1 Churn 2.1% 1.9% 2.0% 2.3% 2.4% Cost per Gross Add $347.2 $346.5 $335.0 $324.8 $319.4 INCOME STATEMENT Total Revenues (Incl. Equip Revenue & Data) 720.3 882.4 1,043.3 1,212.2 1,351.5 EBITDA 268.2 366.7 464.0 539.8 658.4 Depreciation & Amortization (152.4) (181.0) (201.4) (215.1) (227.6) ------ ------ ------- ------- ------- EBIT 115.9 185.7 262.6 324.7 430.8 Minority Interest (pre-tax) (9.1) (13.2) (17.6) (21.1) (27.3) Other Income / (Expense) (5.2) (5.2) (5.2) (5.4) (5.6) Equity in Income of Uncnsl. Subs. (pre-tax) 58.1 58.4 58.8 59.1 59.5 Interest Expense (204.6) (212.5) (217.1) (206.6) (189.9) ------ ------ ------- ------- ------- Pre-Tax Income (44.9) 13.2 81.5 150.8 267.6 Income Tax (8.6) 14.0 41.6 69.3 114.5 ------ ------ ------- ------- ------- Net Income ($36.3) ($0.7) $39.9 $81.5 $153.1 FREE CASH FLOW EBITDA (Consolidated Ops.) 268.2 366.7 464.0 539.8 658.4 Other Income / (Expense) (5.2) (5.2) (5.2) (5.4) (5.6) Dividend Related to Minority Interest (3.0) (4.0) (5.0) (7.0) (10.0) Cash Dividends from Uncnsl. Subs., net 20.1 47.7 50.0 58.1 53.5 Income Tax Expense (Net of Intr. Exp. Ded.) (73.3) (98.9) (128.4) (151.9) (190.4) Deferred Income Taxes 40.9 44.4 46.8 48.2 49.7 Capital Expenditures (297.6) (220.2) (157.6) (135.5) (145.0) Purchase of Cellular Interests (46.0) 0.0 0.0 0.0 0.0 Working Capital (28.0) (31.0) (37.7) (43.2) (49.6) Other Sources / (Uses) 24.2 22.6 27.1 33.9 38.3 ----------------------------------------------------------------------------------------------------- Free Cash Flow ($99.6) $122.1 $254.1 $336.9 $399.3 -----------------------------------------------------------------------------------------------------
(a) Includes Other Income / (Expense). (b) Based on a 40.0% tax rate. Page 2 of 8 5 DRAFT CONTEL CELLULAR INC. DETAILS REGARDING REVENUE PROJECTIONS - -------------------------------------------------------------------------------- (dollars in millions except per share data and as otherwise stated)
Historical Outlook ------------------ ------- Dec 31 Dec 31 Dec 31 1992 1993 1994 ------ ------ ------- REVENUE Access Revenue (Incl Promo Revenues) $85.6 $110.7 $178.2 Airtime Revenue (Incl Promo Revenues) 106.8 145.7 210.4 Roaming Revenue 45.2 59.9 77.5 Data Revenue 0.0 0.0 0.0 Less: Promotions Revenues 0.0 24.9 28.1 Other Revenue 23.3 27.8 46.4 Total Revenues (Excl. Equip & Promotions Revenue) (a) $260.9 $369.0 $540.7 Equipment Sales & Rental 26.1 29.9 38.2 Add-back of Promotions Revenues 0.0 (24.9) (28.1) Total Revenues (Incl. Equip & Promo Revenue) (b) $287.0 $374.0 $550.8 AS A % OF TOTAL REVENUES Access Revenue (Incl Promos) 29.8% 29.6% 32.4% Airtime Revenue (Incl Promos) 37.2% 39.0% 38.2% Roaming Revenue 15.8% 16.0% 14.1% Data Revenue 0.0% 0.0% 0.0% Equipment Sales & Rental 9.1% 8.0% 6.9% Promotions Revenues 0.0% -6.7% -5.1% Other Revenue 8.1% 7.4% 8.4% ------ ------ ------ Total Revenues (Incl. Equip Revenue) 100.0% 93.3% 94.9% REVENUE GROWTH RATES Access Revenue (Incl Promos) -- 29.4% 61.0% Airtime Revenue (Incl Promos) -- 36.4% 44.4% Roaming Revenue -- 32.4% 29.4% Data Revenue -- -- -- Equipment Sales -- 14.5% 27.7% Promotions Revenues -- -- NM Other Revenue -- 19.4% 66.7% Total Revenues (Incl. Equip Revenue) -- 30.3% 47.3% REVENUES / SUBSCRIBER / MONTH Access Cost / Avg Customer / Month -- $26.01 $26.25 Airtime Rate per Minute of Use -- $0.26 $0.22 Composite Access & Airtime Rate per Minute of Use -- $0.42 $0.39 - -------------------------------------------------------------------------------------------------- OPERATING MARGINS Gross Margin 42.4% 45.9% 47.7% EBITDA / Total Revenues 17.4% 23.0% 28.7% EBIT / Total Revenues NM NM 5.8% Net Income / Total Revenues NM NM NM - --------------------------------------------------------------------------------------------------
6
Projected ------------------------------------------------------------ Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 1995 1996 1997 1998 1999 ----------------------------------------------------------- REVENUE Access Revenue (Incl Promo Revenues) $254.4 $336.0 $412.7 $488.5 $552.9 Airtime Revenue (Incl Promo Revenues) 269.2 319.9 353.9 386.4 423.3 Roaming Revenue 85.6 91.2 94.1 97.2 98.6 Data Revenue 1.8 11.6 31.7 52.2 70.5 Less: Promotions Revenues 29.2 31.6 33.4 39.2 36.8 Other Revenue 68.1 72.1 92.1 115.8 136.8 Total Revenues (Excl. Equip & Promotions Revenue) (a) $708.3 $862.4 $1,017.8 $1,179.4 $1,319.0 Equipment Sales & Rental 41.2 51.6 58.9 72.1 69.3 Add-back of Promotions Revenues (29.2) (31.6) (33.4) (39.2) (36.8) Total Revenues (Incl. Equip & Promo Revenue) (b) $720.3 $882.4 $1,043.3 $1,212.2 $1,351.5 AS A % OF TOTAL REVENUES Access Revenue (Incl Promos) 35.3% 38.1% 39.6% 40.3% 40.9% Airtime Revenue (Incl Promos) 37.4% 36.2% 33.9% 31.9% 31.3% Roaming Revenue 11.9% 10.3% 9.0% 8.0% 7.3% Data Revenue 0.3% 1.3% 3.0% 4.3% 5.2% Equipment Sales & Rental 5.7% 5.8% 5.6% 5.9% 5.1% Promotions Revenues -4.1% -3.6% -3.2% -3.2% -2.7% Other Revenue 9.5% 8.2% 8.8% 9.5% 10.1% ------ ------ -------- -------- -------- Total Revenues (Incl. Equip Revenue) 95.9% 96.4% 96.8% 96.8% 97.3% REVENUE GROWTH RATES Access Revenue (Incl Promos) 42.7% 32.1% 22.8% 18.4% 13.2% Airtime Revenue (Incl Promos) 27.9% 18.8% 10.6% 9.2% 9.5% Roaming Revenue 10.5% 6.5% 3.2% 3.3% 1.5% Data Revenue -- 539.8% 173.9% 64.9% 34.9% Equipment Sales 7.7% 25.4% 14.1% 22.4% -3.8% Promotions Revenues NM NM NM NM NM Other Revenue 46.9% 5.9% 27.6% 25.7% 18.1% Total Revenues (Incl. Equip Revenue) 30.8% 22.5% 18.2% 16.2% 11.5% REVENUES / SUBSCRIBER / MONTH Access Cost / Avg Customer / Month $25.75 $25.37 $24.93 $24.70 $24.27 Airtime Rate per Minute of Use $0.21 $0.20 $0.17 $0.15 $0.14 Composite Access & Airtime Rate per Minute of Use $0.40 $0.40 $0.38 $0.34 $0.33 - ----------------------------------------------------------------------------------------------------------------------- OPERATING MARGINS Gross Margin 52.5% 53.8% 54.1% 54.3% 57.0% EBITDA / Total Revenues 37.2% 41.6% 44.5% 44.5% 48.7% EBIT / Total Revenues 16.1% 21.0% 25.2% 26.8% 31.9% Net Income / Total Revenues NM NM 3.8% 6.7% 11.3% - -----------------------------------------------------------------------------------------------------------------------
- ------------------- (a) Reflects revenues generated from total minutes used. (b) Reflects revenues generated from equipment sales & rental and from total minutes paid for. (i.e. the total is adjusted downward to reflect those minutes paid for by the Company) Page 3 of 8 7 DRAFT CONTEL CELLULAR INC. DETAILS REGARDING CASH EXPENSE PROJECTIONS - ------------------------------------------------------------------------------- (dollars in millions except per share data and as otherwise stated)
Historical Outlook ----------------- ------- Dec 31 Dec 31 Dec 31 1992 1993 1994 ------ ------ ------- CASH EXPENSES Customer Acquisition Costs (Incl Promos & Equip Revenues) $76.4 $125.2 $155.4 Add-back of Equipment Revenues (a) 26.1 30.1 40.2 Less: Promo Revenues 0.0 (22.1) (23.5) Less: Depreciation Rental Equipment 0.0 0.0 (0.9) ------ ------ ------- Total Customer - Cash Acquisition Costs Incl Promos & Excl Equip Rev 102.5 133.2 171.1 RETENTION COSTS (INCL PROMOS) 0.0 4.4 10.4 Add-back of Equipment Revenues 0.0 (0.2) (1.9) Less: Promo Revenues 0.0 (2.8) (4.6) ------ ------ ------- Total Cash Retention Costs (Incl Promos & Excl Equip Rev) 0.0 1.4 3.9 COSTS OF SERVICE 44.6 44.7 69.0 Equipment Revenues 0.0 0.0 (0.0) Less: Depreciation & Amortization (0.9) (0.9) (0.1) ------ ------ ------- Total Cash Costs of Service (Excl. Equip Rev ) 43.7 43.8 68.9 SYSTEMS COSTS 82.6 107.8 147.6 Less: Depreciation & Amortization (48.5) (61.7) (84.6) ------ ------ ------- Total Cash Systems Costs 34.1 46.1 63.0 REGION ADMIN EXPENSES 22.0 22.2 38.2 Less: Regional Depreciation (0.9) (1.0) (1.8) ------ ------ ------- Total Region Admin Cash Expenses 21.2 21.3 36.4 HEADQUARTERS EXPENSES 39.9 45.2 50.3 Less: HQ Depreciation (4.1) (3.1) (1.1) ------ ------ ------- Total Headquarters Cash Expenses 35.7 42.1 49.3 TOTAL DEPRECIATION (54.4) (66.6) (88.5) - --------------------------------------------------------------------------------------------------------------- Total Cash Expenses (Incl Equipment Revenues) $211.0 $258.0 $354.3 Equipment Revenue 26.1 29.9 38.2 ------ ------ ------ Total Cash Expenses (Excl Equipment Revenues) $237.2 $287.9 $392.5 - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- AS A % OF TOTAL CASH EXPENSES (EXCL EQUIPMENT REVENUES) Total Customer Acquisition Costs (Incl Promos & Excl Equip Rev) 43.2% 46.3% 43.6% Total Retention Costs (Incl Promos & Excl Equip Rev) 0.0% 0.5% 1.0% Total Costs of Service (Excl. Equip Rev) 18.4% 15.2% 17.5% Total Systems Costs 14.4% 16.0% 16.1% Total Region Admin Expenses 8.9% 7.4% 9.3% Total Headquarters Expenses 15.1% 14.6% 12.5% ----- ----- ----- Total Cash Expenses Excl Equipment Revenues 100.0% 100.0% 100.0% - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- CUSTOMER ACQUISITION COSTS Total Customer Acquisition Costs (Incl Promos & Equip Rev) ($mm) $76.4 $125.2 $155.4 Net Loss on Equipment per Gross Add (Incl Depreciation) 68 68 76 Commissions per Gross Add 113 106 71 Other Sales Costs per Gross Add 189 140 138 Other Acquisition Costs per Gross Add 60 118 92 ------ ------ ------ Total Acquisition Costs per Gross Add (Incl Depreciation) $430 $432 $376 - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- TOTAL CASH COSTS & EXPENSES PLUS DEPRECIATION & AMORTIZATION Cost of Services $44.6 $44.7 $69.0 Cost of Equipment Sales 38.3 49.8 71.5 Systems Costs 82.6 107.8 147.6 Selling, General & Administrative (b) 167.4 193.8 230.7 ------ ------ ------ Total Expenses Excl Equip & Promo Revenues $332.8 $396.1 $518.8 - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- OPERATING MARGINS Gross Margin 42.4% 45.9% 47.7% Cost of Services & Equipment Sales / Total Revenues 28.9% 25.3% 25.5% Systems Costs / Total Revenues 28.8% 28.8% 26.8% S,G&A / Total Revenues 58.3% 51.8% 41.9% ----- ----- ----- Operating Expenses / Total Revenues 116.0% 105.9% 94.2% EBITDA / Total Revenues 17.4% 23.0% 28.7% EBIT / Total Revenues NM NM 5.8% Net Income / Total Revenues NM NM NM - ---------------------------------------------------------------------------------------------------------------
Projected ------------------------------------------------------ Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 1995 1996 1997 1998 1999 ------ ------- ------- ------- ------- CASH EXPENSES Customer Acquisition Costs (Incl Promos & Equip Revenues) $173.7 $194.1 $208.2 $245.2 $239.0 Add-back of Equipment Revenues (a) 41.2 51.6 58.9 72.1 69.3 Less: Promo Revenues (24.7) (27.0) (29.1) (34.7) (33.8) Less: Depreciation Rental Equipment (7.4) (11.4) (16.0) (20.0) (22.7) ------ ------- ------- ------- ------- Total Customer - Cash Acquisition Costs Incl Promos & Excl Equip Rev 182.7 207.4 222.1 262.7 251.8 RETENTION COSTS (INCL PROMOS) 11.5 14.4 15.5 20.2 14.1 Add-back of Equipment Revenues 0.0 0.0 0.0 0.0 0.0 Less: Promo Revenues (4.5) (4.6) (4.3) (4.6) (3.0) ------ ------- ------- ------- ------- Total Cash Retention Costs (Incl Promos & Excl Equip Rev) 7.0 9.8 11.2 15.7 11.0 COSTS OF SERVICE 96.3 102.0 127.2 154.2 173.0 Equipment Revenues 0.0 0.0 0.0 0.0 0.0 Less: Depreciation & Amortization 0.0 0.0 0.0 0.0 0.0 ------ ------- ------- ------- ------- Total Cash Costs of Service (Excl. Equip Rev ) 96.3 102.0 127.2 154.2 173.0 SYSTEMS COSTS 184.9 230.4 263.3 288.6 309.8 Less: Depreciation & Amortization (101.7) (125.7) (141.1) (150.6) (159.9) ------ ------- ------- ------- ------- Total Cash Systems Costs 83.2 104.7 122.2 138.1 149.9 REGION ADMIN EXPENSES 31.5 39.3 42.1 45.1 47.7 Less: Regional Depreciation (1.7) (2.1) (2.4) (2.6) (2.9) ------ ------- ------- ------- ------- Total Region Admin Cash Expenses 29.8 37.1 39.7 42.4 44.8 HEADQUARTERS EXPENSES 54.1 56.0 58.5 61.3 64.5 Less: HQ Depreciation (1.0) (1.4) (1.6) (1.8) (2.0) ------ ------- ------- ------- ------- Total Headquarters Cash Expenses 53.1 54.6 56.9 59.5 62.5 TOTAL DEPRECIATION (111.9) (140.5) (161.0) (175.0) (187.5) - ----------------------------------------------------------------------------------------------------------------------------------- Total Cash Expenses (Incl Equipment Revenues) $410.9 $464.1 $520.4 $600.3 $623.7 Equipment Revenue 41.2 51.6 58.9 72.1 69.3 ------ ------ ------ ------ ------ Total Cash Expenses (Excl Equipment Revenues) $452.1 $515.8 $579.3 $672.5 $693.0 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- AS A % OF TOTAL CASH EXPENSES (EXCL EQUIPMENT REVENUES) Total Customer Acquisition Costs (Incl Promos & Excl Equip Rev) 40.4% 40.2% 38.3% 39.1% 36.3% Total Retention Costs (Incl Promos & Excl Equip Rev) 1.5% 1.9% 1.9% 2.3% 1.6% Total Costs of Service (Excl. Equip Rev) 21.3% 19.8% 21.9% 22.9% 25.0% Total Systems Costs 18.4% 20.3% 21.1% 20.5% 21.6% Total Region Admin Expenses 6.6% 7.2% 6.9% 6.3% 6.5% Total Headquarters Expenses 11.8% 10.6% 9.8% 8.8% 9.0% ----- ----- ----- ----- ----- Total Cash Expenses Excl Equipment Revenues 100.0% 100.0% 100.0% 100.0% 100.0% - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- CUSTOMER ACQUISITION COSTS Total Customer Acquisition Costs (Incl Promos & Equip Rev) ($mm) $173.7 $194.1 $208.2 $245.2 $239.0 Net Loss on Equipment per Gross Add (Incl Depreciation) 49 59 69 68 66 Commissions per Gross Add 71 79 61 36 23 Other Sales Costs per Gross Add 135 117 112 112 116 Other Acquisition Costs per Gross Add 92 92 93 108 115 ------ ------ ------ ------ ------ Total Acquisition Costs per Gross Add (Incl Depreciation) $347 $347 $335 $325 $319 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL CASH COSTS & EXPENSES PLUS DEPRECIATION & AMORTIZATION Cost of Services $96.3 $102.0 $127.2 $154.2 $173.0 Cost of Equipment Sales 60.7 75.2 88.8 111.0 98.1 Systems Costs 184.9 230.4 263.3 288.6 309.8 Selling, General & Administrative (b) 262.5 289.1 301.4 333.8 339.8 ------ ------ ------ ------ ------ Total Expenses Excl Equip & Promo Revenues $604.4 $696.8 $780.7 $887.5 $920.7 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING MARGINS Gross Margin 52.5% 53.8% 54.1% 54.3% 57.0% Cost of Services & Equipment Sales / Total Revenues 21.8% 20.1% 20.7% 21.9% 20.1% Systems Costs / Total Revenues 25.7% 26.1% 25.2% 23.8% 22.9% S, G&A / Total Revenues 36.4% 32.8% 28.9% 27.5% 25.1% ---- ---- ---- ---- ---- Operating Expenses / Total Revenues 83.9% 79.0% 74.8% 73.2% 68.1% EBITDA / Total Revenues 37.2% 41.6% 44.5% 44.5% 48.7% EBIT / Total Revenues 16.1% 21.0% 25.2% 26.8% 31.9% Net Income / Total Revenues NM NM 3.8% 6.7% 11.3% - -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------ (a) Customer Acquisition Costs have been netted for equipment revenue; hence, cash costs requires add-back of revenues. (b) S,G&A includes: (1) headquarters expenses, (2) region admin expenses, (3) retention costs, (4) customer acquisition costs excluding equip costs, (5) some depreciation & amortization and (6) back out of promo revenues. Page 4 of 8 8 DRAFT CONTEL CELLULAR INC. DETAILS REGARDING CAPITAL EXPENDITURE PROJECTIONS - --------------------------------------------------------------------------------
Historical Outlook Projected ---------- ------- ----------------------- Dec 31 Dec 31 Dec 31 Dec 31 1993 1994 1995 1996 ---------- ------- -------- -------- NETWORK EXPENDITURES Infrastructure Number of Cells 449 679 860 923 Incremental New Cells NA 214 181 63 Cost per Incremental Cell NA $369,173 $501,806 $528,991 Number of Voice Path Channels - Analog 10,822 16,926 24,380 24,458 Incremental New Voice Paths - Analog NA 5,804 7,454 78 Cost per Incremental Voice Path Channel - Analog NA $5,146 $9,628 $31,921 Number of Voice Path Channels - Digital 0 0 0 6,372 Incremental New Voice Paths - Digital NA 0 0 6,372 Cost per Incremental Voice Path Channel - Digital NA $0 $0 $6,098 Number of Switches 29 30 32 45 Incremental New Switches NA 1 2 13 Total cost of Incremental Switches (a) NA $600,000 $1,350,000 $3,484,880 - ----------------------------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES ($mm) Cell Sites (Coverage Cells) $0.0 $79.0 $90.8 $33.3 Voice Paths - Analog 0.0 29.9 71.8 2.5 Voice Paths - Digital 0.0 0.0 0.0 38.9 Switches 0.0 33.9 19.9 36.1 Microwave 0.0 21.4 20.2 6.8 Other Network Costs 0.0 51.0 46.6 64.2 Tele-GO 0.0 6.0 6.9 3.9 Capitalized Engineering 7.7 8.1 12.0 12.7 Other 144.4 17.0 29.5 21.8 ------ ------ ------ ------ Total Capital Expenditures $152.1 $246.2 $297.6 $220.2 - ----------------------------------------------------------------------------------------------------------------------------------- AS A % OF CAPITAL EXPENDITURES Cell Sites (Coverage Cells) 0.0% 32.1% 30.5% 15.1% Voice Paths - Analog 0.0% 12.1% 24.1% 1.1% Voice Paths - Digital 0.0% 0.0% 0.0% 17.6% Switches 0.0% 13.8% 6.7% 16.4% Microwave 0.0% 8.7% 6.8% 3.1% Other Network Costs 0.0% 20.7% 15.7% 29.2% Non-Network Costs (Tele-GO, Capitalized Engineering & Other) 94.9% 6.9% 9.9% 9.9% ------ ------ ------ ------ Total Capital Expenditures 94.9% 94.3% 93.6% 92.5% Projected ------------------------------------------------ Dec 31 Dec 31 Dec 31 1997 1998 1999 -------- -------- -------- NETWORK EXPENDITURES INFRASTRUCTURE Number of Cells 945 960 969 Incremental New Cells 22 15 9 Cost per Incremental Cell $519,421 $503,037 $582,048 Number of Voice Path Channels - Analog 24,535 24,616 24,704 Incremental New Voice Paths - Analog 77 81 88 Cost per Incremental Voice Path Channel - Analog $10,404 $11,732 $11,732 Number of Voice Path Channels - Digital 11,942 17,147 20,119 Incremental New Voice Paths - Digital 5,570 5,205 2,972 Cost per Incremental Voice Path Channel - Digital $6,064 $5,598 $5,822 Number of Switches 47 49 49 Incremental New Switches 2 2 0 Total cost of Incremental Switches (a) $2,694,882 $2,640,985 $0 - -------------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES ($mm) Cell Sites (Coverage Cells) $11.4 $7.5 $5.2 Voice Paths - Analog 0.8 1.0 1.0 Voice Paths - Digital 33.8 29.1 17.3 Switches 20.4 18.3 8.6 Microwave 2.2 1.4 0.6 Other Network Costs 36.7 20.6 55.8 Tele-GO 10.4 17.9 18.8 Capitalized Engineering 13.4 14.1 15.0 Other 28.6 25.5 22.5 ------ ------ ------ Total Capital Expenditures $157.6 $135.5 $145.0 - -------------------------------------------------------------------------------------------------------------------- AS A % OF CAPITAL EXPENDITURES Cell Sites (Coverage Cells) 7.3% 5.6% 3.6% Voice Paths - Analog 0.5% 0.7% 0.7% Voice Paths - Digital 21.4% 21.5% 11.9% Switches 13.0% 13.5% 5.9% Microwave 1.4% 1.1% 0.4% Other Network Costs 23.3% 15.2% 38.5% Non-Network Costs (Tele-GO, Capitalized Engineering & Other) 18.1% 18.9% 15.5% ------ ------ ------ Total Capital Expenditures 84.9% 76.4% 76.7%
- ------------------------------- (a) Detail Breakdown of Cost per Incremental Switch:
Year # of Switches Cost per Switch Year # of Switches Cost per Switch ---- ------------- --------------- ---- ------------- --------------- 1995 1 $600,000 1997 2 $2,694,882 1 $750,000 1996 1 $2,749,880 1998 2 $2,640,985 12 $735,000
Page 5 of 8 9 DRAFT CONTEL CELLULAR INC. CONSOLIDATED STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- (dollars in millions except per share data and as otherwise stated)
Historical Outlook Projected -------------------- ------- -------------------------------- Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 1992 1993 1994 1995 1996 1997 ------ ------ ------ ------ ------ ------ REVENUE Access Revenue (Incl Promos) $85.6 $110.7 $178.2 $254.4 $336.0 $412.7 Airtime Revenue (Incl Promos) 106.8 145.7 210.4 269.2 319.9 353.9 Roaming Revenue 45.2 59.9 77.5 85.6 91.2 94.1 Other Network Features 8.3 13.0 25.1 40.5 58.4 75.8 Toll Revenue 12.1 12.3 18.0 20.1 0.0 0.0 ------ ------ ------ ------ ------ -------- Service Revenue Excl Data 258.0 341.5 509.3 669.9 805.5 936.5 Data Revenue 0.0 0.0 0.0 1.8 11.6 31.7 ------ ------ ------ ------ ------ -------- Service Revenue Incl Data 258.0 341.5 509.3 671.7 817.1 968.1 Promotions 0.0 24.9 28.1 29.2 31.6 33.4 ------ ------ ------ ------ ------ -------- Service Revenue Excl Promos 258.0 366.4 537.5 700.8 848.7 1,001.6 Other Revenues 2.8 2.5 3.2 7.5 13.8 16.3 - ----------------------------------------------------------------------------------------------------------------------------------- Total Revenues (Excl. Equip Revenue) $260.9 $369.0 $540.7 $708.3 $862.4 $1,017.8 - ----------------------------------------------------------------------------------------------------------------------------------- Customer Acquisition Costs Equipment Revenues (26.1) (29.5) (39.7) (35.5) (43.3) (47.6) Equipment Costs 38.3 49.8 70.3 58.4 73.0 85.6 ------ ------ ------ ------ ------ -------- Net Loss 12.1 20.3 30.6 22.9 29.8 38.0 Equipment Rental Revenues 0.0 (0.6) (0.5) (5.6) (8.4) (11.3) Depreciation-Rental Equipment 0.0 0.0 0.9 7.4 11.4 16.0 Other Equipment Rental Costs 0.0 0.0 0.3 0.0 0.0 0.0 ------ ------ ------ ------ ------ -------- Net Rental Loss 0.0 (0.5) 0.7 1.8 3.0 4.6 Commissions 20.1 30.8 29.1 35.6 44.4 37.9 Advertising 10.6 12.1 14.4 17.7 20.8 24.7 Sales - Direct 24.9 31.7 45.3 55.7 53.5 57.5 - Indirect 3.1 2.6 3.2 2.9 3.0 2.9 - Stores 5.5 6.2 8.4 8.9 9.1 9.2 Other Acquisition Costs 0.0 0.0 0.1 3.6 3.6 4.2 ------ ------ ------ ------ ------ -------- Total Acquisition Costs Excl Promos 76.4 103.1 131.9 149.0 167.1 179.1 Promotions - Revenues 0.0 22.1 23.5 24.7 27.0 29.1 Total Acquisition Costs Incl Promos 76.4 125.2 155.4 173.7 194.1 208.2 Customer Retention Costs Equipment Revenues (Excl Product Co.) 0.0 0.2 1.9 0.0 0.0 0.0 Equipment Costs (Excl Product Co.) 0.0 0.0 0.9 2.3 2.2 3.2 ------ ------ ------ ------ ------ -------- Net Margin 0.0 0.2 2.9 2.3 2.2 3.2 Retention - Marketing 0.0 1.4 2.9 2.3 3.6 4.5 Customer Services - Customer Loyalty Only 0.0 0.0 0.0 0.0 0.0 0.0 Other Retention Costs 0.0 0.0 0.1 2.4 4.0 3.5 ------ ------ ------ ------ ------ -------- Total Retention Costs Excl Promos 0.0 1.6 5.8 7.0 9.8 11.2 Promotions - Revenues 0.0 2.8 4.6 4.5 4.6 4.3 ------ ------ ------ ------ ------ -------- Total Retention Costs Incl Promos 0.0 4.4 10.4 11.5 14.4 15.5 Other Costs of Service Operating Tax 3.0 1.7 2.0 2.9 3.6 4.4 Customer Services (Excl Customer Loyalty) 7.0 7.3 11.8 17.8 24.1 30.1 Financial Services 0.0 2.9 4.8 7.2 8.2 10.2 Toll Cost of Sales 5.4 6.4 9.7 9.7 0.0 0.0 Customer Base Support 9.4 11.3 15.4 20.2 23.6 28.1 Roamer Administration 11.3 5.5 8.1 9.4 11.2 13.7 Bad Debt Expense 7.5 6.3 13.0 16.1 19.6 23.5 Depreciation & Amortization 0.9 0.9 0.1 0.0 0.0 0.0 Other Cost of service 0.0 2.3 4.0 13.1 11.7 17.0 ------ ------ ------ ------ ------ -------- Total Cost of Service 44.6 44.7 69.0 96.3 102.0 127.2
10
Dec 31 Dec 31 1998 1999 -------- -------- REVENUE Access Revenue (Incl Promos) $488.5 $552.9 Airtime Revenue (Incl Promos) 386.4 423.3 Roaming Revenue 97.2 98.6 Other Network Features 95.0 112.0 Toll Revenue 0.0 0.0 -------- -------- Service Revenue Excl Data 1,067.1 1,186.9 Data Revenue 52.2 70.5 -------- -------- Service Revenue Incl Data 1,119.4 1,257.4 Promotions 39.2 36.8 -------- -------- Service Revenue Excl Promos 1,158.6 1,294.2 Other Revenues 20.8 24.7 - ------------------------------------------------------------------------------ Total Revenues (Excl. Equip Revenue) $1,179.4 $1,319.0 - ------------------------------------------------------------------------------ Customer Acquisition Costs Equipment Revenues (57.1) (52.9) Equipment Costs 103.6 95.7 -------- -------- Net Loss 46.5 42.8 Equipment Rental Revenues (15.0) (16.5) Depreciation-Rental Equipment 20.0 22.7 Other Equipment Rental Costs 0.0 0.0 -------- -------- Net Rental Loss 5.0 6.2 Commissions 27.5 17.2 Advertising 40.1 44.9 Sales - Direct 72.8 75.6 - Indirect 2.6 2.1 - Stores 9.2 9.2 Other Acquisition Costs 6.9 7.1 -------- -------- Total Acquisition Costs Excl Promos 210.5 205.2 Promotions - Revenues 34.7 33.8 Total Acquisition Costs Incl Promos 245.2 239.0 Customer Retention Costs Equipment Revenues (Excl Product Co.) 0.0 0.0 Equipment Costs (Excl Product Co.) 7.4 2.4 -------- -------- Net Margin 7.4 2.4 Retention - Marketing 5.3 6.0 Customer Services - Customer Loyalty Only 0.0 0.0 Other Retention Costs 3.0 2.7 -------- -------- Total Retention Costs Excl Promos 15.7 11.0 Promotions - Revenues 4.6 3.0 -------- -------- Total Retention Costs Incl Promos 20.2 14.1 Other Costs of Service Operating Tax 5.1 5.9 Customer Services (Excl Customer Loyalty) 36.1 41.3 Financial Services 11.8 12.3 Toll Cost of Sales 0.0 0.0 Customer Base Support 33.7 34.7 Roamer Administration 15.4 18.1 Bad Debt Expense 29.8 33.4 Depreciation & Amortization 0.0 0.0 Other Cost of service 22.2 27.3 -------- -------- Total Cost of Service 154.2 173.0
Page 6 of 8 11 DRAFT CONTEL CELLULAR INC. CONSOLIDATED STATEMENT OF OPERATIONS (CON'T) - -------------------------------------------------------------------------------- (dollars in millions except per share data and as otherwise stated)
Historical Outlook Projected -------------------- ------- -------------------------------- Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 1992 1993 1994 1995 1996 1997 ------ ------ ------ ------ -------- -------- Systems Costs Systems Operations 9.6 12.0 15.2 17.6 20.7 22.7 Facilities 12.1 15.3 23.6 34.3 42.3 50.6 Maintenance / Repair 3.9 4.7 7.6 12.2 14.9 18.1 Property Taxes 6.2 11.5 12.6 14.7 22.3 25.9 Leases 2.2 2.6 3.9 4.3 4.5 4.9 Depreciation & Amortization 48.5 61.7 84.6 101.7 125.7 141.1 ------ ------ ------ ------ -------- -------- Total Systems Costs 82.6 107.8 147.6 184.9 230.4 263.3 Region Expenses Engineering 5.2 7.0 7.7 10.6 11.5 12.2 Capitalized Engineering (4.9) (6.7) (6.8) (9.3) (10.1) (10.8) Marketing 2.9 5.2 5.6 4.7 5.4 5.8 G & A 17.9 15.7 29.9 23.8 30.3 32.5 Regional Depreciation 0.9 1.0 1.8 1.7 2.1 2.4 ------ ------ ------ ------ -------- -------- Total Regional Administration Expense 22.0 22.2 38.176 31.5 39.3 42.1 Headquarters Expenses Engineering 3.6 3.9 6.0 7.5 7.5 7.6 Capitalized Engineering (2.0) (1.1) (1.3) (2.6) (2.6) (2.6) Marketing 2.3 4.5 3.3 5.4 5.8 6.3 G & A 31.8 34.7 41.2 42.8 43.9 45.6 HQ Depreciation 4.1 3.1 1.1 1.0 1.4 1.6 ------ ------ ------ ------ -------- -------- Total Headquarters Expenses 39.9 45.2 50.324 54.1 56.0 58.5 - ---------------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses (a) $265.4 $349.4 $470.9 $552.0 $636.3 $714.8 - ---------------------------------------------------------------------------------------------------------------------------------- Operating Income / (Loss) Before Amortization ($4.6) $19.5 $69.8 $156.3 $226.1 $303.0 Amortization of Franchise / Customers 37.0 36.6 30.6 34.4 34.4 34.3 Amortization of Goodwill 4.2 5.0 7.3 6.1 6.1 6.1 Operating Income / (Loss) ($45.8) ($22.1) $32.0 $115.9 $185.7 $262.6 Partnership Invest Income / (Loss) 29.0 37.4 50.9 58.1 58.4 58.8 Other Income / (Expense) 56.0 44.2 101.6 (5.2) (5.2) (5.2) Interest Expenses 150.7 165.4 180.6 206.6 214.3 218.7 I.D.C. (2.6) (2.5) (2.5) (2.0) (1.8) (1.6) ------ ------ ------ ------ -------- -------- Net Interest 148.1 162.9 178.1 204.6 212.5 217.1 Partnership / Corp. Income / (Loss) (108.9) (103.5) 6.5 (35.8) 26.4 99.1 Partnership Minority Interest - Income / (Loss) 2.4 0.8 (6.5) (9.1) (13.2) (17.6) ------ ------ ------ ------ -------- -------- Pretax Income / (Loss) (106.5) (102.6) (0.0) (44.9) 13.2 81.5 State Income Taxes - Exp / (Cr.) 1.2 1.9 9.5 6.1 9.3 15.0 Fed Income Taxes - Exp / (Cr.) (34.7) (29.6) 2.4 (14.7) 4.7 26.6 ------ ------ ------ ------ -------- -------- - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME ($73.1) ($74.9) ($11.9) ($36.3) ($0.7) $39.9 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Total Revenues (Incl Equip) $287.0 $374.0 $550.8 $720.3 $882.4 $1,043.3 Total Operating Exp (Excl Equip Rev & Promos) 332.8 396.1 518.8 604.4 696.8 780.7 Operating Cash Flow 49.8 86.1 158.2 268.2 366.7 464.0 Operating Cash Flow Margin (% of Svc Rev Incl Promos) 19.3% 25.2% 31.1% 39.9% 44.9% 47.9% - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Depreciation & Amortization Depreciation - Network 48.5 61.7 84.6 101.7 125.7 141.1 Depreciation - Other 5.9 4.9 3.9 10.2 14.9 20.0 Amortization of Cust Purchase - Franchise 37.0 36.6 30.6 34.4 34.4 34.3 Amortization of Goodwill 4.2 5.0 7.3 6.1 6.1 6.1 ------ ------ ------ ------ -------- -------- Total D&A $95.7 $108.2 $126.3 $152.4 $181.0 $201.4 - ----------------------------------------------------------------------------------------------------------------------------------
Dec 31 Dec 31 1998 1999 -------- -------- Systems Costs Systems Operations 23.7 24.7 Facilities 61.3 68.3 Maintenance / Repair 19.5 20.7 Property Taxes 28.4 30.8 Leases 5.1 5.4 Depreciation & Amortization 150.6 159.9 -------- -------- Total Systems Costs 288.6 309.8 Region Expenses Engineering 12.7 13.4 Capitalized Engineering (11.2) (11.8) Marketing 6.2 6.6 G & A 34.7 36.6 Regional Depreciation 2.6 2.9 -------- -------- Total Regional Administration Expense 45.1 47.7 Headquarters Expenses Engineering 8.4 9.4 Capitalized Engineering (2.9) (3.2) Marketing 6.7 7.0 G & A 47.3 49.3 HQ Depreciation 1.8 2.0 -------- -------- Total Headquarters Expenses 61.3 64.5 - ------------------------------------------------------------------------------- Total Operating Expenses (a) $814.6 $848.1 - ------------------------------------------------------------------------------- Operating Income / (Loss) Before Amortization $364.8 $470.9 Amortization of Franchise / Customers 34.0 34.0 Amortization of Goodwill 6.1 6.1 Operating Income / (Loss) $324.7 $430.8 Partnership Invest Income / (Loss) 59.1 59.5 Other Income / (Expense) (5.4) (5.6) Interest Expenses 207.6 190.9 I.D.C. (1.0) (1.0) -------- -------- Net Interest 206.6 189.9 Partnership / Corp. Income / (Loss) 171.9 294.9 Partnership Minority Interest - Income / (Loss) (21.1) (27.3) -------- -------- Pretax Income / (Loss) 150.8 267.6 State Income Taxes - Exp / (Cr.) 20.5 27.1 Fed Income Taxes - Exp / (Cr.) 48.8 87.4 -------- -------- - ------------------------------------------------------------------------------- NET INCOME $81.5 $153.1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Total Revenues (Incl Equip) $1,212.2 $1,351.5 Total Operating Exp (Excl Equip Rev & Promos) 887.5 920.7 Operating Cash Flow 539.8 658.4 Operating Cash Flow Margin (% of Svc Rev Incl Promos) 48.2% 52.4% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Depreciation & Amortization Depreciation - Network 150.6 159.9 Depreciation - Other 24.4 27.6 Amortization of Cust Purchase - Franchise 34.0 34.0 Amortization of Goodwill 6.1 6.1 -------- -------- Total D&A $215.1 $227.6 - -------------------------------------------------------------------------------
- ------------------------------------ (a) Netted for equipment revenues, excludes amortization and includes promotional costs. Page 7 of 8 12 DRAFT CONTEL CELLULAR INC. CONSOLIDATED STATEMENT OF CASH FLOWS - -------------------------------------------------------------------------------- (dollars in millions except per share data and as otherwise stated)
HISTORICAL OUTLOOK PROJECTED ---------- -------- ---------------------------------------------------- DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 Dec 31 Dec 31 CASH FLOW FROM OPERATING ACTIVITIES 1993 1994 1995 1996 1997 1998 1999 ---------- -------- ------- ------- ------- ------- ------- Net Income ($74.9) ($11.9) ($36.3) ($0.7) $39.9 $81.5 $153.1 Total Depreciation 66.6 88.5 111.9 140.5 161.0 175.0 187.5 Total Amortization 41.6 37.8 40.5 40.5 40.4 40.1 40.1 Deferred Income Taxes 31.6 30.0 40.9 44.4 46.8 48.2 49.7 Provision for Losses on A/R (WC) 6.3 13.0 16.1 19.6 23.5 29.8 33.4 Gain on Sale of Investment , net 0.0 (112.6) 46.0 0.0 0.0 0.0 0.0 Income from Unconsolidated Partnerships (37.4) (50.9) (58.1) (58.4) (58.8) (59.1) (59.5) Distribution from Unconsolidated Partnerships 13.3 25.9 30.1 57.7 61.5 70.5 65.6 Contributions to Limited Partnerships (5.0) (7.1) (6.2) (8.4) (10.0) (10.3) (9.1) Contributions to Unconsolidated RSA's (6.4) 3.3 (3.8) (1.6) (1.5) (2.1) (3.0) Minority Interest in Net Income (0.8) 6.5 9.1 13.2 17.6 21.1 27.3 Distributions to Minority Partners 0.0 (1.2) (3.0) (4.0) (5.0) (7.0) (10.0) Interest Capitalized (IDC) (2.5) (2.5) (2.0) (1.8) (1.6) (1.0) (1.0) Other Deferrals (Def Charges / Credits) 5.0 0.0 2.3 3.0 3.6 4.1 4.9 Other, net (Other Assets / Other) (3.9) 0.9 5.8 0.0 0.0 0.0 0.0 Change in Accounts Receivable (12.8) (26.2) (38.2) (39.1) (43.4) (50.2) (51.3) Change in Inventory (3.6) 0.0 2.3 (1.8) (1.6) (2.7) 1.5 Change in Other Current Assets (1.9) (2.7) (0.8) (0.1) (0.1) (0.1) (0.1) Change in Accrued Taxes 17.7 36.6 (19.6) 7.8 5.1 4.2 6.0 Change in Other Current Liabilities 88.4 (21.4) 28.3 2.1 2.4 5.5 (5.9) ------- ------- ------- ------- ------- ------- ------- Cash Flow from Operating Activity $121.2 $5.9 $165.3 $213.0 $279.8 $347.5 $429.3 CASH FLOW FROM INVESTING ACTIVITY Capital Expenditures (165.1) (246.2) (297.6) (220.2) (157.6) (135.5) (145.0) Capital Expenditures - Mega 13.0 0.0 0.0 0.0 0.0 0.0 0.0 Purchase of Cellular Interest 0.0 (125.8) (46.0) 0.0 0.0 0.0 0.0 Proceeds from Sale of Investment, Gross 0.0 159.0 0.0 0.0 0.0 0.0 0.0 Other, net (22.6) 0.0 (46.0) 0.0 0.0 0.0 0.0 ------- ------- ------- ------- ------- ------- ------- Cash Flow From Investing Activity ($174.7) ($213.0) ($389.6) ($220.2) ($157.6) ($135.5) ($145.0)
Page 8 of 8 13 DRAFT 10 YEAR DCF - -------------------------------------------------------------------------------- Summary Valuation (a) Assuming Purchase 1/1/95, Exit 12/31/04
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- EBITDA (Consolidated Ops.) & Other Income / (Expense) $710 Net Income Attributable to Minority Interest (b) $ 17 Equity in Income of Uncnsl. Subs. (b) (c) $ 32 Free Cash Flow ($100) $122 $254 $337 $399 $365 $370 $396 $423 $467
Present Value of Consolidated Operations -- Free Cash Flows
12% 13% 14% 15% ------ ------ ------ ------ $1,529 $1,452 $1,381 $1,314
Present Value of Consolidated Operations -- Terminal Value
12% 13% 14% 15% ------ ------ ------ ------ 10 X $2,286 $2,092 $1,915 $1,755 EBITDA Multiple -- Consolidated Operations 11 X 2,515 2,301 2,107 1,931 12 X 2,743 2,510 2,298 2,106
Incremental Present Value Adjustment For Equity Investments and Minority Interests (Net)
12% 13% 14% 15% ------ ----- ----- ------ 16 X $ 80 $ 73 $ 67 $ 61 P/E Multiple -- Equity and Minority Interests 18 X 90 82 75 69 20 X 100 92 84 77
Mexican Interests 10% Interest in 4.185 million gross POPs (d) $20 $20 $20 $20
Total Firm Value ------------------------------------------------------------------------------------- 12% 13% 14% 15% ------ ------ ------ ------ 10X/16X $3,915 $3,637 $3,383 $3,151 EBITDA Multiple / P/E Multiple 11X/18X 4,153 3,856 3,583 3,334 12X/20X 4,392 4,074 3,783 3,517 Implied Equity Value Per Share 12% 13% 14% 15% ------ ------ ------ ------ 10X/16X $18.01 $15.24 $12.69 $10.37 EBITDA Multiple / P/E Multiple 11X/18X 20.40 17.42 14.69 12.20 12X/20X 22.79 19.60 16.69 14.03 -------------------------------------------------------------------------------------
- ---------------------------------------------------------------------- (a) Based on mid-year discounting of Free Cash Flow and year-end 2004 discounting of Exit Value. (b) Taxed at assumed 40% rate. (c) Discounted by 30% due to minority position. (d) Value represents $48 per net POP. (e) Based on 99.95 million shares and net debt of $2,114 million. 14 DRAFT 10 YEAR DCF - -------------------------------------------------------------------------------- Assumptions
VALUATION ASSUMPTIONS TERMINAL VALUE CALCULATION (2004) ----- Net Debt (1/1/95): $2,114 EBITDA (Consolidated Ops.) (a) $710 Common Shares Outstanding: 99.95 Net Income Attributable to Minority Intr. (b) 17 Equity in Income of Uncnsl. Subs. (b) 46 Discount for Unc. Ops. (30%) (14) ----- 1995 1996 1997 1998 1999 2000 2001 2002 ------ ----- ------ ------ ------ ------ ------ ------ OPERATING ASSUMPTIONS EBITDA Margin 37.9% 42.5% 45.6% 45.8% 49.9% 48.8% 48.7% 49.3% Consolidated Subscribers (thousands) 1,057 1,345 1,612 1,898 2,089 2,160 2,231 2,276 Consolidated POPs 16.9 17.1 17.4 17.6 17.9 18.2 18.4 18.7 Penetration 6.3% 7.9% 9.3% 10.8% 11.7% 11.9% 12.1% 12.2% Rev / Sub/ Month $63 $57 $54 $51 $50 $48 $47 $45 Churn 2.1% 1.9% 2.0% 2.3% 2.4% 2.0% 1.8% 1.7% Cost per Gross Add $293 $298 $282 $269 $265 N/A N/A N/A INCOME STATEMENT Total Revenues $708 $862 $1,018 $1,179 $1,319 $1,364 $1,382 $1,380 EBITDA (Consolidated Ops.) $268 $367 $464 $540 $658 $665 $673 $681 Depreciation and Amortization (152) (181) (201) (215) (228) (233) (248) (270) ----- ----- ------ ------ ------ ------ ------ ------ EBIT (Consolidated Ops.) 116 186 263 325 431 432 425 411 Minority Interest (pre-tax) (9) (13) (18) (21) (27) (30) (30) (29) Other Income / (Expense) (5) (5) (5) (5) (6) (6) (7) (7) Equity in Income of Uncnsl. Subs. (pre-tax) 58 58 59 59 59 62 66 69 Interest Expense (205) (212) (217) (207) (190) (161) (130) (91) ----- ----- ------ ------ ------ ------ ------ ------ Pre-tax Income (44) 13 82 151 268 297 324 353 Income Tax 9 (14) (42) (69) (114) (116) (126) (138) ----- ----- ------ ------ ------ ------ ------ ------ Net Income ($36) ($1) $40 $81 $153 $181 $198 $215 FREE CASH FLOW EBITDA (Consolidated Ops.) $268 $367 $464 $540 $658 $665 $673 $681 Other Income / (Expense) ($5) ($5) ($5) ($5) ($6) ($6) ($7) ($7) Minority Interest (3) (4) (5) (7) (10) (15) (18) (20) Cash Dividends from Uncnsl. Subs., net 20 48 50 58 54 32 39 45 Income Tax Expense (Net of Intr. Exp. Ded.) (73) (99) (128) (152) (190) (180) (178) (174) Deferred Income Taxes 41 44 47 48 50 9 10 12 Capital Expenditures (298) (220) (158) (135) (145) (123) (135) (127) Purchase of Cellular Interest (46) 0 0 0 0 0 0 0 Working Capital (28) (31) (38) (43) (50) (17) (14) (14) Other Sources / (Uses) 24 23 27 34 38 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Free Cash Flow ($100) $122 $254 $337 $399 $365 $370 $396 - -------------------------------------------------------------------------------------------------------------------------- SELECTED STATISTICS Revenue Growth 21.8% 18.0% 15.9% 11.8% 3.4% 1.3% -0.2% EBITDA Growth 36.7% 26.5% 16.3% 22.0% 1.0% 1.2% 1.2% Free Cash Flow Growth 108.1% 32.6% 18.5% -8.7% 1.5% 6.9%
15
2003 2004 ------ ------ OPERATING ASSUMPTIONS EBITDA Margin 49.7% 49.7% Consolidated Subscribers (thousands) 2,321 2,368 Consolidated POPs 19.0 19.3 Penetration 12.2% 12.3% Rev / Sub/ Month $45 $45 Churn 1.6% 1.5% Cost per Gross Add N/A N/A INCOME STATEMENT Total Revenues $1,412 $1,447 EBITDA (Consolidated Ops.) $702 $719 Depreciation and Amortization (294) (315) ------ ------ EBIT (Consolidated Ops.) 408 404 Minority Interest (pre-tax) (29) (28) Other Income / (Expense) (8) (9) Equity in Income of Uncnsl. Subs. (pre-tax) 73 77 Interest Expense (52) (8) ------ ------ Pre-tax Income 392 436 Income Tax (153) (170) ------ ------ Net Income $239 $266 FREE CASH FLOW EBITDA (Consolidated Ops.) $702 $719 Other Income / (Expense) ($8) ($9) Minority Interest (24) (30) Cash Dividends from Uncnsl. Subs., net 52 59 Income Tax Expense (Net of Intr. Exp. Ded.) (174) (173) Deferred Income Taxes 15 16 Capital Expenditures (126) (100) Purchase of Cellular Interest 0 0 Working Capital (14) (15) Other Sources / (Uses) 0 0 - -------------------------------------------------------------------- Free Cash Flow $423 $467 - -------------------------------------------------------------------- SELECTED STATISTICS Revenue Growth 2.3% 2.4% EBITDA Growth 3.1% 2.4% Free Cash Flow Growth 7.0% 10.3%
- -------------------------------------------------------- (a) Includes Other Income / (Expense). (b) Based on 40% tax rate. 16
CONTEL CELLULAR INC. Summary POP Valuation Value per Controlled POP CCI POPs(thousands) ------------------------ ----------------------------- Non- Rank Low High Controlled Controlled(a) --------------- --- ---- ---------- ------------- MSAs 1 to 25 $250 $350 0 4,319 MSAs 26 to 75 175 250 6,208 911 MSAs 76 to 125 150 200 4,909 552 MSAs 126 to 175 125 175 949 85 MSAs 176 to 225 125 150 299 2 MSAs 226 to 275 125 150 452 19 MSAs 276+ 75 125 227 0 ------ ----- Total MSAs 13,044 5,887 RSAs 90 90 3,396 1,214(b) ------ ----- Total POPs 16,440 7,102
Total Value(millions) --------------------------------------------------- Rank Low Mid High --------------- ------- ------- ------ MSAs 1 to 25 $756 $907 $1,058 MSAs 26 to 75 1,198 1,455 1,711 MSAs 76 to 125 794 927 1,059 MSAs 126 to 175 126 151 177 MSAs 176 to 225 38 41 45 MSAs 226 to 275 58 64 70 MSAs 276+ 17 23 28 ------- ------- ------- Total MSAs $2,987 $3,567 $4,148 RSAs 382 382 382 ------- ------- ------- Total POPs $3,369 $3,950 $4,530 Mexico (10% interest in 4.185 million gross POPs)(c) $20 $20 $20 Net Debt as of 12/31/94(d) ($2,114) ($2,114) ($2,114) ------- ------- ------- Equity Value Per Share(e) $12.76 $18.57 $24.38 ======= ======= =======
- --------------------------------------------------------------------- (a) Non-Controlled POPs valued at a 30% discount to Controlled POPs. (b) Includes Managed Non-Controlled RSA Interests. (c) Value represents $48 per net POP. (d) Net debt is based on projected notes payable to affiliates of $277.7 million and other long-term debt of $1,836.8 million. As of June 30, 1994, the net debt was $2,021.9 million. The increase during the second half of 1994 includes additional acquisitions of cellular interests of $104.1 million. (e) Based on 99.95 million shares. 17 CONTEL CELLULAR INC. Controlled MSA Interests
COMPANY 1993 COMPANY NET MSA PERCENTAGE ESTIMATED POPULATION MARKET RANK OWNERSHIP POPULATION EQUIVALENTS - ------ ---- ---------- ---------- ----------- Memphis, TN 36 100.00% 1,012,008 1,012,008 Louisville, KY 37 100.00% 920,274 920,274 Birmingham, AL 41 100.00% 892,251 892,251 Norfolk, VA 43 95.01% 1,002,659 952,626 Nashville, TN 46 100.00% 1,028,771 1,028,771 Richmond, VA 59 95.01% 777,882 739,066 Fresno, CA 74 92.00% 720,296 662,672 Knoxville, TN 79 94.12% 530,666 499,463 El Paso, TX 81 100.00% 637,347 637,347 Mobile, AL 83 100.00% 500,537 500,537 Johnson City, TN 85 100.00% 448,163 448,163 Chattanooga, TN 88 100.00% 443,405 443,405 Bakersfield, CA 97 92.00% 602,298 554,114 Davenport, IA 98 100.00% 359,895 359,895 Newport News, VA 104 95.01% 461,126 438,116 Huntsville, AL 115 100.00% 385,000 385,000 Lexington, KY 116 100.00% 361,754 361,754 Evansville, IN 119 88.87% 316,107 280,924 Pensacola, FL 127 100.00% 367,503 367,503 Rockford, IL 131 59.00% 296,872 175,154 Visalia, CA 150 92.00% 339,854 312,666 Roanoke, VA 157 40.00% 235,092 94,037 Clarksville, TN 209 100.00% 171,204 171,204 Tuscaloosa, AL 222 80.71% 158,062 127,580 Florence, AL 226 91.09% 135,917 123,807 Petersburg, VA 235 95.01% 128,356 121,951 Anniston, AL 249 100.00% 115,576 115,576 Gadaden, AL 272 90.00% 100,376 90,338 Las Cruces, NM 285 100.00% 148,349 148,349 Owensboro, KY 293 88.87% 88,897 79,003 ---------- Total 13,043,554
18 CONTEL CELLULAR INC. Non-Controlled MSA Interests
COMPANY 1993 COMPANY NET MSA PERCENTAGE ESTIMATED POPULATION MARKET RANK OWNERSHIP POPULATION EQUIVALENTS - ------ ---- ---------- ---------- ----------- Los Angeles, CA 2 11.20% 14,588,139 1,633,872 San Francisco, CA 7 11.25% 3,796,944 427,278 Washington, DC 8 35.27% 3,761,200 1,326,575 Houston, TX 10 4.40% 3,811,914 167,724 Minneapolis, MN 15 30.00% 2,543,746 763,124 San Jose, CA 27 11.25% 1,535,755 172,772 San Antonio, TX 33 30.00% 1,359,688 407,906 Sacramento, CA 35 0.98% 1,474,137 14,417 Jacksonville, FL 51 14.24% 987,873 140,673 Greensville, SC 67 10.83% 665,263 72,048 Oxnard, CA 73 11.20% 693,427 77,664 Austin, TX 75 3.00% 850,163 25,505 Albuquerque, NM 86 49.00% 575,082 281,790 Beaumont, TX 101 4.40% 377,191 16,596 Stockton, CA 107 0.98% 513,887 5,026 Vallejo, CA 111 11.25% 489,403 55,058 Santa Rosa, CA 123 11.25% 408,734 45,983 Santa Barbara, CA 124 39.00% 379,225 147,898 Salina, CA 126 11.25% 371,326 41,774 Modesto, CA 142 0.98% 410,727 4,017 Galveston, TX 170 4.40% 231,790 10,199 Reno, NV 171 0.98% 276,787 2,713 Santa Cruz, CA 174 11.25% 230,629 25,946 Chico, CA 215 0.98% 194,127 1,899 Anderson, SC 227 10.83% 147,443 15,968 Redding, CA 254 0.98% 165,008 1,614 Uba City, CA 274 0.98% 132,827 1,299 --------- Total 5,887,338
19 CONTEL CELLULAR INC. Controlled RSA Interests
COMPANY 1993 COMPANY NET PERCENTAGE ESTIMATED POPULATION MARKET OWNERSHIP POPULATION EQUIVALENTS - ------ ---------- ---------- ----------- Alabama 1 100.00% 130,000 130,000 California 6 100.00% 28,461 28,461 California 7 100.00% 124,168 124,168 California 9 100.00% 139,220 139,220 Kentucky 2 100.00% 126,486 126,486 Kentucky 7 100.00% 163,006 163,006 Kentucky 11 100.00% 168,570 168,570 Tennessee 1 100.00% 293,481 293,481 Tennessee 2 100.00% 155,849 155,849 Tennessee 3 100.00% 323,052 323,052 Tennessee 5 100.00% 329,525 329,525 Tennessee 6 100.00% 152,984 152,984 Tennessee 7 100.00% 242,747 242,747 Tennessee 9 100.00% 64,034 64,034 Virginia 7 100.00% 38,037 38,037 Virginia 8 95.01% 82,763 78,633 Virginia 9 95.01% 84,841 80,607 Virginia 11 95.01% 107,777 102,399 Virginia 12 95.01% 32,445 30,826 California 12 92.00% 108,282 99,619 Illinois 1 91.50% 313,287 286,658 Virginia 5 77.00% 62,339 48,001 Texas 10 75.00% 29,089 21,817 New Mexico 6-1 71.43% 59,821 42,730 Virginia 3 51.00% 181,166 92,395 Virginia 4 51.00% 64,675 32,984 --------- Total 3,396,289
20 CONTEL CELLULAR INC. Managed Non-Controlled RSA Interests
COMPANY 1993 COMPANY NET PERCENTAGE ESTIMATED POPULATION MARKET OWNERSHIP POPULATION EQUIVALENTS - ------ ---------- ---------- ----------- Kentucky 1 50.00% 184,760 92,380 New Mexico 3 50.00% 76,635 38,318 New Mexico 5 43.00% 55,076 23,683 Iowa 4 38.10% 155,247 59,149 Indiana 7 38.09% 218,704 83,313 Indiana 8 38.09% 249,245 94,947 Indiana 9 38.09% 140,985 53,707 California 4 20.83% 333,324 69,431 Iowa 5 14.29% 108,129 15,452 ------- Total 530,380
21 CONTEL CELLULAR INC. Non-Controlled RSA Interests
COMPANY 1993 COMPANY NET PERCENTAGE ESTIMATED POPULATION MARKET OWNERSHIP POPULATION EQUIVALENTS - ------ ---------- ---------- ----------- New Mexico 1 44.44% 245,584 109,138 Illinois 8 41.13% 330,684 136,010 Illinois 9 41.13% 152,441 62,699 Illinois 2 40.00% 144,909 57,964 California 5 39.00% 222,879 86,923 California 3 27.73% 139,271 38,620 Alabama 1 33.33% 164,672 54,891 California 1 16.67% 209,466 34,918 New Mexico 6-II 12.50% 119,673 14,959 Illinois 3 11.77% 203,742 23,980 Virginia 6 10.00% 208,667 20,867 Minnesota 1 6.60% 50,623 3,341 Minnesota 2 6.60% 62,163 4,103 Minnesota 3 6.60% 57,287 3,781 Minnesota 5 6.60% 202,723 13,380 Minnesota 6 6.60% 241,382 15,931 Virginia 10 1.00% 225,479 2,255 Pennsylvania 3 0.10% 95,651 96 Pennsylvania 4 0.10% 96,721 97 ------- Total 683,953
22 CONTEL CELLULAR INC. Adjustments to August 31, 1994 Summary of Interests in MSAs and RSAs Divestiture of all interest in: Binghamton, NY Burlington, VT Elmira, NY Vermont RSAs 1 and 2 North Carolina RSA 1 New Hampshire RSA 2 New York RSA 2 and 3 Acquisition of interests in: Huntsville, AL with net POPs of 515,000 (assumed to give control) -- Assumed 385,000 POPs in MSA 115 and 130,000 in Alabama RSA 2 Does not include California RSA 4 acquisition since expenditures for this acquisition are not expected until 1995. 23 SUMMARY DATA POINTS IN DETERMINING PRIVATE MARKET VALUE RANGES
---------------------------------------------------------------------- VALUE RANGES UTILIZED: ---------------------------------------------------------------------- Value per POP CCI POPs (thousands) ---------------- -------------------- MSA Rank Low High Control Minority ---------- --- ---- ------- -------- 1 to 25 $250 $350 0 4,319 26 to 75 175 250 6,208 911 76 to 125 150 200 4,909 552 126 to 175 125 175 949 85 176 to 225 125 150 299 2 226 to 275 125 150 452 19 276+ 75 125 227 0 ------ ----- Total MSA 13,044 5,888 RSAs 90 90 3,396 1,214 ------ ----- Total POPs 16,440 7,102
Ranges were derived using subjective determination of value by Merrill Lynch and PaineWebber (including research analyst data), with such subjective valuation reflective of recent data points related to value. The boxes on the right hand side of this sheet represent empirical evidence related to private market values.
- ---------------------------------------------------------------------------------------------- GENERAL M&A DATA POINTS (a) - ---------------------------------------------------------------------------------------------- Target Market Cap/ Acquiror MSA POP (d) Markets - Total POPs - ---------- ----------- -------------------- DC / Baltimore of SBC Comm. $321 Upper Tier (MSAs #10 and #16) CGE LIN Broadcasting $348 Upper Tier (98% in top 10 markets) (Trading Value)(c) McCaw Cellular $330 Upper & Middle Tier (AT&T) (78% in top 75 MSA rank) Cellular Communications $315 Upper & Middle Tier (Trading Value)(c) (78% in top 75 MSA rank) Dallas - GTE $285 Upper Tier (MSA #9) Southwestern Bell Associated Communications $189 Middle Tier Southwestern Bell (97% in top 75 MSA rank) C-Tec $167 Middle Tier Crown (40% in 26-75 MSA rank; 43% RSAs) Celutel Inc. $132 Lower Tier (56% in 76-125 MSA rank, Century Telephone 44% in MSA ranks of 126 and above)
- -------------------------------------------------------------------------- GTE/CCI M&A DATA POINTS(b) - -------------------------------------------------------------------------- Market Cap/ Percent Ownership/ Market POP Acquired or Sold - ------ ----------- ------------------ MSAs: Manchester, NH. MSA 133 $187 60% - Sold Fort Smith, AR. MSA 166 $194 60% - Sold Fayetteville, AR. MSA 182 $183 90% - Sold Burlington, NC. MSA 280 $113 100% - Acquired RSAs: Alaska -RSA 316 $102 50% - Sold California - RSA 339 $180 79% - Acquired Oregon - RSA 610 $103 67% - Sold Tennessee - RSA 644 $67 100% - Acquired Tennessee - RSA 645 $62 51% - Acquired Tennessee - RSA 648 $118 100% - Acquired Tennessee - RSA 651 $130 100% - Acquired
- ---------------------------------------------------------------- (a) Represent M&A transactions over the last two years. (b) Selected GTE/CCI M&A transactions, with data provided by GTE. (c) Subject to a private market value guarantee. (d) RSAs valued at $90 per POP. 24 SUMMARY DATA POINTS IN DETERMINING PRIVATE MARKET VALUE RANGES - -------------------------------------------------------------------------------- Ranges were derived using subjective determinations of value by Merrill Lynch and PaineWebber (including input from research analysts), with such subjective valuation reflective of recent data points related to value.
REPRESENTATIVE TRANSACTIONS -------------------------------------------------------------------------------------- Celutel Inc. Associated Communications --------------------------------------- ------------------------------------------ Value per POP POPs (thousands) Implied Value (MM$) POPs (thousands) Implied Value (MM$) ------------- ------------------ ------------------- ------------------- ------------------- MSA Rank Low High Control Mnrty.(a) Low High Control Mnrty.(a) Low High ---------- ---- ---- ------- --------- ---- ---- ------- --------- ---- ---- 1 to 25 $250 $350 0 0 $0 $0 0 900 $157 $220 26 to 75 175 250 0 0 0 0 2,584 0 452 646 76 to 125 150 200 625 0 94 125 0 0 0 0 126 to 175 125 175 211 0 26 37 0 0 0 0 176 to 225 125 150 180 0 22 27 0 0 0 0 226 to 275 125 150 95 0 12 14 120 0 15 18 276+ 75 125 0 0 0 0 0 0 0 0 RSAs 90 90 0 0 0 0 0 0 0 0 ---- ---- ---- ---- Total Implied Value $154 $203 $625 $884 Actual Transaction Value $147 $680
MobileNet / CCI Acquisitions and Dispositions C-TEC --------------------------------------------- --------------------------------------- Value per POP POPs (thousands) Implied Value (MM$) POPs (thousands) Implied Value (MM$) ------------- ------------------ ------------------------- ------------------ ------------------- MSA Rank Low High Control Mnrty.(a) Low High Control Mnrty.(a) Low High ---------- ---- ---- ------- --------- ---- ---- ------- --------- ---- ---- 1 to 25 $250 $350 0 344 $60 $84 0 0 $0 $0 26 to 75 175 250 0 134 16 23 513 27 93 133 76 to 125 150 200 0 174 18 24 0 32 3 4 126 to 175 125 175 335 145 55 76 0 0 0 0 176 to 225 125 150 193 5 25 29 0 0 0 0 226 to 275 125 150 0 0 0 0 124 0 15 19 276+ 75 125 100 10 8 13 86 0 6 11 RSAs 90 90 1,259 817 165 165 558 19 51 51 ---- ---- ---- ---- Total Implied Value $347 $416 $170 $218 Actual Transaction Value $403 $183
- -------------------------------------------------------------------- (a) Minority POPs are valued at a 30% discount to Control POPs. 25 CELLULAR TRANSACTION ANALYSIS WASHINGTON, DC AND BALTIMORE AREA PROPERTIES OF SBC COMMUNICATIONS Provides useful data point for valuation of Upper Tier MSAs.
TRANSACTION NET TV PER TV PER DATE ACQUIROR VALUE POPs POP MSA POP(a) - --------- ---------------------------------- ----------- ------- ------ ----------- COMPAGNIE GENERALE DES EAUX 10/11/94 (INDIRECTLY) $215 725,282 $296 $323
PERCENTAGE OF MSA NET TOTAL NET RANK MARKET OWNERSHIP POPs POPs - ------ ---------------------------------------- --------- ----------- ---------- 10 Washington, DC 10.0% 391,334 16 Baltimore 10.0% 250,574 ------- SUBTOTAL MSA RANK 1-26 POPs 641,907 TOTAL MSA POPs 641,907 88.5% Virginia RSA 10 10.0% 23,337 Virginia RSA 11 10.0% 25,314 Virginia RSA 12 10.0% 17,770 West Virginia RSA 4 10.0% 16,954 ------- TOTAL RSA POPs 83,375 11.5% TOTAL POPs 725,282
- --------------- (a) Assumes $90 per RSA POP. 26 CELLULAR TRANSACTION ANALYSIS LIN BROADCASTING CORPORATION(a) Provides useful data point for valuation of Upper Tier MSAs. Although LIN Broadcasting information is based on public multiples, such valuation should reflect private market valuation as a result of McCaw's buyout option.
PRICE PER SHARES OUTSTANDING MARKET MARKET CAP MARKET CAP DATE SHARE (IN MILLIONS) CAPITALIZATION PER POP PER MSA POP(a) - ------- --------- -------------------------------- -------------- ---------- -------------- 8/19/94 $129.00 52.4 $9,689 $344 $348
PERCENTAGE OF MSA RANK MARKET OWNERSHIP NET POPs TOTAL NET POPs 1 New York 98.33% 14,690,045 2 Los Angeles 39.97% 5,830,879 4 Philadelphia 49.99% 2,447,048 6 Dallas-Fort Worth 60.44% 2,539,650 8 Houston 56.25% 2,144,202 ---------- SUBTOTAL MSA RANK 1-25 POPs 27,651,824 98.3% 168 Galveston-Texas City 34.30% 79,514 ---------- SUBTOTAL MSA RANK 126-175 POPs 79,514 0.3% TOTAL MSA POPs 27,731,338 98.6% ---------- Connecticut RSA 1 100.00% 177,241 Texas RSA 17 100.00% 230,209 TOTAL RSA POPs 407,450 1.4% ---------- TOTAL POPs 28,138,788 100.0% ----------
- --------------- (a) Assumes $90 per RSA POP. 27 CELLULAR TRANSACTION ANALYSIS MCCAW CELLULAR COMMUNICATIONS Provides useful data point for valuation of Upper and Middle Tier MSAs
TRANSACTION NET TV PER TV PER DATE ACQUIROR VALUE POPS POP MSA POP(a) - ---------- -------- ----------- ----------- ------- ----------- 8/16/93 AT&T $19,482.2 59,826,710 $326 $330 (Pending)
NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS - -------- ----------------------------------- --------- ---------- -------------- 1 New York, NY (b) 48.9% 7,318,004 2 Los Angeles, CA (b) 21.0% 3,061,838 4 Philadelphia, PA (b) 26.2% 1,288,008 6 Dallas, TX (b) 54.3% 2,289,687 9 San Francisco, CA 50.0% 1,881,654 10 Houston, TX (b) 29.5% 1,074,200 11 Miami, FL 100.0% 3,332,680 14 Minneapolis/St. Paul, MN/WI 100.0% 2,516,992 15 St. Louis, MO/IL 15.0% 367,816 18 Seattle/Everett, WA 100.0% 2,081,016 19 Pittsburgh, PA 64.3% 1,334,188 20 Tampa, FL 100.0% 2,063,801 21 Denver, CO 100.0% 1,927,888 24 San Jose, CA 50.0% 770,095 25 Kansas City, MO/KN 50.0% 739,426 ---------- SUBTOTAL MSA RANK 1 - 25 POPs 32,047,294 53.6% 27 Portland, OR/WA 100.0% 1,473,434 29 Sacramento, CA 100.0% 1,437,441 30 San Antonio, TX 100.0% 1,358,318 33 Orlando, FL 100.0% 1,182,341 34 Buffalo, NY 25.0% 294,698 36 Salt Lake City, UT 100.0% 1,138,550 42 Jacksonville, FL 100.0% 972,985 43 Oklahoma City, OK 100.0% 956,362 45 West Palm Beach, FL 100.0% 927,926 49 Austin, TX 100.0% 850,714 52 Las Vegas, NV 100.0% 844,197
28 CELLULAR TRANSACTION ANALYSIS MCCAW CELLULAR COMMUNICATIONS
NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPs TOTAL NET POPs - -------- ----------------------------------- --------- ----------- -------------- 59 Tulsa, OK 100.0% 756,223 61 Worcester, MA 9.4% 67,464 63 Fresno, CA 100.0% 702,820 66 Oxnard/Simi Valley, CA 97.6% 681,956 71 N.E. Pennsylvania 34.3% 221,807 73 Tacoma, WA 100.0% 616,272 ---------- SUBTOTAL MSA RANK 26 - 75 POPs 14,483,508 24.2% 83 Little Rock, AR 89.7% 469,561 84 Stockton, CA 100.0% 514,449 92 Vallejo/Fairfield, CA 50.0% 240,217 99 Colorado Springs, CO 100.0% 436,133 100 Melbourne, FL 91.1% 395,600 103 Lakeland, FL 93.0% 394,252 106 Santa Rosa, CA 45.3% 184,700 109 Daytona Beach, FL 100.0% 402,992 110 Modesto, CA 95.7% 380,369 113 Santa Barbara, CA 81.7% 313,776 116 Shreveport, LA 97.5% 368,817 117 Salinas/Seaside, CA 49.4% 182,582 118 Spokane, WA 88.2% 324,826 123 Corpus Christi, TX 91.0% 322,537 ---------- SUBTOTAL MSA RANK 76 - 125 POPs 4,930,811 8.2% 130 Visalia/Tulare, CA 92.2% 301,261 140 Sarasota, FL 83.5% 248,377 143 Salem, OR 91.5% 263,620 144 Eugene/Springfield, OR 100.0% 287,855 149 Erie, PA 88.3% 243,645 150 Fort Pierce, FL 100.0% 275,807 151 Provo/Orem, UT 92.6% 254,888 153 Reno, NV 88.3% 242,050 156 Killeen/Temple, TX 100.0% 265,517 159 Tallahasse, FL 100.0% 259,588 164 Anchorage, AK 87.2% 208,736 166 Johnstown, FL 100.0% 237,263 168 Bradenton, FL 90.1% 206,667 172 Fort Smith, AR/OK 100.0% 223,365 173 Galveston, TX (b) 18.2% 40,341 ---------- SUBTOTAL MSA RANK 126 - 175 POPs 3,558,980 5.9%
29 CELLULAR TRANSACTION ANALYSIS MCCAW CELLULAR COMMUNICATIONS
NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPs TOTAL NET POPs - -------- ----------------------------------- --------- ----------- -------------- 177 Fayetteville, AR 100.0% 219,210 178 Boise City, ID 88.0% 191,172 179 Lafeyette, LA 87.2% 186,635 182 Ocala, FL 87.3% 184,600 184 Bremerton, WA 95.7% 195,853 186 St. Cloud, MN 69.3% 136,963 187 Fort Collins, CO 89.9% 176,502 188 Yakima, WA 92.8% 180,191 190 Waco, WA 100.0% 193,303 191 Topeka, KS 10.2% 19,705 204 Olympia, WA 86.2% 148,356 208 Longview/Marshall, TX 100.0% 164,541 215 Wheeling, WV/OH 84.2% 131,621 219 Redding, CA 87.1% 133,403 220 Richland, WA 100.0% 152,226 222 Medford, OR 90.8% 137,195 ---------- SUBTOTAL MSA RANK 176 - 225 POPs 2,551,476 4.3% 230 Monroe, LA 80.0% 115,006 239 Texarkana, AR/TX 89.3% 121,144 242 Greeley, CO 86.8% 116,431 245 Bellingham, WA 87.3% 116,803 252 Bryan/Col. St., TX 100.0% 129,576 255 Yuba City, CA 94.4% 119,457 259 Pueblo, CO 75.0% 92,076 ---------- SUBTOTAL MSA RANK 226 - 275 POPs 810,493 1.4% 278 Rochester, MN 84.1% 92,114 289 St. Joseph, MO 45.5% 44,138 291 Sherman/Denison, TX 100.0% 95,957 296 Lawrence, KS 50.0% 42,618 297 Pine Bluff, AR 80.8% 68,500 ---------- SUBTOTAL MSA RANK 275+ POPs 343,327 0.6% TOTAL MSA POPs 58,725,889 98.2% California RSA 4 25.0% 80,684 California RSA 8 100.0% 94,382 Colorado RSA 3 91.5% 222,777
30 CELLULAR TRANSACTION ANALYSIS MCCAW CELLULAR COMMUNICATIONS
NET PERCENTAGE OF MARKET OWNERSHIP POPS TOTAL NET POPS - ----------------------------------------- --------- ----------- -------------- Hawaii RSA 2 100.0% 108,675 Minnesota RSA 3 100.0% 56,179 Utah RSA 1 100.0% 112,515 Washington RSA 1 100.0% 238,251 Washington RSA 5 20.0% 21,286 Washington RSA 6 100.0% 166,072 TOTAL RSA POPs 1,100,821 1.8% TOTAL POPs 59,826,710 100.0%
- --------------- (a) Assumes $90 per RSA POP. (b) Represents McCaw's proportionate interest in a LIN Broadcasting POP, at the time of announcement. 31 CELLULAR TRANSACTION ANALYSIS CELLULAR COMMUNICATIONS INC. Provides useful data point for valuation of Upper and Middle Tier MSAs. Although Cellular Communications information is based on public multiples, such valuation should reflect private market valuation as a result of AirTouch's 1997 private market guarantee.
PRICE PER SHARES OUTSTANDING MARKET MARKET CAP MARKET CAP DATE SHARE (IN MILLIONS) CAPITALIZATION PER POP PER MSA POP(a) - ------- -------- -------------------------- -------------- ---------- -------------- 8/19/94 $54.00 42.5 $2,422 $308 $315 PERCENTAGE OF MSA RANK MARKET OWNERSHIP NET POPS TOTAL NET POPs 5 Detroit-Ann Arbor 50.00% 2,298,465 23 Cleveland 50.00% 923,303 ---------- SUBTOTAL MSA RANK 1 - 25 POPs 3,221,768 41.0% 26 Cincinnati 50.00% 747,341 32 Columbus 50.00% 635,800 51 Dayton 50.00% 427,304 57 Toledo 50.00% 394,979 62 Grand Rapids 50.00% 359,345 69 Akron 50.00% 336,808 ---------- SUBTOTAL MSA RANK 26 - 75 POPs 2,901,577 36.9% 87 Flint 50.00% 252,016 89 Lansing-East Lansing 50.00% 250,041 110 Saginaw-Bay City Midland 50.00% 201,166 111 Canton 50.00% 200,194 ---------- SUBTOTAL MSA RANK 76 - 125 POPs 903,417 11.5% 136 Hamilton-Middletown 50.00% 154,378 152 Lorain-Elyria 50.00% 138,291 ---------- SUBTOTAL MSA RANK 126 - 175 POPs 292,669 3.7% 178 Lima 50.00% 110,268 197 Muskegon 19.46% 36,153 198 Springfield 45.28% 83,824 ---------- SUBTOTAL MSA RANK 176 - 225 POPs 230,245 2.9% 256 Mansfield 50.00% 63,295 ---------- SUBTOTAL MSA RANK 226 - 275 POPs 63,295 0.8% TOTAL MSA POPs 7,612,971 96.9% ---------- Ohio RSA 3 50.00% 50,725 Ohio RSA 4 50.00% 109,344 Ohio RSA 8 50.00% 83,485 TOTAL RSA POPs 243,554 3.1% ---------- TOTAL POPs 7,856,525 100.0% ----------
- --------------- (a) Assumes $90 per RSA POP. 32 CELLULAR TRANSACTION ANALYSIS DALLAS, TEXAS PROPERTIES OF GTE MOBILNET (MSA RANK 9) Provides useful data point for valuation of Upper Tier MSAs.
NET TRANSACTION TV PER DATE ACQUIROR POPS VALUE POP - ------- --------------------------------------------------- ------- ----------- ------ Dec-93 Southwestern Bell 421,744 $120 $285
33 CELLULAR TRANSACTION ANALYSIS ASSOCIATED COMMUNICATIONS Provides useful data point for valuation of Middle Tier MSAs (tax free stock transaction)
TRANSACTION NET TV PER DATE ACQUIROR VALUE POPS POP - -------- ------------------------------------------- ----------- --------- -------------- 2/25/94 Southwestern Bell $ 680.0 3,604,062 $189
NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS - -------- ------------------------------------------- ----------- --------- -------------- 9 San Francisco, CA 3.0% 112,899 19 Pittsburgh, PA 35.7% 740,754 24 San Jose, CA 3.0% 46,206 --------- SUBTOTAL MSA RANK 1-25 POPs 899,859 25.0% 34 Buffalo, NY 75.0% 884,093 40 Rochester, NY 85.7% 863,632 53 Albany, NY 100.0% 836,265 --------- SUBTOTAL MSA RANK 26-75 POPs 2,583,990 71.7% 260 Glen Falls, NY 100.0% 120,213 --------- SUBTOTAL MSA RANK 226-275 POPs 120,213 3.3% TOTAl POPs 3,604,062 100.0% ---------
34 CELLULAR TRANSACTION ANALYSIS C-TEC CORPORATION Provides useful data point for valuation of Middle and Lower Tier MSAs and RSAs
TRANSACTION NET TV PER TV PER DATE ACQUIROR VALUE POPs POP MSA POP(a) - ---------- ----------------------- ----------- --------- ------ ---------- 4/5/94 INDEPENDENT CELLULAR $ 182.5 1,359,148 $134 $167 (Pending) NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPs TOTAL NET POPs -------- ---------------------------- --------- --------- -------------- 56 NEPA Partnership 79.0% 513,000 58 Allentown, PA 4.0% 27,200 --------- SUBTOTAL MSA RANK 26-75 POPs 540,200 39.7% 118 Reading, PA 10.0% 32,000 --------- SUBTOTAL MSA RANK 76-125 POPs 32,000 2.4% 259 Center County, PA 100.0% 123,786 --------- SUBTOTAL MSA RANK 226-275 POPs 123,786 9.1% 296 Iowa City, IA 89.9% 85,500 --------- SUBTOTAL MSA RANK 275+ POPs 85,500 6.3% TOTAL MSA POPs 781,486 57.5% --------- Pennsylvania RSA 4 100.0% 28,076 Pennsylvania RSA 5 28.6% 19,354 Pennsylvania RSA 5 83.3% 28,000 Iowa RSAs 3, 4, 6 & 11 100.0% 502,232 TOTAL RSA POPs 577,662 42.5% --------- TOTAL POPs 1,359,148 100.0% ---------
- --------------- (a) Assumes $90 per RSA POP. 35 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- CELUTEL INC. Provides useful data point for valuation of Lower Tier MSAs
TRANSACTION NET TV PER DATE ACQUIROR VALUE POPS POP - -------- --------------------------------- ----------- --------- ---------- 8/19/93 CENTURY TELEPHONE ENTERPRISES $146.8 1,110,687 $132 NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS - -------- --------------------------------- ----------- --------- -------------- 105 McAllen/Edinburg, TX 67.3% 276,491 108 Jackson, MS 86.1% 348,416 --------- SUBTOTAL MSA RANK 76 - 125 POPS 624,907 56.3% 154 Brownsville/Harlingen, TX 77.4% 211,142 --------- SUBTOTAL MSA RANK 126 - 175 POPS 211,142 19.0% 181 Biloxi/Gulfport, MS 84.8% 179,825 --------- SUBTOTAL MSA RANK 176 - 225 POPS 179,825 16.2% 272 Pascagoula, MS 82.6% 94,813 --------- SUBTOTAL MSA RANK 226 - 275 POPS 94,813 8.5% -------------------------------- TOTAL POPS 1,110,687 100.0% --------------------------------
36 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- MOBILENET / CCI ACQUISITIONS AND DISPOSITIONS Provides useful data points for valuation of MSA and RSA markets on a market by market basis.
MSA / GTEM / Sold / Net Proceeds Rank (a) RSA Market CCI Acq'd. Date Ownership POPs Per POP - -------- ----- ----------------- ------ ------ ------ --------- ------- -------- 7 MSA SAN FRANCISCO, CA CCI Acq'd Mar-93 0.06% 2,378 $202 16 MSA CLEVELAND, OH GTEM Acq'd 1992 10.00% 341,389 $186 ------------------------------------------------------------------------------------------ MEAN (POP WEIGHTED) MSA RANK 1 - 25 POP VALUE $186 MEDIAN (POP WEIGHTED) MSA RANK 1 - 25 POP VALUE $186 ------------------------------------------------------------------------------------------ 30 MSA PORTLAND, OR GTEM Acq'd 1992 3.70% 95,000 $ 43 61 MSA CHARLOTTE, NC GTEM Sold 1992 5.00% 39,014 $141 ------------------------------------------------------------------------------------------ MEAN (POP WEIGHTED) MSA RANK 26 - 75 POP VALUE $ 72 MEDIAN (POP WEIGHTED) MSA RANK 26 - 75 POP VALUE $ 43 ------------------------------------------------------------------------------------------ 112 MSA CORPUS CHRISTI, TX GTEM Sold 1992 49.00% 174,312 $157 ------------------------------------------------------------------------------------------ MEAN (POP WEIGHTED) MSA RANK 76 - 125 POP VALUE $157 MEDIAN (POP WEIGHTED) MSA RANK 76 - 125 POP VALUE $157 ------------------------------------------------------------------------------------------ 133 MSA MANCHESTER, NH CCI Sold Jan-94 60.00% 201,777 $187 144/151 MSA ORANGE/POUGHKEEPSIE, NY CCI Sold Dec-93 25.00% 145,350 $183 155 MSA SAVANNAH, GA GTEM Acq'd Mar-93 0.30% 794 $155 166 MSA FORT SMITH, AR CCI Sold 1992 60.00% 133,184 $194 ------------------------------------------------------------------------------------------ MEAN (POP WEIGHTED) MSA RANK 126 - 175 POP VALUE $188 MEDIAN (POP WEIGHTED) MSA RANK 126 - 175 POP VALUE $187 ------------------------------------------------------------------------------------------
- ------------ 37 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- MOBILENET / CCI ACQUISITIONS AND DISPOSITIONS
MSA / GTEM / Sold / Net Proceeds Rank (a) RSA Market CCI Acq'd. Date Ownership POPs Per POP - --------- ----- --------------- ------ ------ ------ --------- --------- -------- 182 MSA FAYETTEVILLE, AR CCI Sold 1992 89.90% 193,126 $183 222 MSA TUSCALOOSA, AL CCI Acq'd Feb-93 0.35% 541 $ 29 222 MSA TUSCALOOSA, AL CCI Acq'd Mar-93 1.74% 2,692 $ 29 222 MSA TUSCALOOSA, AL CCI Acq'd Apr-93 0.71% 1,098 $ 29 222 MSA TUSCALOOSA, AL CCI Acq'd Apr-94 0.35% 560 $ 28 ------------------------------------------------------------------------------------------------ MEAN (POP WEIGHTED) MSA RANK 176 - 225 POP VALUE $179 MEDIAN (POP WEIGHTED) MSA RANK 176 - 225 POP VALUE $183 ------------------------------------------------------------------------------------------------ 280 MSA BURLINGTON, NC GTEM Acq'd Mar-93 90.98% 99,854 $115 280 MSA BURLINGTON, NC GTEM Acq'd Sep-93 4.75% 5,213 $ 90 280 MSA BURLINGTON, NC GTEM Acq'd Dec-93 4.27% 4,687 $ 90 ----------------------------------------------------------------------------------------------- MEAN (POP WEIGHTED) MSA RANK 275+ POP VALUE $113 MEDIAN (POP WEIGHTED) MSA RANK 275+ POP VALUE $115 ----------------------------------------------------------------------------------------------- 307 RSA ALABAMA 1 CCI Acq'd Jun-94 8.33% 13,725 $ 44 307 RSA Partition of ALABAMA RSA 1 CCI Sold Apr-93 52,130 $ 20 313 RSA ALABAMA 7 (Butler cnty only) CCI Sold 1992 100.00% 22,113 $ 35 316 RSA ALASKA (Matanuska) GTEM Sold Mar-93 50.00% 23,692 $102 319 RSA ARIZONA 2 CCI Sold Dec-93 25.00% 54,025 $ 42 320 RSA ARIZONA 3 CCI Sold Dec-93 39.47% 55,895 $ 14 321 RSA ARIZONA 4 CCI Sold Dec-93 25.00% 31,700 $ 31 323 RSA ARIZONA 6 CCI Sold Dec-93 30.00% 49,500 $ 74 324 RSA ARKANSAS 1 CCI Sold 1992 57.22% 17,603 $ 42 331 RSA ARKANSAS 8 CCI Sold 1992 57.22% 36,695 $ 41 339 RSA CALIFORNIA 4 CCI Acq'd 79.20% 263,900 $180 (c) 389 RSA IDAHO 2 CCI Sold Sep-93 19.70% 11,978 $ 35 390 RSA IDAHO 3 CCI Sold Sep-93 33.33% 4,917 $ 30 391 RSA IDAHO 4 CCI Sold 1992 25.00% 30,267 $ 66 392 RSA IDAHO 5 CCI Sold 1992 14.29% 20,713 $ 65 409/10/11 RSAs INDIANA 7/8/9 (b) CCI Acq'd May-94 3.09% 18,840 $ 50
38 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- MOBILENET / CCI ACQUISITIONS AND DISPOSITIONS
MSA / GTEM/ Sold / Net Proceeds Rank (a) RSA Market CCI Acq'd. Date Ownership POPs Per POP -------- ----- ---------------- ----- ------- ------ --------- ------- -------- 412 RSA IOWA 1 CCI Sold Jan-94 7.07% 4,354 $ 79 413 RSA IOWA 2 CCI Sold Sep-93 33.00% 16,665 $ 86 415 RSA IOWA 4 (b) CCI Acq'd 21.00% 31,000 $ 41(c) 416 RSA IOWA 5 (b) CCI Acq'd 79.00% 84,000 $ 54(c) 418 RSA IOWA 7 CCI Sold Sep-93 6.67% 3,571 $ 64 419 RSA IOWA 8 CCI Sold May-94 16.67% 9,110 $ 25 421 RSA IOWA 10 CCI Sold Sep-93 5.25% 9,539 $ 84 425 RSA IOWA 14 CCI Sold May-94 5.66% 6,028 $ 39 425 RSA IOWA 14 GTEM Sold May-94 5.66% 6,028 $ 39 485 RSA MINNESOTA 4 CCI Sold Sep-93 50.00% 6,850 $ 30 488 RSA MINNESOTA 7 CCI Sold Aug-93 6.25% 10,992 $ 54 489 RSA MINNESOTA 8 CCI Sold Aug-93 10.00% 8,780 $ 55 490 RSA MINNESOTA 9 GTEM Sold Aug-93 6.67% 3,888 $ 46 490 RSA MINNESOTA 9 CCI Sold Aug-93 6.67% 8,851 $ 46 491 RSA MINNESOTA 10 GTEM Sold Aug-93 6.25% 14,041 $ 69 491 RSA MINNESOTA 10 CCI Sold Aug-93 6.25% 14,044 $ 68 492 RSA MINNESOTA 11 GTEM Sold Sep-93 4.78% 9,576 $ 74 492 RSA MINNESOTA 11 CCI Sold Sep-93 7.34% 14,702 $ 72 535-540 RSA NEBRASKA 3,5,6,8 GTEM Sold 1992 8.58% 36,854 $ 31 561 RSA NEW YORK 3 CCI Acq'd Feb-93 2.50% 11,911 $ 16 582 RSA NORTH DAKOTA 3 CCI Sold Sep-93 7.69% 7,075 $ 65 599 RSA OKLAHOMA 4 CCI Sold 1992 66.67% 127,708 $ 64 609 RSA OREGON 4 GTEM Sold Sep-93 20.00% 41,041 $ 57 610 RSA OREGON 5 CCI Sold May-94 66.67% 164,764 $103 638 RSA SOUTH DAKOTA 581 CCI Sold Dec-93 33.33% 4,301 $ 23 639 RSA SOUTH DAKOTA 681 CCI Sold Dec-93 14.29% 5,079 $ 18 644 RSA TENNESSEE 2 CCI Acq'd Jan-94 100.00% 155,849 $ 67 645 RSA TENNESSEE 3 CCI Acq'd Jan-94 51.00% 164,757 $ 62 648 RSA TENNESSEE 6 CCI Acq'd Jun-93 100.00% 146,237 $118 651 RSA TENNESSEE 9 CCI Acq'd Dec-93 100.00% 56,182 $130 668 RSA TEXAS 17 GTEM Acq'd Aug-93 4.94% 11,288 $ 92
39 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- MOBILENET / CCI ACQUISITIONS AND DISPOSITIONS
MSA / GTEM / Sold / Net Proceeds Rank (a) RSA Market CCI Acq'd. Date Ownership POPs Per POP - -------- ----- ------------ ------ ------- ------ --------- ------ -------- 693 RSA WASHINGTON 1 CCI Sold Sep-93 20.00% 47,660 $ 67 694 RSA WASHINGTON 2 CCI Sold Sep-93 33.33% 38,629 $ 32 695 RSA WASHINGTON 3 CCI Sold Sep-93 33.33% 15,665 $ 7 696 RSA WASHINGTON 4 CCI Sold Nov-93 20.00% 52,200 $ 32 699 RSA WASHINGTON 7 GTEM Sold Sep-93 75.00% 19,009 $ 7 ------------------------------------------------------------------------------------ MEAN (POP WEIGHTED) RSA POP VALUE $ 79 MEDIAN (POP WEIGHTED) RSA POP VALUE $ 65 ------------------------------------------------------------------------------------ OTHER TRANSACTIONS CALIFORNIA (San Fran) GTEM Acq'd Apr-93 0.36% 24,481 $133 Acq'd Nov-93 0.13% 8,840 $ 48 120 MSA HUNTSVILLE, AL CCI Acq'd 100.00% 390,000 308 RSA ALABAMA 2 CCI Acq'd 100.00% 125,000 ------- ---- 515,000 $203(c) 289 MSA RAPID CITY, SD CCI Sold Dec-93 100.00% 638 RSA SOUTH DAKOTA 582 CCI Sold Dec-93 33.33% 639 RSA SOUTH DAKOTA 682 CCI Sold Dec-93 14.29% ------- ---- 119,890 $ 85
- ---------------------------------------------------------------------------- (a) SOURCE: 1993 CELLULAR TELEPHONE ATLAS, PAUL KAGAN ASSOCIATES, INC. (b) PART OF RAPID CITY SWAP TRANSACTION. (c) PRICE/POP IS MAXIMUM ACQUISITION PRICE INCLUDED IN STRATEGIC REQUISITION. 40 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- U S WEST NEW VECTOR
TRANSACTION NET TV PER TV PER DATE ACQUIROR VALUE POPS POP MSA POP (a) - -------- -------------------------------- ----------- ---------- -------------- ----------- 11/20/90 U S West $ 2,388.1 16,845,900 $142 $146 NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS - -------- -------------------------------- ----------- ---------- -------------- 15 Minneapolis, MN 69.0% 1,673,500 18 San Diego, CA 100.0% 2,512,300 19 Denver, CO 100.0% 1,896,700 20 Seattle, WA 44.6% 1,427,600 ---------- SUBTOTAL MSA RANK 1 - 25 POPS 7,510,100 44.6% 26 Phoenix, AZ 100.0% 2,118,500 30 Portland, OR 7.6% 106,200 39 Salt Lake City, UT 100.0% 1,115,800 65 Omaha, NE 93.8% 590,600 ---------- SUBTOTAL MSA RANK 26 - 75 POPS 3,931,100 23.3% 77 Tucson, AZ 70.6% 463,000 82 Tacoma, WA 73.6% 423,400 86 Albuquerque, NM 51.0% 290,300 102 Des Moines, IA 76.0% 303,800 109 Spokane, WA 100.0% 360,300 117 Colorado Springs, CO 69.5% 289,800 ---------- SUBTOTAL MSA RANK 76 - 125 POPS 2,130,600 12.6% 135 Eugene, OR 70.5% 193,800 141 Duluth, MN 51.0% 122,500 148 Salem, OR 7.6% 21,000 159 Provo, UT 100.0% 245,100 ---------- SUBTOTAL MSA RANK 126 - 175 POPS 582,400 3.5%
41 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- U S WEST NEW VECTOR
NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS - -------- -------------------------------- --------- ---------- -------------- 176 Springfield, IL 12.7% 24,500 190 Boise, ID 100.0% 205,900 196 Champaign-Urbana, IL 12.7% 21,800 210 Fort Collins, CO 90.0% 167,100 212 Bremerton, WA 73.6% 141,500 221 Fargo, ND 51.0% 76,400 ---------- SUBTOTAL MSA RANK 176 - 225 POPS 637,200 3.8% 230 Decatur, IL 12.7% 15,500 241 Pueblo, CO 34.0% 43,400 242 Olympia, WA 63.8% 104,400 243 Greely, CO 67.5% 92,800 250 Bloomington, IL 12.7% 15,900 267 Sioux Falls, SD 51.0% 65,500 270 Bellingham, WA 100.0% 123,400 ---------- SUBTOTAL MSA RANK 226 - 275 POPS 460,900 2.7% 276 Grand Forks, ND 51.0% 53,200 297 Great Falls, MI 70.0% 54,200 298 Bismark, ND 80.0% 69,200 299 Casper, WY 100.0% 63,300 ---------- SUBTOTAL MSA RANK 275+ POPS 239,900 1.4% ---------------------------------- TOTAL MSA POPS 15,492,200 92.0% ---------------------------------- Arizona 2 16.7% 33,200 Arizona 3 25.0% 35,000 Arizona 4 25.0% 27,900 Arizona 5 14.0% 12,900 Arizona 6 30.0% 48,100 Colorado 3 38.5% 86,500 Idaho 1 50.0% 100,500 Idaho 2 16.7% 9,800 Idaho 3 33.3% 4,800 Idaho 4 25.0% 30,300 Idaho 5 14.3% 20,700 Idaho 6 16.7% 44,900
42 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- U S WEST NEW VECTOR
NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS - -------- --------------- --------- ------ -------------- Illinois 2 2.5% 6,400 Illinois 4 0.1% 200 Illinois 5 12.7% 12,100 Illinois 6 7.7% 15,700 Illinois 7 7.7% 18,600 Iowa 1 7.2% 4,600 Iowa 2 33.2% 17,300 Iowa 7 13.3% 7,300 Iowa 8 8.3% 4,900 Iowa 10 22.6% 41,100 Iowa 11 7.2% 8,100 Iowa 14 5.6% 6,300 Iowa 15 6.7% 5,700 Iowa 16 8.3% 8,700 Minnesota 1 25.0% 12,700 Minnesota 2 11.1% 6,700 Minnesota 3 11.1% 6,300 Minnesota 4 50.0% 7,400 Minnesota 5 4.4% 9,200 Minnesota 6 5.9% 14,100 Minnesota 7 6.3% 10,600 Minnesota 8 10.0% 7,200 Minnesota 9 6.7% 9,300 Minnesota 10 6.3% 13,900 Minnesota 11 7.1% 14,400 Nebraska 1 8.1% 7,700 Nebraska 2 8.1% 2,700 Nebraska 3 6.0% 7,200 Nebraska 4 8.1% 3,100 Nebraska 5 7.4% 10,700 Nebraska 6 5.1% 5,300 Nebraska 7 9.0% 8,000 Nebraska 8 4.9% 3,000 Nebraska 9 1.7% 1,500 Nebraska 10 1.7% 1,500 New Mexico 4 W 57.1% 66,000 New Mexico 4 E 14.3% 16,100 New Mexico 6 II 12.5% 14,800
43 CELLULAR TRANSACTION ANALYSIS - -------------------------------------------------------------------------------- U S WEST NEW VECTOR
NET PERCENTAGE OF MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS -------- ---------------- ---------- ------ -------------- North Dakota 3 7.7% 7,700 North Dakota 4 16.7% 12,900 North Dakota 5 25.0% 13,800 Oregon 2 W 16.7% 8,600 Oregon 2 E 16.7% 1,700 Oregon 3 11.1% 15,700 Oregon 4 12.0% 23,600 Oregon 6 25.0% 39,600 South Dakota 1 14.0% 8,600 South Dakota 2 14.3% 3,600 South Dakota 3 16.7% 9,400 South Dakota 5 A 33.3% 3,800 South Dakota 5 B 33.3% 5,000 South Dakota 6 A 14.3% 700 South Dakota 6 B 14.3% 5,000 South Dakota 7 14.3% 9,600 South Dakota 8 12.5% 9,000 South Dakota 9 16.7% 15,000 Utah 1 25.0% 27,500 Utah 2 50.0% 15,100 Utah 3 16.7% 8,400 Utah 4 50.0% 35,100 Utah 6 20.0% 4,900 Washington 1 29.4% 64,500 Washington 3 33.3% 15,900 Washington 4 20.0% 20,400 Washington 8 20.0% 21,400 Wyoming 4 50.0% 64,200 Wyoming 5 100.0% 12,000 ---------------------------- TOTAL RSA POPS 1,353,700 8.0% ---------------------------- ---------------------------- TOTAL POPS 16,845,900 100.0% ----------------------------
- --------------------------------------- (a) Assumes $90 per RSA POP. 44 RELEVANT ISSUES RELATING TO ACORN VALUATION - - Acorn's markets are concentrated in areas with relatively weak demographics.
CONTROLLED MSAs ---------------------------------------- # OF MARKETS Above # OF MARKETS BELOW U.S. AVERAGE U.S. AVERAGE ------------------ ------------------ Population Density 8 26 Household Income 3 31 Traffic Density 5 29
- - Acorn's markets have a relatively high percentage of RSAs, which will in general not achieve the penetration of larger MSA markets, and hence have reduced value.
COMPANY % RSA POPs ----------------------- ---------- LIN Broadcasting 1% Cellular Communications 3% McCaw Cellular 3% GTE Mobilnet 7% Vanguard Cellular 11% Centennial Cellular 16% ACORN 20% U.S. Cellular 64%
45 RELEVANT ISSUES RELATING TO ACORN VALUATION - - Acorn's holdings of non-control interests, which typically carry a valuation discount of approximately 25 to 33%, are relatively high.
MINORITY INTEREST POPs AS A PERCENTAGE OF NET POPs --------------------------- Cellular Communications 0.5%(1) McCaw Cellular 3.8%(2) Vanguard Cellular 7.2% GTE Mobilnet 8.0% U.S. Cellular 15.8% Centennial Cellular 19.2% LIN Broadcasting 29.7% ACORN 30.2%
- -------------------- (1) Includes as control POPs all Air Touch/CCI Joint Venture control POPs. (2) Includes as control POPs all Air Touch/McCaw Joint Venture control POPs. 46 RELEVANT ISSUES RELATING TO ACORN VALUATION - ------------------------------------------------------------------------------- - - Given its portfolio of properties, Acorn's current penetration is relatively low.
REVENUE/SUBSCRIBER/ OPERATING CASH FLOW COMPANY PENETRATION MONTH MARGIN ----------------------- ----------- ------------------- ------------------- GTE Mobilnet 4.2% NA NA Cellular Communications 3.4% $65 NA LIN Broadcasting 3.4% $80 48% McCaw Cellular 3.3% $78 41% ACORN 2.4% $65 38% Vanguard Cellular 2.3% $63 24% U.S. Cellular 1.2% $72 23% Centennial Cellular 0.9% $78 51%
- - Acorn's POPs clearly have weaker standing than those of GTE.
ACORN GTE MOBILNET ------------------------------------- --------------------------------------- MSA RANK MAJORITY % MINORITY % MAJORITY % MINORITY % ---------- -------- ----- -------- ----- -------- ----- -------- ---- 1 to 25 0 0.0% 4,319 18.3% 12,704 44.0% 1,463 5.1% 26 to 75 6,208 26.4% 911 3.9% 4,590 15.9% 159 0.6% 76 to 125 4,909 20.9% 552 2.3% 3,998 13.9% 55 0.2% 126 to 175 949 4.0% 85 0.4% 2,220 7.7% 17 0.1% 176 to 225 299 1.3% 2 0.0% 424 1.5% 61 0.2% 226 to 275 452 1.9% 19 0.1% 623 2.2% 64 0.2% 276+ 227 1.0% 0 0.0% 327 1.1% 17 0.1% ------ ---- ----- ---- ------ ---- ----- --- Total MSA POPs 13,044 55.4% 5,887 25.0% 24,886 86.2% 1,834 6.4% RSAs 3,396 14.4% 1,214 5.2% 1,678 5.8% 462 1.6% ------ ---- ----- ---- ------ ---- ----- --- Total POPs 16,440 69.8% 7,102 30.2% 26,564 92.0% 2,296 8.0%
47 RELEVANT ISSUES RELATING TO ACORN VALUATION - ------------------------------------------------------------------------------- - - Looking out into the future, the wireless industry is expected to undergo significant changes related to increased competition. Due to these factors, as well as a general maturation of the business, Acorn's growth in operating results is expected to slow significantly beyond 1999. -- PCS buildout by late 1997/early 1998. -- ESMR ubiquitous coverage by 1999. -- Growth in importance of national brand names. - - Because of the characteristics of Acorn's POPs, when examining per POP valuation parameters, it is imperative that its properties be valued on a market by market basis. We find no market evidence to rebut the following ranges:
VALUE PER POP ----------------------- MSA RANK LOW HIGH ---------- ---- ---- 1 to 25 $250 $350 26 to 75 175 250 76 to 125 150 200 126 to 175 125 175 176 to 225 125 150 226 to 275 125 150 276+ 75 125 RSAs 90 90
48 PRELIMINARY CONTEL CELLULAR VALUATION FRAMEWORK - ------------------------------------------------------------------------------- MSA MARKET REVEIW
MAJORITY MSA POPs MINORITY MSA POPs --------------------- ----------------------- NET POPs % OF TOTAL NET POPs % OF TOTAL MSA RANKING (000s) MAJORITY (000s) MINORITY ------------------- -------- ---------- -------- ---------- 1-25 0 0.0% 4,484 74.6% 26-75 6,793 51.7 729 12.1 76-125 3,870 29.5 592 9.8 126-175 1,167 8.9 185 3.1 176-225 296 2.2 3 0.1 226-275 638 4.9 17 0.3 276-300 369 2.8 0 0.0 ------ ---- ----- ---- Total 13,133 100% 6,010 100% ====== ==== ===== ==== % of Total MSA POPs 68.6% 31.4%
49 PRELIMINARY CONTEL CELLULAR VALUATION FRAMEWORK - ------------------------------------------------------------------------------- MSA MARKET REVEIW
MARKET PROFILE ------------------------------------------------ MAJORITY MSA POPs MINORITY MSA POPs ---------------------- ---------------------- # MARKETS # MARKETS # MARKETS # MARKETS ABOVE U.S. BELOW U.S. ABOVE U.S. BELOW U.S. STATISTIC AVERAGE AVERAGE AVERAGE AVERAGE ------------------------------------------ ---------- ---------- ---------- ---------- 1992 POPs/Square Mile 8 26 14 15 1990-1995 POP Growth 13 21 25 4 % of Household Income in Excess of $50,000 3 31 14 15 High Profile POPs as % of Employee Base 13 21 15 14 Local Interstate Traffic Density 5 29 12 17 --- --- --- --- Total 42 128 80 65 === === === ===
50 PRELIMINARY CONTEL CELLULAR VALUATION FRAMEWORK - ------------------------------------------------------------------------------- MSA MARKET REVIEW (13.1mm MAJORITY MSA POPs)
1992 1990-1995 HIGH LOCAL POPs/ ---------------------- % HH PROFILE INTERSTATE CCXLA MSA 1992 SQUARE POP RETAIL SALES INC. MEDIAN POPs % TRAFFIC MARKET NET POPs RANK TOTAL POPs MILE GROWTH GROWTH >$50K HH INC. EMP BASE DENSITY - -------------------- -------- ---- ---------- ------- ------ ------------ ----- ------- -------- ---------- (000's) (000's) Nashville, TN 1,030 38 1,030 250 1.45% 3.71% 21.7% $28,799 21.0% 37,446 Norfolk, VA 975 39 1,015 755 1.99% 6.32% 20.0% $28,442 25.4% 68,673 Memphis, TN 1,006 41 1,006 434 1.04% 2.92% 18.3% $24,901 21.3% 37,240 Louisville, KS 903 47 903 641 0.04% 7.32% 16.2% $25,998 18.1% 40,050 Birmingham, AL 884 48 884 260 0.45% 6.44% 16.7% $24,633 25.7% 33,973 Richmond, VA 731 58 762 357 1.49% 3.95% 25.7% $32,912 25.8% 35,892 Fresno, CA 647 63 702 117 2.58% 6.62% 21.9% $27,326 24.6% 22,411 El Paso, TX 619 72 619 610 2.25% 7.38% 12.2% $20,884 17.9% 19,142 Bakersfield, CA 532 78 575 71 2.95% 6.19% 22.9% $28,797 22.2% 24,986 Knoxville, TN 483 85 510 314 0.59% 3.17% 17.1% $24,356 13.6% 45,378 Mobile, AL 488 89 488 171 0.68% 6.69% 15.8% $24,007 22.2% 25,499 Newport News, VA 429 95 448 712 1.60% 4.69% 18.0% $27,191 15.3% 43,572 Johnson City, TN 438 97 438 152 0.09% 3.28% 12.8% $22,887 12.0% 19,667 Chattanooga, TN 437 98 437 208 0.57% 2.59% 14.2% $23,845 17.4% 31,009 Lexington, KY 358 120 358 239 0.93% 8.22% 17.3% $24,886 17.3% 24,441 Pensacola, FL 357 122 357 210 1.48% 7.06% 18.8% $26,150 20.9% 30,529 Davenport, LA 348 124 348 203 (0.69%) 7.96% 20.7% $30,615 15.5% 13,304 Manchester, NH 201 127 348 397 1.80% 3.51% 36.4% $39,598 17.2% 42,295 Visalia, CA 301 130 327 68 2.45% 4.10% 13.6% $22,105 20.4% 0 Evansville, IN 279 134 311 158 0.06% 5.36% 15.1% $25,809 14.9% 5,910 Binghamton, NY 125 136 305 149 0.10% 4.30% 22.3% $29,430 12.8% 16,311 Rockford, IL 169 145 285 358 0.28% 6.21% 20.5% $31,185 10.9% 21,151 Roanoke, VA 92 169 230 194 0.15% 6.94% 15.3% $25,773 22.8% 29,056 Clarksville, TN 176 202 176 137 0.95% 3.98% 11.0% $21,086 15.9% 12,514 Tuscaloosa, AL 120 216 153 114 0.79% 5.39% 11.9% $20,449 19.1% 20,139 Las Cruces, NM 146 228 146 37 2.76% 5.08% 10.8% $18,273 21.5% 8,984 Burlington, VT 141 232 141 224 1.40% 2.39% 26.4% $31,921 17.6% 17,507 Florence, AL 120 248 131 105 (0.12%) 6.44% 12.2% $22,411 13.3% 0 Petersburg, VA 116 257 126 155 0.16% 6.04% 16.9% $26,669 15.9% 19,579 Anniston, AL 116 267 116 191 0.17% 6.67% 9.6% $20,765 10.7% 20,302 Rapid City, SD 107 280 107 17 1.54% 9.28% 15.6% $24,273 20.6% 7,620 Gadsden, AL 90 288 100 184 (0.12%) 5.13% 8.0% $18,290 13.3% 9,940 Elmira, NY 95 293 95 233 0.25% 2.16% 14.5% $24,953 13.8% 0 Owensboro, KY 78 294 87 188 0.00% 7.28% 11.6% $22,824 18.5% 0 - ----------------------------------------------------------------------------------------------------------------------------------- CCXLA weighted avg. based on total pops 229 0.98% 4.27% 15.7% $22,486 16.6% 23,304 % Above/(Below) Avg. (30.5%) (14.4%) (27.5%) (36.4%) (27.0%) (17.6%) (40.6%) - -----------------------------------------------------------------------------------------------------------------------------------
51 PRELIMINARY CONTEL CELLULAR VALUATION FRAMEWORK - ------------------------------------------------------------------------------- MSA MARKET REVIEW (6.0mm MINORITY MSA POPs)
1992 1990-1995 HIGH LOCAL POPs/ ---------------------- % HH PROFILE INTERSTATE CCXLA MSA 1992 SQUARE POP RETAIL SALES INC. MEDIAN POPs % TRAFFIC MARKET NET POPs RANK TOTAL POPs MILE GROWTH GROWTH >$50K HH INC. EMP BASE DENSITY - -------------------- -------- ---- ---------- ------- ------ ------------ ----- ------- -------- ---------- (000's) (000's) Los Angeles, CA 1,634 2 14,438 449 2.07% 6.54% 30.8% $33,853 18.5% 81,298 Washington, DC 1,341 8 3,791 1,350 1.78% 3.62% 44.0% $45,118 23.0% 102,876 San Francisco, CA 421 9 3,772 1,520 1.16% 6.42% 36.6% $38,443 27.9% 125,423 Houston, TX 160 10 3,572 529 1.12% 6.18% 22.9% $30,631 23.4% 91,974 Minneapolis, MN 755 14 2,519 546 1.66% 7.91% 26.7% $33,800 18.1% 43,187 San Jose, CA 172 24 1,536 1,188 1.28% 4.64% 44.9% $45,662 11.8% 128,258 Sacramento, CA 14 29 1,432 421 2.83% 6.23% 27.6% $32,012 22.6% 42,237 San Antonio, TX 408 30 1,352 537 1.92% 7.97% 15.5% $23,888 22.3% 40,760 Jacksonville, FL 132 42 970 301 2.40% 6.08% 21.5% $27,623 26.1% 37,165 Austin, TX 26 49 818 292 2.36% 8.53% 20.9% $26,784 22.5% 46,600 Oxnard, CA 78 65 696 374 2.03% 6.99% 38.1% $40,320 19.6% 0 Greenville, SC 72 69 656 311 1.16% 4.35% 14.0% $24,709 25.2% 26,315 Albuquerque, NM 277 79 572 117 2.57% 7.11% 15.9% $24,392 21.5% 32,423 Stockton, CA 5 84 503 356 2.33% 6.28% 21.4% $27,627 22.5% 33,585 Vallejo, CA 54 92 479 304 3.08% 5.59% 25.6% $32,781 19.6% 61,191 Santa Rosa, CA 46 106 408 254 2.57% 7.43% 29.3% $33,505 22.6% 0 Modesto, CA 4 110 395 262 3.32% 5.24% 19.1% $26,446 18.0% 22,047 Santa Barbara, CA 150 113 379 138 1.28% 5.22% 29.3% $32,650 19.0% 0 Salinas, CA 41 117 373 113 2.41% 6.14% 26.1% $31,878 19.6% 0 Beaumont, TX 16 121 357 162 -0.60% 6.40% 20.1% $29,410 18.7% 29,858 Orange County, NY 80 132 319 386 1.86% 4.04% 26.7% $33,407 18.9% 29,872 Reno, NV 3 153 266 42 2.27% 9.13% 24.1% $30,460 21.1% 25,472 Poughkeepsie, NY 66 158 266 330 1.18% 6.43% 35.1% $38,897 13.3% 39,558 Santa Cruz, CA 27 165 237 532 1.68% 7.42% 31.0% $33,294 15.1% 0 Galveston, TX 10 173 220 551 0.61% 6.10% 21.0% $29,177 20.3% 40,689 Chico, CA 2 195 189 115 1.82% 6.03% 11.9% $20,435 16.4% 0 Redding, CA 2 219 156 41 2.95% 4.42% 15.1% $23,280 22.3% 18,814 Anderson, SC 16 226 148 205 0.81% 5.25% 12.3% $24,627 11.6% 24,136 Yuba City, CA 1 255 127 102 1.69% 6.01% 16.4% $23,312 20.7% 0 - ---------------------------------------------------------------------------------------------------------------------------------- CCXLA weighted avg. based on total pops 743 1.82% 6.38% 31.0% $34,938 21.6% 76,100 % Above/(Below) Avg. 125.8% 59.4% 8.2% 25.6% 13.4% 7.4% 85.4% - ----------------------------------------------------------------------------------------------------------------------------------
52 GTE MOBILE COMMUNICATIONS BENCHMARKING CUSTOMERS (000s)
McCaw NYNEX AirTouch Sprint BellSouth USWest Bell Atlantic SW Bell Ameritech GTE PCS GTE MN CCI ----- ----- ------- ------ --------- ------ ------------- ------- --------- ------- ------ ----- 1Q93 1,439 410 774 428 1,524 435 753 1,513 646 1,156 804 352 2Q93 1,558 445 857 484 1,650 475 821 1,643 698 1,254 865 389 3Q93 1,695 486 934 539 1,769 517 893 1,777 755 1,364 930 434 4Q93 1,934 575 1,046 652 1,990 601 1,039 2,049 860 1,585 1,064 521 1Q94 2,117 644 1,131 725 2,144 665 1,148 2,206 949 1,718 1,150 568 2Q94 2,259 736 1,221 811 2,292 738 1,300 2,425 1,039 1,878 1,256 622
53 GTE MOBILE COMMUNICATIONS BENCHMARKING ANNUAL CUSTOMER GROWTH (%)
McCaw NYNEX AirTouch Sprint BellSouth USWest Bell Atlantic SW Bell Ameritech GTE PCS GTE MN CCI ----- ----- -------- ------ --------- ------ ------------- ------- --------- ------- ------ ----- 1Q93 30.8% 26.9% 34.4% 53.2% 43.2% 32.9% 40.1% 47.9% 30.8% 33.9% 31.8% 38.8% 2Q93 34.0% 29.2% 38.7% 52.3% 37.2% 33.3% 42.3% 47.6% 38.8% 36.3% 33.2% 43.4% 3Q93 35.4% 34.7% 42.4% 57.8% 37.1% 35.9% 44.7% 45.5% 44.9% 39.7% 35.7% 49.3% 4Q93 41.6% 47.0% 44.7% 66.5% 39.2% 45.0% 48.8% 45.0% 46.8% 45.4% 39.6% 59.0% 1Q94 47.1% 57.3% 46.1% 69.4% 40.7% 53.0% 52.5% 45.8% 46.9% 48.6% 43.1% 61.3% 2Q94 45.0% 65.4% 42.5% 67.5% 39.0% 55.4% 58.3% 47.6% 48.9% 49.7% 45.3% 59.6%
54 GTE MOBILE COMMUNICATIONS BENCHMARKING PENETRATION (%)
McCaw NYNEX AirTouch Sprint BellSouth USWest Bell Atlantic SW Bell Ameritech GTE PCS GTE MN CCI ----- ----- -------- ------ --------- ------ ------------- ------- --------- ------- ------ ----- 1Q93 2.4% 2.1% 2.4% 2.3% 3.2% 2.2% 2.2% 4.2% 3.0% 2.4% 2.3% 2.0% 2Q93 2.6% 2.4% 2.6% 2.6% 3.3% 2.4% 2.4% 4.6% 3.2% 2.6% 2.9% 2.2% 3Q93 2.8% 2.5% 2.8% 2.9% 3.6% 3.0% 2.6% 4.9% 3.4% 2.9% 3.1% 2.5% 4Q93 3.1% 2.8% 3.1% 3.1% 4.0% 3.3% 2.9% 5.9% 3.9% 3.3% 3.5% 2.9% 1Q94 3.4% 3.3% 3.2% 3.5% 4.3% 3.6% 3.3% 6.4% 4.3% 3.5% 3.8% 3.2% 2Q94 3.7% 3.6% 3.5% 3.9% 4.6% 4.1% 3.7% 6.9% 4.7% 3.9% 4.1% 3.5%
55 GTE MOBILE COMMUNICATIONS BENCHMARKING REV/COST/MONTH
McCaw NYNEX AirTouch Sprint BellSouth USWest GTE PCS GTE MN CCI ----- ----- -------- ------ --------- ------ ------- ------ --- 1Q93 84 75 88 70 75 74 70 70 70 2Q93 89 83 90 77 76 79 72 72 74 3Q93 87 83 86 74 73 78 71 70 73 4Q93 84 81 85 68 71 74 68 68 68 1Q94 81 77 79 69 68 70 67 68 67 2Q94 83 86 81 74 70 73 70 69 71
56 GTE MOBILE COMMUNICATIONS BENCHMARKING OPERATING CASH FLOW MARGIN
McCaw NYNEX AirTouch Sprint BellSouth USWEST GTE PCS GTE MN CCI ----- ----- -------- ------ --------- ------ ------- ------ --- 1Q93 45.1% 31.4% 41.0% 21.8% 40.8% 27.4% 35.1% 39.8% 24.2% 2Q93 47.0% 33.1% 44.9% 24.7% 41.6% 26.8% 38.0% 40.6% 32.5% 3Q93 47.6% 32.6% 46.5% 27.2% 41.4% 30.6% 38.5% 41.4% 32.2% 4Q93 40.6% 21.5% 38.2% 19.4% 40.9% 20.1% 23.8% 28.8% 13.3% 1Q94 40.8% 20.9% 46.1% 24.5% 42.8% 25.4% 33.7% 37.4% 26.2% 2Q94 41.5% 19.2% 46.7% 27.5% 44.6% 30.7% 38.9% 41.2% 34.2%
57 CONTEL CELLULAR - ------------------------------------------------------------------------------- COMPARISON OF MARKET CLUSTERS
PEN OCF >200K 100-200K 50-100K 20-50K 10-20K <10K ---- --- ----- -------- ------- ------ ------ ---- LIN 2.3% 48% 75% 25% -- -- -- -- McCaw (w/o LIN) 2.1% 43% 26% 33% 35% 5% -- 1% PacTel 2.1% 41% 77% 11% 8% 4% -- -- NYNEX 1.5% 36% 78% -- 22% -- -- -- Bell South 2.7% 40% 78% 10% 8% 4% -- -- Centel 2.4% 24% -- 58% -- 19% 23% -- CCI 1.6% 22% -- 41% 21% 17% 9% 12% Vanguard 1.5% 16% -- -- -- 63% -- 37% US Cellular 2.1% 14% -- -- -- 21% 15% 65%
58 CONTEL CELLULAR - ------------------------------------------------------------------------------- BENCHMARKING SEPTEMBER 1992 YTD
BELL MCCAW U.S. SOUTH CENTEL W/LIN PACTEL CELLULAR CCI NYNEX VANGUARD ----- ------ ----- ------ -------- ----- ----- -------- Operating Cash Flow % 40.3% 24.5% 44.7% 41.0% 13.8% 21.7% 35.7% 16.3% % Top 30 POPs 50.1% 0.0% 58.8% 76.8% 0.0% 0.0% 72.4% 0.0% Penetration 2.7% 2.4% 2.1% 2.1% 2.1% 1.6% 1.5% 1.5% R/C/M $71 $77 $91 $93 $106 $79 $88 $89
59 CONTEL CELLULAR INC. - -------------------------------------------------------------------------------- Margins and Market Cluster Size
WEIGHTED AVERAGE MARKET SEPT. YTD OPERATING CLUSTER SIZE (000) CASH FLOW MARGIN ----------------------- ------------------- Vanguard 33 16% US Cellular 11 14 CCI 65 22 Centel 105 24 McCaw 129 44 LIN 237 48 NYNEX 224 36 PacTel 299 41 BellSouth 252 40
60 ANALYSIS OF SELECTED PUBLICLY TRADED CELLULAR TELEPHONE COMPANIES SUMMARY INFORMATION (DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FULLY DILUTED FULLY LTM CURRENT FULLY MARKET DILUTED TOTAL LTM REPORTED MARKET PRICE DILUTED VALUE OF MARKET LTM NET REPORTED LTM EBITDA UNITED STATES CELLULAR COMPARABLES 10/17/94 SHARES EQUITY (a) CAP. (b) REVENUES EBITDA EBITDA (c) MARGIN - ---------------------------------- ------------ ------- ---------- ------------- -------- -------- ----------- -------- AIRTOUCH COMMUNICATIONS (PACTEL) $ 29.00 493.6 $14,314 $13,231 $1,096 $304 $425 28% CELLULAR COMMUNICATIONS, INC. 53.00 42.5 2,200 2,383 NA NA NA NA CELLULAR COMM. OF PUERTO RICO 37.12 13.3 492 532 49 5 5 10% CENTENNIAL CELLULAR CORP. 17.00 12.3 209 550 43 17 27 39% COMMNET CELLULAR (CELLULAR, INC.) 25.12 11.9 299 493 53 7 2 13% CONTEL CELLULAR INC. 23.75 100.2 2,380 4,416 461 107 186 23% INTERCEL, INC. 10.25 10.1 104 116 17 4 4 25% LIN BROADCASTING CORPORATION 136.75 52.5 7,177 8,989 777 307 430 40% UNITED STATES CELLULAR CORPORATION 32.00 80.7 2,582 2,862 302 54 84 18% VANGUARD CELLULAR SYSTEMS, INC. 27.25 39.9 1,092 1,378 150 30 30 20%
5 YEAR 1994 OCF GROWTH ESTIMATED UNITED STATES CELLULAR COMPARABLES RATE (d) 1995 EBITDA (e) - ---------------------------------- ------------ --------------- AIRTOUCH COMMUNICATIONS (PACTEL) 18.8 $505 CELLULAR COMMUNICATIONS, INC. 21.0 NA CELLULAR COMM. OF PUERTO RICO 57.0 8 CENTENNIAL CELLULAR CORP. 24.1 34 COMMNET CELLULAR (CELLULAR, INC.) 44.0 3 CONTEL CELLULAR INC. 28.8 240 INTERCEL, INC. NA NA LIN BROADCASTING CORPORATION 13.5 489 UNITED STATES CELLULAR CORPORATION 43.9 120 VANGUARD CELLULAR SYSTEMS, INC. 33.6 40 - ------------------------------------------------------------------------------------------------------------------------------ UNITED STATES SUMMARY INFORMATION: Maximum: 40% Mean: 24% Median: 23% Minimum: 10% - ------------------------------------------------------------------------------------------------------------------------------
- ------------------------- (a) Fully diluted, assuming the conversion of exercisable in-the-money stock options and warrants. (b) Market Capitalization = Fully Diluted Market Value + Total Debt + Preferred Stock + Minority Interest - Cash & Equivalents. (c) Reported EBITDA plus tax-effected earnings from unconsolidated subsidiaries less tax-effected minority interests. (d) Source: Merrill Lynch Research. (e) Merrill Lynch estimated EBITDA growth rate multiplied by EBITDA (including tax effected unconsolidated earnings and tax effected minority interest). 61 MERRILL LYNCH & CO. ANALYSIS OF SELECTED PUBLICLY -- TRADED CELLULAR TELEPHONE COMPANIES
STOCK PRICE INFORMATION ------------------------------------------ PRICE AS MSA POPS 52 WEEK 52 WEEK A % OF 52 TICKER/ NET POPS AS A % OF UNITED STATES CELLULAR COMPARABLES 10/17/94 LOW HIGH WEEK HIGH EXCHANGE (MM) NET POPS (a) - ---------------------------------- -------- ------- ------- --------- -------- -------- ------------ AIRTOUCH COMMUNICATIONS (PACTEL) $ 29.00 $ 19.88 $ 28.25 102.7% ATI/NYSE 35.0 98%(c) CELLULAR COMMUNICATIONS, INC. 53.00 40.25 54.50 97.2% COMMA/OTC 7.9 97% CELLULAR COMM. OF PUERTO RICO 37.12 18.25 31.00 119.7% CCPR/OTC 3.0 91% CENTENNIAL CELLULAR CORP. 17.00 14.00 24.25 70.1% CYCL/OTC 4.2 84% COMMNET CELLULAR (CELLULAR, INC.) 25.12 15.25 24.50 102.5% CELS/OTC 3.2 20% CONTEL CELLULAR INC. 23.75 13.00 22.00 108.0% CCXLA/OTC 23.2 80% INTERCEL, INC. 10.25 7.75 10.25 100.0% ICEL/OTC 0.8 33% LIN BROADCASTING CORPORATION 136.75 102.75 135.25 101.1% LINB/OTC 25.7 99% UNITED STATES CELLULAR CORPORATION 32.00 23.38 39.25 81.5% USM/AMEX 24.3 38% VANGUARD CELLULAR SYSTEMS, INC. 27.25 26.50 39.75 68.6% VCELA/OTC 6.5 90% Averages: 13.9 60%
AVERAGE AVERAGE MONTHLY AVERAGE MONTHLY CELLULAR MONTHLY CELLULAR OPERATING CELLULAR SERVICE CASH FLOW OPERATING MARKETS REVENUE/ (b)/ CASH FLOW UNITED STATES CELLULAR COMPARABLES SERVED SUBSCRIBERS PENETRATION SUBSCRIBER SUBSCRIBER MARGIN - ---------------------------------- ------- ----------- ----------- ---------- ---------- --------- AIRTOUCH COMMUNICATIONS (PACTEL) 61 1,221,000 3.49% $74 $34 46% CELLULAR COMMUNICATIONS, INC. 21 289,500 3.68% 66 NA NA CELLULAR COMM. OF PUERTO RICO 12 47,800 1.59% 86 9 10% CENTENNIAL CELLULAR COPR. 15 57,830 1.38% 78 39 51% COMMNET CELLULAR (CELLULAR, INC.) 80 88,686 2.81% 44 2* 5% CONTEL CELLULAR INC. 108 621,600 2.68% 64 25 39% INTERCEL, INC. 7 23,783 3.03% 57 14 24% LIN BROADCASTING CORPORATION 6 918,000 3.57% 86 39 46% UNITED STATES CELLULAR CORPORATION 208 331,000 1.36% 71 21 30% VANGUARD CELLULAR SYSTEMS, INC. 36 169,000 2.61% 63 15 23%
- -------------------------------------------------------------------------------------------------------------- UNITED STATES SUMMARY INFORMATION: MAXIMUM: 1,221,000 3.68% $86 39 51% MEAN: 376,820 2.62% $69 24 34% MEDIAN: 289,500 2.77% 71 26 40% MINIMUM: 23,783 1.36% 44 9 10% - ---------------------------------------------------------------------------------------------------------------
RBOC & GTE CELLULAR COMPARABLES (d) - ----------------------------------- AMERITECH 4.31% $64 BELL ATLANTIC 3.30% 74 BELLSOUTH 4.29% 66 NYNEX 3.19% 73 SOUTHWESTERN BELL 5.78% 63 US WEST 3.59% 72 GTE 3.45% 70
- -------------------------------- * Excluded from summary statistics (b) Cellular Operating Cash Flow = Estimated Cellular Service Revenue - Cost of Cellular Service + Depreciation. (c) % MSA POPs represent domestic only. (d) Source: Merrill Lynch Research; DLJ Wireless Communications, Summer 1994. 62 MERRILL LYNCH & CO. ANALYSIS OF SELECTED PUBLICLY TRADED CELLULAR TELEPHONE COMPANIES SUMMARY INFORMATION (DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FULLY FULLY DILUTED DILUTED MARKET MARKET TOTAL TOTAL MARKET TOTAL CAP. OF CAP. OF MARKET MARKET VALUE OF MARKET CELLULAR CELLULAR CAP./ CAP./ EQUITY CAP. ASSETS FRANCHISE LTM NET LTM UNITED STATES CELLULAR COMPARABLES (MM) (a) (MM) (b) (MM) (c) (MM) (d) REVENUE EBITDA - ---------------------------------- -------- -------- -------- --------- ------- ------ AIRTOUCH COMMUNICATIONS (PACTEL) $14,314 $13,231 $7,949 (g) $6,989 (g) 12.1x 31.1x CELLULAR COMMUNICATIONS, INC. 2,200 2,383 2,326 (i) 2,313 (i) NA NA CELLULAR COMM. OF PUERTO RICO 492 532 532 485 10.8 106.4* CENTENNIAL CELLULAR CORP. 209 550 551 517 12.7 20.2 COMMNET CELLULAR (CELLULAR, INC.) 299 493 489 419 9.2 NM CONTEL CELLULAR INC. 2,380 4,416 4,402 3,858 9.6 23.7 INTERCEL, INC. 104 116 114 101 6.8 30.0 LIN BROADCASTING CORPORATION 7,177 8,989 8,127 (f) 7,695 (f) 11.6 20.9 UNITED STATES CELLULAR CORPORATION 2,582 2,862 2,847 2,562 9.5 34.2 VANGUARD CELLULAR SYSTEMS, INC. 1,092 1,378 1,348 (j) 1,266 (j) 9.2 45.9
-------------------------------------------------- UNITED STATES SUMMARY INFORMATION: MAXIMUM: 12.7x 45.9x MEAN: 10.2 29.4 MEDIAN: 9.6 30.0 MINIMUM: 6.8 20.2 --------------------------------------------------
MARKET MARKET MARKET CAP. OF CAP. OF CAP. OF CELLULAR MSA CELLULAR CELLULAR ASSETS/ ASSETS/NET FRANCHISE/ UNITED STATES CELLULAR COMPARABLES NET POPS MSA POPS (e) NET POPS - ---------------------------------- --------- ------------ ---------- AIRTOUCH COMMUNICATIONS (PACTEL) $227 $231 $200 CELLULAR COMMUNICATIONS, INC. 296 303 294 CELLULAR COMM. OF PUERTO RICO 177 186 161 CENTENNIAL CELLULAR CORP. 131 139 123 COMMNET CELLULAR (CELLULAR, INC.) 155 412 133 CONTEL CELLULAR INC. 189 215 166 INTERCEL, INC. 145 256 129 LIN BROADCASTING CORPORATION 316 320 300 UNITED STATES CELLULAR CORPORATION 117 161 105 VANGUARD CELLULAR SYSTEMS, INC. 208 222 196
- -------------------------------------------------------------------------------- UNITED STATES SUMMARY INFORMATION: MAXIMUM: $316 $412 300 MEAN: 196 244 181 MEDIAN: 199 227 181 MINIMUM: 117 139 105 - --------------------------------------------------------------------------------
ESTIMATED PRIVATE PUBLIC MKT. LTM OCF TOT. MKT. TOTAL MSA POPS MARKET (PREMIUM) MULTIPLE/ CAP./1995 DEBT/ AS A % OF VALUE/ DISCOUNT TO 1993 GROWTH ESTIMATED UNITED STATES CELLULAR COMPARABLES NET POPS NET POPS POP (h) PMV RATE EBITDA - ---------------------------------- -------- --------- --------- ----------- ----------- --------- AIRTOUCH COMMUNICATIONS (PACTEL) $2 98% $165 -38% 1.65 26.2x CELLULAR COMMUNICATIONS, INC. NA 97% 269 -10% NA NA CELLULAR COMM. OF PUERTO RICO 19 91% 112 -58% 1.87 67.8 CENTENNIAL CELLULAR CORP. 60 84% 173 24% 0.84 16.2 COMMNET CELLULAR (CELLULAR, INC.) 72 20% 130 -19% NM 156.3* CONTEL CELLULAR INC. 87 80% 177 -7% 0.82 18.4 INTERCEL, INC. 14 33% 185 22% NA NA LIN BROADCASTING CORPORATION 72 99% 273 -16% 1.55 18.4 UNITED STATES CELLULAR CORPORATION 11 38% 157 25% 0.78 23.8 VANGUARD CELLULAR SYSTEMS, INC. 44 90% 191 -9% 1.36 34.3
- ---------------------------------------------------------------------------------------------------------------------------- UNITED STATES SUMMARY INFORMATION: MAXIMUM: $87 99% $273 25% 1.87 67.8x MEAN: $42 72% $183 -9% 1.27 29.3 MEDIAN: $44 89% $169 -13% 1.36 23.8 MINIMUM: $2 20% $112 -58% 0.78 16.2 - ----------------------------------------------------------------------------------------------------------------------------
- ------------------------ * Excluded from summary statistics (a) Fully Diluted Market Value assumes the proceeds from exercisable in-the- money stock options and warrants are used to repurchase shares. (b) Market Capitalization = Fully Diluted Market Value + Total Debt + Preferred Stock + Minority Interest - Cash & Equivalents. (c) Market Capitalization of Cellular Assets = Total Market Capitalization - Minority Interest - Estimated Public Market Value of Non-Cellular Assets. (d) Market Capitalization of Cellular Franchise = Market Capitalization of Cellular Assets - Net Working Capital - Net PP&E. (e) Market Capitalization of MSA Cellular Franchise = Market Capitalization of Cellular Assets - RSA Cellular Assets at 90$ per POP. (f) Assumes non-cellular assets, consisting of seven network affiliated television stations and a specialty publishing operation, trade at 9.0x trailing cash flow of $87.0 million. (g) Excludes international cellular assets consisting of 54.7 million POPs at $80.00 per POP, non-cellular assets consisting of 1,167,000 paging units at $550 per unit and AirTouch's investment in Qualcomm at market. (h) Source: Merrill Lynch Research, except Intercel (Kagan). (i) Excludes Note receivable from Cellular Communications of Puerto Rico at $55.3 million. (j) Excludes 2.5 million Geotek shares at market. 63
MERRILL LYNCH & CO. COMPARISON OF SELECTED PUBLICLY -- TRADED CELLULAR TELEPHONE COMPANIES - ----------------------------------------------------------------------------------------------- SUMMARY DATA RANKINGS MARKET VALUE OF EQUITY ($MM) TOTAL MARKET CAPITALIZATION ($MM) - ----------------------------------------------- ---------------------------------------------- 1 AIRTOUCH CORPORATION (PACTEL) $14,314 1 AIRTOUCH CORPORATION (PACTEL) 13,231 2 LIN BROADCASTING CORPORATION 7,177 2 LIN BROADCASTING CORPORATION 8,989 3 UNITED STATES CELLULAR CORPORATION 2,582 3 CONTEL CELLULAR INC. 4,416 4 CONTEL CELLULAR INC. 2,380 4 UNITED STATES CELLULAR CORPORATION 2,862 5 CELLULAR COMMUNICATIONS, INC. 2,200 5 CELLULAR COMMUNICATIONS, INC. 2,383 6 VANGUARD CELLULAR SYSTEMS, INC. 1,092 6 VANGUARD CELLULAR SYSTEMS, INC. 1,378 7 CELLULAR COMM. OF PUERTO RICO 492 7 CENTENNIAL CELLULAR CORP. 550 8 COMMNET CELLULAR (CELLULAR, INC.) 299 8 CELLULAR COMM. OF PUERTO RICO 532 9 CENTENNIAL CELLULAR CORP. 209 9 COMMNET CELLULAR (CELLULAR, INC.) 493 10 INTERCEL 104 10 INTERCEL 116 AVERAGE: $ 3,085 AVERAGE: $ 3,495
MARKET CAPITALIZATION OF CELLULAR FRANCHISE ($MM) - ------------------------------------------------- 1 LIN BROADCASTING CORPORATION 7,695 2 AIRTOUCH CORPORATION (PACTEL) 6,989 3 CONTEL CELLULAR INC. 3,858 4 UNITED STATES CELLULAR CORPORATION 2,562 5 CELLULAR COMMUNICATIONS, INC. 2,313 6 VANGUARD CELLULAR SYSTEMS, INC. 1,266 7 CENTENNIAL CELLULAR CORP. 517 8 CELLULAR COMM. OF PUERTO RICO 485 9 COMMNET CELLULAR (CELLULAR, INC.) 419 10 INTERCEL 101 AVERAGE: $2,620
MARKET CAPITALIZATION / NET POPS MARKET CAPITALIZATION OF CELLULAR ASSETS / NET POPS - ------------------------------------------------- --------------------------------------------------- 1 AIRTOUCH CORPORATION (PACTEL) $378 1 LIN BROADCASTING CORPORATION $316 2 LIN BROADCASTING CORPORATION 350 2 CELLULAR COMMUNICATIONS, INC. 296 3 CELLULAR COMMUNICATIONS, INC. 303 3 AIRTOUCH CORPORATION (PACTEL) 227 4 VANGUARD CELLULAR SYSTEMS, INC. 213 4 VANGUARD CELLULAR SYSTEMS, INC. 208 5 CONTEL CELLULAR INC. 190 5 CONTEL CELLULAR INC. 189 6 CELLULAR COMM. OF PUERTO RICO 177 6 CELLULAR COMM. OF PUERTO RICO 177 7 COMMNET CELLULAR (CELLULAR, INC.) 156 7 COMMNET CELLULAR (CELLULAR, INC.) 155 8 INTERCEL 148 8 INTERCEL 145 9 CENTENNIAL CELLULAR CORP. 131 9 CENTENNIAL CELLULAR CORP. 131 10 UNITED STATES CELLULAR CORPORATION 118 10 UNITED STATES CELLULAR CORPORATION 117 AVERAGE: $216 AVERAGE: $196
MARKET CAPITALIZATION OF CELLULAR FRANCHISE / NET POPS - ------------------------------------------------------- 1 LIN BROADCASTING CORPORATION $300 2 CELLULAR COMMUNICATIONS, INC. 294 3 AIRTOUCH CORPORATION (PACTEL) 200 4 VANGUARD CELLULAR SYSTEMS, INC. 196 5 CONTEL CELLULAR INC. 166 6 CELLULAR COMM. OF PUERTO RICO 161 7 COMMNET CELLULAR (CELLULAR, INC.) 133 8 INTERCEL 129 9 CENTENNIAL CELLULAR CORP. 123 10 UNITED STATES CELLULAR CORPORATION 105 AVERAGE: $181
64
MSA POPS AS A % OF NET POPS PENETRATION - ------------------------------------------- -------------------------------------------- 1 LIN BROADCASTING CORPORATION 99% 1 CELLULAR COMMUNICATIONS, INC. 3.68% 2 AIRTOUCH CORPORATION (PACTEL) 98% 2 LIN BROADCASTING CORPORATION 3.57% 3 CELLULAR COMMUNICATIONS, INC. 97% 3 AIRTOUCH CORPORATION (PACTEL) 3.49% 4 CELLULAR COMM. OF PUERTO RICO 91% 4 INTERCEL 3.03% 5 VANGUARD CELLULAR SYSTEMS, INC. 90% 5 COMMNET CELLULAR (CELLULAR, INC.) 2.81% 6 CENTENNIAL CELLULAR CORP. 84% 6 CONTEL CELLULAR INC. 2.68% 7 CONTEL CELLULAR INC. 80% 7 VANGUARD CELLULAR SYSTEMS, INC. 2.61% 8 UNITED STATES CELLULAR CORPORATION 38% 8 CELLULAR COMM. OF PUERTO RICO 1.59% 9 INTERCEL 33% 9 CENTENNIAL CELLULAR CORP. 1.38% 10 COMMNET CELLULAR (CELLULAR, INC.) 20% 10 UNITED STATES CELLULAR CORPORATION 1.36% AVERAGE: 73% AVERAGE: 2.62%
LTM EBITDA MARGIN - -------------------------------------------- 1 LIN BROADCASTING CORPORATION 40% 2 CENTENNIAL CELLULAR CORP. 39% 3 AIRTOUCH CORPORATION (PACTEL) 28% 4 INTERCEL 24% 5 CONTEL CELLULAR INC. 23% 6 VANGUARD CELLULAR SYSTEMS, INC. 20% 7 UNITED STATES CELLULAR CORPORATION 18% 8 CELLULAR COMM. OF PUERTO RICO 10% 9 COMMNET CELLULAR (CELLULAR, INC.) 5% * AVERAGE: 25%
AVERAGE MONTHLY CELLULAR SERVICE REVENUE / SUBSCRIBER AVERAGE MONTHLY CELLULAR OPERATING CASH FLOW / SUBSCRIBER - ------------------------------------------------------ --------------------------------------------------------- 1 CELLULAR COMM. OF PUERTO RICO $86 1 CENTENNIAL CELLULAR CORP. $39 2 LIN BROADCASTING CORPORATION 86 2 LIN BROADCASTING CORPORATION 39 3 CENTENNIAL CELLULAR CORP. 78 3 AIRTOUCH CORPORATION (PACTEL) 34 4 AIRTOUCH CORPORATION (PACTEL) 74 4 CONTEL CELLULAR INC. 25 5 UNITED STATES CELLULAR CORPORATION 71 5 UNITED STATES CELLULAR CORPORATION 21 6 CONTEL CELLULAR INC. 64 6 VANGUARD CELLULAR SYSTEMS, INC. 15 7 VANGUARD CELLULAR SYSTEMS, INC. 63 7 INTERCEL 14 8 INTERCEL 57 8 CELLULAR COMM. OF PUERTO RICO 9 9 COMMNET CELLULAR (CELLULAR, INC.) 44 9 COMMNET CELLULAR (CELLULAR, INC.) 2 * AVERAGE: $69 AVERAGE: $24
AVERAGE MONTHLY CELLULAR OPERATING CASH FLOW MARGIN - --------------------------------------------------- 1 CENTENNIAL CELLULAR CORP. 51% 2 AIRTOUCH CORPORATION (PACTEL) 46% 3 LIN BROADCASTING CORPORATION 46% 4 CONTEL CELLULAR INC. 39% 5 UNITED STATES CELLULAR CORPORATION 30% 6 INTERCEL 24% 7 VANGUARD CELLULAR SYSTEMS INC. 23% 8 CELLULAR COMM. OF PUERTO RICO 10% 9 COMMNET CELLULAR (CELLULAR, INC.) 5% AVERAGE: 34% *
65 Merrill Lynch & Co.
CELLULAR ACQUISITION COMPARABLES Comparison of Selected Cellular Telephone Company Acquisitions - ------------------------------------------------------------------------------------------------------------------------------------ (in millions, except per POP data) Aggregate Price Paid -------------------------- Acquiror Transaction Adj. Trans. Adjusted Date Target Target Business Description Value(a) Value(b) POPs - ---- --------------------------------- ------------------------------------------ ----------- ----------- -------- 10/11/94* Compagnie Generale des Eaux An indirect 10% stake in SBC's SBC Communications Washington / Baltimore operating region. $215.0 $215.0 0.73 4/5/94* Independent Cellular Network Interests in Pennsylvania and Iowa. $182.5 $182.5 1.40 C-TEC Corporation 2/25/94* Southwestern Bell Interests in Buffalo, Rochester, Albany Associated Communications Corp. and Glens Falls, New York. 680.0 648.5 3.60 11/26/93 Southwestern Bell A 10% stake in the Dallas SMSA Limited GTE Mobilnet Inc. Partnership for $120 mm. 1,200.0(l) 1,200.0(l) 4.20 11/11/93* Southwestern Bell Interests in Syracuse, Utica, Ithaca, Syracuse Telephone Cortland and Auburn, New York. 150 - 250(p) 150 - 250 1.30 Utica Telephone Finger Lakes Telephone 8/19/93* Century Telephone Enterprises Non-wireline operator in Texas and Celutel Inc. Mississippi. 143.3 127.1 1.11 8/16/93* AT&T (Pending) McCaw Cellular Communications McCaw is the largest non-wireline operator in the United States. 19,248.2(o) 15,454.8 60.44 8/12/93* InterCel, Inc. Wireline interests in the Bangor, Unity Cellular Systems, Inc. Maine MSA and Maine RSA 2 & Maine RSA 3 (Augusta) 35.2 28.1 0.45 12/31/92* ALLTEL Corporation Interests in MSAs serving Fort Smith Contel Cellular and Fayetteville, Arkansas and Arkansas RSA 1 and 8 and Oklahoma RSA 4. 71.3 71.3 0.53 8/03/92 Associated Communications Interests in Albany, Glen Falls, and McCaw Cellular Communications Rochester, New York. 85.6 85.6 0.68 6/08/92* ALLTEL Corporation Interests in Houston/ Galveston/ Beaumont, STL Communications, Inc.(m) Texas MSA; Little Rock, Arkansas MSA and several RSA interests in Arkansas and Texas. 34.3 - 58.0 34.3 - 58.0 0.33
66
Price Paid Per POP -------------------------- Transaction Adjusted Acquiror Value per Trans. Value Date Target Target Business Description POP(a) per POP(b) % MSA - ---- --------------------------------- ----------------------------------------- ----------- ------------ -------- 10/11/94* Compagnie Generale des Eaux An indirect 10% stake in SBC's SBC Communications Washington / Baltimore operating region. $295 $295 88.5% 4/5/94* Independent Cellular Network Interests in Pennsylvania and Iowa. $130 $130 65.0% C-TEC Corporation 2/25/94* Southwestern Bell Interests in Buffalo, Rochester, Albany Associated Communications Corp. and Glens Falls, New York. 189 180 60.0% 11/26/93 Southwestern Bell A 10% stake in the Dallas SMSA Limited GTE Mobilnet Inc. Partnership for $120 mm. 286 286 93.1% 11/11/93* Southwestern Bell Interests in Syracuse, Utica, Ithaca, Syracuse Telephone Cortland and Auburn, New York. 115 - 192** 115 - 192** NA Utica Telephone Finger Lakes Telephone 8/19/93* Century Telephone Enterprises Non-wireline operator in Texas and Celutel Inc. Mississippi. 129 115 100.0% 8/16/93* AT&T (Pending) McCaw Cellular Communications McCaw is the largest non-wireline operator in the United States. 318 256 94.9% 8/12/93* InterCel, Inc. Wireline interests in the Bangor, Unity Cellular Systems, Inc. Maine MSA and Maine RSA 2 & Maine RSA 3 (Augusta) 79 63 33.2% 12/31/92* ALLTEL Corporation Interests in MSAs serving Fort Smith Contel Cellular and Fayetteville, Arkansas and Arkansas RSA 1 and 8 and Oklahoma RSA 4. 134 134 58.0% 8/03/92 Associated Communications Interests in Albany, Glen Falls, and McCaw Cellular Communications Rochester, New York. 126 126 100.0% 6/08/92* ALLTEL Corporation Interests in Houston/ Galveston/ Beaumont, STL Communications, Inc.(m) Texas MSA; Little Rock, Arkansas MSA and several RSA interests in Arkansas and Texas. 104.0 - 177.0** 104.0 - 177.0** NA
67 Merrill Lynch & Co.
CELLULAR ACQUISITION COMPARABILES COMPARISON OF SELECTED CELLULAR TELEPHONE COMPANY ACQUISITIONS ----------------------------------------------------------------------------------------------------------------------------------- (IN MILLIONS, EXCEPT PER POP DATA) AGGREGATE PRICE PAID --------------------------------- ACQUIROR TRANSACTION ADJ. TRANS. DATE TARGET TARGET BUSINESS DESCRIPTION VALUE (a) VALUE (b) - ---- ---------------------------- -------------------------------------------- ------------- ------------- 5/27/92* Sprint Corporation Majority Interests in 42 MSA and 21 1267.2-2187.8 1267.2-2187.8 Centel Corporation (n) RSA markets and minority interests in 34 MSA and 22 RSA markets located predominantly in the Midwest and South. 9/24/91* Bell Atlantic Corporation Interests in Connecticut, Rhode Island, 2,317.1 2,102.4 Metro Mobile CTS, Inc. (d) Massachusetts, North Carolina, Arizona, New Mexico and Texas. 7/18/91* McCaw Cellular Communications Interests in Daytona Beach, Florida 107.0 107.0 Crowley Cellular Telecomm. and Waco, Texas. 5/28/91* Ameritech Interests in St. Louis, Illinois, Missouri, 512.0 512.0 CyberTel Financial Corp./ Minneapolis, Hawaii and in the United States CyberTel RSA Cellular LP/ and British Virgin Islands. 5/07/91* Comcast Corp. Interests in New Jersey and Pennsylvania, 1,129.6 1,065.9 Metromedia Co. (e) including the Philadelphia metropolitan area, New Brunswick and Long Branch, NJ. 4/11/91* BellSouth Interests in 18 midwest cellular telephone 454.8 454.8 McCaw Cellular markets: 7 in Indiana, 10 in Wisconsin and Communications (f) 1 in Illinois. 11/12/90 US WEST (g) Interests in the Northwest and Southwest 2,388.1 2,071.1 US WEST NewVector (California, Colorado, Arizona, Washington, Utah, Idaho, Montana, and Oregon). 7/25/90 Pacific Telesis (h) Interests in MI and all major Ohio markets, 1,822.8 1,750.7 Cellular Communications except Toledo, and 5 markets in Puerto Rico, including San Juan-Caguas, Mayaguez, and Arecibo. 4/20/90* GTE Corporation Interests in 12 Southeastern markets, 710.0 661.4 (i) Providence Journal including Greensboro-Winston-Salem and Raleigh-Durham, North Carolina, Charleston, South Carolina; Savannah, Georgia and Lynchburg, Virginia. 1/11/90 McCaw Cellular Communications A 5.56% stake in the Dallas non-wireline 1,093.5 (r) 1,093.5 Cellular Communications partnership for $60.8 mm. 11/20/89* McCaw Cellular Communications Interests in top MSA markets, including 6,676.0 6,639.7 Lin Broadcasting Corp. New York, Los Angeles, Philadelphia, Dallas and Houston. Also involved in broadcasting.
ACQUIROR ADJUSTED DATE TARGET TARGET BUSINESS DESCRIPTION POPs - ---- --------------------- -------------------------------------------- -------- 5/27/92* Sprint Corporation Majority Interests in 42 MSA and 21 16.69 Centel Corporation (n) RSA markets and minority interests in 34 MSA and 22 RSA markets located predominantly in the Midwest and South. 9/24/91* Bell Atlantic Corporation Interests in Connecticut, Rhode Island, 11.52 Metro Mobile CTS, Inc. (d) Massachusetts, North Carolina, Arizona, New Mexico and Texas. 7/18/91* McCaw Cellular Communications Interests in Daytona Beach, Florida 0.61 Crowley Cellular Telecomm. and Waco, Texas. 5/28/91* Ameritech Interests in St. Louis, Illinois, Missouri, 2.80 CyberTel Financial Corp./ Minneapolis, Hawaii and in the United States CyberTel RSA Cellular LP/ and British Virgin Islands. 5/07/91* Comcast Corp. Interests in New Jersey and Pennsylvania, 5.19 Metromedia Co. (e) including the Philadelphia metropolitan area New Brunswick and Long Branch, NJ. 4/11/91* BellSouth Interests in 18 midwest cellular telephone 2.53 McCaw Cellular markets: 7 in Indiana, 10 in Wisconsin and Communications (f) 1 in Illinois. 11/12/90 US WEST (g) Interests in the Northwest and Southwest 16.90 US WEST NewVector (California, Colorado, Arizona, Washington, Utah, Idaho, Montana, and Oregon). 7/25/90 Pacific Telesis (h) Interests in MI and all major Ohio markets, 9.71 Cellular Communications except Toledo, and 5 markets in Puerto Rico, including San Juan-Caguas, Mayaguez, and Arecibo. 4/20/90* GTE Corporation Interests in 12 Southeastern markets, 3.50 Providence Journal including Greensboro-Winston-Salem and Raleigh-Durham, North Carolina, Charleston, South Carolina; Savannah, Georgia and Lynchburg, Virginia. 1/11/90 McCaw Cellular Communications A 5.56% stake in the Dallas non-wireline 3.88 Cellular Communications partnership for $60.8 mm. 11/20/89* McCaw Cellular Communications Interests in top MSA markets, including 18.90 Lin Broadcasting Corp. New York, Los Angeles, Philadelphia, Dallas and Houston. Also involved in broadcasting.
PRICE PAID PER POP ------------------------------- TRANSACTION ADJUSTED ACQUIROR VALUE PER TRANS. VALUE DATE TARGET TARGET BUSINESS DESCRIPTION POP (a) PER POP (b) - ---- -------- ----------------------------------------------- ------------ -------------- 5/27/92* Sprint Corporation Majority Interests in 42 MSA and 21 76.0-131.0** 76.0-131.0** Centel Corporation(n) RSA markets and minority interests in 34 MSA and 22 RSA markets located predominantly in the Midwest and South. 9/24/91* Bell Atlantic Corporation Interests in Connecticut, Rhode Island, 201 183 Metro Mobile CTS, Inc. (d) Massachusetts, North Carolina, Arizona, New Mexico and Texas. 7/18/91* McCaw Cellular Communications Interests in Daytona Beach, Florida 175 175 Crowley Cellular Telecomm. and Waco, Texas. 5/28/91* Ameritech Interests in St. Louis, Illinois, Missouri, 183 183 CyberTel Financial Corp./ Minneapolis, Hawaii and in the United States CyberTel RSA Cellular LP/ and British Virgin Islands. 5/07/91* Comcast Corp. Interests in New Jersey and Pennsylvania, 218 205 Metromedia Co. (e) including the Philadelphia metropolitan area, New Brunswick and Long Branch, NJ. 4/11/91* BellSouth Interests in 18 midwest cellular telephone 180 180 McCaw Cellular markets: 7 in Indiana, 10 in Wisconsin and Communications (f) 1 in Illinois. 11/12/90 US WEST (g) Interests in the Northwest and Southwest 141 123 US WEST NewVector (California, Colorado, Arizona, Washington, Utah, Idaho, Montana, and Oregon). 7/25/90 Pacific Telesis (h) Interests in MI and all major Ohio markets, 188 180 Cellular Communications except Toledo, and 5 markets in Puerto Rico, including San Juan-Caguas, Mayaguez, and Arecibo. 4/20/90* GTE Corporation Interests in 12 Southeastern markets, 203 189 (i) Providence Journal including Greensboro-Winston-Salem and Raleigh-Durham, North Carolina, Charleston, South Carolina; Savannah, Georgia and Lynchburg, Virginia. 1/11/90 McCaw Cellular Communications A 5.56% stake in the Dallas non-wireline 282 282 Cellular Communications partnership for $60.8 mm. 11/20/89* McCaw Cellular Communications Interests in top MSA markets, including 353 351 Lin Broadcasting Corp. New York, Los Angeles, Philadelphia, Dallas and Houston. Also involved in broadcasting.
ACQUIROR DATE TARGET TARGET BUSINESS DESCRIPTION % MSA - ---- -------- ----------------------------------------------- ----- 5/27/92* Sprint Corporation Majority Interests in 42 MSA and 21 87.4% Centel Corporation (n) RSA markets and minority interests in 34 MSA and 22 RSA markets located predominantly in the Midwest and South. 9/24/91* Bell Atlantic Corporation Interests in Connecticut, Rhode Island, NA Metro Mobile CTS, Inc. (d) Massachusetts, North Carolina, Arizona, New Mexico and Texas. 7/18/91* McCaw Cellular Communications Interests in Daytona Beach, Florida 90.3% Crowley Cellular Telecomm. and Waco, Texas. 5/28/91* Ameritech Interests in St. Louis, Illinois, Missouri, NA CyberTel Financial Corp./ Minneapolis, Hawaii and in the United States CyberTel RSA Cellular LP/ and British Virgin Islands. 5/07/91* Comcast Corp. Interests in New Jersey and Pennsylvania, NA Metromedia Co. (e) including the Philadelphia metropolitan area, New Brunswick and Long Branch, NJ. 4/11/91* BellSouth Interests in 18 midwest cellular telephone 96.7% McCaw Cellular markets: 7 in Indiana, 10 in Wisconsin and Communications (f) 1 in Illinois. 11/12/90 US WEST (g) Interests in the Northwest and Southwest NA US WEST NewVector (California, Colorado, Arizona, Washington, Utah, Idaho, Montana, and Oregon). 7/25/90 Pacific Telesis (h) Interests in MI and all major Ohio markets, 94.9% Cellular Communications except Toledo, and 5 markets in Puerto Rico, including San Juan-Caguas, Mayaguez, and Arecibo. 4/20/90* GTE Corporation Interests in 12 Southeastern markets, NA Providence Journal including Greensboro-Winston-Salem and Raleigh-Durham, North Carolina, Charleston, South Carolina; Savannah, Georgia and Lynchburg, Virginia. 1/11/90 McCaw Cellular Communications A 5.56% stake in the Dallas non-wireline 100.0% Cellular Communications partnership for $60.8 mm. 11/20/89* McCaw Cellular Communications Interests in top MSA markets, including 100.0% Lin Broadcasting Corp. New York, Los Angeles, Philadelphia, Dallas and Houston. Also involved in broadcasting.
68 Merrill Lynch & Co.
CELLULAR ACQUISITION COMPARABLES Comparison of Selected Cellular Telephone Company Acquisitions ----------------------------------------------------------------------------------------------------------------------------------- (in millions, except per POP data) AGGREGATE PRICE PAID ------------------------------ ACQUIROR TRANSACTION ADJ. TRANS. DATE TARGET TARGET BUSINESS DESCRIPTION VALUE(a) VALUE(b) - ---- --------------------------------- --------------------------------- ------------- ------------ 10/27/89* LIN Broadcasting Corp.(k) 46.3% interest in New York City 1,941.0 1,941.0 Metromedia Co. cellular market. 10/3/89* Contel Cellular Interest in 13 markets, including 1,299.3 1,233.7 McCaw Cellular Communications Birmingham, Alabama, Louisville, (Southeastern POPs) Kentucky, Memphis and Nashville, Tennessee. 1/9/89 British Telecom plc(l) British Telecom acquired a 22% 7,100.2 6,694.0 McCaw Cellular Communications stake in the largest cellular telephone company in the United States.
ACQUIROR ADJUSTED DATE TARGET TARGET BUSINESS DESCRIPTION POPs - ---- --------------------------------- --------------------------------- -------- 10/27/89* LIN Broadcasting Corp. (k) 46.3% interest in New York City 7.22 Metromedia Co. cellular market. 10/3/89* Contel Cellular Interest in 13 markets, including 6.10 McCaw Cellular Communications Birmingham, Alabama, Louisville, (Southeastern POPs) Kentucky, Memphis and Nashville, Tennessee. 1/9/89 British Telecom plc (l) British Telecom acquired a 22% 50.30 McCaw Cellular Communications stake in the largest cellular telephone company in the United States.
PRICE PAID PER POP -------------------------- TRANSACTION ADJUSTED ACQUIROR VALUE PER TRANS. VALUE DATE TARGET TARGET BUSINESS DESCRIPTION POP(a) PER POP(b) % MSA - ---- --------------------------------- --------------------------------- ----------- ------------ ---- 10/27/89* LIN Broadcasting Corp. (k) 46.3% interest in New York City 269 269 NA Metromedia Co. cellular market. 10/3/89* Contel Cellular Interest in 13 markets, including 213 202 NA McCaw Cellular Communications Birmingham, Alabama, Louisville, (Southeastern POPs) Kentucky, Memphis and Nashville, Tennessee. 1/9/89 British Telecom plc (l) British Telecom acquired a 22% 141 133 96.7% McCaw Cellular Communications stake in the largest cellular telephone company in the United States.
All Transactions: Maximum $353 $351 Mean 193 185 Minimum 79 63 - ---------------------------------------------- Change of Control Transactions*: Maximum $353 $351 Mean 187 178 Minimum 79 63 - ---------------------------------------------- Non-Change of Control Transactions: Maximum $295 $295 Mean 208 203 Minimum 126 123 - ----------------------------------------------
69 Merrill Lynch & Co. CELLULAR ACQUISITION COMPARABLES Comparison of Selected Cellular Telephone Company Acquisitions - -------------------------------------------------------------------------------- (in millions, except per POP data) - ------------------------------------ * Change of control transaction. ** Midpoint of range used in summary multiples. *** Excluded from summary multiples. (a) Transaction value is defined as market value of equity on a fully-diluted basis plus preferred stock plus debt less cash less estimated value of non-cellular operations. (b) Adjusted transaction value represents transaction value less property, plant and equipment and net working capital. Adjusted transaction value is meant to represent the value of the license itself, as opposed to the value of the ongoing business. (c) Adjusted population or POPs equals the total population of a market multiplied by the percentage interest held by the target; no distinction is made between RSA and MSA POPs. (d) Assumes $215 million value for distribution properties. (e) Assumes $64 million value for media properties. (f) Value based on $360 million purchase price plus $50 million of debt forgiven by BellSouth plus 35% interest in Rochester mobile phone system (280,000 POPs @ $160 per POP). (g) US WEST acquired the remaining 19% interest in US WEST New Vector for US WEST stock. The transaction value and adjusted transaction are calculated on a price per share of $36.25 for US WEST and assumes 100% was acquired at this price. (h) Assumes market value of assets and licenses contributed by PacTel and Cellular Communications to joint venture are equal and that PacTel paid $87 million for 5% of Cellular Communications after the spinoff of certain operations. (i) Based on GTE press release in 8-K filing dated 4/20/90, excluding PP&E but not net working capital. (j) Post-offer, McCaw owns approximately 52% of LIN shares outstanding; transaction values are calculated as if 100% acquired and assume LIN's media properties valued at $1.26 billion. (k) Offer represented exercise of LIN's right of first refusal in response to McCaw's bid for NYC market on 10/3/89 and acquisition of 2.1% minority interests. Assumes market value of $850 million preferred stock issued is equal to fair market value and that no debt was assumed. Balance sheet information not disclosed. (l) Transaction and adjusted transaction values are calculated as if 100% of the equity was acquired. (m) Assumes a $2,500-$3,000 per access line valuation for telephone company segment, a $2,000 per subscriber valuation for cable television segment, and a $550 per pager valuation for paging segment; also includes $20 million valuation for STL's interest in NYNEX / DPI, a joint venture. (n) Assumes a $1,200-$1,800 per access line valuation for telephone company segment. Adjusted to exclude 63,000 access lines sold to Century Telephone in April, 1992, and Century's assumption of $15 million in preferred stock. $120 million in cash is used in the calculation to reflect this transaction. (o) Assumes a merger price of $60.125 at announcement. (p) Industry analyst estimates. Midpoint of $153 per POP used in change of control analysis. 70 SUMMARY OF SELECTED MINORITY CLOSEOUTS FROM 1/14/88 - 10/14/94 STOCK OR CASH TRANSACTIONS
PREMIUMS PAID OVER PRICE PER SHARE % Change of ----------------------------------------------------------- Initial to 6 Months 1 Month 1 Day 1 Day LTM LTM Final Offer Prior Prior Prior After High Low ----------- -------- ------- ----- ----- ---- ---- All Deals - --------- Mean 11.7% 40.0% 43.4% 31.7% 10.9% 1.8% 85.9% Median 4.6 33.3 33.3 21.3 7.4 2.2 60.7 High 240.8 480.0 533.3 322.2 137.5 123.5 660.0 Low (10.7) (66.2) (8.4) (19.3) (15.6) (47.9) (20.5) Deals Under $250 Million - ------------------------ Mean 7.6% 41.1% 45.7% 33.0% 9.6% 0.5% 86.4% Median 4.5 33.7 34.7 23.2 7.7 0.0 66.9 High 50.0 480.0 533.3 322.2 137.5 123.5 660.0 Low (9.3) (66.2) (8.4) (19.3) (15.6) (47.9) (20.5) Deals Over $250 Million - ----------------------- Mean 24.0% 36.3% 35.5% 25.4% 15.4% 6.5% 84.1% Median 8.5 33.3 32.5 18.9 7.4 5.3 57.0 High 240.8 130.8 87.5 66.7 57.9 62.2 350.0 Low (10.7) (43.9) (2.5) 1.8 (3.2) (46.3) 21.3
71 SUMMARY OF SELECTED MINORITY CLOSEOUTS FROM 1/14/88 - 10/14/94
STOCK AND OTHER NON-CASH TRANSACTIONS ----------------------------------------------------------------------- PREMIUMS PAID OVER PRICE PER SHARE ---------------------------------------------------- % Change of Initial to 6 Months 1 Month 1 Day 1 Day All Deals Final Offer Prior Prior Prior After - --------- ----------- -------- ------- ------ ----- Mean 5.7% 34.7% 46.9% 30.9% 11.4% Median 0.0 34.0 33.3 19.4 34.9 High 240.8 245.5 533.3 322.2 533.3 Low (10.7) (66.2) (2.5) (9.0) 7.9 Deals Under $250 Million - ------------------------ Mean 6.2% 36.5% 51.0% 33.5% 9.9% Median 4.2 34.7 33.3 20.1 6.2 High 26.7 245.5 533.3 322.2 137.5 Low (9.3) (66.2) 7.9 (9.0) (15.1) Deals Over $250 Million - ----------------------- Mean 5.4% 30.0% 36.8% 24.4% 15.4% Median 0.0 28.3 32.9 18.8 7.4 High 240.8 106.0 87.5 66.7 57.9 Low (10.7) (43.9) (2.5) 1.8 (3.2)
CASH TRANSACTIONS ------------------------------------------------------------------------- PREMIUMS PAID OVER PRICE PER SHARE ----------------------------------------------------- % Change of Initial to 6 Months 1 Month 1 Day 1 Day All Deals Final Offer Prior Prior Prior After - --------- ----------- -------- ------- ------ ------ Mean 10.4% 50.2% 36.8% 31.9% 9.8% Median 4.9 30.4 34.7 24.6 9.5 High 50.0 480.0 120.0 120.0 42.9 Low 0.0 (29.7) (8.4) (19.3) (15.6) Deals Under $250 Million - ------------------------ Mean 11.7% 48.2% 37.7% 32.2% 9.1% Median 5.3 29.8 36.0 26.8 9.8 High 50.0 480.0 120.0 120.0 38.8 Low 0.0 (29.7) (8.4) (19.3) (15.6) Deals Over $250 Million - ----------------------- Mean 5.7% 65.6% 29.5% 29.8% 15.8% Median 4.5 36.4 23.3 22.4 2.3 High 12.5 130.8 61.4 62.2 42.9 Low 0.0 29.6 3.7 4.9 2.2
72 ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
% OWNED BY EQUITY VALUE ($MIL) ACQUIROR ON OFFER PER SHARE ------------------ ANNOUCEMENT ACQUIROR/ ANNOUCEMENT ----------------------------------- MINORITY DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION ----------- -------- ----------- -------- ---- ---------- ----- -------- 09/13/94 Investor Group 69.0% N/A $5.50 NA $10 $3 LDB Corp 09/08/94 GTE Corp. 90.0% N/A $22.50 NA $2,240 $224 Contel Cellular Inc. 08/24/94 Dole Food Co Inc. 83.0% N/A $14.00 NA $426 $72 Castle & Cooke Homes Inc. 07/28/94 WMX Technologies Inc. 78.6% $7.86 $8.85 12.6% $1,639 $397 Chemical Waste Management 06/30/94 Parkway Co. 51.3% $14.59 $17.25 18.2% $25 $12 EB Inc. 06/09/94 Investor Group 53.8% N/A $1.43 NA $2 $1 S & M Co. 04/26/94 Burlington Resources Inc. 87.1% N/A $4.48 NA $330 $43 Diamond Shamrock Offshore 03/15/94 MFS Communications Co. 7.0% N/A $11.00 NA $201 $187 Centex Telemanagement Inc. 03/14/94 Sea Containers Ltd. 41.9% N/A $2.68 NA $129 $75 Orient Express Hotels Inc. 01/07/94 Holderbank Financiere Glaris 95.0% $7.65 $7.65 0.0% $1,034 $52 Holnam Inc. 10/18/93 La Quinta Motor Inns Inc. 11.4% N/A $13.00 NA $52 $46 La Quinta Motor Inns LP 10/14/93 Valero Energy Corp. 49.0% N/A $12.10 NA $230 $117 Valero Natural Gas Partners LP 10/13/93 Medco Containment 54.2% $25.00 $27.25 9.0% $267 $123 Services Inc. Medical Marketing Group Inc. 09/22/93 Primerica Corp. 27.0% N/A $36.99 NA $5,419 $3,956 Travelers Corp.
PREMIUM PAID OVER PER SHARE PRICE ------------------------------------------------------ ANNOUCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION ----------- -------- -------- ------- ----- ----- ---- --- ----------- 09/13/94 Investor Group 37.5% 22.2% 22.2% 15.8% (4.3%) 57.1% Cash LDB Corp 09/08/94 GTE Corp. 38.5% 23.3% 26.8% (2.7%) (6.3%) 73.1% Cash Contel Cellular Inc. 08/24/94 Dole Food Co Inc. 3.7% 33.3% 20.4% (1.8%) (11.1%) 47.4% Cash Castle & Cooke Homes Inc. 07/28/94 WMX Technologies Inc. (17.7%) 1.1% 10.6% 7.3% (22.2%) 26.4% Common Stock Chemical Waste Management 06/30/94 Parkway Co. 56.8% 50.0% 43.8% 1.5% 0.0% 56.8% Common Stock EB Inc. & Cash 06/09/94 Investor Group 90.7% 52.5% 20.4% 20.4% (4.7%) 90.7% Cash S & M Co. 04/26/94 Burlington Resources Inc. (29.7%) 8.6% (3.1%) (0.4%) (33.6%) 12.0% Cash Diamond Shamrock Offshore Tender Offer 03/15/94 MFS Communications Co. 63.0% 120.0% 120.0% 4.8% (2.2%) 144.4% Cash Centex Telemanagement Inc. Tender Offer 03/14/94 Sea Containers Ltd. 34.0% 78.7% 114.4% (6.8%) (14.2%) 114.4% Common Stock Orient Express Hotels Inc. Tender Offer 01/07/94 Holderbank Financiere Glaris 61.1% 5.5% 13.3% 0.3% (1.3%) 80.0% Cash Holnam Inc. 10/18/93 La Quinta Motor Inns Inc. 44.4% 33.3% 33.3% 14.3% (1.9%) 36.8% Cash La Quinta Motor Inns LP Tender Offer 10/14/93 Valero Energy Corp. 51.3% 36.3% 18.0% 11.3% (1.2%) 38.3% Cash Valero Natural Gas Merger Partners LP 10/13/93 Medco Containment 29.8% (8.4%) (19.3%) 4.3% (19.9%) 13.5% Cash Services Inc. Merger Medical Marketing Group Inc. 09/22/93 Primerica Corp. 33.3% 15.1% 2.8% (2.0%) (4.8%) 21.3% Common Stock Travelers Corp. Tender Offer
73 ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
EQUITY % OWNED BY VALUE ($MIL) ACQUIROR ON OFFER PER SHARE ---------------- ANNOUNCEMENT ACQUIROR/ ANNOUNCEMENT ---------------------------- MINORITY DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION - ------------ ------------------------------- ------------ -------- ------ ---------- ------ -------- 09/20/93 Valley Fashions Corp. 95.0% N/A $46.00 NA $1,288 $64 West Point-Pepperrell (Valley Fashions) 08/26/93 McGraw-Hill Inc 50.0% N/A N/A NA $338 $169 Macmillan/McGraw-Hill School 08/17/93 Time Warner Entertainment Co. 50.0% N/A N/A NA $70 $35 Six Flags Entertainment Corp. 02/19/93 National Mutual Insurance Co. 55.0% N/A $5.80 NA $4 $2 Celina Financial Corp. 01/04/93 Investor Group 52.0% N/A $9.50 NA $25 $12 United Medical Corp.
PREMIUM PAID OVER PER SHARE PRICE -------------------------------------------------------------- ANNOUNCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION - ----------- ------------------------------ -------- ------- ----- ----- ----- ----- ------------ 09/20/93 Valley Fashions Corp. -4.7% -5.4% -7.8% -15.6% 11.5% -20.5% Cash West Point-Pepperrell (Valley Fashions) 08/26/93 McGraw-Hill Inc N/A N/A N/A N/A N/A N/A Cash Macmillan/McGraw-Hill School Tender Offer 08/17/93 Time Warner Entertainment Co. N/A N/A N/A N/A N/A N/A Cash Six Flags Entertainment Corp. Tender Offer 02/19/93 National Mutual Insurance Co. 480.0% 36.5% 36.5% 16.0% -10.8% 480.0% Cash Celina Financial Corp. Tender Offer 01/04/93 Investor Group 31.0% 49.0% 49.0% 4.1% -2.6% 55.1% Cash United Medical Corp. Tender Offer
EQUITY % OWNED BY VALUE ($MIL) ACQUIROR ON OFFER PER SHARE ---------------- ANNOUNCEMENT ACQUIROR/ ANNOUNCEMENT ---------------------------- MINORITY DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION - ------------ ------------------------------- ------------ -------- ------ ---------- ------ -------- 11/13/92 Rust International Corp. 55.8% N/A $18.75 NA $419 $185 Brand Cos Inc. 03/02/92 WR Grace & Co 83.4% N/A $19.00 NA $464 $77 Grace Energy Corp 02/24/92 Unocal Corp 96.0% N/A $11.68 NA $2,925 $117 Unocal Exploration Corp 02/06/92 Charter Co. 82.3% N/A $7.25 NA $239 $42 Spelling Entertainment Inc. 10/16/91 Time Warner Inc. 82.0% N/A $82.50 NA $8,994 $1,619 American Television & Comm. 05/01/91 Tele-Communications Inc. 53.2% $4.75 $16.19 240.8% $2,327 $1,089 United Artists Entertainment 03/01/91 Air & Water Technologies Corp. 82.0% $18.27 $18.92 3.6% $272 $49 Metcalf & Eddy Cos. Inc. 01/31/91 Murphy Oil Corp 61.1% $19.39 $17.31 -10.7% $985 $383 Odeco 02/06/91 BHP Holdings 50.1% $40.00 NA NA $1,055 $528 Hamilton Oil
PREMIUM PAID OVER PER SHARE PRICE -------------------------------------------------------------- ANNOUNCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION - ----------- ------------------------------ -------- ------- ----- ----- ----- ----- ------------ 11/13/92 Rust International Corp. -4.5% 10.3% 4.9% -6.3% -21.5% 33.9% Common Stock Brand Cos Inc. Merger 03/02/92 WR Grace & Co 13.4% 61.7% 31.0% 10.9% 0.0% 0.7% Cash Grace Energy Corp Tender Offer 02/24/92 Unocal Corp 2.7% 19.8% 18.3% 1.6% N/A N/A Common Stock Unocal Exploration Corp Merger 02/06/92 Charter Co. 34.9% 48.7% 52.6% 20.8% -3.3% 7.4% Common Stock Spelling Entertainment Inc. Merger 10/16/91 Time Warner Inc. 82.3% 87.5% 66.7% 57.9% 32.3% 32.8% Con. Pfd. American Television & Comm. Exchange Stock Merger 05/01/91 Tele-Communications Inc. 61.9% 29.5% 19.9% 8.8% N/A N/A Common Stock United Artists Entertainment Merger 03/01/91 Air & Water Technologies Corp. 42.8% 22.1% 20.1% 0.9% N/A N/A Common Stock Metcalf & Eddy Cos. Inc. Merger 01/31/91 Murphy Oil Corp -12.4% -2.5% 1.8% -3.2% N/A N/A Common Stock Odeco Tender 02/06/91 BHP Holdings 18.5% 16.8% 25.0% 26.0% 11.9% 58.4% Cash Hamilton Oil Tender Offer
74 ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
% OWNED BY EQUITY VALUE ($MIL) ACQUIROR ON OFFER PER SHARE ------------------- ANNOUCEMENT ACQUIROR/ ANNOUCEMENT ------------------------------- MINORITY DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION - ----------- -------------------------------- ----------- -------- ------ ---------- ----- -------- 11/12/90 U.S. West Inc. 81.0% $36.00 $44.00 22.2% $1,850 $350 U.S. West NewVector Group 9/26/90 Pier 1 Imports 54.0% $12.00 $12.00 0.0% $42 $19 Sunbelt Nursery Group 7/31/90 Freeport-McMoran Inc. 81.5% $10.50 $11.00 4.8% $1,292 $239 Freeport-McMoran Oil & Gas Co. 7/6/90 Renault Vehicles 44.5% $6.00 $6.25 4.2% $186 $103 Mack Trucks 5/17/90 Kansas City Southern Industries 87.1% $14.00 $15.85 13.2% $270 $35 DST Systems 5/9/90 Primerica Corp. 82.8% $11.06 $11.80 6.7% $285 $49 American Capital Mgmt. & Research 3/19/90 De Georges 51.0% $24.00 $25.00 4.2% $78 $38 LPL Technologies 2/26/90 American Express 68.4% $11.45 $12.90 12.7% $1,245 $394 Shearson Lehman Hutton 1/24/90 Imetal SA 65.6% $15.50 $17.00 9.7% $151 $52 Copperweld Corp.
PREMIUM PAID OVER PER SHARE PRICE --------------------------------------------------------- ANNOUCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION - ----------- -------------------------------- -------- ------- ----- ----- ---- ----- ---------------- 11/12/90 U.S. West Inc. 47.9% 74.3% 44.3% 28.0% 2.9% 122.8% Common Stock U.S. West NewVector Group Merger 9/26/90 Pier 1 Imports 84.6% 41.2% 37.1% 2.1% 0.0% 128.6% Cash Sunbelt Nursery Group Tender Offer 7/31/90 Freeport-McMoran Inc. 15.8% 49.2% 37.5% 8.6% (15.4%) 54.4% Common Stock Freeport-McMoran Oil & Gas Co. Merger 7/6/90 Renault Vehicles 13.6% 22.0% 19.0% (3.8%) (47.9%) 35.1% Cash Mack Trucks Tender Offer 5/17/90 Kansas City Southern Industries 47.4% 54.6% 24.3% 7.5% 4.8% 76.1% Cash DST Systems Tender Offer 5/9/90 Primerica Corp. 36.8% 36.8% 40.9% 29.3% 18.0% 43.0% Common Stock American Capital Mgmt. Merger & Research 3/19/90 De Georges 42.9% 44.9% 28.2% 11.1% 0.0% 163.2% Cash & Preferred LPL Technologies Tender 2/26/90 American Express (43.9%) 18.6% 18.6% 7.4% (46.3%) 27.4% Common Stock Shearson Lehman Hutton Merger 1/24/90 Imetal SA 23.6% 31.4% 7.8% 7.9% 6.3% 51.1% Cash Copperweld Corp. Tender Offer
75 ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
% OWNED BY EQUITY VALUE ($MIL) ACQUIROR ON OFFER PER SHARE ------------------- ANNOUNCEMENT ACQUIROR/ ANNOUCEMENT ------------------------------- MINORITY DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION - ------------ ------------------------------- ----------- -------- ------ ---------- ------- -------- 1/15/91 Fuji Heavy Industries 49.5% $6.00 $8.50 41.7% $420 $208 Subaru of America 4/9/90 Canadian Pacific Ltd. 55.8% $21.50 $19.50 -9.3% $185 $82 Soo Line Corp. 12/20/89 National Intergroup 44.1% $4.00 $4.43 10.8% $106 $59 Permian Partners 10/5/89 Ogden Corp. 68.3% $14.75 $15.13 2.6% $114 $36 ERC Environmental 10/3/89 Esselte AB 78.0% $40.00 $46.50 16.3% $956 $210 Esselte Business Systems Inc. 9/22/89 Dow Jones & Co. 67.0% $18.00 $21.00 16.7% $1,993 $658 Telerate, Inc. 8/4/89 Jefferson Smurfit Group 78.0% $38.00 $43.00 13.2% $497 $109 PLC/Morgan Stanley Leveraged Equity Fund II L.P. Jefferson Smurfit Corporation 7/31/89 Montedison S.p.A. 72.0% $37.00 $37.00 0.0% $1,639 $459 Erbamont NV 7/31/89 Montedison S.p.A. 81.0% $49.00 $51.00 4.1% $3,306 $628 Himont Incorporated 6/9/89 Primerica 69.0% $20.50 $20.50 0.0% $1,385 $429 A.L. Williams corp. 6/9/89 Henley Group, Inc. 80.0% $20.50 $22.25 8.5% $815 $163 Fisher Scientific Group Inc. 5/24/89 Tele-Communications Inc. 75.0% $32.25 $32.25 0.0% $401 $100 WestMarc Communications Inc. 5/19/89 Carlson Hospitality Group 80.0% $14.50 $14.88 2.6% $165 $33 TGI Fridays Inc. 1/17/89 Paramount Communications 74.8% $7.50 $9.50 26.7% $187 $47 TVX Broadcast Group 12/14/88 Ingram Industries 59.0% $12.50 $12.50 0.0% $90 $37 Micro D 12/6/88 General Electric 54.0% $22.50 $22.50 0.0% $602 $277 FGIC Corp 12/6/88 Investor (Amini) 69.0% $5.87 $5.87 0.0% $65 $20 Sage Energy 12/1/88 RTZ Corp. 60.5% $11.79 $12.63 7.1% $619 $244 Indal Ltd.
PREMIUM PAID OVER PER SHARE PRICE -------------------------------------------------------- ANNOUNCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION ---- ------ ----- ----- ----- ----- ---- --- ----------- 1/15/91 Fuji Heavy Industries 47.8% 44.7% 61.9% 38.8% 0.0% 70.0% Cash Subaru of America Merger 4/9/90 Canadian Pacific Ltd. 3.3% 12.2% 11.4% (3.7%) (24.6%) 14.7% Cash Soo Line Corp. Tender Offer 12/20/89 National Intergroup (21.2%) 26.6% 26.6% 14.3% (36.7%) 86.5% Cash Permian Partners Tender Offer
76
10/5/89 Ogden Corp. 89.0% 78.0% 61.4% 23.5% 15.3% 108.7% Cash ERC Environmental Tender Offer 10/3/89 Esselte AB 36.8% 38.8% 24.2% 8.1% 22.8% 69.1% Cash Esselte Business Systems Inc. Tender Offer 9/22/89 Dow Jones & Co. 52.7% 37.7% 3.0% 5.0% 3.1% 57.0% Cash Telerate, Inc. Tender Offer 8/4/89 Jefferson Smurfit Group 20.3% 62.3% 38.7% 12.4% 13.5% 74.6% Cash PLC/Morgan Stanley Leveraged Tender Offer Equity Fund II L.P. Jefferson Smurfit Corporation 7/31/89 Montedison S.p. A. 23.3% 33.3% 18.9% 1.0% 2.4% 45.1% Cash/Warrents Erbamont NV Tender Offer 7/31/89 Montedison S.p. A. 22.5% 32.5% 15.6% 7.4% 6.8% 54.5% Cash/Warrents Himont Incorporated Tender Offer 6/9/89 Primerica 41.4% 33.3% 14.7% 13.9% 13.1% 34.3% Common Stock A.L. Williams corp. Merger 6/9/89 Henley Group, Inc. 36.9% 14.1% 15.6% 9.9% 7.2% 58.9% Cash Fisher Scientific Group Inc. Tender Offer 5/24/89 Tele-Communications Inc. 79.2% 55.4% 19.4% 6.2% 7.1% 98.5% Cash or Pfd WestMarc Communications Inc. Tender Offer 5/19/89 Carlson Hospitality Group 29.3% 14.4% 12.3% 0.0% 8.2% 95.1% Cash TGI Fridays Inc. Tender Offer 1/17/89 Paramount Communications 245.5% 533.3% 322.2% 137.5% 123.5% 660.0% Cash TVX Broadcast Group Tender Offer 12/14/88 Ingram Industries 33.3% 33.3% 19.0% 2.0% 5.3% 88.7% Cash Micro D Tender Offer 12/6/88 General Electric 36.4% 23.3% 22.4% 2.3% 14.6% 60.7% Cash FGIC Corp Merger 12/6/88 Investor (Amini) (7.9%) 9.2% 11.8% 11.8% (9.7%) 11.8% Cash Sage Energy Merger 12/1/88 RTZ Corp. 34.7% 20.3% (9.0%) (15.1%) (15.1%) (9.0%) Cash Indal Ltd. Tender Offer
77 ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
% OWNED BY EQUITY VALUE ($MIL) ACQUIROR ON OFFER PER SHARE ------------------- ANNOUNCEMENT ACQUIROR/ ANNOUCEMENT ------------------------------- MINORITY DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION - ------------ -------------------------------- ----------- -------- ------ ---------- ------ -------- 12/1/88 Network Security Corporation 56.0% $14.50 $17.38 19.9% $69 $30 Interactive Technologies, Inc. 11/18/88 Management 51.0% $80.00 $90.00 12.5% $991 $486 Henely Manufacturing Corp. 10/6/88 Bally Manufacturing Corp. 71.0% $5.34 $5.34 0.0% $84 $24 U.S. Health Inc. 10/4/88 Qintex Australia Limited 53.0% $15.50 $15.50 0.0% $150 $71 Princeville Corporation 9/28/88 Nontedison SpA 72.7% $33.50 $35.00 4.5% $1,019 $278 Ausimont NV 9/16/88 Investors (Warburg) 63.0% $8.50 $8.50 0.0% $89 $33 Coast America 8/15/88 MGC Merger Company (a) 75.0% $10.25 $11.13 8.6% $94 $24 Malrite Communications 6/15/88 Albert Energy Co. Ltd. (b) 57.0% $11.48 $11.48 0.0% $231 $100 Chieftain Development 5/2/88 Management Group 70.0% $15.00 $22.50 50.0% $168 $50 Thompson Medical Co. 4/26/88 S.H. Holdings 77.0% $10.50 $11.75 11.9% $96 $22 Gruen Marketing 4/25/88 DC Holdings Inc. 76.0% $35.00 $35.00 0.0% $90 $22 Diamond Crystal Salt 4/22/88 Carl C. Ichan (c) 77.0% $39.50 $41.19 4.3% $1,257 $289 Trans World Airlines 4/13/88 Curtis Squire Inc. 70.0% $16.25 $17.70 8.9% $146 $44 Regis Corp. 3/18/88 Management 80.0% $29.50 $29.50 0.0% $80 $16 Meyers Parking Systems, Inc. 3/18/88 Dyson-Kissner-Moran Corp. 53.8% $17.00 $19.35 13.8% $110 $51 Kearney-National Inc. 3/17/88 ESOP (d) 70.0% $57.00 $60.00 5.3% $152 $46 Arthur D. Little Inc. 3/10/88 ISSC Holdings 55.0% $12.00 $12.00 0.0% $49 $22 Ideal School Supply 2/25/88 Compagnie de Saint-Gobain 57.0% $41.00 $47.50 15.9% $902 $388 Certain Teed Corporation 2/25/88 L'Air Liquid S.A. 94.1% $37.00 $37.00 0.0% $466 $27 Liquid Air Corporation
PREMIUM PAID OVER PER SHARE PRICE -------------------------------------------------------- ANNOUCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION - ----------- -------------------------------- -------- ------- ----- ----- ---- --- ----------- 12/1/88 Network Security Corporation 61.7% 22.0% 24.1% 5.3% 8.6% 275.8% Cash Interactive Technologies, Inc. Tender Offer 11/18/88 Management 130.8% 61.4% 62.2% 42.9% 62.2% 350.0% Cash Henely Manufacturing Corp. Merger 10/6/88 Bally Manufacturing Corp. 6.8% 8.1% 6.8% 4.2% 6.8% 151.3% Cash U.S. Health Inc. Merger 10/4/88 Qintex Australia Limited 36.3% 27.8% 7.8% 5.1% 6.0% 87.9% Cash Princeville Corporation Tender Offer 9/28/88 Nontedison SpA 29.6% 3.7% 4.9% 2.2% (2.4%) 164.2% Cash Ausimont NV Merger 9/16/88 Investors (Warburg) 13.3% 36.0% 30.8% 7.9% 3.0% 38.8% Cash Coast America Merger 8/15/88 MGC Merger Company (a) 68.0% 29.0% 39.1% 9.9% (12.7%) 93.6% Cash/Notes Malrite Communications Tender Offer 6/15/88 Albert Energy Co. Ltd. (b) 64.0% 21.6% (0.2%) (1.2%) (1.2%) 70.1% Cash Chieftain Development Tender Offer 5/2/88 Management Group 56.5% 78.2% 59.3% 17.6% (4.3%) 93.5% Cash Thompson Medical Co. Merger 4/26/88 S.H. Holdings 67.9% 16.0% 17.5% 19.0% 2.2% 91.8% Cash Gruen Marketing Tender Offer 4/25/88 DC Holdings Inc. 9.4% 12.9% (1.4%) (1.4%) (10.3%) 40.0% Cash Diamond Crystal Salt Tender Offer 4/22/88 Carl C. Ichan (c) 106.0% 51.2% 49.8% 53.3% 18.1% 115.4% Merger for Trans World Airlines Cash/Notes 4/13/88 Curtis Squire Inc. 18.0% 22.1% 8.9% 9.8% 8.9% 64.7% Cash Regis Corp. Merger 3/18/88 Management 25.5% 73.5% 68.6% 18.0% 15.7% 84.4% Cash Meyers Parking Systems, Inc. Merger 3/18/88 Dyson-Kissner-Moran Corp. 17.7% 56.4% 50.3% 9.8% 9.8% 54.8% Cash Kearney-National Inc. Merger 3/17/88 ESOP (d) 20.0% 71.4% 81.8% 9.1% 15.4% 81.8% Cash Arthur D. Little Inc. Merger 3/10/88 ISSC Holdings 3.2% 7.9% 14.3% 11.6% (12.7%) 54.8% Cash Ideal School Supply Tender Offer 2/25/88 Compagnie de Saint-Gobain 4.4% 86.3% 50.2% 4.4% 5.3% 91.9% Cash Certain Teed Corporation Tender Offer 2/25/88 L'Air Liquid S.A. 10.4% 52.6% 31.0% 2.8% 8.8% 60.9% Cash Liquid Air Corporation Tender Offer
78 MERRILL LYNCH & CO. ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
% OWNED BY EQUITY VALUE ($MIL) ACQUIROR ON OFFER PER SHARE ------------------- ANNOUNCEMENT ACQUIROR/ ANNOUCEMENT ------------------------------- MINORITY DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION - ------------ ---------------------------------------- ----------- -------- ------ ---------- ----- -------- 2/17/88 Minstar Inc. 83.5% $11.50 $12.50 8.7% $362 $60 Genmar Industries 2/1/88 Donald J. Trump (e) 0.0% $22.00 $22.00 0.0% $125 $125 Resorts International (Class A shares) 1/14/88 Kinburn Corp. 51.8% $9.31 $9.31 0.0% $112 $54 Paperboard Industries Corp.
PREMIUM PAID OVER PER SHARE PRICE -------------------------------------------------------- ANNOUCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION - ----------- ---------------------------------------- -------- ------- ----- ----- ---- ----- ------------ 2/17/88 Minstar Inc. 19.0% 51.5% 37.0% 16.3% 17.6% 127.3% Cash Genmar Industries Tender Offer 2/1/88 Donald J. Trump (e) (66.2%) 67.6% 12.1% 6.7% 8.6% 12.1% Cash Resorts International (Class A shares) Tender Offer 1/14/88 Kinburn Corp. (13.9%) 77.3% 2.0% 4.9% 55.2% Cash Paperboard Industries Corp. Tender Offer
79 CONTEL CELLULAR INC. (CLASS A) HISTORICAL PRICE PERFOMANCE SUMMARY: APRIL 21, 1988 TO OCTOBER 14, 1994 - -------------------------------------------------------------------------------- Calendar 1988 Stock Trading Summary: High: $ 12.00 30-Dec-88 High Close: $ 12.00 30-Dec-88 Average Close: $ 9.28 Low: 7.06 23-May-88 Low Close: 7.06 23-May-88 Average Volume: 153,331 Calendar 1989 Stock Trading Summary: High: $ 27.25 13-Sep-89 High Close: $ 26.75 13-Sep-89 Average Close: $ 21.20 Low: 11.75 04-Jan-89 Low Close: 11.81 03-Jan-89 Average Volume: 92,956 Calendar 1990 Stock Trading Summary: High: $ 25.50 02-Jan-90 High Close: $ 25.25 01-Jan-90 Average Close: $ 17.26 Low: 9.38 21-Sep-90 Low Close: 9.75 21-Sep-90 Average Volume: 53,509 Calendar 1991 Stock Trading Summary: High: $ 25.00 28-Mar-91 High Close: $ 24.88 28-Mar-91 Average Close: $ 20.40 Low: 16.00 14-Jan-91 Low Close: 16.50 14-Jan-91 Average Volume: 31,984 Calendar 1992 Stock Trading Summary: High: $ 23.25 03-Jan-92 High Close: $ 22.50 01-Jan-92 Average Close: $ 16.97 Low: 13.00 23-Jun-92 Low Close: 13.25 25-Jun-92 Average Volume: 33,592 Calendar 1993 Stock Trading Summary: High: $ 22.00 15-Oct-93 High Close: $ 22.00 14-Oct-93 Average Close: $ 16.35 Low: 13.25 08-Feb-93 Low Close: 13.50 19-Apr-93 Average Volume: 59,577 Calendar 1994YTD Stock Trading Summary: High: $ 24.00 13-Oct-94 High Close: $ 23.88 05-Oct-94 Average Close: $ 17.51 Low: 13.00 04-Apr-94 Low Close: 13.25 04-Apr-94 Average Volume: 63,263 - -------------------------------------------------------------------------------------------------- Stock Trading Summary Since IPO: High: $ 27.25 13-Sep-89 High Close: $ 26.75 13-Sep-89 Average Close: $ 17.34 Low: 7.06 23-May-88 Low Close: 7.06 23-May-88 Average Volume: 63,481 - -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- Stock Trading Summary Since GTE/Contel Merger Annoucement (7/11/90): High: $ 25.00 28-Mar-91 High Close: $ 24.88 28-Mar-91 Average Close: $ 17.54 Low: 9.38 21-Sep-90 Low Close: 9.75 21-Sep-90 Average Volume: 46,575 - -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- Stock Trading Summary Since GTE Minority Buyback Announcement (9/8/94): High: $ 24.00 13-Oct-94 High Close: $ 23.88 05-Oct-94 Average Close: $ 23.61 Low: 22.75 08-Sep-94 Low Close: 23.13 09-Sep-94 Average Volume: 233,289 - --------------------------------------------------------------------------------------------------
80 OVERVIEW OF CONTEL CELLULAR - -------------------------------------------------------------------------------- STOCK PRICE PERFORMANCE
PRIOR TO MERGER AT IPO ANNOUNCEMENT CURRENT PRICE 21-APR-88 11-JUL-90 17-OCT-94 --------- --------------- ------------- Contel Cellular Stock Price $8.500 $17.625 $23.750 RETURNS SINCE IPO: Contel Cellular Compound Annual Return 17.1% -- Composite Cellular Index Annual Return April 21, 1988 to October 17, 1994(a) 14.1% -- Adjusted Composite Cellular Index Annual Return April 21, 1988 to October 17, 1994(b) 12.2% -- RETURNS SINCE MERGER ANNOUNCEMENT Contel Cellular Compound Annual Return -- 7.2% Composite Cellular Index Annual Return July 11, 1990 to October 17, 1994(a) -- 11.4% Adjusted Composite Cellular Index Annual Return July 11, 1990 to October 17, 1994(b) -- 6.5%
- --------------------------- (a) Cellular Composite: LIN Broadcasting, McCaw Cellular, Vanguard Cellular & U.S. Cellular (b) Adjusted Cellular Composite excludes McCaw Cellular & LIN Broadcasting EX-99.C2 3 LETTER AGREEMENT 1 April 21, 1995 To the Holders of Stock Options Issued Pursuant to the 1987 Key Employee Stock Plan of Contel Cellular Inc. As you know, Contel Corporation ("Contel"), a subsidiary of GTE, intends to acquire all of the outstanding shares of Class A Common Stock of Contel Cellular Inc. ("CCI") for $25.50 per share in cash. The transaction will be structured as a merger (the "Merger") of a Contel subsidiary into CCI. CCI will be the surviving corporation. On the effective date of the Merger (the "Effective Date"), the holders of currently outstanding shares of Class A Common Stock will be entitled to receive $25.50 per share in cash, and the outstanding shares of Class A Common Stock of CCI will be cancelled. After the Merger, there will no longer be a public market for the Class A Common Stock, and that stock will cease to be quoted on the Nasdaq National Market. When the Merger occurs, the surviving corporation will file to terminate the registration of the Class A Common Stock under the Securities Exchange Act of 1934. Once the registration of the Class A Common Stock is terminated, the surviving corporation will no longer be required to file reports with the Securities and Exchange Commission or to solicit proxies. You have been granted non-qualified options to purchase shares of Class A Common Stock of CCI pursuant to the terms of the 1987 Key Employee Stock Plan of Contel Cellular Inc. (the "Plan"). (The number of options you hold and their exercise prices are set forth on the attached Schedule 1.) In connection with the Merger, CCI offers to make a cash payment to you for the surrender of all (but not less than all) of the options you hold, other than those options which have ceased to be exercisable prior to the date of the Merger (the "Options"). The offer is conditioned upon consummation of the Merger. For each Option you surrender, whether or not your interest in the Option is vested, you will receive an amount in cash (the "Option Consideration") equal to $25.50, less the exercise price for the Option. If you agree to surrender your Options based on the terms of this offer, CCI will pay you the Option Consideration for each Option you hold, whether or not that Option is currently vested. You will receive the Option Consideration promptly after the Effective Date. If the Merger is not consummated within 6 months of the date of this letter, this letter agreement shall be null and void. The Option Consideration will be taxable to you as ordinary income; reported on your Form W-2 in the year the consideration is paid to you; and subject to applicable federal and state payroll tax withholding. This is the same tax treatment you would receive if you exercised the Options. The Option Consideration will not be considered compensation under any company pension or benefit plan. By executing this letter in the space indicated below, you hereby agree that upon the effectiveness of the Merger and payment of the Option Consideration for all of your Options (less all applicable taxes required to be withheld), and without any further action by CCI, you or any other person, all rights under (i) all Options and any related SARs (as defined in the Plan), and (ii) the Plan and all Stock Option Agreements and Stock Appreciation Rights Agreements entered into between you and CCI thereunder, shall be terminated. You further agree to execute any additional documents that may be requested to evidence such termination. C-2-1 2 By executing this letter, you acknowledge and agree that you have received and had the opportunity to review the Information Statement on Schedule 14C relating to the Merger. You should be aware that if you do not surrender your Options, in accordance with the terms of the Plan and existing Stock Options Agreements, if your employment with CCI terminates, any unvested Options will be forfeited and the period during which your Options can be exercised will be limited. If you are transferred to another GTE subsidiary, that will be considered to be a termination under the Plan. If you are under age 55 at the time of your employment with CCI terminates, you will have 90 days to exercise any vested Options. If you are age 55 or older at that time, you will have one year to exercise any vested options. If any Options have not been surrendered under the terms of this letter on the Effective Date or terminated in accordance with the terms of the Plan, the committee administering the Plan has authority under Article X of the Plan to adjust the terms of such Options. The committee could decide to adjust the terms of such Options to provide that, upon the Effective Date, each remaining Option entitles the holder thereof to receive, upon exercise of the Option, a cash payment equal to the payment to be made to holders of shares of Class A Common Stock of CCI pursuant to the Merger less the exercise price of the Option. The committee has decided not to make any adjustment to the terms of the Options. Thus, the Options will continue to entitle the holder to acquire Class A Common Stock of CCI. However, that stock will not be listed for trading on any exchange, nor will it be registered under the securities laws. Accordingly, such stock will not be transferable, unless an exemption from registration is available, and it is not expected that there will be any regular market for such stock. To surrender your Options in exchange for the Option Consideration, you must sign this letter in the space indicated below and return the executed copy to the following address no later than May 5, 1995. If you have any questions about this offer, please contact Jae Early. Contel Cellular Inc. 245 Parimeter Center Parkway Atlanta, GA 30346 (404) 804-3443 Very truly yours, Acknowledged and Agreed Name: ______________________ Date: ______________________ C-2-2 EX-99.D2 4 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO ACCOMPANY CERTIFICATES REPRESENTING SHARES OF CLASS A COMMON STOCK OF CONTEL CELLULAR INC. PURSUANT TO THE MERGER AGREEMENT DATED AS OF DECEMBER 27, 1994, AS AMENDED AMONG CONTEL CELLULAR INC., CONTEL CELLULAR ACQUISITION CORPORATION, CONTEL CORPORATION AND GTE CORPORATION DISBURSING AGENT: CHEMICAL BANK
If by Mail: If by Hand or Overnight Delivery: Chemical Bank Chemical Bank Reorganization Department Reorganization Department P.O. Box 1916 55 Water Street GPO Station Second Floor--Room 234 New York, NY 10116-1916 New York, NY 10041
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
- ------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF COMMON STOCK ENCLOSED - ------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OF CLASS A COMMON STOCK, $1.00 PAR VALUE PER SHARE CERTIFICATE(S) ENCLOSED (PLEASE FILL IN) (ATTACH ADDITIONAL LIST IF NECESSARY) ------------------------------------------------------------------------------------------------------------------ CERTIFICATE NUMBER(S) NUMBER OF SHARES ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ Total Number of Shares ------------------------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Gentlemen: Pursuant to the Merger Agreement dated as of December 27, 1994, as amended (the "Merger Agreement"), providing for the merger (the "Merger") of Contel Cellular Acquisition Corporation ("CCI Acquisition") with and into Contel Cellular Inc. (the "Company"), the undersigned surrenders the enclosed certificate(s) which, prior to the Merger, represented shares of Class A common stock of the Company, $1.00 par value (the "Shares"), to be exchanged for cash in the amount of $25.50, without interest, for each such Share. The undersigned has received a copy of the Information Statement dated April 21, 1995. The undersigned hereby represents and warrants that (i) the undersigned is the exclusive owner of the Shares represented by the enclosed certificates and is entitled to all rights evidenced thereby and (ii) such Shares are free and clear of all liens, claims and encumbrances. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the undersigned and the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive the death or incapacity of, the undersigned. Submission of the certificates for Shares listed above is subject to the terms, conditions and limitations set forth in the Merger Agreement and in the instructions herein contained. In accordance with the Merger Agreement, please deliver in compliance with the instructions below a check in an amount determined by multiplying $25.50 times the number of Shares submitted herewith as payment for such Shares. Unless otherwise indicated under Special Payment Instructions, please issue the check in the name of the undersigned. Unless otherwise indicated under Special Delivery Instructions, please mail the check to the person to whom it is issued at the address shown above or, if the Special Payment Instructions are completed, at the address there indicated. 2 - ------------------------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 5 AND 6) To be completed ONLY if the check is to be issued in the name of someone other than the undersigned. Issue check to: Name __________________________________________________________________________ (Please Print) Address _______________________________________________________________________ _______________________________________________________________________________ (Include Zip Code) _______________________________________________________________________________ (Tax Identification or Social Security No.) (See Substitute Form W-9) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 5 AND 6) To be completed ONLY if the check is to be sent to a name or address other than that of the party to which it is to be issued. Mail check to: Name __________________________________________________________________________ (Please Print) Address _______________________________________________________________________ _______________________________________________________________________________ (Include Zip Code) _______________________________________________________________________________ (Tax Identification or Social Security No.) (See Substitute Form W-9) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- STOCKHOLDER(S) SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 _ _______________________________________________________________________________ _ _______________________________________________________________________________ Signature(s) of Registered Holder(s)) Dated: __________________________________________________________________, 19__ (MUST BE SIGNED BY THE REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON STOCK CERTIFICATE(S) OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY CERTIFICATES AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS OF CORPORATIONS OR OTHERS ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE PROVIDE THE FOLLOWING INFORMATION AND SEE INSTRUCTION 4.) Name(s) _______________________________________________________________________ _______________________________________________________________________________ (Please print) Capacity (full title) _________________________________________________________ Address _______________________________________________________________________ _______________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number: _______________________________________________ Tax Identification or Social Security No. ___________________________________________________________ GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 4) Authorized Signature __________________________________________________________ Name __________________________________________________________________________ Name of Firm __________________________________________________________________ (Please Print) Address _______________________________________________________________________ _______________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number ________________________________________________ Dated: __________________________________________________________________, 19__ - ------------------------------------------------------------------------------- 3 INSTRUCTIONS 1. Guarantee of Signatures. Signatures on all Letters of Transmittal must be guaranteed by a financial institution that is a member of a Securities Transfer Association approved medallion program such as STAMP, SEMP or MSP (an "Eligible Institution"), except in cases where Shares are surrendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 4. 2. Delivery of Letter of Transmittal and Certificates. This Letter of Transmittal, properly completed and duly executed, together with the certificate(s) for Shares described should be delivered to the address set forth on the face hereof. A return envelope addressed to the Disbursing Agent is enclosed for convenience. THE METHOD OF DELIVERY OF CERTIFICATE(S) FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE OWNER, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL WITH RETURN RECEIPT REQUEST. 3. Inadequate Space. If the space provided is inadequate, the certificate numbers and the number of Shares should be listed on a separate schedule to be attached hereto. 4. Signatures on Letter of Transmittal, Stock Powers and Endorsements. When this Letter of Transmittal is signed by the registered owner(s) of the certificate(s) listed and surrendered hereby, no endorsements of certificates or separate stock powers are required. If the certificate(s) surrendered hereby is (are) owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any surrendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by a person other than the registered owner of the certificate(s) listed, such certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificate(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificate or stock power is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence, satisfactory to the Disbursing Agent, of their authority must be submitted. 5. Stock Transfer Taxes. If payment for Shares is to be made to any person other than the registered holder, or if surrendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person will be deducted from the payment for such Shares if satisfactory evidence of the payment of such taxes, or exemption therefrom, is not submitted. Except as provided in this Instruction 5, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter of Transmittal. 6. Special Payment and Delivery Instructions. Indicate the name and address to which payment for the Shares is to be sent if different from the name and address of the person(s) signing this Letter of Transmittal. 7. Return of Certificate(s) for Shares. If the Merger is not consummated within 120 days from the date of the Information Statement, the Disbursing Agent will return all certificates for Shares to stockholders. The Company's stockholders may request that the Disbursing Agent return the certificates for Shares to them at any time before the Merger is consummated. 8. Substitute Form W-9. The stockholder is required to provide the Disbursing Agent with a correct taxpayer identification number on Substitute Form W-9. Failure to provide the information on the form may subject the tendering shareholder to 31% Federal income tax withholding on any payments due to such stockholder. A stockholder may write "Applied For" in the space provided in Part I of Substitute Form W-9 and may sign the Certificate of Awaiting Taxpayer Identification Number if the stockholder has not been issued a taxpayer identification number and has applied for a number or intends to apply for a number in the near future. If the stockholder writes "Applied For" and signs such Certificate and the Disbursing Agent is not provided with a taxpayer identification number within 60 days, the Disbursing Agent will withhold 31% of any payments due to the stockholder thereafter until a taxpayer identification number is provided to the Disbursing Agent. 9. Additional Copies. Additional copies of this Letter of Transmittal and of the Information Statement may be obtained from the Information Agent, Chemical Bank at the address listed on the last page of this Letter of Transmittal. 10. Lost or Destroyed Certificates. Any stockholder of the Company who has lost certificates of Shares should make arrangements (which may include the posting of a bond or other satisfactory indemnification) to replace lost certificates for Shares. Such arrangements should be made with the Disbursing Agent which is also the transfer agent for the Shares. All questions as to the validity, form and eligibility of any surrender of certificates hereunder will be determined by the Disbursing Agent and the Company and such determination shall be final and binding. The Disbursing Agent and the Company reserve the right to waive any irregularities or defects in the surrender of any certificates. A surrender will not be deemed to have been made until all irregularities have been cured or waived. IMPORTANT TAX INFORMATION Under the Federal income tax law, a stockholder whose Shares are surrendered for payment is required to provide the Disbursing Agent with such stockholder's correct taxpayer identification number on Substitute Form W-9 below. If such stockholder is an individual, the taxpayer identification number is such stockholder's social security number. If the Disbursing Agent is not provided with the correct taxpayer identification number, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder may be subject to backup withholding. Exempt stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that stockholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Disbursing Agent. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Disbursing Agent is required to withhold 31% of any payments made to the stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 4 PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a stockholder with respect to Shares surrendered pursuant to the Merger, the stockholder is required to notify the Disbursing Agent of his correct taxpayer identification number by completing the form below certifying that the taxpayer identification number provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a taxpayer identification number) and that the stockholder is not subject to backup withholding either because he has not been notified by the IRS that he is subject to backup withholding or because the IRS has notified him that he is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DISBURSING AGENT The taxpayer identification number that must be provided is that of the registered holder(s) of the Shares or of the last transferee appearing on the transfers attached to or endorsed on the Shares (or, if the check is made payable to another person(s) as provided in Instruction 6, then of such persons(s)). The taxpayer identification number is the social security number or employer identification number of such registered holder(s) or of such last transferee. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering stockholder or other payee has not been issued a taxpayer identification number, but has applied for a taxpayer identification number, or intends to apply for one in the near future, such holder should write "Applied For" in the space provided for the taxpayer identification number in Part I of the Substitute Form W-9, sign and date the Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I and the Disbursing Agent is not provided with a taxpayer identification number within sixty (60) days, the Disbursing Agent will withhold 31% of all payments to such stockholder until a taxpayer identification number is provided to the Disbursing Agent. If the tendering stockholder or other payee furnishes the Disbursing Agent with his taxpayer identification number within sixty (60) days of the date of the Substitute Form W-9, the Disbursing Agent shall remit such amounts retained during such period to such holder. If, however, the tendering stockholder or other payee has not provided the Disbursing Agent with his taxpayer identification number within the sixty (60) day period, the Disbursing Agent shall remit such previously retained amounts to the Internal Revenue Service as backup withholding. For additional guidance, see the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. - -------------------------------------------------------------------------------- PAYER'S NAME: CHEMICAL BANK - -------------------------------------------------------------------------------- PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW --------------------------------------- SUBSTITUTE SOCIAL SECURITY NUMBER(S) FORM W-9 OR DEPARTMENT OF THE TREASURY --------------------------------------- INTERNAL REVENUE SERVICE EMPLOYER IDENTIFICATION NUMBER(S) ------------------------------------------------------------------------------------------- PART 2 -- CERTIFICATION -- Under Penalties of Perjury, I certify that: PART 3 -- (1) The number shown on this form is my correct Taxpayer Identification PAYER'S REQUEST FOR TAXPAYER Number (or I am waiting for a number to be issued to me) and Awaiting TIN / / IDENTIFICATION NUMBER (TIN) ------------------- (2) I am not subject to backup withholding because (a) I am exempt from backup withholding or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such Item(2). SIGNATURE: DATE , 1995
- -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a tax identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days of the date of this Certificate. - --------------------------------------------------- ------------------------------------------,1995 Signature Date
THE INFORMATION AGENT FOR THE MERGER IS: CHEMICAL BANK INFORMATION AGENT 450 WEST 33RD STREET, 15TH FLOOR NEW YORK, NY 10001 OR CALL TOLL-FREE 1-800-648-8169 EX-99.D3 5 NOTICE OF CLASS ACTION 1 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ---------------------------------------------------------------- In re: CONTEL CELLULAR INC. Civil Action No. 13726 SHAREHOLDERS' LITIGATION - ----------------------------------------------------------------
NOTICE OF PENDENCY OF CLASS ACTIONS, CLASS ACTION DETERMINATION, PROPOSED SETTLEMENT, SETTLEMENT HEARING AND RIGHT TO APPEAR TO: ALL RECORD AND BENEFICIAL OWNERS OF CLASS A COMMON STOCK ("CLASS A STOCK") OF CONTEL CELLULAR INC. ("CONTEL") AT ANY TIME FROM SEPTEMBER 8, 1994 AND THEIR SUCCESSORS IN INTEREST OR TRANSFEREES AND ASSIGNS, IMMEDIATE AND REMOTE, EXCLUDING ANY SUCH OWNERS WHO VALIDLY REQUEST AN APPRAISAL OF THEIR CLASS A STOCK. PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT OF THE SHAREHOLDER CLASS ACTION LITIGATION AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS. AN ESSENTIAL ELEMENT OF THIS SETTLEMENT IS A MERGER. THE $25.50 PER SHARE PRICE PROVIDED BY THE MERGER WILL BE PAID ONLY TO THOSE MEMBERS OF THE CLASS WHO OWN CLASS A STOCK AT THE TIME OF THE MERGER. YOU NEED NOT FILE A PROOF OF CLAIM IN ORDER TO RECEIVE THE $25.50 PER SHARE AMOUNT. IF THE COURT APPROVES THE PROPOSED SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE FAIRNESS, REASONABLENESS, OR ADEQUACY OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE SETTLED CLAIMS. IF YOU ARE NOT THE BENEFICIAL HOLDER OF CLASS A STOCK BUT HOLD CLASS A STOCK FOR A BENEFICIAL HOLDER, PLEASE TRANSMIT THIS NOTICE TO SUCH BENEFICIAL HOLDER. ADDITIONAL COPIES OF THIS NOTICE WILL BE MADE AVAILABLE TO YOU FOR THIS PURPOSE UPON REQUEST DIRECTED TO THE INFORMATION AGENT FOR THE MERGER -- CHEMICAL BANK, 450 WEST 33RD STREET, 15TH FLOOR, NEW YORK, NY 10001. This notice is given pursuant to Rule 23 of the Court of Chancery of the State of Delaware, in and for New Castle County (the "Court"), and pursuant to an Order of the Court, to notify you of the pendency of these lawsuits, the proposed settlement of these lawsuits, and the Court's certification of a class of Contel common stockholders, and to give you notice of a hearing (the "Hearing") to be held by the Court at 11:30 a.m. on June 8, 1995, and of your rights, among other things, to participate in the Hearing. The Hearing will be held to determine whether the proposed settlement should be approved by the Court as fair, reasonable and adequate, and in the best interests of the Class as defined below, and whether final judgment should be entered thereon, and to consider the applications by plaintiffs' counsel for attorneys' fees and reimbursement of expenses. BACKGROUND On or about September 8, 1994, defendant GTE Corporation ("GTE") announced that GTE had proposed to acquire all outstanding Contel Cellular Inc. ("Contel") Class A common stock held by the public, consisting entirely of approximately 10 million shares of Class A Stock, for $22.50 cash per share (the "Class A Stock"). (GTE owns the remaining 90 percent of outstanding Contel common shares, consisting entirely of Contel Class B common stock ("Class B Stock")). Under the terms of the proposal, a GTE subsidiary would be merged into Contel, and the Class B Stock would remain outstanding as shares of the 2 merged entity. It was further announced that the proposed merger (the "Merger") would not require a vote by the holders of Class A Stock or the shareholders of GTE. Following the announcement, four class actions were commenced in this Court alleging that the purchase price of $22.50 cash per Class A share was grossly inadequate and constituted a breach of the defendants' fiduciary duties to Contel public shareholders (collectively, the "Actions"). The Actions were brought by plaintiffs Airmont Plaza Associates, Arnel Gonzalez, Blimy Itzkowitz, and Paul Gambal ("Plaintiffs"). The complaints asserted claims on behalf of a Class consisting of all public common stockholders of Contel as of September 8, 1994. The actions are denoted as: Airmont Plaza Associates v. Parker, C.A. No. 13726; Gonzales v. Parker, C.A. No. 13727; Itzkowitz v. Parker, C.A. No. 13730; and Gambal v. Contel Cellular Inc., C.A. No. 13734. On November 16, 1994, the Court entered an Order consolidating the Actions for all purposes as In re Contel Cellular Inc. Shareholders' Litigation, Consol. C.A. No. 13726, and appointed the law firms of Abbey & Ellis, Wolf Popper Ross Wolf & Jones L.L.P. and Bernstein, Liebhard & Lifshitz, as Plaintiffs' Co-lead Counsel. At the time GTE informed Contel of its offer to acquire the publicly held shares of Class A Stock, nine of Contel's twelve directors were executive officers or directors of GTE or Contel. These nine directors could not participate in assessing the fairness of GTE's offer to acquire Contel without the appearance of a conflict of interest. Accordingly, at a meeting of Contel's Board of Directors on September 9, 1994, the Contel Board appointed the three independent Contel directors who are not officers or directors of GTE or Contel to a special committee (the "Special Committee") to review the fairness of, and to negotiate the terms of the proposed Merger. The Special Committee retained Cahill Gordon & Reindel ("Cahill Gordon") as its legal counsel and Lazard Freres & Co. ("Lazard Freres") as its financial advisor. Plaintiffs' counsel retained an expert adviser and obtained initial documentary discovery, including documents produced by Lazard Freres. Thereafter, counsel for GTE and Contel began discussions and negotiations with Plaintiffs' counsel regarding the resolution of the Actions. While negotiations were ongoing, Plaintiffs' counsel met with the Special Committee, its counsel and Lazard Freres to discuss valuations, and negotiated with GTE during a period of two months commencing October 17, 1994. Following negotiations with Plaintiffs' counsel and with the Special Committee (through Lazard Freres), GTE agreed, in December 1994, to raise the offer for the proposed merger to $25.50 per share of Class A Stock. On December 23, 1994, GTE and Contel reached an agreement in principle with Plaintiffs' counsel to settle the Actions, subject to confirmatory discovery, based on the increased price of $25.50 per share of Class A Stock. Following the settlement agreement in principle, and the completion of additional documentary and deposition discovery, Plaintiffs and defendants executed a Stipulation and Agreement of Compromise and Settlement (the "Stipulation" or the "Settlement") containing the terms and conditions as set forth in more detail below. The parties entered into an Agreement and Plan of Merger dated as of December 27, 1994, as amended, whereby Contel agreed to merge with a subsidiary of GTE (the "Merger Agreement"). THE SETTLEMENT As described above, the settlement increases the consideration offered in the proposed merger from $22.50 per share of Class A Stock to $25.50 per share. GTE, Contel, and the Special Committee acknowledge that the litigation efforts and negotiations by Plaintiffs' counsel were significant factors in prompting GTE to consider the possibility of improving its original $22.50 per share offer and in arriving at the improved price of $25.50 per Class A share. Plaintiffs' counsel have made a thorough investigation of the facts, including the review of thousands of pages of documents and the taking of three depositions, the retention of a financial expert, and a study of legal principles applicable to plaintiffs' claims and have conducted discussions and arms-length negotiations with representatives of the defendants with a view to settling the issues in dispute and achieving the best possible relief consistent with the interests of the Class. 3 Having made such investigation and having fully considered the events and agreements described above, plaintiffs' counsel have determined that the terms and conditions of the settlement are fair, reasonable, adequate and in the best interests of the plaintiffs and the Class. Plaintiffs and plaintiffs' counsel have agreed to settle the Actions according to the terms and provisions of the Stipulation after considering: (i) the benefits to be obtained by the public shareholders as a result of the settlement; (ii) the attendant risks of litigation; (iii) the probability of success on the merits of Plaintiffs' claims, including the uncertainty relating to the proof of the allegations; (iv) the desirability of settling the Actions; and (v) plaintiffs' and plaintiffs' counsels' conclusion that the settlement is fair, reasonable and adequate. The defendants have denied and continue to deny all claims of wrongdoing made in the Actions. Nonetheless, the defendants consider it desirable that the Actions be settled in the manner and on the terms and conditions set forth in the Stipulation, thereby putting to rest all claims which have been or might have been asserted by any parties arising out of the matters alleged in the Actions or set forth in the Stipulation, and avoiding further expense, inconvenience, distraction, and diversion of management of GTE and Contel, which would be caused by further litigation. CLASS ACTION DETERMINATION The Court has ordered that, for purposes of the settlement only, the Actions shall be maintained as a class action, pursuant to Court of Chancery Rules 23(b)(1) and (b)(2), on behalf of a Class consisting of all holders of Class A Stock from September 8, 1994 and their successors in interest and/or transferees and assigns, immediate and remote, excluding any such holders who validly request an appraisal of their Class A Stock and excluding the defendants and their families and affiliates. Inquiries or comments about the settlement may be directed to the attention of Liaison Counsel to the Class representatives as follows: Norman M. Monhait, Esq. Rosenthal, Monhait, Gross & Goddess, P.A. Suite 214 First Federal Plaza P.O. Box 1070 Wilmington, Delaware 19899-1070 (302) 656-4433 Please do not contact the Court of Chancery or Register in Chancery regarding any questions or comments you may have. THE TERMS OF THE SETTLEMENT The principal terms, conditions and other matters that are part of the settlement are summarized here. This summary should be read in conjunction with, and is qualified in its entirety by reference to, the Stipulation, which is on file with the Court of Chancery. The parties have agreed to the following terms and conditions: In furtherance of the merger of Contel and GTE, GTE shall pay $25.50 cash per outstanding share of Contel Class A Stock. A GTE subsidiary will merge into Contel. The Class A Stock will be cancelled, and each outstanding share of Class B Stock will remain outstanding as shares of Class B Stock of the merged entity. The merger will not require a vote by the holders of Contel Class A Stock or by GTE shareholders. GTE (not the Class) will bear the Plaintiffs' attorneys' fees and expenses incurred in prosecuting and settling the Actions up to the amount of $525,000, as approved by the Court. If the settlement is approved by the Court, the Actions will be dismissed on the merits with respect to all defendants and with prejudice as against Plaintiffs and all holders of Class A Stock. The settlement is in full compromise, settlement and discharge of all claims, whether or not presently known, which have been asserted by Plaintiffs or which might have been asserted by Plaintiffs or by Contel shareholders in this Court or any other forum against any of the defendants arising from or in any way relating to the events or transactions alleged in the Complaint or set forth in the Stipulation. 4 APPLICATION FOR ATTORNEYS' FEES AND EXPENSES Plaintiffs' counsel will jointly apply to the Court for an award of attorneys' fees and expenses in an amount not to exceed $525,000, subject to obtaining judicial approval of the Settlement and the dismissal with prejudice of the Actions. GTE has agreed to bear such fees and expenses, and defendants have agreed not to oppose such application. Subject to the terms and conditions and on the date set forth in the Stipulation, GTE will pay all such attorneys' fees and expenses the Court awards to the Plaintiff (subject to the maximum amount set forth above). RIGHT TO APPEAR Any member of the Class who objects to the Settlement, the class action determination, the judgment to be entered in the Action, and/or the application for attorneys' fees and disbursements, or who otherwise wishes to be heard, may appear in person or by his or her attorney at the Hearing and present evidence or argument that may be proper and relevant; provided, however, that no person other than Plaintiffs' Counsel, counsel for the Defendants and counsel for the Special Committee shall be heard and no papers, briefs, pleadings or other documents submitted by any person shall be considered by the Court unless not later than ten (10) calendar days prior to the Hearing such person files with the Court and serves upon counsel: (a) written notice of intention to appear; (b) a statement of such person's objection to any matters before the Court; (c) the grounds or the reasons such person desires to appear and be heard, as well as all documents or writings such person desires the Court to consider. Such filing shall be served upon: Norman M. Monhait, Esq. Rosenthal, Monhait, Gross & Goddess, P.A. First Federal Plaza P.O. Box 1070 Wilmington, DE 19899 Counsel for Plaintiffs David McBride, Esq. Young, Conaway, Stargatt & Taylor Rodney Square North P.O. Box 391 Wilmington, DE 19899-0391 Counsel for the Special Committee Defendants R. Franklin Balotti, Esq. Richards Layton & Finger One Rodney Square Wilmington, DE 19801 Counsel for all other Defendants Unless the Court otherwise directs, no stockholder of Contel will be entitled to contest the approval of the Stipulation, the settlement, the judgment to be entered thereon, or the award of attorneys' fees and expenses to Plaintiffs' counsel, or otherwise to be heard, except by serving and filing written objections as described above. Any person who fails to object in the manner prescribed above will be deemed to have waived such objection and will be forever barred from raising such objection. SCOPE OF THIS NOTICE The foregoing description of the Hearing, the Actions, the activities leading to the settlement, the terms of the settlement, and other matters described herein, does not purport to be comprehensive. Accordingly, holders of Contel Class A Stock are referred to the documents filed with the Court, including the Stipulation, pleadings, briefs, and other papers, all of which may be examined during regular business hours of each business day at the Office of the Register in Chancery, Daniel L. Herrmann Courthouse, Eleventh and Kings Streets, Wilmington, Delaware 19801. Register in Chancery Dated: April 21, 1995 EX-99.D6 6 DEFINITIVE INFORMATION STATEMENT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14C INFORMATION INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934 CHECK THE APPROPRIATE BOX: / / PRELIMINARY INFORMATION STATEMENT /X/ DEFINITIVE INFORMATION STATEMENT CONTEL CELLULAR INC. (NAME OF REGISTRANT AS SPECIFIED IN CHARTER) CONTEL CELLULAR INC. (NAME OF PERSON FILING THE INFORMATION STATEMENT) PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX): / / $125 PER EXCHANGE ACT RULE 0-11(C)(1)(II), OR 14C-5(G). /X/ FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14C-5(G) AND 0-11. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
TITLE OF EACH PER UNIT PRICE OR OTHER CLASS OF SECURITIES AGGREGATE NUMBER OF UNDERLYING VALUE OF TRANSACTION PROPOSED MAXIMUM TO WHICH SECURITIES TO WHICH COMPUTED PURSUANT TO AGGREGATE VALUE AMOUNT OF TRANSACTION APPLIES TRANSACTION APPLIES EXCHANGE ACT RULE 0-11 OF TRANSACTION FILING FEE - --------------------------------------------------------------------------------------------------------------------- Class A Common Stock, par value $1.00 per share....... 9,970,953 $25.50 $254,259,301.50 $50,851.86 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $50,851.86 Filing Party: Contel Cellular Inc. Form, Schedule or Registration Statement No.: 14C Date Filed: January 30, 1995
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INFORMATION STATEMENT ------------------------ CONCERNING THE MERGER OF CONTEL CELLULAR ACQUISITION CORPORATION, A SUBSIDIARY OF CONTEL CORPORATION, WITH AND INTO CONTEL CELLULAR INC., AT A PRICE OF $25.50 PER CLASS A SHARE ------------------------ WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. ------------------------ This Information Statement is being furnished to the holders of outstanding shares of the Class A Common Stock (the "Class A Stockholders") of Contel Cellular Inc., a Delaware corporation (the "Company"), as of the Record Date (as defined below) in connection with the proposed merger (the "Merger") of Contel Cellular Acquisition Corporation, a Delaware corporation ("CCI Acquisition"), with and into the Company. The Company will be the corporation that survives the Merger (the "Surviving Corporation"). The Merger will be effected pursuant to an Agreement and Plan of Merger dated as of December 27, 1994, as amended (the "Merger Agreement"), among the Company, GTE Corporation, a New York corporation ("GTE"), Contel Corporation, a Delaware corporation in liquidation and a wholly owned subsidiary of GTE ("Contel"), and CCI Acquisition, which is a wholly owned subsidiary of Contel. In the Merger, (i) each outstanding share of the Class A Common Stock, par value $1.00 per share, of the Company (a "Class A Share") (other than Class A Shares as to which appraisal rights have been properly exercised under the General Corporation Law of the State of Delaware (the "DGCL")) will be converted into the right to receive $25.50 in cash, without interest, subject to applicable back-up withholding taxes (the "Merger Consideration"), (ii) each Class A Share held by the Company and each outstanding share of the common stock of CCI Acquisition will be cancelled, and no payment will be made with respect thereto and (iii) each outstanding share of the Class B Common Stock, par value $1.00 per share, of the Company (a "Class B Share") will continue to be outstanding. After the effective date of the Merger, the Class A Shares will cease to be quoted on the Nasdaq National Market. YOU ARE URGED TO REVIEW THIS INFORMATION STATEMENT CAREFULLY TO DECIDE WHETHER TO ACCEPT THE MERGER CONSIDERATION OR TO EXERCISE APPRAISAL RIGHTS PURSUANT TO THE DGCL. IF YOU WISH TO ACCEPT THE MERGER CONSIDERATION, PLEASE COMPLETE, EXECUTE AND SEND THE ENCLOSED LETTER OF TRANSMITTAL, TOGETHER WITH CERTIFICATES REPRESENTING YOUR CLASS A SHARES, TO CHEMICAL BANK, AS DISBURSING AGENT FOR THE MERGER (THE "DISBURSING AGENT"), IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN THE LETTER OF TRANSMITTAL. IF YOU WISH TO EXERCISE APPRAISAL RIGHTS PURSUANT TO THE DGCL, YOU MUST, WITHIN 20 DAYS OF THE DATE OF THE MAILING OF THIS INFORMATION STATEMENT, DELIVER TO THE COMPANY A WRITTEN DEMAND FOR A JUDICIAL APPRAISAL OF THE FAIR VALUE OF YOUR CLASS A SHARES AND OTHERWISE COMPLY WITH THE APPLICABLE PROVISIONS OF THE DGCL. SEE "DISSENTERS' RIGHTS OF APPRAISAL" AND THE TEXT OF SECTION 262 OF THE DGCL ATTACHED AS EXHIBIT D TO THIS INFORMATION STATEMENT. The record date for stockholders entitled to notice of or entitled to give consent to the Merger was March 16, 1995 (the "Record Date"). As of the Record Date there were issued and outstanding 9,970,953 Class A Shares and 90,000,000 Class B Shares. Each Class A Share is entitled to one vote per share and each Class B Share is entitled to five votes per share. On the Record Date, Contel owned 90,000,000 Class B Shares, which accounted for approximately 98% of the combined voting power of the outstanding Class A Shares and Class B Shares. Pursuant to the DGCL, Contel, as the owner of more than 50% of the combined voting power of the Class A Shares and Class B Shares, approved the Merger by written consent on April 10, 1995. Other than such written consent, no further action by the stockholders of the Company is necessary to approve or consummate the Merger and no such approval will be sought. The Company will not hold a meeting of the stockholders of the Company in connection with the Merger. The Merger will be consummated on May 12, 1995. This Information Statement is being mailed on April 21, 1995 to Class A Stockholders of record on the Record Date, and constitutes the notice of appraisal rights required by Section 262 of the DGCL and the notice of corporate action without meeting required by Section 228(d) of the DGCL. The principal executive offices of the Company are located at 245 Perimeter Center Parkway, Atlanta, Georgia 30346 and its telephone number is (404) 804-3400. THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE DISBURSING AGENT FOR THE MERGER IS: CHEMICAL BANK The date of this Information Statement is April 21, 1995 3 TABLE OF CONTENTS
PAGE ----- SUMMARY.............................................................................. 4 SPECIAL FACTORS...................................................................... 10 Introduction; The Merger........................................................... 10 Background of the Merger........................................................... 10 Determination of the Special Committee and the Board; Fairness of the Merger....... 13 Opinion of Financial Advisor to the Special Committee.............................. 15 Determination of the Fairness of the Merger by GTE, Contel and CCI Acquisition..... 19 Opinions of Financial Advisors to GTE.............................................. 20 Certain Litigation................................................................. 29 Written Consent.................................................................... 29 Merger Consideration............................................................... 30 Accounting Treatment of the Merger................................................. 30 Certain Federal Income Tax Consequences of the Merger.............................. 30 Plans for the Company; Certain Effects of the Merger............................... 31 THE MERGER AGREEMENT................................................................. 32 General............................................................................ 32 Designation of Directors; Certificate of Incorporation and By-laws................. 32 Representations and Warranties..................................................... 32 Indemnification and Other Covenants................................................ 32 Conditions to the Merger........................................................... 33 Termination........................................................................ 33 Amendment.......................................................................... 33 Extension; Waiver.................................................................. 33 PAYMENT OF THE MERGER CONSIDERATION.................................................. 34 DISSENTERS' RIGHTS OF APPRAISAL...................................................... 35 MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY..................................................................... 37 SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY.................................. 38 PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY................................. 39 BUSINESS OF THE COMPANY.............................................................. 41 Overview........................................................................... 41 Cellular Interests................................................................. 41 The Cellular Telephone Industry.................................................... 44 The Company's Cellular Operations.................................................. 45 Non-Controlled Systems............................................................. 49 International Interests............................................................ 50 Competition........................................................................ 50 Regulation......................................................................... 50 RELATED PARTY TRANSACTIONS........................................................... 51 Arrangements and Transactions with Contel and GTE.................................. 51 Payments to Optionholders.......................................................... 53 Relationship between GTE Director and PaineWebber.................................. 53 Transition Arrangements............................................................ 54 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................................................... 55 Certain Beneficial Owners.......................................................... 55 Directors and Executive Officers of the Company.................................... 55 Directors and Executive Officers of GTE, Contel and CCI Acquisition................ 56
2 4
PAGE ----- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 57 GLOSSARY............................................................................. 58 EXHIBIT A -- AGREEMENT AND PLAN OF MERGER, AS AMENDED............................... A-1 EXHIBIT B -- OPINION OF LAZARD FRERES & CO.......................................... B-1 EXHIBIT C-1 -- OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED...................................................... C-1-1 EXHIBIT C-2 -- OPINION OF PAINEWEBBER INCORPORATED................................... C-2-1 EXHIBIT D -- DELAWARE GENERAL CORPORATION LAW SECTION 262........................... D-1 EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL CELLULAR INC........................................................... E-1
3 5 SUMMARY The following is a summary of certain information contained elsewhere in this Information Statement. This Summary does not purport to be complete and is qualified in its entirety by the more detailed information contained elsewhere in this Information Statement and the Exhibits hereto. Unless defined in this Summary, capitalized terms used herein have the meanings ascribed to them elsewhere in this Information Statement. STOCKHOLDERS ARE URGED TO READ THIS INFORMATION STATEMENT AND THE EXHIBITS HERETO IN THEIR ENTIRETY IN ORDER TO DECIDE WHETHER TO ACCEPT THE MERGER CONSIDERATION OR TO EXERCISE APPRAISAL RIGHTS PURSUANT TO THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE (THE "DGCL"). WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. SPECIAL FACTORS Introduction; The Merger. This Information Statement is being furnished to the holders of outstanding shares of the Class A Common Stock (the "Class A Stockholders") of Contel Cellular Inc., a Delaware corporation (the "Company"), in connection with the proposed merger (the "Merger") of Contel Cellular Acquisition Corporation, a Delaware corporation ("CCI Acquisition"), with and into the Company. The Company will be the corporation that survives the Merger (the "Surviving Corporation"). The Merger will be effected pursuant to an Agreement and Plan of Merger dated as of December 27, 1994, as amended (the "Merger Agreement"), among the Company, GTE Corporation, a New York corporation ("GTE"), Contel Corporation, a Delaware corporation in liquidation and a wholly owned subsidiary of GTE ("Contel"), and CCI Acquisition, which is a wholly owned subsidiary of Contel. Certain additional information relating to GTE, Contel, CCI Acquisition and the Company and each of their respective directors and executive officers is included in Exhibit E to this Information Statement. In the Merger, (i) each outstanding share of the Class A Common Stock of the Company, par value $1.00 per share (each a "Class A Share") (other than Class A Shares as to which appraisal rights have been properly exercised under the DGCL), will be converted into the right to receive $25.50 in cash, without interest, subject to back-up withholding taxes (the "Merger Consideration"), (ii) each Class A Share held by the Company and each outstanding share of the common stock of CCI Acquisition will be cancelled, and no payment will be made with respect thereto and (iii) each outstanding share of the Class B Common Stock of the Company, par value $1.00 per share (each a "Class B Share"), will continue to be outstanding. The Merger is subject to the satisfaction of certain conditions. See "THE MERGER AGREEMENT -- Conditions to the Merger". Assuming the satisfaction of such conditions, the Merger will be consummated on May 12, 1995. Background of the Merger. GTE, through its wholly owned subsidiary Contel, owns all of the outstanding Class B Shares of the Company, which constitute 90% of the Company's outstanding common stock and approximately 98% of the combined voting power of the capital stock of the Company. The outstanding Class A Shares, which constitute 10% of the Company's outstanding common stock and approximately 2% of the combined voting power of the capital stock of the Company, are held by the public. GTE believes that the cellular communications businesses conducted by the Company and another wholly owned subsidiary of GTE, GTE Mobilnet Incorporated ("GTE Mobilnet"), can be conducted more effectively by acquiring the outstanding minority interest in the Company and consolidating GTE's cellular operations. GTE's decision is based on its belief that such consolidation will permit GTE to implement a unified marketing strategy for its cellular operations, provide increased flexibility in pursuing future opportunities, generate efficiencies in the combined cellular communications business and eliminate the complexities of operating two cellular businesses with overlapping but not identical ownership. For a discussion of GTE's reasons for acquiring the minority interest see "SPECIAL FACTORS -- Background of the Merger" and "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger". GTE believes that the most efficient way to effect the acquisition of the shares held by the public and to provide Class A Stockholders with cash for their Class A Shares is through the merger of a wholly owned subsidiary of Contel into the Company. At the time the Company received GTE's initial proposal to acquire the Class A Shares, nine of the Company's twelve directors were executive officers or directors of GTE or the Company. 4 6 Accordingly, the Board of Directors of the Company (the "Board") appointed a special committee of the three independent directors (the "Special Committee") to negotiate the Merger on behalf of Class A Stockholders and make a recommendation to the Board of Directors in connection with the transaction. Record Date; No Action Required by Class A Stockholders to Consummate the Merger. The Record Date for stockholders entitled to notice of or entitled to give consent to the Merger was March 16, 1995. As of the Record Date, there were issued and outstanding 9,970,953 Class A Shares, each of which has one vote per share, and 90,000,000 Class B Shares, each of which has five votes per share. On the Record Date, Contel owned 90,000,000 Class B Shares, which accounted for approximately 98% of the combined voting power of the outstanding Class A Shares and Class B Shares. Pursuant to the DGCL, Contel, as holder of record of more than 50% of the combined voting power of the Class A Shares and Class B Shares, approved the Merger by written consent on April 10, 1995. Under the DGCL, no action on the part of any other stockholder of the Company is necessary to authorize or to consummate the Merger. The Company will not hold a meeting of stockholders in connection with the Merger. Determination of the Special Committee and the Board; Fairness of the Merger. On December 27, 1994, the Special Committee concluded that the acquisition of Class A Shares pursuant to the Merger was substantively and procedurally fair to the holders of the outstanding Class A Shares, including from a financial point of view, and unanimously recommended that the Board of Directors approve the Merger Agreement and approve the Merger at a price of $25.50 per Class A Share. Based on the recommendation of the Special Committee, the Board unanimously approved the Merger and the Merger Agreement. For a discussion of the factors the Special Committee considered in reaching its decision, see "SPECIAL FACTORS -- Determination of the Special Committee and the Board; Fairness of the Merger". Opinion of Financial Advisor to the Special Committee. At a meeting on December 22, 1994 (the "December 22 Special Committee Meeting"), Lazard Freres & Co. ("Lazard Freres"), financial advisor to the Special Committee, informed the Special Committee that it would be prepared to deliver a written opinion to the effect that the proposed price of $25.50 per Class A Share to be received by the Class A Stockholders in the Merger would be fair to such holders from a financial point of view. Subsequently, on December 30, 1994, Lazard Freres delivered its written opinion to the Special Committee that, as of such date, the consideration to be received by the holders of the Class A Shares in the Merger (other than GTE, Contel or any of their affiliates) is fair to such holders from a financial point of view. A copy of such written opinion, setting forth the assumptions made, matters considered and the review undertaken, is attached to this Information Statement as Exhibit B. Class A Stockholders are urged to read this opinion in its entirety. No limitations were imposed by the Special Committee upon Lazard Freres with respect to the investigation made or the procedures followed by Lazard Freres in rendering its opinion. For a discussion of the matters Lazard Freres considered in reaching its opinion, see "SPECIAL FACTORS -- Opinion of Financial Advisor to the Special Committee". Determination of Fairness of the Merger by GTE, Contel and CCI Acquisition. GTE, Contel and CCI Acquisition believe that the transaction is fair to the Class A Stockholders. GTE, Contel and CCI Acquisition did not retain financial advisors to evaluate the fairness of the transaction to the Class A Stockholders. See "SPECIAL FACTORS -- Determination of the Fairness of the Merger by GTE, Contel and CCI Acquisition". Opinions of Financial Advisors to GTE. GTE retained Merrill Lynch, Pierce, Fenner & Smith Incorporated and PaineWebber Incorporated (the "GTE Financial Advisors") in connection with the transaction. The GTE Financial Advisors assisted GTE in its negotiations with the Special Committee and Lazard Freres. In connection with the transaction, the GTE Financial Advisors rendered opinions to GTE to the effect that the price to be paid for the Class A Shares in the Merger is fair to GTE from a financial point of view. A copy of the fairness opinions of the GTE Financial Advisors setting forth the assumptions made, matters considered and review undertaken, are attached to this Information Statement as Exhibits C-1 and C-2 and incorporated herein by reference. For a discussion of the matters the GTE Financial Advisors considered in reaching their respective opinions, see "SPECIAL FACTORS -- Opinions of Financial Advisors to GTE". 5 7 Certain Litigation. Following the public announcement of the proposed Merger four stockholders of the Company filed separate lawsuits in the Court of Chancery of the State of Delaware in and for New Castle County (the "Court") against the Company on behalf of the Class A Stockholders alleging that the initially announced purchase price was inadequate. After negotiations involving plaintiffs' counsel and counsel for GTE, Contel and CCI Acquisition and counsel for the Special Committee, a tentative settlement agreement was reached with plaintiffs on December 23, 1994, subject to confirmatory discovery. The tentative settlement approves the price of $25.50 per Class A Share and the payment of $525,000 in plaintiffs' counsel fees and expenses. The confirmatory discovery has been completed by plaintiffs' counsel and all documentation necessary to effect the settlement has been submitted to the Court. The Court has scheduled a hearing on June 8, 1995 to approve the settlement. The tentative settlement agreement does not limit the ability of Class A Stockholders to otherwise challenge corporate actions or to exercise appraisal rights pursuant to the DGCL. See "SPECIAL FACTORS -- Certain Litigation". Plans for the Company; Certain Effects of the Merger. As a result of the transaction, the Class A Stockholders will no longer have an equity interest in the Company and, accordingly, will not continue to participate in the results of the Company as an equity holder. However, they will receive cash for their interest. The receipt of cash for the Class A Shares is a taxable transaction under federal and certain state laws. Generally, each Class A Stockholder will be required to recognize a gain or loss equal to the difference between the stockholder's basis in the Class A Shares and the amount of cash received pursuant to the Merger. See "SPECIAL FACTORS -- Certain Federal Income Tax Consequences of the Merger"; "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger". Also, as a result of the transaction the Class A Shares will cease to be registered under the federal securities laws and cease to be publicly traded. It is expected that the operations of the Company and GTE's other cellular subsidiary will be consolidated over time into a single business unit. For a discussion of the effects of the Merger on GTE, Contel and the Company see "SPECIAL FACTORS -- Certain Federal Income Tax Consequences of the Merger" and "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger". PAYMENT OF THE MERGER CONSIDERATION CCI Acquisition will make available to Chemical Bank, as disbursing agent in connection with the Merger (the "Disbursing Agent"), the aggregate amount of cash to be paid in respect of the Class A Shares pursuant to the Merger. In order to receive the Merger Consideration, Class A Stockholders must send their certificates representing Class A Shares to the Disbursing Agent along with a Letter of Transmittal. All certificates so surrendered will be cancelled. A Letter of Transmittal setting forth the procedures for surrendering to the Disbursing Agent certificates representing Class A Shares in exchange for cash is enclosed with this Information Statement. Upon surrender of a certificate representing Class A Shares together with a duly executed Letter of Transmittal, the Class A Stockholder will receive $25.50 in cash in exchange for each Class A Share, without interest, subject to applicable back-up withholding taxes. Any cash held by the Disbursing Agent that remains unclaimed by stockholders for 180 days after the effective time of the Merger will be returned to the Surviving Corporation. After that time, Class A Stockholders may look only to the Surviving Corporation for payment of the Merger Consideration without interest and subject to applicable abandoned property, escheat and other similar laws. ALL QUESTIONS AND REQUESTS FOR INFORMATION RELATING TO THE PROCEDURE FOR PAYMENT OF THE MERGER CONSIDERATION FOR THE CLASS A SHARES SHOULD BE DIRECTED TO THE DISBURSING AGENT. SEE "PAYMENT OF THE MERGER CONSIDERATION". DISSENTERS' RIGHTS OF APPRAISAL By following the procedures prescribed by the DGCL, Class A Stockholders have the right to dissent from the Merger and to receive cash equal to the fair value of their Class A Shares as determined pursuant to appraisal proceedings in the Delaware courts. A WRITTEN DEMAND FOR APPRAISAL OF CLASS A SHARES MUST BE 6 8 DELIVERED TO THE GENERAL COUNSEL OF THE COMPANY WITHIN 20 DAYS AFTER THE DATE OF THE MAILING OF THIS INFORMATION STATEMENT. Because of the complexity of the procedures for exercising the right to dissent, the Company believes that Class A Stockholders who consider exercising such right should seek the advice of counsel. Failure to take any step in connection with the exercise of dissenters' right of appraisal may result in the termination or waiver of such rights. See "DISSENTERS' RIGHTS OF APPRAISAL" and Exhibit D. MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY The Class A Shares are publicly traded in the over the counter market and quoted on the Nasdaq National Market under the symbol "CCXLA". There is no established trading market for the Class B Shares. The Company has not paid any dividends on its Class A Shares or Class B Shares and does not anticipate that it will do so in the foreseeable future. The following table indicates the high and low sales prices for the Class A Shares during the designated periods:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- 1994 High.......................... $ 18.75 $ 17.25 $ 24.00 $ 25.25 Low........................... 14.00 13.00 16.00 23.50 1993 High.......................... $ 18.63 $ 16.25 $ 18.75 $ 22.00 Low........................... 13.25 13.50 15.50 15.00 1992 High.......................... $ 23.25 $ 18.50 $ 16.50 $ 19.00 Low........................... 17.25 13.00 13.50 13.25
On September 7, 1994, the last full day of trading prior to the announcement of GTE's intention to acquire the Class A Shares, the high, low and closing sales prices per Class A Share quoted on the Nasdaq National Market were $18.25, $17.75 and $17.75, respectively. For the first quarter of 1995, the high and low sales prices per Class A Share quoted on the Nasdaq National Market were $25.375 and $24.875, respectively. For the second quarter of 1995 through April 18, 1995, the high and low sales prices per Class A Share quoted on the Nasdaq National Market were $25.375 and $25.25, respectively. BUSINESS OF THE COMPANY The Company, through its subsidiaries and through partnerships, provides or participates in the provision of cellular telephone service in various metropolitan statistical areas ("MSAs") and rural service areas ("RSAs") throughout the United States. As of December 31, 1994, the Company had interests in cellular telephone systems in the United States representing approximately 23.9 million "POPs". ("POPs" refer to the population of a market area multiplied by the Company's percentage ownership in the cellular system serving that market.) The Company's 23.9 million POPs include cellular systems which the Company controls or manages and cellular systems operated by partnerships in which the Company is not the controlling partner. As of December 31, 1994, approximately 19.5 million of the Company's 23.9 million POPs were located in 59 MSAs. The Company owned a controlling interest in and/or managed cellular systems servicing 32 of these 59 MSAs (representing approximately 69% of the Company's MSA POPs). The Company owned a non-controlling interest in cellular systems servicing the remaining 27 MSAs. The remaining 4.4 million of the Company's 23.9 million POPs were located in 52 RSAs. As of December 31, 1994, the Company owned controlling interests in entities licensed to provide cellular service in 24 RSAs, owned non-controlling interests in and managed 10 RSA markets and held non-controlling interests 7 9 in 18 RSAs. Most of the Company's RSA POPs are in areas adjacent to MSAs currently served by the Company. See "BUSINESS OF THE COMPANY". RELATED PARTY TRANSACTIONS The Company, Contel and GTE have a number of financial, operating and other arrangements believed to be of mutual benefit. Those arrangements include, without limitation, a Third Restated Competition Agreement dated March 14, 1991 among Contel, GTE and the Company (the "Competition Agreement") which, among other things, allocates cellular business opportunities among GTE's cellular businesses and a Services Agreement dated May 1, 1991, as amended, between GTE Mobile Communications Service Corporation ("GTE Mobile") and the Company (the "Services Agreement"). The terms of these arrangements have been established by Contel and GTE in consultation with the Company but are not the result of arms-length negotiations. See "RELATED PARTY TRANSACTIONS -- Arrangements and Transactions with Contel and GTE". SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
YEARS ENDED DECEMBER 31, ---------------------------------------------------------------------- 1990 1991 1992 1993 1994 ---------- ---------- ---------- ---------- ---------- (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Revenues and sales................................. $ 167,178 $ 235,107 $ 286,999 $ 374,014 $ 562,955 Operating income (loss)(1)......................... (38,143) (68,577) (50,113) (28,305) 41,011 Loss from consolidated operations.................. (158,865) (223,726) (196,347) (188,011) (143,332) Equity in earnings of unconsolidated partnerships..................................... 19,069 15,687 29,027 37,351 62,792 Gains on sales of partnership interests............ -- 18,387 60,806 48,023 96,607 Net income (loss) before cumulative effect of change in accounting principles.................. (102,794) (118,900) (73,061) (74,918) 1,871 Cumulative effect of change in accounting principles(2).................................... -- -- (2,080) (241) -- Net income (loss).................................. (102,794) (118,900) (75,141) (75,159) 1,871 Net income (loss) per share before cumulative effect of change in accounting principles........ (1.03) (1.19) (0.73) (0.75) 0.02 Net income (loss) per share........................ (1.03) (1.19) (0.75) (0.75) 0.02 Number of weighted average shares outstanding (in thousands)....................................... 99,931 99,942 99,943 99,948 99,953 OTHER OPERATING DATA: Capital expenditures............................... 70,841 107,792 183,504 130,042 255,174 Number of ending subscribers....................... 155,285 236,282 327,645 521,226 789,580
AS OF DECEMBER 31, ---------------------------------------------------------------------- 1990 1991 1992 1993 1994 ---------- ---------- ---------- ---------- ---------- (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA: Total assets....................................... $1,665,395 $1,870,669 $1,930,469 $2,052,984 $2,346,466 Long-term obligations: Notes payable -- affiliates...................... 1,540,000 1,735,034 1,814,327 1,901,726 2,136,263 Other............................................ 14,280 42,280 36,280 36,792 30,792 Stockholders' equity (deficit)..................... 27,525 (91,085) (166,084) (241,221) (238,920) Book value per share............................... 0.28 (0.91) (1.66) (2.41) (2.39)
- --------------- (1) The operating loss in 1991 includes approximately $12 million of integration costs associated with the merger of Contel with a wholly owned subsidiary of GTE. (2) In 1993, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." In 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and No. 109, "Accounting for Income Taxes." Earnings were not adequate to cover fixed charges in 1992, 1993 or 1994. The amount of such deficiency was $128 million, $129 million and $19 million for the years ended December 31, 1992, 1993 and 1994, respectively. 8 10 PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY The Company does not, as a matter of course, publicly disclose projections as to future revenues or earnings. As part of its normal planning process, the Company has prepared certain five year projected financial data for internal purposes. Additionally, the Company prepared ten year projected financial data which was based on an earlier version of the five year projected financial data. Differences between the ten and the five year projected data are attributable to the inclusion or exclusion of certain acquisitions which occurred subsequent to the preparation of the ten year projected data. These five year and ten year financial projections have been included in this Information Statement because such projections were made available to the Special Committee's financial advisor, GTE and the GTE Financial Advisors. See "PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY". There can be no assurance that the projections will be realized and actual results may vary materially from the projections. 9 11 SPECIAL FACTORS INTRODUCTION; THE MERGER This Information Statement is being furnished to the holders of outstanding shares of the Class A Common Stock (the "Class A Stockholders") of Contel Cellular Inc., a Delaware corporation (the "Company"), in connection with the proposed merger (the "Merger") of Contel Cellular Acquisition Corporation, a Delaware corporation ("CCI Acquisition"), with and into the Company. The Company will be the corporation that survives the Merger (the "Surviving Corporation"). The Merger will be effected pursuant to an Agreement and Plan of Merger dated as of December 27, 1994, as amended (the "Merger Agreement"), among the Company, GTE Corporation, a New York corporation ("GTE"), Contel Corporation, a Delaware corporation in liquidation and a wholly owned subsidiary of GTE ("Contel"), and CCI Acquisition, which is a wholly owned subsidiary of Contel. Certain additional information relating to GTE, Contel, CCI Acquisition and the Company and each of their respective directors and executive officers is included in Exhibit E to this Information Statement. In the Merger, (i) each outstanding Class A Share (other than Class A Shares as to which appraisal rights have been properly exercised under the DGCL) will be converted into the right to receive $25.50 in cash, without interest, subject to backup withholding of taxes (the "Merger Consideration"), (ii) each Class A Share held by the Company and each outstanding share of the common stock of CCI Acquisition will be cancelled, and no payment will be made with respect thereto and (iii) each outstanding Class B Share will continue to be outstanding. The Merger is subject to the satisfaction of certain conditions. See "THE MERGER AGREEMENT -- Conditions to the Merger". The Merger will require notice filings in a number of states, but the approval of regulatory authorities will not be required in any jurisdiction. Assuming the satisfaction of such conditions, the Merger will be consummated on May 12, 1995. For a discussion of the effects of the Merger on each of the Class A Stockholders, the Company, GTE, Contel and CCI Acquisition, see "-- Certain Federal Income Tax Consequences of the Merger" and "-- Plans for the Company; Certain Effects of the Merger" below. BACKGROUND OF THE MERGER Existing Ownership. The outstanding stock of the Company consists of 9,970,953 Class A Shares, which represent approximately 2% of the voting power of the combined capital stock of the Company, and 90,000,000 Class B Shares, which represent approximately 98% of the voting power of the combined capital stock of the Company. GTE, through its wholly owned subsidiary Contel, owns all of the outstanding Class B Shares. The outstanding Class A Shares are held by the public and trade in the over the counter market with prices quoted on the Nasdaq National Market under the symbol "CCXLA". The Company was originally formed as a wholly owned subsidiary of Contel. In April 1988, a portion of the Company's stock was sold to the public in a public offering. In March 1991, a wholly owned subsidiary of GTE merged into Contel and Contel became a wholly owned subsidiary of GTE (the "GTE/Contel Merger"). As a result of this merger, the Company became an indirectly held subsidiary of GTE. GTE also provided and continues to provide cellular mobile services through another wholly owned subsidiary, GTE Mobilnet Incorporated ("GTE Mobilnet"). GTE/Contel Merger; California Proceeding. At the time of the GTE/Contel Merger, both GTE and Contel had telephone and cellular operations in California subject to the jurisdiction of the California Public Utilities Commission (the "CPUC"). The CPUC asserted jurisdiction over the GTE/Contel Merger. Under California law, the CPUC is required to approve the merger of the California telephone operations of GTE and Contel (the "California Proceeding"). In order to complete the GTE/Contel Merger in jurisdictions other than California, the companies entered into a stipulation that was approved by the CPUC (the "Stipulation"). The Stipulation resulted in the approval of the GTE/Contel Merger on an interim basis. The Stipulation provided that the GTE and Contel telephone and cellular companies located in California would be operated as separate entities until the CPUC could conduct a detailed review of the GTE/Contel Merger under the provisions of California law. As of this date, the GTE/Contel Merger and the merger of the GTE and Contel regulated operations in California have not yet received final approval. 10 12 In April 1994, GTE received a proposed final decision with respect to the California Proceeding. As a result of concerns with certain provisions in the order with respect to the distribution of the GTE/Contel Merger benefits, GTE requested that the evidentiary record be reopened. That request was granted. The CPUC, however, has not yet acted based upon the additional evidence that has been submitted. GTE's Determination to Proceed and Discussions Regarding Structure. Since the date of the GTE/Contel Merger, GTE's management has, from time to time, discussed the concept of acquiring the publicly held shares of the Company. The discussions were held among GTE's management on a limited and confidential basis and no decision was made to proceed. In early 1994, GTE anticipated receiving an order in the California Proceeding which would approve the GTE/Contel Merger and clarify certain issues relating to the California operations and began to seriously consider acquiring the publicly held shares of the Company. As a result of the continuing delays in the CPUC proceeding described in the preceding paragraph, GTE's management concluded in early August 1994 that issuance of the final order in the California Proceeding would be delayed and that it would be advisable to proceed at that time to acquire the publicly held shares of the Company. GTE management met with its legal and financial advisors to discuss structuring the transaction and decided that the most efficient way to effect the acquisition of the public minority would be through a merger of a wholly owned subsidiary of Contel into the Company. This structure would ensure that GTE acquired all of the Class A Shares in a single step. GTE's management considered using GTE Common Stock to effect the Merger. However, GTE's management believed that its Common Stock was undervalued and elected to use cash. If a stock for stock transaction had been used to effect the Merger, the number of shares of GTE Common Stock that holders of the Class A Shares would have received would have been determined by reference to the market value of shares of GTE Common Stock. Since GTE believed that shares of GTE Common Stock were undervalued in the market, GTE felt that in a stock for stock transaction GTE would either (a) effectively pay more for the Class A Shares than the $25.50 per share price or (b) have to offer shares of GTE Common Stock with a lower current market value than $25.50 per Class A Share in order to give the holders of Class A Shares what GTE considered to be of equal value to its cash offer. Accordingly, GTE determined that payment of the purchase price in cash was preferable from the standpoint of both GTE and its stockholders and, except with respect to tax treatment, the Class A Stockholders. GTE's management further considered two alternatives: whether the Company should merge with and into a subsidiary of Contel that would be created to accomplish the merger (the "New Subsidiary"), with the New Subsidiary being the survivor of the merger; or whether the New Subsidiary should merge with the Company, with the Company being the survivor of the merger. GTE's management elected to structure the transaction so that the Company would be the survivor of the Merger. The Company holds licenses to operate cellular systems in its name and, under applicable rules and regulations of the Federal Communications Commission (the "FCC"), if the Company was not the surviving company in the merger, the merger would be considered to be a transfer of the licenses. The Company would be required to obtain FCC approval for the transfer of the licenses before effecting such merger. The approval process could take up to six months and could delay the completion of the Merger and the payment of Merger Consideration to the Class A Stockholders. The tax consequences and other effects of a merger would be the same to the Class A Stockholders regardless of whether the Company or the New Subsidiary was the survivor of a merger. Approval by GTE Board. On September 8, 1994, the Board of Directors of GTE approved a proposal to acquire the Class A Shares for $22.50 per share and also authorized negotiations with the Company. On the same date, GTE notified the Board of Directors of the Company of its proposal to acquire the Class A Shares for $22.50 per Class A Share, or approximately $224 million. Purpose of the Merger. At the present time, the Company is operated separately from GTE's other cellular interests. The Company has retained its own name and own brand identity. Decisions regarding opportunities for the Company and the decisions on various actions to be taken by the Company have been made by its Board of Directors based upon the best interests of the Company, not the best interests of GTE's combined operations. The Merger will permit GTE to operate its cellular operations as a single unit; enable GTE to implement a unified marketing strategy for its cellular operations; provide increased flexibility to 11 13 pursue joint ventures and other combinations and new business opportunities; generate efficiencies and reduce overhead in the combined cellular communications business; and eliminate the complexities raised by operating two cellular businesses under overlapping but not identical ownership. After the Merger, GTE plans to operate its combined cellular operations as a single business unit and to maximize the use of the GTE brand name for all of its cellular operations. These actions will expand the area covered by service that can be readily identified as being provided by GTE and increase recognition of the GTE brand name among consumers that are served by GTE's cellular operations. GTE acquired its majority equity position in the Company as part of the GTE/Contel Merger. From time to time, GTE has attempted to align its legal entities and simplify its corporate structure. In January 1993, Contel adopted a plan of liquidation to facilitate the realignment of GTE and Contel entities and is in the process of distributing its assets to GTE. Contel will continue to wind up its affairs and to distribute its assets to GTE. When the distributions have been completed, Contel will be completely liquidated. Contel is the parent of the Company and, accordingly, is a party to the Merger. Contel is a wholly owned subsidiary of GTE and is not engaged in operations or making business determinations that are separate from GTE. The Merger and the consolidation of the cellular operations of the Company and GTE's other cellular subsidiary are a part of this process. Special Committee; Negotiations with GTE Financial Advisors. At the time GTE informed the Company of its offer to acquire the publicly held Class A Shares, nine of the Company's twelve directors were executive officers or directors of GTE or the Company. Accordingly, the Board of Directors of the Company at a meeting on September 9, 1994 appointed the three independent directors, Messrs. Irwin Schneiderman, Leo Jaffe and Robert LaBlanc, to a special committee (the "Special Committee") to review the fairness of and negotiate the material terms of the proposed Merger on behalf of the Class A Stockholders. Members of the Special Committee each received a fee of $35,000 and the Chairman of the Special Committee received a fee of $45,000. As part of the Stipulation entered into in the California Proceeding, at least three of the Company's directors are required to be independent directors who are not otherwise officers, directors or employees of GTE until the CPUC approval has been received. GTE has not at this time determined whether or not Messrs. Schneiderman, Jaffe and LaBlanc will remain as independent directors after the Merger. The Special Committee met for the first time on September 17, 1994 and authorized the retention of Cahill Gordon & Reindel ("Cahill") as legal counsel to the Special Committee. On September 17 and September 22, 1994, the Special Committee interviewed seven investment banking firms for possible engagement as a financial advisor to the Special Committee in its evaluation of the proposed Merger. On September 22, 1994, the Special Committee retained Lazard Freres & Co. ("Lazard Freres") as its financial advisor. Lazard Freres has not had any material relationship with GTE or any of its subsidiaries including the Company. Between September 28 and December 22, 1994, the Special Committee and Lazard Freres held thirteen meetings either in person or by telephone conference call to discuss the proposed Merger. During each of such meetings, members of the Special Committee asked questions of the representatives of Lazard Freres regarding numerous topics, including the experience of Lazard Freres in transactions of this type, the experience of Lazard Freres in transactions in this industry, and the methodology that Lazard Freres intended to use in valuing the Class A Shares from a financial point of view. The methodology Lazard Freres used and the various details of their analyses are set forth below under "-- Opinion of Financial Advisor to the Special Committee". Beginning on October 17, 1994, the Special Committee (acting through Lazard Freres) entered into negotiations with GTE's financial advisors, Merrill Lynch, Pierce, Fenner & Smith Incorporated and PaineWebber Incorporated (individually, "Merrill Lynch" and "PaineWebber", respectively, and, collectively, the "GTE Financial Advisors") relating to the proposed price to be paid in the Merger, which process continued for several weeks. During the course of such negotiations in October 1994, the GTE Financial Advisors furnished to GTE's management a preliminary draft of their background analysis and furnished to Lazard Freres a portion of such preliminary draft. A final version of such preliminary draft background analysis was never furnished to GTE or Lazard Freres by the GTE Financial Advisors. See "-- Opinions of Financial Advisors to GTE -- Draft Preliminary Analysis of GTE Financial Advisors". The GTE Financial Advisors based their fairness opinions to GTE on the analyses described below in "-- Opinions of Financial Advisors to GTE -- Summary of PaineWebber's Opinion to the Board of GTE Corporation" and "-- Opin- 12 14 ions of Financial Advisors to GTE -- Summary of Merrill Lynch's Opinion to the Board of GTE Corporation". On November 7, 1994 Lazard Freres furnished to the GTE Financial Advisors a preliminary draft of the Lazard Freres Report referred to below under "-- Opinion of Financial Advisor to the Special Committee". On November 10, 1994 the GTE Financial Advisors and Lazard Freres met to review their respective preliminary analyses. Thereafter, in November 1994, GTE indicated that it might be willing to increase its offer to $25.00 per Class A Share. As a result of continued negotiations between Lazard Freres and the GTE Financial Advisors, and negotiations with counsel for certain stockholders who brought suit against the Company and certain of its affiliates in connection with the proposed transaction described below under "-- Certain Litigation", the price per Class A Share proposed to be given in the Merger was increased by GTE to $25.50. In December 1994, counsel for the Special Committee requested several changes to the draft Merger Agreement. Counsel for the Special Committee indicated that because GTE controlled the Company, it would be appropriate to add GTE as a party to the agreement and delete a covenant that the Company conduct its business in the ordinary course until the date of the Merger. GTE agreed to those changes. After discussions with counsel for the Special Committee, GTE, in recognition of the fact that it controlled the Company and did not intend to delay or avoid closing the Merger, also agreed to delete certain conditions to the closing of the Merger, relating to material adverse changes in the business, properties or conditions or prospects of the Company, third party consents and litigation in connection with the Merger. GTE also agreed to remove a provision allowing termination of the agreement for breach of covenants or representations and warranties. Certain other non-material changes were also made as a result of these discussions. DETERMINATION OF THE SPECIAL COMMITTEE AND THE BOARD; FAIRNESS OF THE MERGER At a meeting on December 22, 1994 (the "December 22 Special Committee Meeting"), Lazard Freres informed the Special Committee that it would be prepared to deliver a written opinion to the effect that the proposed price of $25.50 per Class A Share to be received by the holders of the Class A Shares (other than GTE, Contel or any of their affiliates) in the Merger would be fair to such holders from a financial point of view. Subsequently, on December 30, 1994, Lazard Freres delivered its written opinion to the Special Committee that, as of such date, the consideration to be received by the holders of the Class A Shares (other than GTE, Contel or any of their affiliates) in the Merger is fair to such holders from a financial point of view. On December 22, 1994 the Special Committee reviewed a draft of the Merger Agreement, pursuant to which (i) each outstanding Class A Share (other than Class A Shares as to which appraisal rights have been properly exercised under the DGCL) would be converted into the right to receive the Merger Consideration, (ii) each Class A Share held by the Company and each outstanding share of the common stock of CCI Acquisition would be cancelled, and no payment would be made with respect thereto and (iii) each outstanding Class B Share would continue to be outstanding. At a meeting held on December 27, 1994, the Special Committee unanimously decided that the acquisition of Class A Shares pursuant to the Merger was substantively and procedurally fair to the holders of the outstanding Class A Shares, including from a financial point of view, and, therefore, unanimously recommended to the Board of Directors of the Company that it approve the Merger at a price of $25.50 per Class A Share. Based on the recommendation of the Special Committee, the Company's Board of Directors unanimously found that the Merger was substantively and procedurally fair to the Class A Stockholders, including from a financial point of view and approved the Merger Agreement and approved the Merger at a price of $25.50 per Class A Share. In finding that the Merger was substantively and procedurally fair to the Class A Stockholders, the Board of the Company relied on the factors relied on by the Special Committee and the determinations of the Special Committee. In determining to recommend to the Board of Directors of the Company that it approve the Merger and the Merger Agreement, the Special Committee considered a number of factors. The material factors considered by the Special Committee were: (a) the Special Committee's evaluation of the Company's business, properties and future prospects (which evaluation was substantially the same as the evaluation by Lazard Freres summarized hereinafter under the caption "-- Opinion of Financial Advisor to the Special Committee"); 13 15 (b) that the price of $25.50 per Class A Share represents (i) a premium of 43.7% over the closing sales price of the Class A Shares on the Nasdaq National Market on September 7, 1994, the last trading day prior to the public announcement of the proposed Merger, (ii) a premium of 37.8% over the closing sales price of the Class A Shares on the Nasdaq National Market one week prior to September 8, 1994, and (iii) a premium of 39.7% over the closing sales price of the Class A Shares on the Nasdaq National Market one month prior to September 8, 1994; (c) that the sales price of the Class A Shares on the Nasdaq National Market had not exceeded the price of $25.50 per Class A Share since October 10, 1989; (d) presentations by Lazard Freres regarding the financial condition, results of operations, business and prospects of the Company, including the possible dislocation and competitive uncertainty that could result from major changes in the cellular communication industry; (e) presentations by Lazard Freres regarding the industry in which the Company operates and the financial, operating and stock price history of the Company in comparison to certain companies operating in the Company's industry, including the Company's competitors as summarized below in "-- Opinion of Financial Advisor to the Special Committee"; (f) statements by Lazard Freres at the December 22 Special Committee Meeting that it would be prepared to deliver to the Special Committee a written opinion to the effect that the price of $25.50 per Class A Share was fair to the Class A Stockholders (other than GTE, Contel or any of their affiliates) from a financial point of view, which written opinion dated as of December 30, 1994 was in fact delivered to the Special Committee by Lazard Freres; and (g) the Special Committee's belief that GTE would not increase the price above $25.50 per Class A Share. In view of the variety and nature of the factors considered by the Special Committee, the Special Committee did not attempt to assign relative weights to the specific factors considered in reaching its determination, except that the Special Committee placed particular emphasis on the opinion of Lazard Freres and the fact that the price of $25.50 per Class A Share represented a substantial premium over the price at which the Class A Shares had recently and historically traded. The Special Committee did not consider book value to be a material factor as it believed that the financial analysis by Lazard Freres provided more accurate implied values of the Class A Shares. The Special Committee did not consider liquidation value as the holders of Class A Shares do not have the power to liquidate the Company. GTE had not purchased any Class A Shares and there were no firm offers of which the Special Committee was aware made by any unaffiliated person, so the Special Committee did not consider such factors. Moreover, the quantifiable per share value of the factors considered did not exceed the price being offered except to the extent that Lazard Freres' financial analyses produced estimated ranges of values that in some cases partially exceeded or exceeded $25.50. The Special Committee determined that the Merger is fair despite such higher values for two reasons. First, in the case of the private market transaction analysis summarized below under "-- Opinion of Financial Advisor to the Special Committee" which produced an estimated range of implied full private market valuations of the Class A Shares higher than $25.50, Lazard Freres advised the Special Committee that, in acquisition transactions where an acquiror already owned a controlling position in the company to be acquired (as in the case of GTE's existing ownership of the Company), the public stockholders would not obtain the full private market valuation for their shares since full private market valuation would only be paid in order to obtain control of a company. Second, the price of $25.50 exceeded the mid-point and approached the high end of those other ranges that included a higher value. The approval of the Merger by a majority of the Class A Stockholders is not required and is not being sought. Notwithstanding this fact, the Special Committee believed that the acquisition of Class A Shares pursuant to the Merger is substantively and procedurally fair to the holders of Class A Shares because the Special Committee of independent directors of the Company was established to evaluate the transaction and 14 16 because GTE and its financial advisors negotiated in good faith with the Special Committee and its financial advisor. Moreover, the Special Committee, unanimously approved the Merger. With the exception of the members of the Special Committee and the Board of Directors of the Company, no director, executive officer or affiliate of the Company, GTE, Contel or CCI Acquisition has made a recommendation in support of or opposed to the Merger. OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE General. Lazard Freres delivered its written opinion to the Special Committee that, as of December 30, 1994, the consideration to be received by the holders of the Class A Shares (other than GTE, Contel or any of their affiliates) in the Merger is fair to such holders from a financial point of view. The full text of the written opinion of Lazard Freres, dated as of December 30, 1994, which sets forth the assumptions made, matters considered and the review undertaken with regard to such opinion, is attached to this Information Statement as Exhibit B. The summary of the opinion of Lazard Freres set forth below is qualified in its entirety by reference to the full text of the opinion. Class A Stockholders are urged to read this opinion in its entirety. Additional copies of such opinion are available for inspection and copying at the principal executive offices of GTE during regular business hours and are also available upon request directed to GTE Corporation, One Stamford Forum, Stamford, CT 06904, Attention: Ronald J. Tuccillo, Assistant Secretary. In rendering its opinion on December 30, 1994, Lazard Freres, among other things, (i) reviewed the terms and conditions of a December 29, 1994 draft of the Merger Agreement (the "Draft Merger Agreement"); (ii) analyzed certain historical business and financial information relating to the Company, including the Annual Report to Stockholders and Annual Reports on Form 10-K of the Company for each of the fiscal years ended December 31, 1991 through 1993, and Quarterly Reports on Form 10-Q of the Company for the quarters ended March 31, June 30 and September 30, 1994; (iii) reviewed certain financial forecasts and other data provided by the Company relating to the Company; (iv) held discussions with members of the senior managements of the Company and GTE with respect to the businesses and prospects of the Company and its strategic objectives; (v) reviewed public information with respect to certain other companies in lines of business Lazard Freres believes to be generally comparable to the businesses of the Company; (vi) reviewed the financial terms of certain recent business combinations involving companies in lines of businesses Lazard Freres believes to be generally comparable to those of the Company, and in other industries generally; (vii) reviewed the financial terms of certain recent business combinations Lazard Freres believes to be comparable in certain respects to the proposed Merger; (viii) reviewed the historical stock prices and trading volumes of the Class A Shares; and (ix) conducted such other financial studies, analyses and investigations as Lazard Freres deemed appropriate. In arriving at its opinion and making its presentation to the Special Committee at the December 22 Special Committee Meeting, Lazard Freres was advised that the Company and an affiliate of GTE propose to exchange certain cellular assets owned by each of them for certain cellular assets owned by a publicly held company (the "Cellular Exchange"). Lazard Freres received a copy of a letter dated December 19, 1994 from GTE's Senior Vice President - Finance addressed to the GTE Financial Advisors regarding the Cellular Exchange to the effect that it is an exchange of equivalent assets and, accordingly, is value neutral to the Company. Lazard Freres has neither received nor reviewed any other information regarding the Cellular Exchange, including any financial projections or any other non-public financial information prepared by GTE or the Company. With the consent of the Special Committee, Lazard Freres has assumed that the Cellular Exchange involves the exchange of assets with substantially equivalent value and, accordingly, would have an immaterial effect, if any, on the Company. For a discussion of the agreement entered into in February 1995 by the Company and certain affiliates of GTE relating to the Cellular Exchange, see "BUSINESS OF THE COMPANY -- The Company's Cellular Operations -- Cellular Exchange Transaction". For purposes of its opinion, Lazard Freres, with the Special Committee's concurrence, has ascribed no value to the Company's rights under either (i) the Competition Agreement or (ii) the Services Agreement. 15 17 In rendering its opinion, Lazard Freres did not review this Information Statement or any similar document that may be prepared for use in connection with the proposed Merger. In addition, Lazard Freres was not asked by the Special Committee to solicit third party indications of interest in acquiring all or any part of the Company, nor did Lazard Freres seek any such offers. In connection with its review, Lazard Freres relied upon the accuracy and completeness of the financial and other information concerning the Company received by Lazard Freres and did not assume any responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets of the Company. With respect to the financial forecasts provided to it by the Company, Lazard Freres assumed that such financial forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the future financial performance of the Company. Lazard Freres assumed no responsibility for and expressed no view as to such forecasts or the assumptions upon which they were based. Lazard Freres' opinion was based on economic, monetary, market and other conditions as in effect on, and information made available to it as of, the date of the opinion. In rendering its opinion, Lazard Freres assumed that the Merger Agreement entered into among the parties thereto would be identical in all material respects to the Draft Merger Agreement, and that the Merger would be consummated on the terms described in the Draft Merger Agreement, without any waiver of any material terms or conditions by the Company. Lazard Freres also assumed that obtaining any necessary regulatory approvals for the Merger would not have an adverse effect on the Company. Lazard Freres has since advised the Special Committee that the changes included in the Merger Agreement from the Draft Merger Agreement on which its opinion was based would not have effected Lazard Freres' ability to deliver its opinion set forth therein. In arriving at its opinion and making its presentation at the December 22 Special Committee Meeting, Lazard Freres considered and discussed certain financial analyses and other factors. In connection with its presentation, Lazard Freres presented the Special Committee with a summary of its analyses (the "Lazard Freres Report"), which had been discussed in preliminary form at prior meetings of the Special Committee. The following is a brief summary of the analyses performed by Lazard Freres in connection with rendering its opinion and discussed with the Special Committee at the December 22 Special Committee Meeting. In reviewing the background of GTE's initial offer to acquire the Class A Shares at $22.50 per share (the "GTE Initial Offer") and GTE's revised offer of $25.50 per share (the "GTE Revised Offer"), Lazard Freres noted the GTE Initial Offer implied a value for the Company's approximately 23.9 million POPs of approximately $194 of market capitalization (defined as the total market value of the Company's equity plus its net debt) per net POP, $181 of cellular asset value per net POP (which excludes from market capitalization the value of the Company's non-cellular assets), and $156 of cellular license value per net POP (which excludes from cellular asset value the value of the Company's net cellular property, plant and equipment and working capital). Lazard Freres explained that the GTE Initial Offer also represented a 26.8% premium over the closing price per share of the Class A Shares on September 7, 1994, one day prior to GTE's announcement of the GTE Initial Offer, on which date the closing price per share of the Class A Shares was $17.75. In addition, Lazard Freres noted that the Revised GTE Offer recommended by the Special Committee implied a value of approximately $207 of market capitalization per net POP, $193 of cellular asset value per net POP, and $169 of cellular license value per net POP; the GTE Revised Offer also represented a 43.7% premium over the closing price per share of the Class A Shares one day prior to GTE's announcement of the GTE Initial Offer, and a 13.3% increase over the GTE Initial Offer. Lazard Freres explained that in arriving at its opinion, Lazard Freres performed a number of financial analyses, including: (i) a private market transaction analysis, in which Lazard Freres reviewed publicly available information on twenty-six private market sale transactions announced since July 1993, involving cellular operations in MSAs; (ii) a comparable public company analysis, in which Lazard Freres reviewed certain financial, operating, and stock market trading information of selected publicly traded companies engaged primarily in the cellular business; and (iii) a discounted cash flow analysis, in which Lazard Freres 16 18 estimated the present value of the future cash flows that the management of the Company expects its businesses to generate. The material portions of the foregoing analyses (which are all of the material valuation methodologies performed by Lazard Freres) are summarized below. Private Market Transaction Analysis. Lazard Freres reviewed publicly available information on twenty-six private market sale transactions that were announced and consummated since July 1993, involving cellular operations in MSAs (the "Comparable Transactions"). Using regression analysis, private market value for cellular properties in the Comparable Transactions were estimated as a function of MSA ranking (e.g., New York City, as the largest MSA, ranked number 1). These results were then applied to the Company's MSA net POPs, with adjustments made to the resulting valuations depending upon whether (i) population growth in each such MSA is expected to increase at a faster rate than average population growth expected for the United States, as a whole; (ii) median household income in each such MSA is greater than median household income for the United States, as a whole; (iii) average commuting time for each such MSA is greater than average commuting time for the United States, as a whole; and (iv) each such MSA is contiguous to other MSAs or RSAs serviced by the Company. Such adjustments were calculated by applying to the valuation of each of the Company's MSA markets a 5% premium for each of the foregoing factors which applied to such MSA market, and a 5% discount for each of the foregoing factors which did not apply to such MSA market. Utilizing this methodology, the implied values of the Company's controlled MSA net POPs and non-controlled MSA net POPs were estimated at $211 per POP and $280 per POP, respectively. In view of the Company's substantial holdings of non-controlled MSA net POPs in large MSA markets, including non-controlling interests in four of the country's ten largest MSA markets (Los Angeles, San Francisco, Washington, D.C. and Houston), implied private market values for the Company's non-controlled MSA net POPs were also estimated utilizing a cash flow based comparable public company analysis to estimate the value of such non-controlled MSA net POPs as if such interests were held by a stand-alone company. In this analysis, which Lazard Freres analyzed for selected publicly traded companies in the cellular communications business (the "Comparable Companies") the stock prices, market capitalizations, cellular asset values and publicly available estimates of projected operating cash flows for 1994 through 1996. This analysis showed an average ratio of market capitalization to projected cash flow in 1994 for the Comparable Companies of 23.9. Applying this multiple to the projected 1994 operating cash flow of the Company's non-controlled MSA net POPs provided by management, the implied value of such non-controlled MSA net POPs was estimated at $341 per POP. The Comparable Companies reviewed by Lazard Freres in this analysis included AirTouch Communications Inc., BCE Mobile Communications, Inc., Centennial Cellular Corp., Rogers Cantel Mobile Communications, Inc., United States Cellular Corporation, and Vanguard Cellular Systems, Inc. Implied private market valuations for the Company's net MSA POPs were then calculated for the Company's approximately 12.9 million controlled MSA net POPs (estimated at $211 per MSA net POP utilizing the regression analysis referred to above) and the Company's approximately 5.9 million non-controlled MSA net POPs (estimated ranging from $280 per MSA net POP utilizing the regression analysis referred to above to $341 per MSA net POP utilizing the comparable public company analysis referred to above). After adding (i) an assumed value of $130 per net POP for each of the Company's approximately 3.3 million controlled and clustered RSA net POPs (where "clustered RSA net POPs" refers to the POPs serviced by the Company in RSAs that are contiguous to other MSAs or RSAs serviced by the Company), (ii) an assumed value of $105 per net POP for each of the Company's approximately 0.5 million controlled and non-clustered RSA net POPs (where "non-clustered RSA net POPs" refers to the POPs that are not clustered RSA net POPs), (iii) an assumed value of $77 per net POP for each of the Company's approximately 1.2 million non-controlled RSA net POPs, (iv) an implied value of $300 million for the Company's wireless data business, estimated utilizing a discounted cash flow analysis described below, and (v) an assumed value of $30 million for the Company's international assets, and subtracting net debt, Lazard Freres arrived at estimated ranges of value for the common equity of the Company, including the Class A Shares. The assumed values referred to in clauses (i), (ii), (iii) and (v) above were derived based on consultations with management of the Company and Lazard Freres' experience with similar properties in 17 19 other transactions. Utilizing this methodology, the implied full private market valuation of the Class A Shares was estimated at between $32.36 and $36.00 per share. While the estimated range of implied full private market valuations of the Class A Shares utilizing this methodology was higher than the GTE Revised Offer, the Lazard Freres Report noted that in acquisition transactions where an acquiror already owned a controlling position in the company to be acquired (as in the case of GTE's existing equity ownership of the Company), public stockholders would not obtain full private market valuation as a result of such acquisitions. Comparable Public Company Analysis. Lazard Freres compared certain publicly available financial data of selected publicly traded companies in the cellular communications business with the historical financial performance of the Company. Lazard Freres analyzed on a per net POP basis for each of the Company and such selected publicly traded companies, among other things, the market values (defined as the total market value of a company's equity), market capitalizations, cellular asset values and cellular license values. This analysis showed that the cellular asset values per net POP for such publicly traded companies ranged from an estimated low of $117 to an estimated high of $194, which compared to an implied value in the GTE Revised Offer of approximately $193 of cellular asset value per net POP. The publicly traded companies reviewed by Lazard Freres in this analysis included the Comparable Companies, Commnet Cellular, Inc. and PriCellular Corp. Utilizing this methodology, the implied value of the Class A Shares was estimated at between $23.29 and $25.68 per share, compared to $25.50 in the GTE Revised Offer. Discounted Cash Flow Analysis. Lazard Freres performed a discounted cash flow analysis of the Company based upon estimates of financial performance of the Company provided by management. Utilizing these projections, Lazard Freres discounted to the present (i) the projected stream of the Company's unlevered cash flows for its cellular business through the year 2004, and (ii) the projected terminal value of the Company's cellular business at such year based upon a range of multiples of cash flow in year 2004. Lazard applied several discount rates (ranging from 11% to 13%) and multiples of cash flow in year 2004 (ranging from 12.0 to 14.0). Similarly, for the Company's wireless data business, Lazard Freres discounted to the present projected streams of the Company's cash flows for its wireless data business and arrived at an estimated valuation by applying several discount rates (ranging from 12.0% to 16.0%) and multiples of cash flow in year 2004 (ranging from 13.5 to 15.5). After adding an assumed value of $30 million for the Company's international assets and subtracting net debt, Lazard Freres arrived at estimated ranges of value for the common equity of the Company, including the Class A Shares. Utilizing this methodology, the implied value of the Class A Shares was estimated at between $19.99 and $28.60 per share, compared to $25.50 in the GTE Revised Offer. The analyses contained in the preliminary draft of the Lazard Freres Report presented to the Special Committee on November 7, 1994 did not materially differ from the final Lazard Freres Report presented to the Special Committee at the December 22 Special Committee Meeting, except that the final Lazard Freres Report included: (i) an updated summary of the negotiations with the GTE Financial Advisors and an analysis of the GTE Revised Offer of $25.50 per Class A Share, (ii) a revised private market transaction analysis and comparable public company analysis of the Company that took into account (A) the sale by the Company of certain POPs during the period following the date of the preliminary draft of the Lazard Freres Report, and (B) the then-current publicly available financial data of the publicly traded companies reviewed by Lazard Freres in such analyses, and (iii) a discounted cash flow analysis of the Company based upon a revised projected stream of the Company's unlevered cash flow for its cellular business. Such revised cash flow projections excluded projected unlevered cash flows for the Company's wireless data business, since a separate discounted cash flow analysis was performed for such business in both the preliminary draft of and in the final Lazard Freres Report. In the preliminary draft of the Lazard Freres Report, the implied full private market valuation of the Class A Shares utilizing a private market transaction analysis was estimated at between $32.56 and $37.20 per share (compared to an estimated range of $32.36 and $36.00 per share set forth in the final Lazard Freres Report), the implied value of the Class A Shares utilizing a comparable public company analysis was estimated at between $23.53 and $25.92 per share (compared to an estimated range of $23.29 and $25.68 per share set forth in the final Lazard Freres Report), and the implied value of the Class A Shares utilizing a 18 20 discounted cash flow analysis was estimated at between $23.05 and $32.37 per share (compared to an estimated range of $19.99 and $28.60 per share set forth in the final Lazard Freres Report). In arriving at its written opinion and in presenting the Lazard Freres Report to the Special Committee, Lazard Freres performed various financial analyses, portions of which are summarized above. The summary set forth above does not purport to be a complete description of Lazard Freres' analyses. Lazard Freres believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all such analyses, could create an incomplete view of the process underlying its analyses set forth in the opinion and the Lazard Freres Report. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. However, the Lazard Freres Report noted that the GTE Revised Offer fell within the range of implied values of the Class A Shares for each of the analyses performed and described above other than the private market transaction analysis, for which the Lazard Freres Report noted that since GTE already held a controlling position in the Company through its existing equity ownership, the Company's public stockholders would not obtain full private market valuation for the Class A Shares. With regard to the private market transaction analysis and the comparable public company analyses summarized above, Lazard Freres selected comparable public companies on the basis of various factors, including the size of the public company and similarity of the line of business; however, no public company utilized as a comparison is identical to the Company. Accordingly, an analysis of the foregoing is not mathematical; rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the acquisition or public trading value of the comparable companies to which the Company is being compared. In performing its analyses, Lazard Freres made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. The analyses performed by Lazard Freres are not necessarily indicative of actual past or future results or values, which may be significantly more or less than such estimates. Additionally, analyses relating to the values of businesses do not purport to be appraisals or to reflect the price at which such companies may actually be sold, and such estimates are inherently subject to uncertainty. Lazard Freres regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions and for other purposes. The Special Committee selected Lazard Freres to act as its financial advisor on the basis of Lazard Freres' qualifications, expertise and reputation in investment banking, in general, and mergers and acquisitions, specifically. The Company has paid Lazard Freres a retainer fee of $250,000 and an additional fee of $500,000 upon delivery of its written opinion. The Company has also agreed to reimburse Lazard Freres for its out-of-pocket expenses, including reasonable fees and disbursements of counsel, and to indemnify Lazard Freres and its partners, employees, agents, affiliates and controlling persons against certain liabilities under the federal securities laws, relating to or arising out of its engagement. DETERMINATION OF THE FAIRNESS OF THE MERGER BY GTE, CONTEL AND CCI ACQUISITION GTE, Contel and CCI Acquisition reasonably believe that the Merger is fair to the Class A Stockholders. GTE, Contel and CCI Acquisition have concluded that the price to be paid to the Class A Stockholders is fair based solely on the previously described determinations of the Special Committee. The material factors considered in making such a determination are those that were considered by the Special Committee. See " -- Determination of the Special Committee and the Board; Fairness of the Merger". GTE, Contel and CCI Acquisition also believe that the Merger is procedurally fair because, in addition to the appraisal rights granted to the Class A Stockholders under the DGCL described below in "DISSENTERS' RIGHTS OF APPRAISAL", the final price and terms were negotiated in good faith by GTE and its financial advisors and the Special Committee and the Merger was unanimously approved by the Company's Board including the independent directors of the Company. GTE retained its financial advisors to assist in the negotiation and determine whether the transaction was fair to GTE's shareholders. 19 21 OPINIONS OF FINANCIAL ADVISORS TO GTE GTE was assisted in its negotiations with the Special Committee and Lazard Freres by its financial advisors, Merrill Lynch and PaineWebber. Merrill Lynch and PaineWebber regularly value businesses and their securities and provide advice in connection with merger and acquisition transactions. Merrill Lynch and PaineWebber previously served as financial advisors to GTE in connection with the merger of a wholly owned subsidiary of GTE with and into Contel. As part of the agreements with Merrill Lynch and PaineWebber with respect to that transaction, GTE agreed to retain Merrill Lynch and PaineWebber as financial advisors in connection with any related restructuring. Based upon that agreement and the expertise of both Merrill Lynch and PaineWebber in evaluating transactions similar to the Merger, GTE decided to retain Merrill Lynch and PaineWebber as its financial advisors in connection with the Merger. PaineWebber has provided investment banking and other services to GTE from time to time, including serving as underwriter in connection with the issuance of GTE's debt and equity financings. During the last two years, PaineWebber has earned compensation with respect to all such services, other than fees in connection with the Merger, of approximately $5.0 million. In the future, GTE may retain PaineWebber from time to time for similar services. In the ordinary course of its business, PaineWebber actively trades debt and equity securities of GTE for its own account and the accounts of its customers, and PaineWebber therefore may, from time to time, hold a long or short position in such securities. A director of GTE is engaged as a consultant to PaineWebber. See "RELATED PARTY TRANSACTIONS -- Relationship between GTE Director and PaineWebber." Merrill Lynch has also provided investment banking and other services to GTE from time to time, including serving as a dealer in connection with the issuance of GTE's commercial paper and as an underwriter in connection with its issuance of its debt and equity financings. During the last two years, Merrill Lynch has earned compensation with respect to all such services, other than fees in connection with the Merger, of approximately $7.4 million. Merrill Lynch is presently providing GTE with financial and strategic advice in connection with a matter other than the Merger, for which it is receiving a fee of $150,000 per month which commenced in August 1994 and will continue until such matter is completed. In the future, GTE may retain Merrill Lynch from time to time for similar services. In the ordinary course of its business, Merrill Lynch actively trades debt and equity securities of GTE for its own account and the accounts of its customers, and Merrill Lynch therefore may, from time to time, hold a long or short position in such securities. In connection with the transaction, the GTE Financial Advisors rendered opinions to GTE to the effect that the price to be paid for the Class A Shares in the Merger is fair to GTE from a financial point of view. A copy of the fairness opinions of the GTE Financial Advisors are attached to this Information Statement as Exhibits C-1 and C-2. Additional copies of such opinions are available for inspection and copying at the principal executive offices of GTE during regular business hours and are also available upon request directed to GTE, One Stamford Forum, Stamford, CT 06904, Attention: Ronald J. Tuccillo, Assistant Secretary. The GTE Financial Advisors believe that their analyses must be considered as a whole and that selecting portions of their analyses and of the factors considered by them without considering all factors and analyses, could create an incomplete view of the processes underlying their analyses and opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analyses or summary descriptions. In rendering their opinions, the GTE Financial Advisors did not make or seek to obtain appraisals of the Company's assets in connection with their analyses of the valuation of the Company and did not determine the amount of consideration to be paid in the Merger. In addition, the GTE Financial Advisors were not requested to and did not solicit third parties who might be interested in acquiring all or any part of the Company. In their respective analyses, the GTE Financial Advisors made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the Company's control. Any estimates of value contained therein are not necessarily indicative of actual values, which may be significantly more or less favorable than as set forth therein. Estimates of values of companies do not purport to be appraisals or necessarily reflect the prices at which companies may actually be sold. 20 22 Because such estimates are inherently subject to uncertainty, none of the Company, GTE or the GTE Financial Advisors or any other person assumes responsibility for their accuracy. In arriving at their opinions, the GTE Financial Advisors (a) reviewed the Company's Annual Reports, Forms 10-K and related financial information for the five fiscal years ended December 31, 1993 and the Company's Forms 10-Q and the related unaudited financial information for the quarterly periods ending March 31, June 30, and September 30, 1994; (b) reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets and prospects of the Company, furnished to them by the Company; (c) conducted discussions with members of senior management of the Company concerning its businesses and prospects; (d) reviewed the historical market prices and trading activity for the Class A Shares and compared them with that of certain publicly traded companies which they deemed to be reasonably similar to the Company; (e) compared the results of operations of the Company with that of certain companies which they deemed to be reasonably similar to the Company; (f) compared the proposed financial terms of the transactions contemplated by the Merger Agreement with the financial terms of certain other mergers and acquisitions which they deemed to be relevant; (g) considered the pro forma effect of the Merger on GTE's capitalization ratios, earnings and cash flow; (h) considered a discounted cash flow analysis on future cash flows that management of the Company expects the Company to generate; (i) reviewed a draft of the Merger Agreement; and (j) reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as they deemed necessary, including their assessments of general economic, market and monetary conditions. The GTE Financial Advisors will each receive an aggregate fee of $500,000 in connection with the transaction. A retention fee of $50,000 each was paid at the time the GTE Financial Advisors were retained and a fee of $450,000 each will be paid at the time of the Merger. In addition, GTE has agreed to reimburse the GTE Financial Advisors for all of their reasonable out-of-pocket expenses, including but not limited to, legal fees and travel expenses. GTE also agreed to indemnify and hold harmless the GTE Financial Advisors against certain liabilities, including liabilities under the federal securities laws or arising out of or in connection with their rendering of services. In preparing their opinions, the GTE Financial Advisors relied on the accuracy and completeness of all information supplied or otherwise made available to them by the Company, and the GTE Financial Advisors have not assumed any responsibility to independently verify such information. With respect to the financial forecasts furnished by the Company, the GTE Financial Advisors assumed that they have been reasonably prepared and reflect the best currently available estimates and judgment of the Company's management as to the expected future performance of the Company. The opinions of the GTE Financial Advisors do not address the relative merits of the Merger and any other transactions or business strategies which may have been discussed by the Board of Directors of GTE as alternatives to the Merger or the decision of the Board of Directors of GTE to proceed with the Merger. In rendering their opinions, the GTE Financial Advisors were not engaged to act as an agent or fiduciary of GTE's equity holders or any other third party. The opinions rendered by each of the GTE Financial Advisors contain the following provision: "In rendering this opinion, we have not been engaged to act as an agent or fiduciary of . . . [GTE's] equity holders or any other third party." This language was included by each GTE Financial Advisor to make it clear that with respect to their respective opinions, they were each engaged to advise only the GTE Board of Directors and that they were not acting on behalf of GTE's stockholders or any other third party (including, without limitation, the Company's stockholders or the Special Committee). If any person other than the addressee of such an opinion (including, without limitation, any stockholder of the Company) were to bring any action against either of the GTE Financial Advisors based on its opinion, such GTE Financial Advisor might seek to cite such language as a defense to such action, although the law in this area is unsettled. 21 23 Summary of PaineWebber's Opinion to the Board of GTE Corporation The following paragraphs summarize the material financial and comparative analyses performed by PaineWebber in arriving at the PaineWebber opinion. The following does not purport to be a complete description of the analyses performed, or the matters considered by PaineWebber in arriving at the PaineWebber opinion. PaineWebber delivered its December 1994 Opinion Letter (the "PaineWebber Opinion Letter") to the Board of Directors of GTE at a meeting held on December 27, 1994. The PaineWebber Opinion Letter relied on the valuation methods described below to determine a range of values for the Company. Discounted Cash Flow Analysis. PaineWebber prepared and reviewed the results of an unlevered discounted cash flow analysis of the Company based on certain operating and financial assumptions. The assumptions were based on two sets of financial projections provided to PaineWebber by the management of the Company: a five year strategic plan and a ten year projection. For a discussion of these projections, see "PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY". The purpose of the discounted cash flow analysis was to determine the present value of each of the Company's unlevered after-tax free cash flows over the projected periods. To calculate the value of a business using a discounted cash flow analysis, the projected cash flows for each year together with the estimated value of the business in the final year of the projected period ("Terminal Value") are discounted to the present using various assumed discount rates. PaineWebber estimated the Terminal Value for the Company in two components. First, PaineWebber applied an earnings before interest, taxes, depreciation and amortization ("EBITDA") multiple to the Company's EBITDA, before minority interest and equity in unconsolidated affiliates, in the final year of the projected period. PaineWebber then applied a price/earnings multiple ("P/E multiple") to the net tax-affected amount of minority interests and equity in earnings of unconsolidated affiliates (discounted by 30% to reflect a minority interest). After discounting the projected cash flows and the Terminal Value, PaineWebber added the value of the Company's 10% interest in licenses in the states of Sonora and Sinaloa, Mexico, calculated as $48 per POP for the Company's approximately 0.4 million POPs. The sum of these components derived the implied total market capitalization of the Company at December 31, 1994. PaineWebber then subtracted the Company's estimated net debt at December 31, 1994 of $2,114.5 million and divided by the number of shares outstanding at December 31, 1994 of 100.0 million to determine the implied equity value per Class A Share. PaineWebber considered exit EBITDA multiples ranging from 10.5x to 12.5x for both sets of projections and exit P/E multiples ranging from 18.0x to 22.0x for the five year projections and 16.0x to 20.0x for the ten year projections. For the purposes of determining the appropriate discount rate to be applied in the discounted cash flow analyses, PaineWebber considered weighted average costs of capital ranging from 13.0% to 15.0% to discount all values from December 31, 1999 to January 1, 1995 and 10.0% to 12.0% to discount all values from December 31, 2004 to January 1, 2000. This analysis resulted in a range of equity values per share for the Class A Shares of between $19.56 to $30.46 using the five year projections and $13.57 to $24.31 using the ten year projections. PaineWebber noted that the per share price of $25.50 fell within the range implied by the five year projections. Due to the inherently less certain nature of the ten year projections, and the fact that the Company had advised PaineWebber that it had not prepared the ten year projections as part of its normal planning process, PaineWebber relied more heavily on the analysis derived from the five year projections. Comparable Transaction Analysis. PaineWebber reviewed several publicly announced merger and acquisition transactions in the cellular communications industry, together with information regarding certain transactions that GTE furnished to PaineWebber. The publicly announced transactions examined by PaineWebber included the following: McCaw Cellular Communications Inc.'s private market value guarantee of LIN Broadcasting Corp.; AirTouch Communications Inc.'s private market value guarantee of Cellular Communications Inc.; Compagnie Generale des Eaux's indirect acquisition of cellular properties from SBC Communications Inc.; Independent Cellular Network, Inc.'s acquisition of cellular properties from C-TEC Corp.; Southwestern Bell Corp.'s acquisition of Associated Communications Corp.; Southwestern Bell Corp.'s 22 24 acquisition of cellular properties from GTE Mobilnet; Southwestern Bell Corp.'s acquisition of cellular properties from Syracuse Telephone, Utica Telephone and Finger Lakes Telephone; Century Telephone Enterprises Inc.'s acquisition of Celutel Inc.; AT&T Corp.'s then pending acquisition of McCaw Cellular Communications Inc.; InterCel Inc.'s acquisition of cellular properties from Unity Cellular Systems, Inc.; ALLTEL Corp.'s acquisition of cellular properties from Contel Cellular Inc.; Associated Communications Corp.'s acquisition of cellular properties from McCaw Cellular Communications Inc.; ALLTEL Corp.'s acquisition of cellular properties from SLT Communications Inc.; Sprint Corp.'s acquisition of cellular properties from Centel Corp.; Bell Atlantic Corp.'s acquisition of cellular properties from Metro Mobile CTS Inc.; McCaw Cellular Communications Inc.'s acquisition of cellular properties from Crowley Cellular Telecommunications Inc.; Ameritech Corp.'s acquisition of cellular properties from Cybertel Financial and Cybertel RSA Cellular L.P.; Comcast Corporation's acquisition of cellular properties from Metromedia Inc.; BellSouth Corp.'s acquisition of cellular properties from McCaw Cellular Communications Inc.; and US WEST, Inc.'s acquisition of the minority interest in US WEST NewVector Group, Inc. Certain information regarding the comparable transactions is contained in a preliminary draft of a background analysis prepared by the GTE Financial Advisors, a copy of which has been filed with the Commission. The background analysis was preliminary in nature and the PaineWebber Opinion Letter is not based on such analysis. See "-- Opinions of Financial Advisors to GTE -- Draft Preliminary Analysis of GTE Financial Advisors". Using information regarding the MSA rank of the target's POPs in the comparable transactions, the percentage ownership purchased in the comparable transactions and PaineWebber's experience with similar transactions, PaineWebber developed ranges of assumed private market values for controlled positions in the various categories of MSA market rank. In determining the assumed ranges of values, PaineWebber noted that the per POP values for the transactions were, in certain cases, affected by economic factors in the applicable region, such as population density, population growth, median household income, local interstate traffic density, and certain general market factors, such as general financing conditions and the state of the mergers and acquisitions market. Certain of the private transactions involving subsidiaries of GTE were consummated at prices per MSA POP above or below the applicable range of assumed values for the relevant market size. These value ranges were: MSA markets ranked 1 to 25: $250 per POP to $350 per POP; MSA markets ranked 26 to 75: $175 per POP to $250 per POP; MSA markets ranked 76 to 125: $150 per POP to $200 per POP; MSA markets ranked 126 to 175: $125 per POP to $175 per POP; MSA markets ranked 176 to 275: $125 per POP to $150 per POP; and MSA markets ranked 276 and above: $75 per POP to $125 per POP. Based on the RSA transactions examined, PaineWebber developed a valuation assumption for RSA POPs of $90 per POP. PaineWebber then applied these per POP valuation ranges to the Company's POPs. PaineWebber applied a range of discounts between 0% and 30% to the Company's non-controlled POPs. PaineWebber selected this range of discounts based on its experience with similar transactions and its analysis of publicly disclosed information regarding other transactions. This methodology resulted in a range of values per Class A Share of $12.75 to $30.30. PaineWebber noted that the per share price of $25.50 fell within this range. Comparable Public Companies Analysis. PaineWebber compared selected historical stock and earnings data and financial ratios for the Company to the corresponding data and ratios of certain publicly-traded companies which PaineWebber deemed to be comparable to the Company. For the purposes of the PaineWebber Opinion Letter, the set of companies which PaineWebber deemed comparable to the Company was comprised of AirTouch Communications Inc., Cellular Communications, Inc., Cellular Communications of Puerto Rico, Inc., Centennial Cellular Corporation, Commnet Cellular, Inc., InterCel Inc., LIN Broadcasting Corporation, United States Cellular Corporation and Vanguard Cellular Systems, Inc. (the "Comparable Group"). This analysis resulted in a range of market capitalization of cellular assets (defined as total market capitalization, less minority interests, less estimated public market value of non-cellular assets) per POP of $330 to $111 with a median of $170 and a range of market capitalization of MSA cellular assets (defined as market capitalization of cellular assets less the value of RSA cellular assets at $90 per RSA POP) per POP from $451 to $133 with a median of $212. PaineWebber noted that the proposed price of $25.50 implied a 23 25 market capitalization of cellular assets per POP for the Company of $198 and a market capitalization of MSA cellular assets per POP of $224. Minority Buy Out Analysis. PaineWebber examined the seventy-seven minority buy out transactions since January 1, 1988 for which PaineWebber was able to find adequate public information. Due to the limited information available regarding minority buy out transactions in the cellular communications industry, the analysis of transactions was not limited to those in the cellular communications industry. PaineWebber examined the transactions on the basis of percentage change from initial offer price to final offer price and percentage premium of the offer price to the trading price per share at six months prior to announcement, one month prior to announcement, one day prior to announcement, one day after announcement, the latest twelve months ("LTM") high and the LTM low. This analysis resulted in average premiums of 11.7% (percent change from initial offer price to final offer price) and 39.8%, 43.3%, 31.5%, 10.9%, 1.8% and 85.4%, respectively and resulted in median premiums of 4.6% (percent change from initial offer price to final offer price) and 33.3%, 33.3%, 20.4%, 7.4%, 2.2% and 58.9%, respectively. PaineWebber examined the premiums paid in the only minority buy out in the cellular communications industry included as one of the seventy-seven minority buy out transactions since January 1, 1988 for which PaineWebber was able to find adequate public information, US WEST, Inc.'s purchase of the minority interest in US WEST NewVector Group, Inc. on November 12, 1990, which resulted in premiums of 22.2% (percent change from initial offer price to final offer price) and 47.9%, 74.3%, 44.3%, 28.0%, 2.9% and 122.8%, respectively. PaineWebber noted that the per share price of $25.50 implied premiums to the trading price per share of the Class A Shares of 13.3% (percent change from initial offer price to final offer price) and 56.9%, 39.7%, 43.7%, 10.3%, 6.3% and 96.2%, respectively. PaineWebber noted that these implied premiums were within the range of transactions examined. Historical Market Valuation and Ownership Analysis. PaineWebber reviewed the daily performance of the intra-day and closing market prices per share and trading volumes of the Class A Shares from April 21, 1988 to December 2, 1994. This analysis was utilized to provide historical background for the manner in which the public trading market had valued the Class A Shares since their initial public offering. PaineWebber also reviewed the volume of the Class A Shares which traded and the prices at which the Class A Shares traded for the period January 1, 1994 to December 5, 1994 and since the announcement of the Merger on September 8, 1994 to December 5, 1994. The implied premiums to the market price of the Class A Shares at specified intervals is set forth above in "-- Opinions of Financial Advisors to GTE -- Summary of PaineWebber's Opinion to the Board of GTE Corporation -- Minority Buy Out Analysis". Summary of Merrill Lynch's Opinion to the Board of GTE Corporation The following paragraphs summarize the material financial and comparative analyses performed by Merrill Lynch in arriving at the Merrill Lynch Opinion. The following does not purport to be a complete description of the analyses performed, or the matters considered by Merrill Lynch in arriving at the Merrill Lynch Opinion. Merrill Lynch delivered its December 1994 Opinion Letter (the "Merrill Opinion Letter") to the Board of Directors of GTE at a meeting held on December 27, 1994. The Merrill Opinion Letter relied primarily upon two valuation methods to determine a range of values for the Company: a discounted cash flow analysis and a private market transaction analysis. In addition, the Merrill Opinion Letter relied upon analysis of comparable public companies, premiums paid in similar transactions, pro forma merger consequences, and historical market valuation and ownership. Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash flow analysis based upon forecasts provided by the Company's management. The Company's management provided Merrill Lynch with two sets of financial forecasts: a five year strategic plan projection and a ten year projection. For a discussion of these projections, see "PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY". Due to the inherently less certain nature of the ten year projections, and the fact that the Company had advised Merrill Lynch that it had not prepared the ten year projections as part of its normal planning process, Merrill Lynch relied more heavily on the analysis derived from the five year projections. The following assumptions were made in the discounted cash flow analysis: (1) a range of discount rates from 12.0% to 14.0% was used to discount all values from December 31, 1999 to January 1, 1995 and in the case of the ten 24 26 year discounted cash flow analysis, a range of discounted rates from 10.0% to 12.0% was used to discount all values from December 31, 2004 to January 1, 2000; and (2) a range of EBITDA exit multiples from 10.0x to 12.0x was used to determine the terminal value using the EBITDA exit methodology. Merrill Lynch discounted to present value the projected five year and ten year streams of free cash flow, the year 1999 terminal value and the year 2004 terminal value based upon the ranges of discount rates and EBITDA multiples described above. Total enterprise value was adjusted for the Company's minority interest obligations and unconsolidated equity investments. Based on the exit multiple methodology, a P/E multiple of 16.0x to 20.0x was applied to the net amount of the minority interest obligations and the tax-affected equity income in unconsolidated subsidiaries (discounted 30% for the minority position) in the terminal year. Total enterprise value was also adjusted upward by the value of the Company's 10% interest in licenses in the states of Sonora and Sinaloa, Mexico, calculated as $48 per POP for the Company's approximately 0.4 million POPs. Utilizing the five year projections Merrill Lynch arrived at a range of values per Class A Share of approximately $19.63-$30.90 per share, and utilizing the ten year projections Merrill Lynch arrived at a range of values per Class A Share of approximately $14.93-$25.97 per share. Comparable Transaction Analysis. Merrill Lynch reviewed several publicly announced merger and acquisition transactions in the cellular communications industry, together with information regarding certain transactions that GTE furnished to Merrill Lynch. The publicly announced transactions examined by Merrill Lynch included the following: McCaw Cellular Communications Inc.'s private market value guarantee of LIN Broadcasting Corp.; AirTouch Communications Inc.'s private market value guarantee of Cellular Communications Inc.; Southern New England Telecommunications Corp.'s acquisition of cellular properties from Bell Atlantic Corp. and NYNEX; Compagnie Generale des Eaux's indirect acquisition of cellular properties from SBC Communications Inc.; Independent Cellular Network, Inc.'s acquisition of cellular properties from C-TEC Corp.; Southwestern Bell Corp.'s acquisition of Associated Communications Corp.; Southwestern Bell Corp.'s acquisition of cellular properties from GTE Mobilnet; Southwestern Bell Corp.'s acquisition of cellular properties from Syracuse Telephone, Utica Telephone and Finger Lakes Telephone; Century Telephone Enterprises Inc.'s acquisition of Celutel Inc.; AT&T Corp.'s then pending acquisition of McCaw Cellular Communications Inc.; InterCel Inc.'s acquisition of cellular properties from Unity Cellular Systems, Inc.; ALLTEL Corp.'s acquisition of cellular properties from Contel Cellular Inc.; Associated Communications Corp.'s acquisition of cellular properties from McCaw Cellular Communications Inc.; ALLTEL Corp.'s acquisition of cellular properties from SLT Communications Inc.; Sprint Corp.'s acquisition of cellular properties from Centel Corp.; Bell Atlantic Corp.'s acquisition of cellular properties from Metro Mobile CTS Inc.; McCaw Cellular Communications Inc.'s acquisition of cellular properties from Crowley Cellular Telecommunications Inc.; Ameritech Corp.'s acquisition of cellular properties from Cybertel Financial and Cybertel RSA Cellular L.P.; Comcast Corporation's acquisition of cellular properties from Metromedia Inc.; BellSouth Corp.'s acquisition of cellular properties from McCaw Cellular Communications Inc.; US WEST, Inc.'s acquisition of the minority interest in US WEST NewVector Group, Inc.; Pacific Telesis Group's acquisition of cellular properties from Cellular Communications Inc.; GTE Corporation's acquisition of cellular properties from Providence Journal Co.; McCaw Cellular Communications Inc.'s acquisition of cellular properties from Cellular Communications Inc.; McCaw Cellular Communications Inc.'s acquisition of cellular properties from LIN Broadcasting Corp.; LIN Broadcasting Corp.'s acquisition of cellular properties from Metromedia Inc.; Contel Cellular Inc.'s acquisition of cellular properties from McCaw Cellular Communications Inc.; and British Telecom plc's acquisition of an interest in McCaw Cellular Communications Inc. Certain information regarding the comparable transactions is contained in a preliminary draft of a background analysis prepared by the GTE Financial Advisors, a copy of which has been filed with the Commission. The background analysis was preliminary in nature and the Merrill Opinion Letter is not based on such analysis. See "-- Opinions of Financial Advisors to GTE -- Draft Preliminary Analysis of GTE Financial Advisors". Using information regarding the MSA rank of the target's POPs in the comparable transactions, the percentage ownership purchased in the comparable transactions and Merrill Lynch's experience with similar transactions, Merrill Lynch developed ranges of assumed private market values for controlled positions in the various categories of MSA market rank. In determining the assumed ranges of values, Merrill Lynch noted 25 27 that the per POP values for the transactions were, in certain cases, affected by economic factors in the applicable region, such as population density, population growth, median household income, local interstate traffic density, and certain general market factors, such as general financing conditions and the state of the mergers and acquisitions market. Certain of the private transactions involving subsidiaries of GTE were consummated at prices per MSA POP above or below the applicable range of assumed values for the relevant market size. These value ranges were: MSA markets ranked 1 to 25: $250 per POP to $350 per POP; MSA markets ranked 26 to 75: $175 per POP to $250 per POP; MSA markets ranked 76 to 125: $150 per POP to $200 per POP; MSA markets ranked 126 to 175: $125 per POP to $175 per POP; MSA markets ranked 176 to 275: $125 per POP to $150 per POP; and MSA markets ranked 276 and above: $75 per POP to $125 per POP. Based on the RSA transactions examined, Merrill Lynch developed a valuation assumption for RSA POPs of $90 per POP. Merrill Lynch applied a range of discounts between 0% and 30% to the Company's non-controlled POPs to reflect reduced value based on absence of control. Merrill Lynch selected this range of discounts based on its experience with similar transactions and its analysis of publicly-disclosed information regarding other transactions. This methodology resulted in a range of values per Class A Share of $12.76 to $30.31 per share. Comparable Public Companies Analysis. Merrill Lynch compared selected historical stock and earnings data and financial ratios for the Company to the corresponding data and ratios of certain publicly traded companies which Merrill Lynch deemed to be comparable to the Company. For the purposes of the Merrill Opinion Letter, the set of companies which Merrill Lynch deemed comparable to the Company was the Comparable Group. This analysis resulted in a range of market capitalization of cellular assets (defined as total market capitalization, less minority interests, less estimated public market value of non-cellular assets) per POP of $331 to $115 with a median of $169 and a range of market capitalization of MSA cellular assets (defined as market capitalization of cellular assets, less value of RSA assets at $90 per POP) per POP from $343 to $133 with a median of $215. Merrill Lynch noted that the price of $25.50 per Class A Share implied a market capitalization of cellular assets per POP for the Company of $198 and a market capitalization of MSA cellular assets per POP of $224. Premiums Paid in Selected Minority Buy Outs; Minority Buy Out Analysis. Merrill Lynch examined the seventy-seven minority buy out transactions since January 1, 1988 for which Merrill Lynch was able to find adequate public information. Due to lack of available information regarding minority buy out transactions in the cellular communications industry, these transactions were not limited to the cellular communications industry. Merrill Lynch examined these transactions on the basis of percentage change from initial offer price to the final offer price and percentage premium of the offer price to the trading price per share at six months prior to announcement, one month prior to announcement, one day prior to announcement, one day after announcement, the LTM high and the LTM low. This analysis resulted in average premiums of 11.7% (% change from initial offer price to final offer price) and 39.8%, 43.3%, 31.5%, 10.9%, 1.8% and 85.4%, respectively, and resulted in median premiums of 4.6% (percent change from initial offer price to final offer price) and 33.3%, 33.3%, 20.4%, 7.4%, 2.2%, and 58.9%, respectively. Merrill Lynch examined the premiums paid in the only minority buy out in the cellular communications industry included as one of the seventy-seven minority buy out transactions since January 1, 1988 for which Merrill Lynch was able to find adequate public information, US WEST, Inc.'s purchase of the minority interest in US WEST NewVector Group, Inc. on November 12, 1990, which resulted in premiums of 22.2% (percent change from initial offer price to final offer price) and 47.9%, 74.3%, 44.3%, 28.0%, 2.9% and 122.8%, respectively. Merrill Lynch noted that the price of $25.50 per Class A Share implied premiums to the trading price per share of the Class A Shares of 13.3% (percent change from initial offer price to final offer price) and 56.9%, 39.7%, 43.7%, 10.3%, 6.3% and 96.2%, respectively. Merrill Lynch noted that these implied premiums were within the range of transactions examined. Pro Forma Merger Consequences. Merrill Lynch examined the potential impact of the Merger on the financial results and capitalization of GTE and found it to be immaterial. 26 28 Historical Market Valuation and Ownership Analysis. Merrill Lynch reviewed the daily performance of the intra-day and closing market prices per share and trading volumes of the Class A Shares from April 21, 1988 to December 2, 1994. This analysis was utilized to provide historical background for the manner in which the public trading market had valued the Class A Shares since their initial public offering. Merrill Lynch also reviewed the volume of the Class A Shares which traded and the prices at which the Class A Shares traded for the period January 1, 1994 to December 5, 1994 and since the announcement of the Merger on September 8, 1994 to December 5, 1994. The implied premiums to the market price of the Class A Shares at specified intervals is set forth above in "-- Opinions of Financial Advisors to GTE -- Summary of Merrill Lynch's Opinion to the Board of GTE Corporation -- Premiums Paid in Selected Minority Buy Outs; Minority Buy Out Analysis". Draft Preliminary Analysis of GTE Financial Advisors In advising GTE management in connection with the proposed Merger, the GTE Financial Advisors performed certain financial and comparative analyses which were summarized in a draft preliminary report furnished to GTE's management. A portion of the draft preliminary report was also provided to Lazard Freres in connection with the negotiations with the Special Committee described above in "SPECIAL FACTORS -- Background of the Merger -- Special Committee; Negotiations with GTE Financial Advisors". A final version of such draft preliminary report was never furnished to GTE or Lazard Freres by the GTE Financial Advisors. The draft preliminary report was a draft, was preliminary and was intended to be used as an information document for GTE management which could be used to establish negotiating strategies, and as such is not necessarily complete, contains numerous factual and other assumptions which may differ from, and in the view of the GTE Financial Advisors may not be as appropriate, complete, or up to date as, those used in the final analyses carried out in connection with the delivery of their opinions. Thus, the information, assumptions and analyses contained in such draft preliminary report could be misleading. The opinions issued by each of the GTE Financial Advisors were based on the final, completed analyses carried out by each of the GTE Financial Advisors, descriptions of which are set forth above under "-- Opinions of the Financial Advisors to GTE -- Summary of PaineWebber's Opinion to the Board of GTE Corporation" and "-- Opinions of the Financial Advisors to GTE -- Summary of Merrill Lynch's Opinion to the Board of GTE Corporation". The analyses performed by the GTE Financial Advisors and summarized in the draft preliminary report were substantially similar to the analyses ultimately relied upon by the GTE Financial Advisors in rendering their opinions described above in "-- Opinions of the Financial Advisors to GTE -- Summary of PaineWebber's Opinion to the Board of GTE Corporation" and "-- Opinions of the Financial Advisors to GTE -- Summary of Merrill Lynch's Opinion to the Board of GTE Corporation". The range of equity values per share for the Class A Shares generated by the analyses summarized in the draft preliminary report did not materially differ from the ranges generated by the analyses ultimately relied upon by the GTE Financial Advisors in rendering their opinions, except to the extent described below. In the draft preliminary report, the range of equity values per share for the Class A Shares utilizing a discounted cash flow analysis was between $18.34 to $31.27 using the five year strategic plan and $10.37 to $22.79 using the ten year projections (compared to the ranges in the analyses ultimately relied upon by each of the GTE Financial Advisors in rendering their opinions, which were $19.56 to $30.46 using the five year strategic plan and $13.57 to $24.31 using the ten year projections for PaineWebber and $19.63 to $30.90 using the five year strategic plan and $14.93 to $25.97 using the ten year projections for Merrill Lynch). The difference in ranges is attributable to both GTE Financial Advisors using the same range of discount rates and both using those rates over both the five year and ten year horizons in the discounted cash flow analysis underlying the draft preliminary report. On further reflection, the GTE Financial Advisors each determined that differing rates should be used for year 0 to year 5 and year 5 to year 10, and each selected its own set of rates. Such determinations were reflected in the analyses ultimately used by the GTE Financial Advisors in rendering their respective opinions. In addition, the GTE Financial Advisors determined that a different methodology should be used in determining the exit multiples. The different methodology, which considered exit multiples in the context of implied perpetual growth rates, resulted in the use of different and differing exit multiples in the analyses relied upon by the GTE Financial Advisors in rendering their respective opinions. 27 29 Utilizing the comparable transaction analysis in the draft preliminary report, the range of equity values per share for the Class A Shares was between $12.76 and $24.38 (compared to the ranges in the analyses ultimately relied upon by each of the GTE Financial Advisors in rendering their opinions, which were $12.75 to $30.30 for PaineWebber and $12.76 to $30.31 for Merrill Lynch). The difference in ranges is attributable to the GTE Financial Advisors' use of a single percentage discount for the Company's non-controlled POPs in the analysis underlying the draft preliminary report. Subsequent to the preparation of the draft preliminary report, the GTE Financial Advisors determined that a range of discounts should be applied to the Company's non-controlled POPs. Additionally, PaineWebber decided, for purposes of comparability, to further limit the time period in which comparable transactions would be examined. In the analyses relied upon by PaineWebber in rendering its opinion, PaineWebber determined to exclude certain transactions which occurred before January 1, 1991 (with the exception of US WEST Inc.'s acquisition of the minority interest in US WEST NewVector Group, Inc. due to the availability of detailed per POP information). Those transactions which were included in the analysis in the preliminary draft report, but were not included in the analysis relied upon by PaineWebber in rendering its opinion were Pacific Telesis Group's acquisition of cellular properties from Cellular Communications Inc.; GTE Corporation's acquisition of cellular properties from Providence Journal Co.; McCaw Cellular Communications Inc.'s acquisition of cellular properties from Cellular Communications Inc.; McCaw Cellular Communications Inc.'s acquisition of cellular properties from LIN Broadcasting Corp.; LIN Broadcasting Corp.'s acquisition of cellular properties from Metromedia Inc.; Contel Cellular Inc.'s acquisition of cellular properties from McCaw Cellular Communications Inc.; and British Telecom plc's acquisition of an interest in McCaw Cellular Communications Inc. In the comparable transaction analysis relied upon by Merrill Lynch in rendering its opinion, Merrill Lynch examined an additional transaction, Southern New England Telecommunications Corp.'s acquisition of cellular properties from Bell Atlantic Corp. and NYNEX. The comparable public company analysis and historical market valuation analysis presented in the draft preliminary report utilized stock prices for the Comparable Group and the Company up to and/or including October 17, 1994. The comparable public company analysis used in the draft preliminary report resulted in a range of market capitalization of cellular assets per POP of $316 to $117 with a median of $177 (compared to the ranges in the analyses ultimately relied upon by each of the GTE Financial Advisors in rendering their opinions, which were $330 to $111 with a median of $170 for PaineWebber and $331 to $115 with a median of $169 for Merrill Lynch) and a range of market capitalization of MSA cellular assets per POP from $412 to $139 with a median of $231 (compared to the ranges in the analyses ultimately relied upon by each of the GTE Financial Advisors in rendering their opinions, which were $451 to $133 with a median of $212 for PaineWebber and $343 to $133 with a median of $215 for Merrill Lynch). In the draft preliminary report, the minority buy out analysis resulted in average premiums of 11.7% (percent change from initial offer price to final offer price) and 40.0%, 43.4%, 31.7%, 10.9%, 1.8% and 85.9%, respectively on the basis of percentage change from initial offer price to final offer price and percentage premium of the offer price to the trading price per share at six months prior to announcement, one month prior to announcement, one day prior to announcement, one day after announcement, the LTM high and the LTM low (compared to the average premiums in the analyses ultimately relied upon by the GTE Financial Advisors in rendering their opinions, which were 11.7% (percent change from initial offer price to final offer price) and 39.8%, 43.3%, 31.5%, 10.9%, 1.8% and 85.4%, respectively) and resulted in median premiums of 4.6% (percent change from initial offer price to final offer price) and 33.3%, 33.3%, 21.3%, 7.4%, 2.2% and 60.7%, respectively (compared to the average premiums in the analyses ultimately relied upon by the GTE Financial Advisors in rendering their opinions, which were 4.6% (percent change from initial offer price to final offer price) and 33.3%, 33.3%, 20.4%, 7.4%, 2.2% and 58.9%, respectively). The difference is attributable to the GTE Financial Advisors' examination of one additional transaction in the analyses relied upon by the GTE Financial Advisors in rendering their opinions, PacifiCorp's pending buy out of the minority holders of Pacific Telecom, Inc. 28 30 CERTAIN LITIGATION Following the public announcement of the proposed Merger on September 8, 1994, four stockholders of the Company filed separate lawsuits in the Court of Chancery of the State of Delaware in and for New Castle County (the "Court") against the Company on behalf of the Class A Stockholders alleging that the announced purchase price of $22.50 per Class A Share was inadequate. On November 16, 1994 the Court entered an order consolidating the actions for all purposes as In re Contel Cellular Inc. Shareholders' Litigation. On November 29, 1994 counsel for GTE, Contel and CCI Acquisition began discussions with plaintiffs' counsel regarding the lawsuits. At a subsequent meeting, counsel for GTE, Contel and CCI Acquisition suggested that plaintiffs' counsel meet with counsel for the Special Committee and discuss the status and substance of negotiations between GTE and the Special Committee. On December 2, 1994 counsel for the Special Committee reviewed at length with plaintiffs' counsel the steps taken up to that date by the Special Committee since its formation on September 9, 1994 to determine the fairness of the proposed Merger on behalf of the Class A Stockholders. In furtherance of such discussion, counsel for the Special Committee forwarded to plaintiffs' counsel on December 5, 1995 certain information on a confidential basis that had been considered by the Special Committee up to that date, including the press release of GTE and the Company dated September 8, 1994 announcing the Merger, minutes of the Company's September 9, 1994 meeting of the Board, the Lazard Freres engagement letter, correspondence received by the Special Committee and a preliminary draft of the Lazard Freres Report. Subsequent to additional brief telephone discussions with counsel for the Special Committee, counsel for Lazard Freres (at the request of counsel for the Special Committee) delivered certain additional information on a confidential basis to plaintiffs' counsel on December 14, 1995, including detailed historical financial information of the Company and the five year and ten year projections prepared by the Company and summarized below in "PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY". Plaintiffs' counsel subsequently reviewed the Lazard Freres Report and met with counsel for the Special Committee, counsel for Lazard Freres and representatives of Lazard Freres immediately prior to the Special Committee Meeting on December 22, 1994, at which time plaintiffs' counsel discussed with Lazard Freres the Lazard Freres Report. Plaintiffs' counsel also was present at the Special Committee Meeting and discussed with the Special Committee the factors considered by the Special Committee in its negotiation of the price to be paid for the Class A Shares. After the Special Committee Meeting, plaintiffs' counsel contacted counsel for GTE, Contel and CCI Acquisition to negotiate the terms of a settlement. On December 23, 1994 a tentative settlement agreement was reached with plaintiffs, subject to confirmatory discovery. The tentative settlement approves an increased price of $25.50 per Class A Share and the payment of $525,000 in plaintiffs' counsel fees and expenses. The tentative settlement agreement is binding on all Class A Stockholders and does not include provisions permitting Class A Stockholders to opt out of the settlement agreement. The tentative settlement agreement does not, however, limit the ability of Class A Stockholders to otherwise challenge corporate actions or to exercise appraisal rights pursuant to the DGCL. See "DISSENTERS' RIGHTS OF APPRAISAL". The confirmatory discovery has been completed by plaintiffs' counsel and all documentation necessary to effect the settlement has been submitted to the Court. The Court has scheduled a hearing on June 8, 1995 to approve the settlement. WRITTEN CONSENT The Record Date for stockholders entitled to notice of or entitled to give consent to the Merger was March 16, 1995. As of the Record Date there were issued and outstanding 9,970,953 Class A Shares and 90,000,000 Class B Shares. Each Class A Share is entitled to one vote per share and each Class B Share is entitled to five votes per share. On the Record Date, Contel owned 90,000,000 Class B Shares, which accounted for approximately 98% of the combined voting power of the outstanding Class A Shares and Class B Shares. Pursuant to the DGCL, Contel, as holder of record of more than 50% of the combined voting power of the Class A Shares and Class B Shares, approved the Merger by written consent on April 10, 1995. Consequently, no action on the part of any other stockholder of the Company is necessary to authorize or to 29 31 consummate the Merger and no meeting of stockholders of the Company will be held in connection with the Merger. MERGER CONSIDERATION The aggregate consideration to be paid to Class A Stockholders in connection with the Merger is approximately $254 million. The acquisition of the minority interest in the Company will be financed through equity contributions from GTE. GTE will make an equity contribution to Contel and Contel will in turn make an equity contribution to CCI Acquisition. GTE will finance such equity contributions through cash, the issuance of short term debt or a combination of cash and short term debt. Any short term debt required to fund the transaction is expected to be issued prior to the Effective Time with terms comparable to those pursuant to which GTE periodically issues short term debt in the ordinary course of its business. GTE plans to issue commercial paper to the extent any short term debt is required to fund the payment of the Merger Consideration. No specific plans have been made to refinance or repay the short term debt. Such short term debt will be either retired through internally generated funds or will remain outstanding until such time as GTE's total short term debt balance is replaced with long term funding in accordance with GTE's internal policies. ACCOUNTING TREATMENT OF THE MERGER The purchase method of accounting will be used to account for the Merger. After the Merger, GTE, through its ownership of Contel, will increase its interest in the Company from 90% to 100%. Because the Company's accumulated losses exceed the amount attributable to the 10% minority ownership interest, GTE currently is required to record 100% of the net book value and net income or net loss of the Company in its financial statements. Accordingly, the Merger will not alter GTE's present interest in such net book value or net income or loss of the Company. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER The receipt of cash for Class A Shares purchased pursuant to the Merger will be a taxable transaction for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be a taxable transaction under applicable state, local, foreign or other tax laws. Generally, a Class A Stockholder will recognize a gain or loss equal to the difference between such holder's basis in the Class A Shares held by such holder and the amount of cash received in exchange therefor pursuant to the Merger. The gain or loss will be treated as a capital gain or loss if the Class A Shares are held as capital assets. The gain or loss will be considered to be a long-term capital gain or loss if, on the date the stockholder receives cash for the Class A Shares, those shares have been held by such stockholder for more than one year. For 1995, the maximum federal income tax rate for individuals on net long-term capital gains is 28%, and the maximum individual marginal tax rate on net short-term capital gains and on ordinary income is 39.6%. The maximum federal income tax rate for corporations is 35% on all capital gains and ordinary income. If a Class A Stockholder recognizes a capital loss as a result of receiving cash for the Class A Shares pursuant to the Merger, such loss will only be deductible to the extent of other capital gains, plus, in the case of an individual Class A Stockholder, $3,000 per year. The federal income tax consequences described in the preceding paragraph may not apply to (i) Class A Shares acquired upon exercise of incentive stock options, non-qualified stock options, or otherwise as compensation, (ii) certain tax-exempt stockholders, (iii) stockholders that are subject to special tax provisions, such as banks and insurance companies and (iv) certain nonresident aliens and foreign corporations. THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR GENERAL INFORMATION ONLY AND IS BASED ON EXISTING LAW AS OF THE DATE OF THIS INFORMATION STATEMENT. EACH CLASS A STOCKHOLDER IS URGED TO 30 32 CONSULT HIS OR HER TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE MERGER (INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS). The Merger will not cause additional federal tax liability for the Company, GTE, Contel or CCI Acquisition. PLANS FOR THE COMPANY; CERTAIN EFFECTS OF THE MERGER Plans for the Company. Over time GTE intends to combine the operations of the Company and its other cellular subsidiary, GTE Mobilnet. A merger transition team has been formed to develop plans for the consolidation. The merger transition team has recommended that certain functions be centralized in Atlanta and that area operations focus on tactical operational issues, network planning, construction/maintenance, revenue goals and sales activities. The merger transition team is continuing to examine both the nature of GTE's cellular communications business and the structure of the cellular communications market. As part of the consolidation process most of the intercompany arrangements between GTE, Contel and the Company will be restructured or eliminated. For a description of the material intercompany arrangements see "RELATED PARTY TRANSACTIONS". It is expected that the Competition Agreement will be terminated immediately. The details of how other intercompany arrangements will be treated in the consolidation have not been determined at this time. Terry S. Parker who served as Chairman of the Company as well as Senior Vice President of GTE and President of Personal Communications Services -- GTE Service Corporation, will retire from GTE and resigned from those offices effective March 1, 1995. GTE plans to consolidate its cellular businesses under Personal Communications Services -- GTE Service Corporation. Mark S. Feighner has been named President of Personal Communications Services -- GTE Service Corporation. Certain Effects of the Merger on the Class A Stockholders. As a result of the transaction, the Class A Stockholders will no longer have an equity interest in the Company and, accordingly, will not continue to participate in the results of the Company as an equity holder. However, they will receive cash for their interest. For a discussion of the tax consequences of the Merger on the Class A Stockholders see "-- Certain Federal Income Tax Consequences of the Merger". Certain Effects of the Merger on GTE, Contel and the Company. As a result of the Merger, CCI Acquisition will merge into the Company and cease to exist and the Company will become wholly owned by Contel. The Merger will permit GTE to consolidate and realign its cellular businesses over time as described above under "-- Plans for the Company". The Company's Class A Shares will be deregistered and delisted as described below. The Merger will permit GTE and Contel to obtain certain operating efficiencies but will otherwise have no material effect on the operations of GTE, Contel or the Company. Deregistration and Delisting. The Company is currently subject to the informational filing requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and is required to file reports and other information with the Securities and Exchange Commission (the "Commission") relating to its business, financial statements and other matters. As a result of the Merger, there will cease to be any public market for the Class A Shares, and after the Effective Time (as defined below), the Class A Shares will cease to be quoted on the Nasdaq National Market. When the Merger occurs, the Surviving Corporation is expected to file with the Commission a Certification and Notice of Termination of Registration of the Class A Shares under the Exchange Act (the "Certification"). Upon filing of the Certification, the Surviving Corporation will no longer be required to file reports and other information under the Exchange Act. Once the Certification has been filed, the Exchange Act (including the proxy solicitation provisions of Section 14(a), the periodic reporting requirements of Section 13 and the short swing trading provisions of Section 16(b)) will no longer apply to the Surviving Corporation. Additionally, upon the termination of the registration of the Class A Shares, the shares will no longer constitute "margin securities" under the regulations of the Board of Governors of the Federal Reserve System. 31 33 THE MERGER AGREEMENT The following summary of the Merger Agreement is qualified in its entirety by reference to the provisions of the Merger Agreement, the full text of which is attached hereto as Exhibit A and incorporated by reference herein. GENERAL CCI Acquisition is a wholly owned subsidiary of Contel formed for the purpose of the Merger. Contel, a wholly owned subsidiary of GTE, has adopted a plan of liquidation. The Merger Agreement provides, upon the terms and subject to the conditions set forth therein, that CCI Acquisition will be merged with and into the Company and that the Company will be the Surviving Corporation. Pursuant to the Merger, (i) each Class A Share outstanding immediately prior to the time of the filing of a certificate of merger with the Secretary of State of the State of Delaware (the "Effective Time"), other than any Class A Shares as to which appraisal rights have been properly exercised under the DGCL, will be converted into the right to receive the Merger Consideration, (ii) each Class A Share held by the Company and each share of common stock of CCI Acquisition outstanding immediately prior to the Effective Time will be cancelled, and no payment will be made with respect thereto and (iii) each outstanding Class B Share will continue to be outstanding. DESIGNATION OF DIRECTORS; CERTIFICATE OF INCORPORATION AND BY-LAWS The Merger Agreement provides that the directors of the Company at the Effective Time will be the directors of the Surviving Corporation and will hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the certificate of incorporation and by-laws of the Surviving Corporation. The certificate of incorporation and by-laws of the Company shall be the certificate of incorporation and by-laws of the Surviving Corporation. REPRESENTATIONS AND WARRANTIES The Merger Agreement contains standard representations and warranties on the part of GTE, Contel, CCI Acquisition and the Company relating to, among other things, due organization and qualification and authority to enter into and perform the respective obligations of the parties under the Merger Agreement. In addition, CCI Acquisition represents in the Merger Agreement that it has not engaged in any business activities other than those related to the acquisition of the Company. INDEMNIFICATION AND OTHER COVENANTS Pursuant to the Merger Agreement, the Company has agreed that it will indemnify and hold harmless, and, after the Effective Time, the Surviving Corporation and GTE will indemnify and hold harmless, each present and former director and officer of the Company (each an "Indemnified Party") against any losses, claims, damages, liabilities, costs, expenses, judgments and amounts paid in settlement arising out of or pertaining to any action or omission occurring prior to the Effective Time (including without limitation, any actions or omissions which arise out of or relate to the transactions contemplated by the Merger Agreement) to the full extent permitted under the DGCL, provided that any determination required to be made with respect to whether an Indemnified Party's conduct complied with the standards set forth in the DGCL shall be made in accordance with the DGCL. GTE has agreed to maintain in place the current policy of insurance covering officers and directors of the Company (or an equivalent policy) for a period of three years after the Effective Time. The Company also covenants that, from the date of the Merger Agreement to the Effective Time, the Company will conduct its business in the ordinary course. The Company and CCI Acquisition each covenant that, promptly after the execution of the Merger Agreement, they will cooperate in the preparation of all materials necessary to be filed with the Commission in connection with the Merger. Additionally, each of the parties to the Merger Agreement agrees to use its commercially reasonable efforts to take all action and to do all things necessary to consummate the 32 34 transactions contemplated by the Merger Agreement, including using commercially reasonable efforts to (i) obtain all necessary contractual waivers and consents, (ii) obtain all necessary consents and authorizations as are required to be obtained under any federal, state or foreign law or regulations, (iii) defend all lawsuits or other legal proceedings challenging the Merger Agreement or the consummation of the transactions contemplated thereby, (iv) lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated by the Merger Agreement and (v) effect all registrations and filings necessary to consummate the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, Contel agreed to execute a written consent as majority stockholder of the Company approving the Merger and the Merger Agreement. CONDITIONS TO THE MERGER The respective obligations of CCI Acquisition, the Company, Contel and GTE to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (i) the Merger Agreement and the transactions contemplated by the Merger Agreement shall have been approved by any necessary vote of the stockholders of the Company and CCI Acquisition in accordance with applicable law and the terms of the Merger Agreement; (ii) no statute, rule, regulation, executive order, decree or injunction (preliminary or permanent) shall have been enacted, entered, promulgated or enforced by any federal or state court of competent jurisdiction in the United States or other governmental authority which prohibits the consummation of the Merger remains in effect after GTE, CCI Acquisition and the Company shall have used all commercially reasonable efforts to lift any injunction; (iii) no consents of or filings with any governmental entity shall be required for consummation of the Merger which have not been obtained or filed and (iv) the Special Committee shall not have modified or rescinded its recommendation with respect to the Merger. TERMINATION The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company: (i) by mutual written consent of each of the Company and CCI Acquisition, (ii) by the Company or CCI Acquisition if any court of competent jurisdiction in the United States or other United States governmental body has issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Merger and such order, decree, judgment, injunction, ruling or other action has become final and nonappealable or (iii) by the Company or CCI Acquisition if the Merger does not occur within 120 days of the date of the Merger Agreement unless such delay is caused by regulatory review of required filings. AMENDMENT The Merger Agreement provides that any provision of the Merger Agreement may be amended by action taken by the Company and CCI Acquisition at any time prior to the Effective Time, provided that following approval of the Merger Agreement by the stockholders of the Company or CCI Acquisition any amendment of the Merger Agreement will be subject to compliance with Section 251(d) of the DGCL. The prior approval of a majority of the members of the Special Committee shall also be required in connection with any amendment or modification of the Merger Agreement by or on behalf of the Company. The Merger Agreement may not be amended, modified or supplemented except by an instrument in writing signed on behalf of the party against whom enforcement is sought. EXTENSION; WAIVER The Merger Agreement provides that at any time prior to the Effective Time, the Company, CCI Acquisition, GTE and Contel may (i) extend the time for the performance of any of the obligations or other acts of the other parties, (ii) waive any inaccuracies in the representations and warranties of the other parties contained therein or in any document, certificate or writing delivered pursuant to the Merger Agreement or (iii) waive compliance by the other parties with any of the agreements or conditions contained in the Merger Agreement other than those relating to indemnification. Any agreement on the part of any party to any such 33 35 extension or waiver shall be valid only if set forth in writing and signed on behalf of such party, and, in the case of an extension or waiver by the Company, if such extension or waiver has been approved by a majority of the members of the Special Committee. PAYMENT OF THE MERGER CONSIDERATION In order to receive $25.50 per Class A Share (less any applicable withholding taxes) (the "Merger Consideration"), Class A Stockholders must return certificates representing their Class A Shares along with a completed Letter of Transmittal that is being mailed to the Class A Stockholders with this Information Statement. The Letter of Transmittal is being mailed to the Class A Stockholders with the Information Statement on April 21, 1995. After the Merger has been consummated, the Disbursing Agent will issue payment of the Merger Consideration when it receives a holder's Class A Shares and a validly completed Letter of Transmittal for those shares. Class A Stockholders should not send their Class A Shares without a completed Letter of Transmittal. Class A Stockholders who wish to exercise appraisal rights must not surrender their certificates representing Class A Shares pursuant to the Letter of Transmittal and must comply with the provisions of Section 262 of the DGCL. See "DISSENTERS' RIGHTS OF APPRAISAL". When a Class A Stockholder properly surrenders certificates for Class A Shares to the Disbursing Agent, those shares will be canceled and the Class A Stockholder will receive the Merger Consideration. No interest will be paid with respect to the Merger Consideration. Class A Stockholders who wish to receive the Merger Consideration promptly after the Merger should send their Class A Shares along with a properly completed and executed Letter of Transmittal to the Disbursing Agent as soon as possible. If the Merger is not consummated within 120 days of the date of this Information Statement, the Disbursing Agent will return all certificates representing Class A Shares to the Class A Stockholders. Any Class A Stockholder who has lost certificates representing their Class A Shares should make arrangements (which may include the posting of a bond or other satisfactory indemnification) to replace lost certificates. These arrangements should be made with the Disbursing Agent, which is also the transfer agent for the Class A Shares. The method of delivery of all required documents is at the option and risk of the Class A Stockholder. If a Class A Stockholder elects to mail certificates representing Class A Shares, the Company recommends properly insuring such certificates and sending them by registered mail with return receipt requested. Under Federal Income Tax Backup and Withholding Rules, unless an exception applies under applicable laws and regulations, the Disbursing Agent will be required to withhold and remit to the United States Treasury 31% of the cash payment for Class A Shares made to a stockholder, a dissenting stockholder or any other payee pursuant to the Merger, unless such stockholder or other payee provides his taxpayer identification number (employer identification number or social security number) and certifies that such number is correct. THEREFORE, EACH CLASS A STOCKHOLDER SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM, AND IF APPLICABLE, EACH PAYEE SHOULD COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF TRANSMITTAL, IN ORDER TO PROVIDE THE INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING. FOREIGN STOCKHOLDERS MAY BE REQUIRED TO SUBMIT A FORM W-8 AND A FURTHER CERTIFICATION IN ORDER TO AVOID BACKUP WITHHOLDING. All questions as to the form of all documents and the validity, form and acceptance of any certificates representing Class A Shares for payment will be determined by the Disbursing Agent and the Company, whose determination will be final and binding. ALL QUESTIONS AND REQUESTS FOR INFORMATION RELATING TO THE PROCEDURE FOR PAYMENT OF THE MERGER CONSIDERATION FOR THE CLASS A SHARES SHOULD BE DIRECTED TO THE DISBURSING AGENT -- CHEMICAL BANK, REORGANIZATION DEPARTMENT, P.O. BOX 1916, GPO STATION, NEW YORK, NY 10116-1916. 34 36 DISSENTERS' RIGHTS OF APPRAISAL Under Section 262 of the DGCL ("Section 262"), Class A Stockholders who do not wish to accept the Merger Consideration have the right to seek appraisal of the fair value of their Class A Shares in the Delaware Court of Chancery. Section 262 is set forth in its entirely as Exhibit D to this Information Statement and incorporated by reference herein. The following discussion is not a complete statement of the law relating to appraisal rights and is qualified in its entirety by reference to Exhibit D. This discussion and Exhibit D should be reviewed carefully by any holder who wishes to exercise statutory appraisal rights or who wishes to preserve the right to do so, as failure to comply with the procedures set forth therein will result in the loss of appraisal rights. Moreover, because of the complexity of the procedures for exercising the right to dissent and seek appraisal rights, the Company believes that Class A Stockholders who consider exercising such rights should seek the advice of counsel. CLASS A STOCKHOLDERS WHO DESIRE TO EXERCISE THEIR APPRAISAL RIGHTS MUST NOT SURRENDER THEIR CERTIFICATES REPRESENTING CLASS A SHARES PURSUANT TO THE LETTER OF TRANSMITTAL AND MUST SATISFY ALL THE CONDITIONS SET FORTH IN THE FOLLOWING PARAGRAPHS. In order to exercise appraisal rights, a holder must deliver a written demand for appraisal of Class A Shares to the General Counsel of the Company within 20 days after the date of the mailing of this Information Statement. This Information Statement is being mailed on April 21, 1995. The address of the General Counsel of the Company is Contel Cellular Inc., 245 Perimeter Center Parkway, Atlanta, Georgia 30346, Attention: General Counsel. The telephone number of the General Counsel is (404) 804-3400. A demand for appraisal must be executed by or for the Class A Stockholder of record, fully and correctly, as such Class A Stockholder's name appears on the certificate or certificates evidencing such stockholder's Class A Shares. If the Class A Shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, such demand must be executed by the fiduciary. If the Class A Shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, such demand must be executed by all record owners. An authorized agent, including an agent for two or more record owners, may execute the demand for appraisal for a Class A Stockholder of record; however, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, such person is acting as agent for the owner. A record owner, such as a broker, who holds Class A Shares as a nominee for others, may exercise appraisal rights with respect to the Class A Shares held for all or less than all beneficial owners of Class A Shares as to which such person is the record owner. In such case the written demand must set forth the number of Class A Shares covered by such demand. Where the number of Class A Shares is not expressly stated, the demand will be presumed to cover all Class A Shares outstanding in the name of such record owner. Beneficial owners who are not record owners and who intend to exercise appraisal rights should instruct their record owners to comply strictly with the statutory requirements with respect to the exercise of appraisal rights. The Effective Time of the Merger shall be May 12, 1995. From and after the Effective Time, dissenters may not vote their Class A Shares or receive distributions on such Class A Shares declared after the Effective Time. Within 120 days after the Effective Time, but not thereafter, either the Surviving Corporation or any Class A Stockholder entitled to appraisal rights under Section 262 (who has notified the Company as described above within 20 days after the date of the mailing of this Information Statement) may file a petition in the Delaware Court of Chancery demanding a determination of the value of the Class A Shares of all Class A Stockholders entitled to appraisal, provided that during the first 60 days after the Effective Time any Class A Stockholder has the right to withdraw his demand for appraisal and accept the cash payment of the Merger Consideration provided for in the Merger Agreement. Within such 120 day period, any dissenting shareholder who has perfected his or her rights may, by written request to the Surviving Corporation, obtain a list of the aggregate number of holders of Class A Shares for which appraisal demands have been received. Such list must be delivered by the Surviving Corporation to the requesting Stockholder within 10 days of the date on which the request is received by the Surviving Corporation or the expiration of the period for delivery of demands under Section 262(d) of the DGCL, whichever is later. 35 37 Within 20 days after the service upon the Surviving Corporation of a copy of a petition filed in the Delaware Court of Chancery demanding an appraisal, the Surviving Corporation is obligated to file in the office of the Register in Chancery a verified list of all Class A Stockholders who have demanded appraisal and have not reached agreement as to the value of their Class A Shares with the Surviving Corporation or withdrawn the demand for appraisal of their Class A Shares. After notice to such Class A Stockholders, the Court of Chancery is empowered to conduct a hearing upon the petition of any such Class A Stockholder. The court shall then determine those Class A Stockholders entitled to appraisal and appraise the fair value of the Class A Shares held by them, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest to be paid, if any, upon the amount determined to be the fair value. In determining fair value, the Court of Chancery is to take into account all relevant factors. In Weinberger v. UOP Inc., et al., decided February 1, 1983, the Delaware Supreme Court discussed the considerations that could be considered in determining fair value in an appraisal proceeding, stating the "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered and that "fair price obviously requires consideration of all relevant factors involving the value of a company". The Delaware Supreme Court stated that in making this determination of fair value the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the merger which throw any light on future prospects of the corporation. Section 262 provides that fair value is to be "exclusive of any element of value arising from the accomplishment or expectation of the merger". In Weinberger, the Delaware Supreme Court construed Section 262 to mean that "elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered". Class A Stockholders considering seeking appraisal should bear in mind that the fair value of their Class A Shares determined under Section 262 could be more than, the same as or less than the consideration they are to receive pursuant to the Merger Agreement if they do not seek appraisal of their Class A Shares, and that an opinion of an investment banking firm as to fairness is not an opinion as to fair value under Section 262. Costs of the appraisal proceeding may be taxed upon the parties thereto by the court as the court deems equitable in the circumstances. Upon application of a dissenting stockholder, the Delaware Court of Chancery may order that all or a portion of the expenses incurred by any dissenting Class A Stockholder in connection with the appraisal proceeding, including without limitation reasonable attorney's fees and the fees and expenses of experts, be charged pro rata against the value of all Class A Shares entitled to appraisal. If a Class A Stockholder does not file a petition for an appraisal within 120 days after the Effective Time, then the right of such Class A Stockholder to an appraisal shall cease. In addition, if any Class A Stockholder shall deliver to the Surviving Corporation a written withdrawal of such holder's demand for an appraisal and an acceptance of the Merger Consideration, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such Class A Stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of Chancery shall be dismissed as to any Class A Stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. The class action suits brought on behalf of the Class A Stockholders described in "SPECIAL FACTORS -- Certain Litigation" do not affect the appraisal rights summarized above. 36 38 MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY The Class A Shares are publicly traded in the over the counter market and quoted on the Nasdaq National Market under the symbol "CCXLA". There is no established trading market for the Class B Shares. As of April 18, 1995, the Company had 371 Class A Stockholders of record. The Company has not paid any cash dividends on the Class A Shares or Class B Shares, and it is not anticipated that the Company will pay any cash dividends in the foreseeable future. The following table indicates the high and low sales prices for the Class A Shares during the designated periods:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------ -------- 1994 High.............................. $ 18.75 $ 17.25 $24.00 $ 25.25 Low............................... 14.00 13.00 16.00 23.50 1993 High.............................. $ 18.63 $ 16.25 $18.75 $ 22.00 Low............................... 13.25 13.50 15.50 15.00 1992 High.............................. $ 23.25 $ 18.50 $16.50 $ 19.00 Low............................... 17.25 13.00 13.50 13.25
On September 7, 1994, the last full day of trading prior to the announcement of GTE's intention to acquire the Class A Shares, the high, low and closing sales prices per Class A Share on the Nasdaq National Market were $18.25, $17.75 and $17.75, respectively. For the first quarter of 1995, the high and low sales prices per Class A Share quoted on the Nasdaq National Market were $25.375 and $24.875, respectively. For the second quarter of 1995 through April 18, 1995, the high and low sales prices per Class A Share quoted on the Nasdaq National Market were $25.375 and $25.25, respectively. 37 39 SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY The selected consolidated financial data presented below as of December 31, 1990-1994 and for each of the years then ended have been derived from the audited consolidated financial statements of the Company. The consolidated financial statements as of December 31, 1994 and 1993, and for each of the years in the three-year period ended December 31, 1994, have been incorporated by reference into this Information Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE". This financial information should be read in conjunction with such financial statements and notes thereto.
YEARS ENDED DECEMBER 31, ---------------------------------------------------------------------- 1990 1991 1992 1993 1994 ---------- ---------- ---------- ---------- ---------- (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Revenues and sales................................. $ 167,178 $ 235,107 $ 286,999 $ 374,014 $ 562,955 Operating income (loss)(1)......................... (38,143) (68,577) (50,113) (28,305) 41,011 Loss from consolidated operations.................. (158,865) (223,726) (196,347) (188,011) (143,332) Equity in earnings of unconsolidated partnerships..................................... 19,069 15,687 29,027 37,351 62,792 Gains on sales of partnership interests............ -- 18,387 60,806 48,023 96,607 Net income (loss) before cumulative effect of change in accounting principles.................. (102,794) (118,900) (73,061) (74,918) 1,871 Cumulative effect of change in accounting principles(2).................................... -- -- (2,080) (241) -- Net income (loss).................................. (102,794) (118,900) (75,141) (75,159) 1,871 Net income (loss) per share before cumulative effect of change in accounting principles........ (1.03) (1.19) (0.73) (0.75) 0.02 Net income (loss) per share........................ (1.03) (1.19) (0.75) (0.75) 0.02 Number of weighted average shares outstanding (in thousands)....................................... 99,931 99,942 99,943 99,948 99,953 OTHER OPERATING DATA: Capital expenditures............................... 70,841 107,792 183,504 130,042 255,174 Number of ending subscribers....................... 155,285 236,282 327,645 521,226 789,580
AS OF DECEMBER 31, ---------------------------------------------------------------------- 1990 1991 1992 1993 1994 ---------- ---------- ---------- ---------- ---------- (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA: Total assets....................................... $1,665,395 $1,870,669 $1,930,469 $2,052,984 $2,346,466 Long-term obligations Notes payable -- affiliates...................... 1,540,000 1,735,034 1,814,327 1,901,726 2,136,263 Other............................................ 14,280 42,280 36,280 36,792 30,792 Stockholders' equity (deficit)..................... 27,525 (91,085) (166,084) (241,221) (238,920) Book value per share............................... 0.28 (0.91) (1.66) (2.41) (2.39)
- --------------- (1) The operating loss in 1991 includes approximately $12 million of integration costs associated with the merger of Contel with a wholly owned subsidiary of GTE. (2) In 1993, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." In 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and No. 109, "Accounting for Income Taxes." Earnings were not adequate to cover fixed charges in 1992, 1993 or 1994. The amount of such deficiency was $128 million, $129 million and $19 million for the years ended December 31, 1992, 1993 and 1994, respectively. 38 40 PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY(1) The Company does not, as a matter of course, publicly disclose projections as to future revenues or earnings. The following five year projections for the period 1995-1999 were prepared by management for GTE and internal planning purposes. These five year projections are included in this Information Statement because such projections were made available to the Special Committee's financial advisor and the GTE Financial Advisors. These projections, while presented with numerical specificity, are based upon a variety of estimates and assumptions. Such estimates and assumptions, some of which are described below, involve judgments with respect to, among other things, future economic and competitive conditions, the ability of the Company to continue operations, and future business decisions. These judgments, though considered reasonable by the Company at the time, may not be realized, and are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond the control of the Company. There can be no assurance that the results of operations set forth in such projections will be realized. Actual results may vary materially from those shown. In light of the uncertainties inherent in projections of any kind, the inclusion of projections herein should not be regarded as a representation by the Company or any other person that the projections will be achieved. The Company's independent auditors have not examined or compiled the projections presented herein and accordingly, assume no responsibility for them. Class A Stockholders are cautioned not to place undue reliance on these projections. Management has not and does not intend to update or otherwise revise the projections to reflect changing circumstances existing after the preparation of the projections included herein or to reflect the occurrence of unanticipated events that may have occurred. The significant assumptions underlying these projections are described in the footnotes following the projections. The projections provided to the Special Committee's financial advisor and the GTE Financial Advisors were based on forecasted results for 1994 since actual 1994 results were not available at the time.
YEARS ENDED DECEMBER 31,(1) ------------------------------------------ 1995 1996 1997 1998 1999 ------ ------ ------ ------ ------ (DOLLAR AMOUNTS IN MILLIONS) INCOME STATEMENT DATA: Service revenues(2)................................... $ 679 $ 831 $ 984 $1,140 $1,282 Depreciation and amortization(3)(4)(6)................ 152 181 201 215 228 Operating income...................................... 116 186 263 325 431 Net income (loss)(5).................................. (36) (1) 40 81 153 OTHER OPERATING DATA: Capital expenditures(3)(6)............................ 298 220 158 135 145 Operating cash flow(6)................................ 268 367 464 540 659 Return on investment(7)............................... 5.4% 7.3% 9.7% 12.1% 16.5%
AS OF DECEMBER 31,(1) ------------------------------------------ 1995 1996 1997 1998 1999 ------ ------ ------ ------ ------ (DOLLAR AMOUNTS IN MILLIONS) BALANCE SHEET DATA: Total assets.......................................... $2,541 $2,614 $2,602 $2,548 $2,488 Long-term liabilities(8).............................. 2,135 2,183 2,233 2,185 1,983 Stockholders' deficit(9).............................. (289) (290) (250) (169) (16)
- --------------- (1) Basis of presentation: The five year projections do not include the effect of the proposed Merger. The five year projections include the effect of the 1994 acquisitions of 100% of the cellular system serving the Huntsville, Alabama MSA and Alabama RSA 2, a controlling interest in a company with interim operating authority to provide cellular service in Alabama RSA 1 and the acquisition of a controlling interest in California RSA 4. Prior to completion of these five year projections, ten year projections were prepared that did not include the effects of the acquisitions referred to above. These ten year projections were prepared outside of the Company's normal planning process and therefore, in addition to being inherently less certain, they received less management review than the five year projections. The ten year projections, as presented below, were made available to the Special Committee's financial advisor, GTE 39 41 and the GTE Financial Advisors. Both the ten year and five year projections include the effect of the proposed sales in 1994 of certain properties to NYNEX Mobile Communications Company, including the Company's cellular interests in the MSAs of Binghamton and Elmira, New York, and New York RSA 3. These sales are expected to close sometime in 1995. Additionally, the California RSA 4 acquisition is not expected to close until sometime in 1995.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------------------------ 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ (DOLLAR AMOUNTS IN MILLIONS) INCOME STATEMENT DATA: Service revenues......... $ 656 $ 799 $ 945 $1,092 $1,228 $1,270 $1,287 $1,285 $1,315 $1,347 Depreciation and amortization........... 148 176 196 210 223 233 248 270 294 315 Operating income......... 103 182 257 316 421 432 425 411 408 404 Net income (loss)........ (37) 4 43 83 154 181 198 216 239 266 OTHER OPERATING DATA: Capital expenditures..... 298 214 156 134 143 123 135 127 126 100 Operating cash flow...... 251 358 453 526 644 665 673 681 702 719 Return on investment..... 5.4% 7.9% 10.4% 12.8% 17.3% 19.0% 19.7% 20.5% 22.4% 25.6%
(2) Service revenues: Service revenues include airtime, access, roaming, long-distance and other service revenues, but do not include revenues for the sale or rental of cellular equipment. The projections generally assume that service revenues will increase over prior years due to increasing volumes; however, revenue per subscriber will continue to decline as an increasing number of casual users are added to the base and as new entrants in the wireless communication market compete for subscribers. (3) Capital expenditures/depreciation: The projections assume that increased capital will be required to provide high quality, portable network coverage, to accommodate volume and provide for economies of scale. (4) Amortization: The five year projections include the amortization of intangibles related to the acquisitions described in Note 1 above. (5) Net income: The projections assume a federal income tax rate of 35% for all periods presented. (6) Wireless data business: The business plan for the Company's wireless data business was approved during the process of preparation of the five year projections. As a result, the parties who received the five year projections also received data that backed out the wireless data business from the five year projections. Excluding the wireless data business, projected operating cash flow is $270, $362, $446, $509 and $616 in 1995-1999, respectively, projected capital expenditures are $284, $215, $153, $130 and $139 in 1995-1999, respectively, and projected depreciation and amortization is $151, $177, $196, $209 and $220 in 1995-1999, respectively. (7) Return on investment: Represents net income (loss) plus interest expense, net of tax benefit, and minority interest, divided by average investment. (8) Long term liabilities: The projections assume increases in long-term debt between 1995 and 1997 reflecting the expected increase in required capital as described in Note 3. Thereafter, the projections assume that operating cash flow will be sufficient to satisfy operating requirements and capital expenditures and enable the Company to gradually repay outstanding debt. (9) Stockholders' deficit: Stockholders' deficit includes the par value of the Class A Shares and Class B Shares, additional paid-in capital, the cost of the Class A treasury stock and the accumulated deficit all as of December 31, 1993, adjusted for the projected net results for the year ended December 31, 1994 and for each of the years included in the above projections. 40 42 BUSINESS OF THE COMPANY OVERVIEW The Company, through its subsidiaries and through partnerships, provides or participates in the provision of cellular telephone service in various MSAs and RSAs throughout the United States. As of December 31, 1994, the Company had interests in cellular telephone systems in the United States representing approximately 23.9 million "POPs". ("POPs" refer to the population of a market area multiplied by the Company's percentage ownership in the cellular system serving that market.) The Company's 23.9 million POPs include cellular systems which the Company controls or manages and cellular systems operated by partnerships in which the Company is not the controlling partner. As of December 31, 1994, approximately 19.5 million of the Company's 23.9 million POPs were located in 59 MSAs. The Company owned a controlling interest in and managed cellular systems servicing 32 of these 59 MSAs (representing approximately 69% of the Company's MSA POPs). The Company owned a non-controlling interest in cellular systems servicing the remaining 27 MSAs. The remaining 4.4 million of the Company's 23.9 million POPs were located in 52 RSAs. As of December 31, 1994, the Company owned controlling interests in entities licensed to provide cellular service in 24 RSAs, owned non-controlling interests in and managed 10 RSA markets and held non-controlling interests in 18 RSAs. Most of the Company's RSA POPs are in areas adjacent to MSAs currently served by the Company. CELLULAR INTERESTS The Company's controlled MSA interests, non-controlled MSA interests, controlled RSA interests, managed, non-controlled RSA interests and non-controlled RSA interests, are set forth below.
COMPANY COMPANY PERCENTAGE 1994 ESTIMATED POPULATION MARKET MSA RANK OWNERSHIP POPULATION(1) EQUIVALENTS - ------------------------------------------- -------- ---------- -------------- ----------- CONTROLLED MSA INTERESTS Memphis, TN................................ 36 100.00% 1,030,496 1,030,496 Louisville, KY............................. 37 100.00% 931,413 931,413 Birmingham, AL............................. 41 100.00% 904,436 904,436 Norfolk, VA................................ 43 95.01% 1,020,794 969,856 Nashville, TN.............................. 46 100.00% 1,051,872 1,051,872 Richmond, VA............................... 59 95.01% 797,942 758,125 Fresno, CA................................. 74 92.00% 735,494 676,654 Knoxville, TN.............................. 79 94.12% 544,045 512,055 El Paso, TX................................ 81 100.00% 652,655 652,655 Mobile, AL................................. 83 100.00% 510,599 510,599 Johnson City, TN........................... 85 100.00% 452,809 452,809 Chattanooga, TN............................ 88 100.00% 451,120 451,120 Bakersfield, CA............................ 97 92.00% 618,209 568,752 Davenport, IA.............................. 98 100.00% 362,249 362,249 Newport News, VA........................... 104 95.01% 474,518 450,840 Huntsville, AL............................. 115 100.00% 393,160 393,160 Lexington, KY.............................. 116 100.00% 367,623 367,623 Evansville, IN............................. 119 88.87% 318,396 282,959 Binghamton, NY............................. 122 41.00% 309,418 126,861 Pensacola, FL.............................. 127 100.00% 374,969 374,969 Rockford, IL............................... 131 59.00% 301,026 177,605 Visalia, CA................................ 150 92.00% 347,899 320,067 Roanoke, VA................................ 157 40.00% 239,829 95,932 Clarksville, TN............................ 209 100.00% 172,410 172,410
41 43
COMPANY COMPANY PERCENTAGE 1994 ESTIMATED POPULATION MARKET MSA RANK OWNERSHIP POPULATION(1) EQUIVALENTS - ------------------------------------------- -------- ---------- -------------- ----------- Tuscaloosa, AL............................. 222 80.40% 161,333 129,705 Florence, AL............................... 226 91.09% 138,073 125,771 Petersburg, VA............................. 235 95.01% 130,585 124,069 Anniston, AL............................... 249 100.00% 116,063 116,063 Gadsden, AL................................ 272 90.00% 101,153 91,038 Elmira, NY................................. 284 100.00% 95,612 95,612 Las Cruces, NM............................. 285 100.00% 153,838 153,838 Owensboro, KY.............................. 293 88.87% 89,993 79,977 -------------- ----------- 32 TOTAL CONTROLLED MSAs.................................. 14,350,031 13,511,590 =========== ========= NON-CONTROLLED MSA INTERESTS Los Angeles, CA............................ 2 11.20% 14,718,542 1,648,477 San Francisco, CA.......................... 7 11.25% 3,832,050 431,106 Washington, DC............................. 8 35.27% 3,783,479 1,334,433 Houston, TX................................ 10 4.40% 3,897,637 171,496 Minneapolis, MN............................ 15 30.00% 2,569,391 770,817 San Jose, CA............................... 27 11.25% 1,541,573 173,427 San Antonio, TX............................ 33 30.00% 1,382,982 414,895 Sacramento, CA............................. 35 0.98% 1,479,697 14,501 Jacksonville, FL........................... 51 14.24% 1,003,832 142,946 Greenville, SC............................. 67 10.83% 667,011 72,237 Oxnard, CA................................. 73 11.20% 697,369 78,105 Austin, TX................................. 75 3.00% 874,277 26,228 Albuquerque, NM............................ 86 49.00% 590,335 289,264 Beaumont, TX............................... 101 4.40% 384,136 16,902 Stockton, CA............................... 107 0.98% 517,135 5,068 Vallejo, CA................................ 111 11.25% 489,096 55,023 Santa Rosa, CA............................. 123 11.25% 411,058 46,244 Santa Barbara, CA.......................... 124 39.00% 378,431 147,588 Salinas, CA................................ 126 11.25% 372,027 41,853 Modesto, CA................................ 142 0.98% 415,482 4,072 Galveston, TX.............................. 170 4.40% 237,243 10,439 Reno, NV................................... 171 0.98% 279,735 2,741 Santa Cruz, CA............................. 174 11.25% 230,417 25,922 Chico, CA.................................. 215 0.98% 197,623 1,937 Anderson, SC............................... 227 10.83% 146,845 15,903 Redding, CA................................ 254 0.98% 167,321 1,640 Yuba City, CA.............................. 274 0.98% 135,636 1,329 -------------- ----------- 27 TOTAL NON-CONTROLLED MSAs.............................. 41,400,360 5,944,593 =========== ========= 59 TOTAL MSAs............................................. 55,750,391 19,456,183 =========== =========
42 44
COMPANY COMPANY PERCENTAGE 1994 ESTIMATED POPULATION MARKET OWNERSHIP POPULATION(1) EQUIVALENTS - ------------------------------------------------------- ---------- -------------- ----------- CONTROLLED RSA INTERESTS Alabama 2.............................................. 100.00% 127,611 127,611 California 6........................................... 100.00% 28,183 28,183 California 9........................................... 100.00% 140,612 140,612 Kentucky 2............................................. 100.00% 127,813 127,813 Kentucky 7............................................. 100.00% 166,424 166,424 Tennessee 1............................................ 100.00% 297,449 297,449 Tennessee 2............................................ 100.00% 159,071 159,071 Tennessee 3............................................ 100.00% 329,746 329,746 Tennessee 5............................................ 100.00% 336,480 336,480 Tennessee 6............................................ 100.00% 156,906 156,906 Tennessee 7............................................ 100.00% 248,005 248,005 Tennessee 9............................................ 100.00% 67,581 67,581 Virginia 7............................................. 100.00% 38,853 38,853 Virginia 8............................................. 95.01% 84,513 80,296 Virginia 9............................................. 95.01% 87,028 82,685 Virginia 11............................................ 95.01% 111,650 106,079 Virginia 12............................................ 95.01% 33,536 31,863 California 12.......................................... 92.00% 110,515 101,674 Illinois 1............................................. 91.50% 316,168 289,294 Virginia 5............................................. 77.00% 63,347 48,777 Texas 10............................................... 75.00% 29,489 22,117 New Mexico 6-I......................................... 71.43% 60,988 43,564 Virginia 3............................................. 51.00% 183,153 93,408 Virginia 4............................................. 51.00% 66,772 34,054 -------------- ----------- 24 TOTAL CONTROLLED RSAs................................. 3,371,893 3,158,545 =========== ========= MANAGED, NON-CONTROLLED RSA INTERESTS Kentucky 1............................................. 50.00% 187,079 93,540 New Mexico 3........................................... 50.00% 78,980 39,490 New Mexico 5........................................... 43.00% 56,850 24,446 Iowa 4................................................. 38.10% 155,924 59,407 Indiana 7.............................................. 38.09% 220,819 84,119 Indiana 8.............................................. 38.09% 252,283 96,105 Indiana 9.............................................. 38.09% 142,859 54,421 New York 3............................................. 22.50% 492,406 110,791 California 4........................................... 20.83% 338,983 70,610 Iowa 5................................................. 14.29% 108,063 15,442 -------------- ----------- 10 TOTAL MANAGED RSAs.................................... 2,034,246 648,371 =========== =========
43 45
COMPANY COMPANY PERCENTAGE 1994 ESTIMATED POPULATION MARKET OWNERSHIP POPULATION(1) EQUIVALENTS - ------------------------------------------------------- ---------- -------------- ----------- NON-CONTROLLED RSA INTERESTS New Mexico 1........................................... 44.44% 251,919 111,953 Illinois 8............................................. 41.13% 331,629 136,399 Illinois 9............................................. 41.13% 152,791 62,843 Illinois 2............................................. 40.00% 145,844 58,338 California 5........................................... 39.00% 218,249 85,117 California 3........................................... 27.73% 143,187 39,706 California 1........................................... 16.67% 212,401 35,407 New Mexico 6-II........................................ 12.50% 123,267 15,408 Illinois 3............................................. 11.77% 204,375 24,055 Virginia 6............................................. 10.00% 213,307 21,331 Minnesota 1............................................ 6.60% 51,014 3,367 Minnesota 2............................................ 6.60% 62,994 4,158 Minnesota 3............................................ 6.60% 57,315 3,783 Minnesota 5............................................ 6.60% 203,906 13,458 Minnesota 6............................................ 6.60% 244,817 16,158 Virginia 10............................................ 1.00% 231,404 2,314 Pennsylvania 3......................................... 0.10% 95,755 96 Pennsylvania 4......................................... 0.10% 97,172 97 -------------- ----------- 18 TOTAL NON-CONTROLLED RSAs............................. 3,041,346 633,988 =========== ========= 52 TOTAL RSAs............................................ 8,447,485 4,440,904 =========== ========= 111 TOTAL MSAs and RSAs.................................. 64,197,876 23,897,087 =========== =========
- --------------- (1) Population figures are derived from the 1994 Donnelly marketing population estimates for counties comprising FCC defined MSAs and RSAs. POP figures discussed in "SPECIAL FACTORS -- Opinion of Financial Advisor to the Special Committee" and "SPECIAL FACTORS -- Opinions of Financial Advisors to GTE" are based on 1993 population estimates which differ, although not materially in the aggregate, from the figures set forth in the table above. THE CELLULAR TELEPHONE INDUSTRY Background. In 1983, the FCC issued the first license to provide cellular telephone service in the United States. Since that time, cellular telephone service has become available to all 305 MSAs and 428 RSAs and is available to most of the population of the United States. Cellular telephone service was developed as a response to the shortcomings of conventional mobile telephone systems. By providing high quality, high capacity communication to and from vehicle-mounted telephones ("mobiles") and hand-held radio telephones ("portables"), the cellular telephone industry has grown at a very rapid pace and, as of year-end 1994, exceeded 22 million subscribers. In 1994, the cellular telephone industry recorded an overall growth rate of approximately 37%. Technology. Cellular telephone service achieves its high quality and capacity capability by dividing the radio spectrum allocated to it by the FCC into smaller groups or "sets" of frequencies and re-using those frequencies many times in geographically distant parts of the network. Each set of frequencies is allocated to a specific geographic area called a "cell." Adjacent cells must use a different set of frequencies to avoid cell-to-cell frequency interference. Cells which are sufficiently distant from one another may use the same frequencies because the radio signals naturally decay over distance until they reach a low enough level that does not cause interference. Therefore, by use of frequency planning techniques, the radio spectrum allocated to a cellular 44 46 provider can be re-used many times in various parts of the system to achieve high overall call capacities and very low call interference rates. The cells in a system are connected to a computer-controlled switch called a mobile telephone switching office ("MTSO"). The MTSO monitors all calls to all cell sites within the system and routes them to their intended destinations. Once a call request is received, it is directed to the cell site where the signal strength is greatest, and is then continuously monitored for quality signal strength. If the signal strength begins to decline as a vehicle travels through the radio coverage area of one cell, the MTSO recognizes the cell which is getting weaker in signal strength and which is the next cell in the path of the vehicle where signal strength is increasing. At the appropriate point in time, the MTSO instructs the new cell to take over the call and the original cell to release the call. This allows an in-process call to achieve a cell-to-cell handoff with no interruption in the conversation. The MTSO is capable of achieving this handoff as many times as necessary for each call. Today's cellular systems utilize digital switching equipment, digital connections between the switch and the cells, and analog radio frequency ("RF") technology between the cells and the mobile units. The analog RF technology is limited because a finite number of channels can be used at any one cell within a system without causing system problems. The capacity of the system can be increased in areas with heavy call traffic by either cell splitting or cell sectoring. Cell splitting involves constructing numerous cells to serve the coverage area of the original cell. If a large cell is split into four smaller cells, the total channels available within the original coverage area is increased up to four times. Cell sectoring is accomplished by replacing a cell's omni-directional antennas with either three or six directional antennas. This allows for different sets of channels to be used in each sector. The advantage of this method is that capacity can be increased in the cell without increasing system interference and that the same frequency sets can be reused at closer spacing. The cellular telephone industry is moving toward implementing digital RF technology in existing cellular systems. Two technologies are currently under consideration by major cellular providers -- Time Division Multiple Access ("TDMA") and Code Division Multiple Access ("CDMA"). Either technology will offer a considerable capacity increase over today's technology. Market Structure. Historically, FCC regulations provided that licenses would be granted to two cellular service providers in each MSA and RSA; a wireline licensee and a non-wireline licensee. Each of the two licensees has 25 MHz of radio spectrum allocated to it, and each further subdivides this spectrum into 415 two-way channels. Each license is granted for a period of ten years and is subject to renewal at the end of that period. FCC rules require all cellular system operators to provide, on a nondiscriminatory basis, cellular service to resellers who may purchase blocks of numbers at a wholesale rate and resell such service to the public. The FCC is in the process of auctioning additional licenses for the provision of personal communications services in the 1.8 GHz to 1.99 GHz frequency band. These auctions will not be completed until later this year and will result in new licensees in each of the Company's service areas. The first part of the auction was completed on March 13 and resulted in the purchase of 99 licenses by 18 entities. A GTE subsidiary, GTE Macro Communications Corporation, purchased four licenses (Atlanta, Seattle, Cincinnati and Denver). THE COMPANY'S CELLULAR OPERATIONS General. The Company, or partnerships which the Company controls or manages, provides cellular service in 32 MSAs and 34 RSAs ("Company Controlled Systems" or "Company Controlled Markets"). Company Controlled Systems represent approximately 72% of the Company's total POPs. The information provided below with respect to the Company's cellular operations applies only to the Company Controlled Systems because these are the only systems whose operations the Company controls. The Company's non-controlled cellular interests are described below in "-- Non-Controlled Systems". The Company obtained the right to provide cellular service in the Company Controlled Markets either (i) as the result of the FCC's licensing process, or (ii) through an acquisition program. Since the Company 45 47 was an affiliate of a wireline telephone company, it had the right to apply for the wireline cellular license in any area served by its landline affiliate. As a result of this licensing process, the Company is the wireline licensee in 43 Company Controlled Markets (approximately 8.7 million POPs). As a result of its acquisition program, the Company is the non-wireline licensee in 23 Company Controlled Markets (approximately 8.6 million POPs). In acquiring and developing these cellular telephone systems, the Company has utilized a strategy of focusing on coastal and sun belt areas where the Company believes the demographics and business climate are favorable to the development of cellular systems. In addition, the Company has attempted to develop cellular systems in regional clusters of significant size. The cellular telephone systems originally licensed to the Company as part of the FCC licensing process for MSAs and RSAs are generally located in 5 geographic areas: Virginia, California, the Midwest, Texas/New Mexico, and the Gulf of Mexico. The cellular telephone systems acquired by the Company are located in Tennessee, Alabama and Kentucky. Acquisitions and Divestitures. To further its strategy of acquiring and developing large regional clusters in economically strong areas, the Company has developed and followed a program of selling certain properties which are not strategically located and purchasing certain other properties which are strategic. In 1994, the Company purchased 100% of the cellular system serving Tennessee RSA 2, the remaining 51% interest in the cellular system serving Tennessee RSA 3, and 100% of the cellular systems serving the Huntsville, Alabama MSA and Alabama RSA 2, representing an aggregate increase of approximately 831,000 POPs. Through the purchase of the Huntsville, Alabama MSA, the Company gained an 80% interest in the partnership that currently operates the cellular system in Alabama RSA 1A pursuant to an interim operating license. Additionally, the Company increased its ownership interests in the cellular systems serving the Tuscaloosa, Alabama MSA, Indiana RSAs 7, 8 and 9, and Alabama RSA 1B, representing an aggregate increase of approximately 33,000 POPs. Also during 1994, the Company sold its interest in several northeastern cellular properties (the "Northeast Properties"), pursuant to the agreement signed in December 1993 with NYNEX Mobile Communications Company ("NYNEX"), including the cellular systems serving Manchester, New Hampshire and Burlington, Vermont MSAs; New Hampshire RSA 2, Vermont RSAs 1 and 2A, and New York RSA 2. Additional sales completed during 1994 include the Company's interest in Iowa RSAs 1, 8 and 14, Oregon RSA 5, South Dakota RSAs 5B1 and 6B1, North Carolina RSA 1, Kentucky RSA 11, California RSA 7 and Alabama RSA 1B. The Company recognized an aggregated pretax gain of approximately $94.3 million with respect to the 1994 sales, representing approximately 1,445,000 POPs. Additionally, as part of the agreement, NYNEX will purchase the Company's interests in the Binghamton and Elmira, New York MSAs, Pennsylvania RSAs 3A and 4A, and New York RSA 3 pending certain regulatory approvals, which are expected to be completed in 1995. After the acquisitions and dispositions described above and the cellular exchange transaction described below, the Company will provide or participate in the provision of cellular services in 56 MSA markets and 49 RSA markets with total combined POPs of approximately 23.3 million. Cellular Exchange Transaction. The Company, GTE Mobilnet Incorporated, GTE Mobilnet of Oregon Limited Partnership, GTE Mobilnet of Northwest Oregon Limited Partnership and GTE Mobile Communications Service Corporation (the "GTE Parties") have entered into an Asset Exchange Agreement dated February 3, 1995 (the "Asset Exchange Agreement") with US WEST NewVector Group, Inc. ("NewVector"). Pursuant to the Asset Exchange Agreement, the GTE Parties will exchange certain cellular assets currently owned by them for 100% of the assets, including the non-wireline cellular license, currently owned by NewVector in San Diego, California. The Company's assets included in the exchange are its 49% interest in the cellular assets, including the wireline cellular license, in Albuquerque, New Mexico, and its 30% interest in the cellular assets, including the wireline cellular license, in Minneapolis, Minnesota. The assets of the other GTE Parties consist of (i) 91.4% of the assets of the cellular system serving the MSAs of Portland 46 48 and Salem, Oregon, (ii) 100% of the assets of the cellular system serving Oregon RSA 1, and (iii) either a 10% partnership interest in the partnership providing cellular service in Seattle, Bremerton and Tacoma, Washington or a 10% interest in the assets of that system. The Company will acquire a 28% interest, as a tenant-in-common, in the San Diego assets received from NewVector, representing the equivalent market value of assets exchanged, and will operate the system pursuant to a management agreement with the other GTE Parties. Operations Partnerships. A substantial number of the Company's cellular systems in MSAs are owned by limited partnerships in which the Company is a general partner ("MSA Partnerships"). Most of these partnerships are governed by partnership agreements with similar terms, including, among other things, customary provisions concerning capital contributions, sharing of profits and losses, and dissolution and termination of the partnership. Most of these partnership agreements vest complete operational control of the partnership with the general partner. The general partner typically has the power to manage, supervise and conduct the affairs of the partnership, make all decisions appropriate in connection with the business purposes of the partnership, and incur obligations and execute agreements on behalf of the partnership. The general partner also may make decisions regarding the timing and amount of cash contributions and distributions, and the nature, timing and extent of construction, without the consent of the other partners. The Company owns more than fifty percent (50%) of almost all of the MSA Partnerships. A substantial number of the Company's cellular systems in RSAs are also owned by limited or general partnerships in which the Company is either the general or managing partner (the "RSA Partnerships"). These partnerships are governed by partnership agreements with varying terms and provisions. In many of these partnerships, the noncontrolling partners have the right to vote on major issues such as the annual budget and system design. In addition, in certain of these partnerships, the partners have the right to build, under certain circumstances, independent cells in areas of the RSA not served by the partnership. Finally, in a few of these partnerships, the Company's management position is for a limited term (similar to a management contract) and the other partners in the partnership have the right to change managers, with or without cause. The Company owns less than fifty percent (50%) of many of the RSA Partnerships. The partnership agreements for both the MSA Partnerships and RSA Partnerships generally contain provisions granting all partners a right of first refusal in the event a partner desires to transfer a partnership interest. This restriction on transfer can make these partnership interests difficult to sell to a third party. Provision of Services by GTE Personal Communications Services. During 1993, the Company maintained a headquarters staff and two regional staffs which provided strategic as well as day-to-day operational support to the Company's operations in its 66 Company Controlled Markets. In 1994, the Company implemented a new organizational structure pursuant to which the two regional staffs were replaced with eight area staffs which are located in the Company's eight clusters of MSAs and RSAs. These eight areas are Virginia, Tennessee, Kentucky, Alabama, the Midwest, Texas/New Mexico, the Gulf of Mexico and California. The purpose of this reorganization was to move essential, customer impacting resources closer to the marketplace to enhance the Company's competitive advantage and position the Company for future growth. The Company also receives general and administrative as well as functional support from GTE Personal Communications Services ("GTE PCS"), a division of GTE. Pursuant to the Services Agreement, GTE PCS provides finance, accounting, tax, human resources, legal, regulatory and information management services to the Company. The Services Agreement provides that the Company is allocated a portion of GTE PCS expenses based on a two-step process. The first step is the designation of GTE PCS expenses as cellular or non-cellular. The second step is the allocation of cellular expenses between the Company and GTE Mobilnet (a GTE subsidiary also engaged in the cellular communications business) based on a cost-causative allocation methodology. Under this methodology, pools of costs are allocated to operating units based on one of several factors. The factors were developed and applied to cost categories in an effort to allocate the cost to areas in proportion to the use and benefit of the cost. Under this Services Agreement, the Company was allocated 47 49 approximately 34% of GTE PCS's cellular expenses for the twelve months ended December 31, 1994. See "RELATED PARTY TRANSACTIONS -- Arrangements and Transactions with Contel and GTE". Construction and Maintenance. The construction and maintenance of cellular systems is capital intensive. Although all of the Company's MSA and RSA systems were operational in 1994, the Company continually adds cells to increase coverage, provide additional capacity and improve the quality of these systems. In 1994, the Company completed construction of 153 new cells in Company Controlled Systems. In addition the Company completed a replacement program for most of its older technology cell site equipment. The newer technology equipment provides higher quality and increased flexibility in providing analog services, as well as positions a platform that supports deployment of future digital technologies. Total capital expenditures related to Company Controlled Systems were approximately $253 million in 1994 and are anticipated to be approximately $315 million in 1995. Marketing General. The Company markets its cellular telephone services through several distribution channels, including independent agents, its direct sales force and retail outlets. Agents are independent contractors who solicit customers on a commission basis exclusively for the Company. The Company's agents are diverse in size and type of business. Most are agents for the Company within a limited geographic area, while a few agents sell the Company's cellular service regionally or nationally. Some of the Company's agents sell cellular products and services exclusively, while others sell a variety of products (such as radio and electronics equipment). Finally, some of the Company's agents are small shops, while others are large retail stores. The Company's agents generally receive a commission payment for each cellular subscriber they add to the Company's systems. The Company's direct sales force is made up of sales people who are employees of the Company and are compensated on an incentive basis. These employees earn a portion of their compensation as a guaranteed salary and receive additional payments for each subscriber added. These employees are required to meet certain quotas set by the Company. Another distribution channel utilized by the Company is retail outlets, including kiosks and retail stores. The retail outlets are staffed by salaried employees, part-time employees and temporary employees who receive a base salary and incentive compensation for each unit sold. Finally, the Company is constantly attempting to develop new distribution channels, including telemarketing, co-promotions with various other industry leaders and door-to-door sales. National Industry Alliance. During the past several years, cellular providers have been forming industry alliances to market cellular service nationwide. Many cellular providers holding non-wireline licenses have become Cellular One(R) franchisees. Many cellular providers holding wireline licenses have joined a consortium to market under the brand name, MobiLink(R), a registered mark of B-Side Carriers L.P. Because the Company holds both wireline and non-wireline licenses, it participates in both of these alliances. GTE Mobile is an equity owner in B-Side Carriers L.P. See "RELATED PARTY TRANSACTIONS". Subscribers Total Number. The Company had 789,580 subscribers at December 31, 1994, an increase of 51.5% over its subscribers at December 31, 1993. The Company's subscribers at December 31, 1994 were distributed as follows: 33% in Tennessee, 21% in Virginia and 46% in all other markets combined. Cost of Acquisition. The sales and marketing costs of obtaining new subscribers are substantial. The Company not only has to pay for advertising, but also incurs a direct expense for most new subscribers, either in the form of a commission payment to an agent or a salary/incentive payment to a direct sales person. In addition, the Company periodically runs promotions which discount the cost of cellular telephone equipment, or provide some amount of initial access or airtime free to new subscribers. Each of these promotions results in costs to the Company. Although the Company has continued to lower the cost of acquisition per subscriber, it remains one of the Company's single largest expenses. 48 50 Churn. A factor common throughout the cellular industry is that many subscribers either completely discontinue cellular service or switch from one cellular provider to another. In 1994, this monthly turnover or "churn" in the Company's subscribers averaged 2.7% of all subscribers per month. Subscriber Revenue. The Company charges its subscribers for access to its systems, for minutes of use and for enhanced services, such as voice mail and Mr. RescueSM. A subscriber may purchase each of these services separately for a set price or may purchase any number of rate plans which bundle these services in different ways. For example, a high usage subscriber may purchase a pre-determined number of minutes of use per month for a set fee rather than pay a fixed amount per minute. Similarly, a user who purchases cellular service for security reasons may choose a plan with a low monthly access fee but higher per minute usage fees. Rates charged by the Company and the number and type of rate plans vary from market to market. The average monthly revenue the Company receives per subscriber has been declining over the last several years. The Company believes that this industry trend is caused in part by an increase in the number of casual and security cellular users. The Company expects this trend to continue in 1995 and future years. Roaming Roamers. The Company also provides cellular service to cellular users who are customers of other carriers but who are visiting and wish to use their cellular phone in the Company's service area ("roamers"). When roamers enter the Company's service area and attempt to use their cellular phones, the Company, through participation in an industry clearinghouse, establishes the identity and validity of the roamer and provides cellular service. The Company then bills the roamer's home cellular carrier for the service. Likewise, subscribers of the Company use their cellular phones in areas outside the Company's service areas. Roaming Revenue. The charges applicable to roamers are determined by agreements between the Company and other carriers in the industry and vary among markets and carriers. Roaming revenue has increased over the last several years and for the year ending December 31, 1994 represented approximately 18.6% of the Company's total service revenues. This increase is a result of the higher number of cellular subscribers nationwide and the Company's larger service areas due to an increasing number of cell sites. The Company believes that roaming will become more frequent in future years due to advances in intelligent networking which will simplify roaming procedures and make roaming transparent to the roamer. Roamer Fraud. Roamer fraud remains a cellular industry problem. Roamer fraud occurs when cellular telephone equipment is programmed to conceal the true identity and location of the user. While the Company and the industry have implemented an extensive fraud control process, they have not been able to eliminate fraud altogether. Employees At December 31, 1994, the Company had 2,387 employees. Of these, 230 were employed in the Company's headquarters offices in Atlanta and the remaining 2,157 were employed throughout the Company's Controlled Markets. NON-CONTROLLED SYSTEMS The Company participates as a non-controlling general or limited partner in 27 MSAs and 18 RSAs. These interests represent approximately 28% of the Company's total POPs and are typically limited partnership interests in partnerships providing cellular service to the larger MSAs, such as Los Angeles, San Francisco, Washington D.C., Minneapolis and Houston. The partnership agreements which govern these partnerships are similar to those described under the heading "-- Operations -- Partnerships". Since these partnership agreements vest the power to manage, supervise and conduct the affairs of the partnership with someone other than the Company, there can be no assurance that decisions made by these partnerships would be the same as those made by the Company under similar circumstances. 49 51 INTERNATIONAL INTERESTS The Company owns a 10% interest in a corporation which provides cellular service in the Sonora and Sinaloa regions of Mexico. The Company currently receives services related to international ventures from GTE PCS. COMPETITION The cellular telephone industry is part of the much broader telecommunications industry. Direct competition is in the form of the other cellular licensee in any given market. Competition between the two cellular licensees is principally on the basis of service quality, price and coverage area. In addition to the direct cellular competitor in each market, there will also be competition from newly emerging Enhanced Specialized Mobile Radio ("ESMR") operators who generally provide dispatch and other private radio systems. With new digital technology it may be possible for ESMR operators to provide services in the future that may be difficult to distinguish from traditional cellular service. In 1993 the FCC announced that it would license additional frequencies in the 1.8 GHz to 1.99 GHz frequency band to enable up to six additional wireless competitors to enter each market. These new licenses consist of two licenses in each of 51 large, often multi-state, geographical areas known as Major Trading Areas ("MTAs") and four licenses in each of 492 smaller geographical areas known as Basic Trading Areas ("BTAs"). Auctions for such licenses began in 1994 and will continue in 1995. The first part of the auction was completed on March 13 and resulted in the purchase of 99 licenses by 18 entities. A GTE subsidiary, GTE Macro Communications Corporation, purchased four licenses (Atlanta, Seattle, Cincinnati and Denver). REGULATION General. The FCC regulates the licensing, construction, operation, sale and acquisition of cellular carriers as well as interconnection arrangements between cellular carriers. In addition, certain aspects of cellular system operation, also may be subject to public utility regulation in the state in which service is provided. Changes in federal or state regulation of the Company's and its competitors' activities, such as increased rate regulation or deregulation of interconnection arrangements, could adversely affect the Company's results. A brief summary of federal and applicable state regulation of cellular service is set forth below. Federal Regulation. The FCC initially authorized cellular telephone service in 1981 by allocating 40 MHz of spectrum for two competing cellular systems in each market. A 20 MHz block of spectrum was given to each carrier. Due to cellular's rapid growth, the FCC allocated to each carrier an additional 5 MHz of spectrum in 1986. The initial cellular licenses granted by the FCC expire ten years from their date of issuance and are renewable upon application to, and approval by, the FCC. The FCC has established the criteria under which existing licensees may have their cellular licenses renewed. Basically, a comparative preference will be given to any current cellular licensee who can prove that it substantially used its spectrum for its intended purpose, complied with applicable FCC rules, and did not engage in substantial relevant misconduct. This preference will be the most important factor to be considered by the FCC during its hearing on each license renewal request in comparing the current licensee's application with any competing applications. Failure to comply with FCC rules can be raised as an issue during the license renewal proceedings and could result in termination of the license. The first of the Company's cellular licenses came up for renewal in October 1994. The Company filed renewal applications for its licenses in Mobile, Alabama, El Paso, Texas and Richmond and Norfork, Virginia in August 1994. No entity filed competing applications or oppositions to any of those renewal applications. The remainder of the Company's licenses will expire over the next several years, including two which expire in 1995, seven which expire in 1996 and eleven which expire in 1997. All of the licenses expiring between 1995 50 52 and 1997 are MSA licenses. The Company expects to file renewal applications for such licenses upon their expiration. The FCC is currently in the process of auctioning additional licenses in the 1.8 GHz to 1.99 GHz range for the provision of personal communications services. Existing cellular companies are eligible to bid at auction for new licenses. Existing cellular companies may bid for an MTA license where they have no current substantial cellular holdings and one BTA license in all BTA's, including areas where they are currently the cellular provider. The first part of the auction was completed on March 13 and resulted in the purchase of 99 licenses by 18 entities. A GTE subsidiary, GTE Macro Communications Corporation, purchased four licenses (Atlanta, Seattle, Cincinnati and Denver). In addition to regulating cellular service, the FCC also regulates point-to-point microwave facilities which are often utilized by cellular providers to link base stations to each other and to the MTSO. The Company holds certain microwave licenses for these purposes. Such licenses, which are issued for a ten year period, were all renewed by the Company in 1991 for an additional ten year period. The FCC has issued regulations pursuant to which a significant portion of the Company's microwave licenses may have to be relocated to a higher spectrum at the request of a party receiving a license to use such spectrum for a new technology. The regulations currently provide that incumbent microwave licensees will be reimbursed for expenses associated with this relocation by the new licensee. State Regulation. In 1981, the FCC preempted the states from exercising jurisdiction in the areas of cellular technical standards and market structure. Under the Communications Act of 1934, as amended, however, certain aspects of the economic regulation of common carriers were reserved to the states. The states had exclusive jurisdiction with respect to charges, classifications, practices and service or facilities for or in connection with intrastate communications. Although many states have deregulated cellular service, some still require the filing of tariffs and operational reports pursuant to statutes governing public utilities. In August 1994, certain provisions of the Omnibus Budget Reconciliation Act of 1993 (the "Omnibus Act") became effective. These provisions prohibited the states from continuing to exercise jurisdiction over rates and entry into the wireless telecommunications business. The Omnibus Act did, however, provide that states could file a petition with the FCC to continue rate jurisdiction. Only two states in which the Company provides service, California and New York, filed to continue such regulation. All states may continue to regulate other aspects of cellular service not preempted by federal law, although it is unclear at this time the extent to which the other states will continue to do so. RELATED PARTY TRANSACTIONS ARRANGEMENTS AND TRANSACTIONS WITH CONTEL AND GTE The Company, Contel and GTE have a number of financial, operating and other arrangements and have engaged in certain transactions believed to be of mutual benefit. The terms of these arrangements have been established by Contel and GTE in consultation with the Company but are not the result of arms-length negotiations. The following is a summary of the principal arrangements and transactions among the Company, Contel and GTE. Taxes. The Company and GTE have a tax sharing arrangement under which the Company and its subsidiaries are included in the consolidated federal income tax returns and in certain state income and franchise tax returns of GTE. Tax payments, if applicable, are made by the Company to GTE on a quarterly basis using methods prescribed by GTE. When the Company and its subsidiaries generate a federal tax loss or excess credits (credits exceeding tax liability), the Company is reimbursed by GTE on a quarterly basis based on the actual loss or credit which may be utilized in the consolidated GTE federal tax returns. With respect to states permitting unitary or combined tax filings, GTE includes the Company and its subsidiaries in its unitary or combined tax filing. The Company pays to GTE an amount equal to the state income or franchise tax that would have been payable by the Company or its subsidiaries if a separate tax return had been filed. 51 53 Financing and Cash Management. During 1994, the Company relied on GTE for its short term and long term cash needs. The Company's long term cash needs are mainly the result of its acquisition in February 1990 of the cellular telephone properties previously owned by McCaw Cellular Communications, Inc. in Kentucky, Alabama and Tennessee (the "Southeast Properties") for approximately $1.3 billion and subsequent borrowings to pay interest on such amount. The $1.3 billion was originally funded by a loan from Contel Capital Corporation, which at that time was a wholly owned subsidiary of Contel, which became due in July 1991. This original loan was replaced in 1991 with (i) a $700 million loan from GTE to the Company bearing interest at 10.47% and maturing on March 1, 1998, (ii) a $150 million loan from GTE Finance Corporation ("GTE Finance"), a wholly owned subsidiary of GTE, bearing interest at 9.22% and maturing on February 15, 1993 (subsequently refinanced as set forth below), and (iii) a variable rate note from GTE bearing interest at one and one-half percentage points above GTE's external cost of borrowing these funds. The interest rate on the notes described in (i) and (ii) above include an additional one and one-half percentage point of interest in excess of the interest paid by GTE for these funds. During 1992, the Company began a program of converting a portion of its variable rate debt, including a portion of the debt incurred in connection with the acquisition of the Southeast Properties, to fixed rate debt. As a result of this program, the Company entered into the following loans in 1992, 1993 and 1994: (i) a $150 million loan from GTE Finance to the Company bearing interest at 8.38% and maturing on September 25, 1997, (ii) a $150 million loan from GTE Finance to the Company bearing interest at 8.97% and maturing on September 27, 1999, (iii) a $200 million loan from GTE to the Company bearing interest at 8.56% and maturing on December 31, 1996, (iv) a $200 million loan from GTE to the Company bearing interest at 8.08% and maturing on December 31, 1995, (v) a $150 million loan from GTE Finance to the Company bearing interest at 7.71% and maturing on February 25, 1997 and (vi) a $75 million loan from GTE Finance to the Company bearing interest at 9.90% and maturing on August 17, 2000. The interest rates on these loans were comparable to rates for United States Treasury securities of similar maturity plus 3% per annum at the time such loans were entered into and are the rates which GTE believes approximate the interest rates the Company could have obtained in the marketplace from nonaffiliated lenders. These rates exceed the interest paid by GTE for these funds. As of December 31, 1994, the Company has borrowed approximately $1.63 billion from GTE and GTE Finance in fixed rate debt. The Company fulfills its immediate cash needs with an intercompany note from GTE (the "ICN"). The amount borrowed and the rate of interest on the ICN fluctuate daily. As of December 31, 1994 the amount of the ICN was approximately $495 million. During 1994, the interest rate on the ICN was the daily Prime Rate quoted in The Wall Street Journal plus .75%, which is the interest rate which GTE believes approximates the interest rate the Company could have obtained in the marketplace from nonaffiliated lenders and exceeds the interest paid by GTE for these funds. During 1994, the Company also received cash management services from GTE. Trademark License Agreement. The Company and Contel have entered into an agreement under which the Company has been granted a non-exclusive, non-transferrable license and right to use the trademark, service mark and design "CONTEL CELLULAR". This grant may be terminated at the sole discretion of Contel and will automatically terminate if Contel no longer owns a majority of the outstanding common stock of the Company. General Services. During 1994, the Company received numerous services, both primary and supplemental, from GTE PCS pursuant to the Services Agreement between the Company and GTE Mobile. These services were also provided to GTE's wholly owned cellular subsidiary, GTE Mobilnet, and included accounting, finance, marketing, human resources, legal, regulatory, governmental relations, international, engineering, network design and maintenance services. In exchange for these services, the Company reimbursed GTE PCS for its expenses in accordance with a cost causative allocation formula which allocated pools of costs to operating units based on one of several factors. These factors were developed and applied to cost categories in an effort to allocate expenses to operating units in proportion to the use and benefit of the underlying cost. Under this Services Agreement, the Company paid GTE PCS approximately $49.8 million in 1994, which was approximately 34% of all of the expenses of GTE PCS. 52 54 Insurance. The Company and its officers, directors and employees are insured under a master contract negotiated by GTE with a private insurance carrier. The premium due the insurance carrier under this master policy is allocated among all GTE subsidiaries based on the loss history, total payroll and total number of vehicles owned by each subsidiary. The premium is paid directly to the private insurance carrier by each subsidiary. Competition. The Company, Contel and GTE have entered into the Competition Agreement pursuant to which Contel and GTE have agreed that they will not engage in the cellular business except in accordance with the terms of the Competition Agreement. Under the Competition Agreement, GTE Mobilnet may continue to engage in the cellular business. However, the Company has a right of first refusal with respect to future acquisitions by GTE of cellular businesses except for (i) acquisitions of minority interests in cellular properties held by GTE Mobilnet and (ii) acquisitions contemplated at the time of the Contel Merger which were specifically listed in the Competition Agreement. After the Merger is effective, the Competition Agreement will be terminated. Equity Ownership in B-Side Carriers L.P. GTE Mobile, an affiliate of GTE, is an equity owner in B-Side Carriers L.P., a consortium of cellular providers who market under the brand name MobiLink(R). The Company has an agreement with B-Side Carriers L.P. to market its wireline properties as MobiLink providers. See "BUSINESS OF THE COMPANY -- The Company's Cellular Operations -- Marketing". Government Systems Contract. In 1994 the Company entered into an agreement with GTE Government Systems Corporation ("GTE Systems") pursuant to which GTE Systems will construct not less than 40 cell sites for the Company in 1994 and 50 cell sites in 1995. The cost to be charged the Company in 1994 will consist of (i) an administrative fixed fee of $3.1 million, (ii) reimbursement of materials and equipment estimated to be $7.8 million and (iii) reimbursement of external labor costs estimated to be $3.0 million. Contract pricing in 1995 will be agreed upon by the parties. Cellular Exchange Transaction. The Company and the GTE Parties entered into an Asset Exchange Agreement dated February 3, 1995. Under the terms of the Asset Exchange Agreement the Company will receive a 28% interest in the San Diego MSA in exchange for certain cellular assets in Albuquerque, New Mexico and Minneapolis, Minnesota. The Company will operate the San Diego system pursuant to a management agreement with the other GTE Parties. See "BUSINESS OF THE COMPANY -- The Company's Cellular Operations". PAYMENTS TO OPTIONHOLDERS Certain officers and employees of the Company are participants under the 1987 Key Employee Stock Plan of the Company (the "Option Plan"). Options were granted under the Option Plan at prices ranging from $15.00 to $22.81. In connection with the Merger, the Company has offered to make cash payments to those holders of options to purchase Class A Shares issued pursuant to the Option Plan who agree to surrender all of their options. Each optionholder who agrees to surrender all of his or her options will receive a cash payment for each option cancelled, whether or not currently vested (so long as the exercise period has not lapsed), equal to $25.50 multiplied by the number of Class A Shares subject to such options, less the exercise price for such option. If the vesting of the options is accelerated and if all of the options are surrendered as described above, the largest payment any single optionholder will receive is $168,388. See footnote 8 to the table in "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Directors and Executive Officers of the Company". RELATIONSHIP BETWEEN GTE DIRECTOR AND PAINEWEBBER Pursuant to a long standing agreement, Mr. Richard W. Jones, a director of GTE, has been engaged as a consultant to PaineWebber, one of the GTE Financial Advisors in connection with the Merger. Mr. Jones is entitled to receive from PaineWebber an annual retainer of $480,000 for the fiscal year ended July 1, 1995 and an annual retainer of $300,000 for each of the following two fiscal years. 53 55 TRANSITION ARRANGEMENTS In order to provide a degree of continuity during the merger transition process GTE has entered into a Transition Bonus Agreement with two executives, Dennis L. Whipple, President and Chief Executive Officer of the Company, and Theodore J. Carrier, Treasurer and Chief Financial Officer of the Company. If Mr. Whipple agrees to remain with GTE from the date of the Merger until December 31, 1995 or such earlier date as the parties may determine, he will be eligible for a transition bonus equal to 100% of the sum of his final GTE annual base rate of pay and the average of his GTE Executive Incentive Plan ("EIP") awards for the 1993 and 1994 plan years. If Mr. Carrier agrees to remain with GTE through December 31, 1995, he will be eligible for a transition bonus equal to 100% of the sum of his final GTE annual base rate of pay and the average of his EIP awards for the 1992, 1993, and 1994 plan years. In addition, Mr. Whipple will receive an initial bonus of $20,000. In 1995, Mr. Whipple will participate in the 1994-1995 and 1994-1996 GTE Long-Term Incentive Plan performance bonus award cycles and the 1995-1997 cycle. If Mr. Whipple remains on the payroll to the end of the agreed upon period then, in lieu of an award for the 1995-1997 bonus award cycle, he will receive an equivalent bonus award prorated to December 31, 1995. Any executive officer whose employment is involuntarily terminated will receive an enhanced retirement benefit paid out of GTE's qualified pension assets pursuant to the terms of the GTE's Involuntary Separation Plan ("ISEP"). ISEP provides for a benefit based on length of service and/or grade level and the benefit will not exceed 120% of one year's salary. Mr. Whipple's and Mr. Carrier's ISEP benefits also include a non-qualified benefit attributable to their EIP award for the three previous years. 54 56 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT CERTAIN BENEFICIAL OWNERS The following table contains certain information regarding the only persons known to the Company as of the date of this Information Statement to be beneficial owners of more than 5% of any class of the Company's voting securities:
AMOUNT OF NAME AND ADDRESS OF BENEFICIAL PERCENTAGE TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS ----------------------------- ----------------------------- ---------- ---------- Class A Common Stock......... CS First Boston, Inc. 551,480(2) 5.54% Park Avenue Plaza 55 East 52nd Street New York, NY 10055(1) Class B Common Stock......... GTE Corporation 90,000,000(4) 100% One Stamford Forum Stamford, CT 06904(3)
- --------------- (1) This information was obtained from a Schedule 13G filed with the SEC on February 13, 1995 by CS First Boston, Inc. (2) The Schedule 13G filed by CS First Boston, Inc. discloses that CS First Boston, Inc. exercises sole voting power and sole dispositive power over these shares. (3) GTE acquired beneficial ownership of these shares as a result of the merger of a subsidiary of GTE into Contel. Contel remains the holder of record of these shares. The address of Contel is One Stamford Forum, Stamford, Connecticut 06904. (4) GTE, through Contel, exercises sole voting power and sole dispositive power over these shares. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The number of Class A Shares and shares of GTE Common Stock owned by each director and executive officer of the Company as of February 13, 1995 is set forth in the table below. Unless otherwise indicated, all persons shown in the table have sole voting and investment power with respect to the shares shown.
NUMBER OF SHARES OF CLASS A COMMON STOCK NUMBER OF SHARES OF BENEFICIALLY GTE COMMON STOCK NAME OF DIRECTOR OWNED(1) BENEFICIALLY OWNED(2) ------------------------------------------------ ----------------- --------------------- Leo Jaffe....................................... 2,000 0 James L. Johnson................................ 0 722,085(3)(4) Robert E. LaBlanc............................... 4,000 0 Charles R. Lee.................................. 0 634,148(3)(4) Michael T. Masin................................ 0 75,291(3)(5) Russell E. Palmer............................... 0 2,000(6) Irwin Schneiderman.............................. 0 0 Nicholas L. Trivisonno.......................... 0 181,956(3)(4) James W. Walter................................. 0 12,000(7) Dennis L. Whipple............................... 18,650(8) 9,724(3)(4) Charles Wohlstetter............................. 0 232,655
55 57
NUMBER OF SHARES OF CLASS A COMMON STOCK NUMBER OF SHARES OF BENEFICIALLY GTE COMMON STOCK NAME OF EXECUTIVE OFFICER OWNED(1) BENEFICIALLY OWNED(2) ---------------------------------------------- -------------------- --------------------- Dennis L. Whipple............................. 18,650(8) 9,724(3)(4) Randall L. Crouse............................. 3,100(8) 5,505(4) Pamela F. Lopez............................... 1,700(8) 2,585(4) Laura E. Binion............................... 1,700(8) 1,905(3)(4) Theodore J. Carrier........................... 15,000(8) 216(4) Jay M. Rosen.................................. 0 47,995(3) All directors and officers as a group (the "Executive Group").......................... 46,150 1,928,065(3)(4)
- --------------- (1) Each of these amounts, and all of them in the aggregate, represented less than 1% of the outstanding Class A Shares as of January 31, 1995. Each director and executive officer is expected to accept the Merger Consideration and not exercise appraisal rights. (2) Each of these amounts, and all of them in the aggregate, represented less than 1% of the outstanding shares of GTE Common Stock as of January 31, 1995. (3) Included in the number of shares beneficially owned by Messrs. Johnson, Lee, Masin, Trivisonno, Whipple, and Rosen and Ms. Binion and the Executive Group are: 633,300; 553,399; 72,599; 170,233; 5,300; 25,632; 816; and 1,461,279 shares, respectively, which such persons have the right to acquire within 60 days pursuant to stock options. (4) This amount includes shares acquired through participation in GTE's Consolidated Employee Stock Ownership Plan and/or Savings Plan. (5) In addition to the shares of GTE Common Stock shown above, Mr. Masin owns 10,088 GTE Common Stock Units, which are payable in cash under the Deferred Compensation Plan and Phantom Stock Plan for Non-employee Members of the Board of Directors of GTE Corporation (the "Deferred Compensation Plan"). Mr. Masin was a non-employee director of GTE prior to joining GTE as Vice Chairman in 1993. (6) In addition to the shares of GTE Common Stock shown above, Mr. Palmer owns 1,294 GTE Common Stock Units, which are payable in cash under the Deferred Compensation Plan. (7) In addition to the shares of GTE Common Stock shown above, Mr. Walter owns 121,116 GTE Common Stock Units, which are payable in cash under the Deferred Compensation Plan. (8) Included in the number of shares beneficially owned by Messrs. Whipple, Crouse and Carrier and Ms. Lopez and Ms. Binion and the Executive Group are 18,650, 3,100, 15,000, 1,700, 1,700 and 40,150 shares, respectively, which such persons have the right to acquire upon the exercise of certain stock options. Pursuant to an offer made by the Company in connection with the Merger, such options, whether or not currently vested, may be surrendered for a cash payment equal to $25.50 times the number of shares issuable upon exercise thereof, less the exercise price applicable thereto. See "RELATED PARTY TRANSACTIONS -- Payments to Optionholders". If Messrs. Whipple, Crouse and Carrier and Ms. Lopez and Ms. Binion and the Executive Group agree to surrender the options they hold, the maximum amount payable to those individuals and the Executive Group is $168,388, $30,425, $59,760, $15,725, $16,600 and $290,898, respectively. DIRECTORS AND EXECUTIVE OFFICERS OF GTE, CONTEL AND CCI ACQUISITION As set forth in Exhibit E, certain directors and executive officers of the Company are also directors or executive officers of GTE, Contel or CCI Acquisition. With the exception of the ownership of Class A Shares by certain of such persons set forth in "-- Directors and Executive Officers of the Company", no director or executive officer of GTE, Contel or CCI Acquisition owns any Class A Shares. 56 58 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following document which has been filed by the Company with the Securities and Exchange Commission is incorporated by reference into this Information Statement: Annual Report on Form 10-K for the fiscal year ended December 31, 1994. The File Number for the above referenced document is Commission File No. 0-16714. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, and prior to the date the written consent is used to effect the Merger, shall be deemed to be incorporated by reference into this Information Statement. Any statement contained herein or in any document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this Information Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed to constitute a part of this Information Statement, except as so modified or superseded. The Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Information Statement is delivered, upon written or oral request of such person and by first class mail or other equally prompt means within one business day of receipt of such request, a copy of any and all of the information that has been incorporated by reference in this Information Statement (not including exhibits to such information unless such exhibits are specifically incorporated by reference into such information), including information contained in documents filed subsequent to April 21, 1995. Such requests for information should be directed to Contel Cellular Inc., 245 Perimeter Parkway, Atlanta, Georgia 30346, Attention: General Counsel. The telephone number of the General Counsel is (404) 804-3400. By Order of the Board of Directors /s/ JAY M. ROSEN ---------------------------------- Secretary Atlanta, Georgia April 21, 1995 57 59 GLOSSARY "Asset Exchange Agreement" means the agreement between the GTE Parties and NewVector pursuant to which the GTE Parties will exchange certain cellular assets currently owned by them for 100% of the assets, including the non-wireline cellular license, currently owned by NewVector in San Diego, California. "Board" means the board of directors of the Company. "BTAs" means Basic Trading Areas. "Cahill" means Cahill Gordon & Reindel. "California Proceeding" means the proceeding pursuant to which the CPUC is considering the approval of the merger of the California telephone operations of GTE and Contel in connection with the GTE/Contel Merger. "CCI Acquisition" means Contel Cellular Acquisition Corporation, a Delaware corporation. "CDMA" means Code Division Multiple Access. "cellular asset value" means market capitalization less the value of the Company's non-cellular assets. "Cellular Exchange" means the exchange contemplated by the Asset Exchange Agreement. "cellular license value" means cellular asset value less the value of the Company's net cellular property, plant and equipment and working capital. "Certification" means the Certification and Notice of Termination of Registration of the Class A Shares under the Exchange Act. "Class A Share" means a share of the Class A Common Stock of the Company, par value $1.00 per share. "Class A Stockholders" means the holders of outstanding Class A Shares. "Class B Share" means a share of the Class B Common Stock of the Company, par value $1.00 per share. "clustered RSA net POPs" means POPs serviced by the Company in RSAs that are contiguous to other MSAs or RSAs serviced by the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission. "Company" means Contel Cellular Inc., a Delaware corporation. "Company Controlled Markets" means the 32 MSAs and 34 RSAs in which the Company, or partnerships which the Company controls or manages, provides cellular service. "Company Controlled Systems" has the same meaning as Company Controlled Markets. "Comparable Companies" means selected publicly traded companies in the cellular communications business which Lazard Freres analyzed in connection with the opinion rendered by Lazard Freres to the Special Committee. "Comparable Group" means the set of companies which PaineWebber and Merrill Lynch deemed comparable to the Company for the purpose of comparing selected historical stock and earnings data and financial ratios for the Company to the corresponding data and ratios of such companies in connection with the opinions rendered by PaineWebber and Merrill Lynch to the board of directors of GTE. "Comparable Transactions" means the twenty-six private market sale transactions about which Lazard Freres reviewed publicly available information in connection with the opinion rendered by Lazard Freres to the Special Committee. 58 60 "Competition Agreement" means the Third Restated Competition Agreement dated March 14, 1991 among Contel, GTE and the Company which, among other things, allocates cellular business opportunities among GTE's cellular businesses. "Court" means the Court of Chancery of the State of Delaware in and for New Castle County. "Contel" means Contel Corporation, a Delaware corporation. "CPUC" means the California Public Utilities Commission. "December 22 Special Committee Meeting" means the meeting of the Special Committee on December 22, 1994. "Deferred Compensation Plan" means the Deferred Compensation Plan and Phantom Stock Plan for Nonemployee Members of the Board of Directors of GTE. "DGCL" means the General Corporation Law of the State of Delaware. "Disbursing Agent" means Chemical Bank, as disbursing agent in connection with the Merger. "Draft Merger Agreement" means the December 29, 1994 draft of the Merger Agreement. "EBITDA" means earnings before interest, taxes, depreciation and amortization. "Effective Time" means May 12, 1995. "EIP" means the GTE Executive Incentive Plan. "ESMR" means Enhanced Specialized Mobile Radio. "Exchange Act" means the Securities Exchange Act of 1934. "FCC" means the Federal Communications Commission. "GTE" means GTE Corporation, a New York corporation. "GTE/Contel Merger" means the March 1991 merger of a wholly owned subsidiary of GTE into Contel, pursuant to which Contel became a wholly owned subsidiary of GTE. "GTE Finance" means GTE Finance Corporation, a Delaware corporation. "GTE Financial Advisors" means Merrill Lynch and PaineWebber. "GTE Initial Offer" means GTE's initial offer to acquire the Class A Shares at $22.50 per share. "GTE Mobile" means GTE Mobile Communications Service Corporation, a Delaware corporation. "GTE Mobilnet" means GTE Mobilnet Incorporated, a Delaware corporation. "GTE Parties" means, in connection with the Asset Exchange Agreement, the Company, GTE Mobilnet, GTE Mobilnet of Oregon Limited Partnership, GTE Mobilnet of Northwest Oregon Limited Partnership and GTE Mobile. "GTE PCS" means GTE Personal Communications Services, a division of GTE. "GTE Revised Offer" means GTE's revised offer to acquire the Class A Shares at $25.50 per share. "GTE Systems" means GTE Government Systems Corporation. "ICN" means the intercompany note from GTE with which the Company fulfills its immediate cash needs. "Indemnified Party" means, in connection with the Merger Agreement, each present and former director and officer of the Company. "ISEP" means GTE's Involuntary Separation Plan. "Lazard Freres" means Lazard Freres & Co. "Lazard Freres Report" means the report of Lazard Freres presented by Lazard Freres to the Special Committee at the December 22 Special Committee Meeting summarizing the analyses performed by Lazard Freres in rendering its opinion to the Special Committee. 59 61 "LTM" means the latest twelve months. "market capitalization" means the total market value of the Company's equity plus its net debt. "market capitalization of cellular assets" means total market capitalization, less minority interests, less estimated public market value of non-cellular assets. "market capitalization of MSA cellular assets" means market capitalization of cellular assets less the value of RSA assets at $90 per POP. "market values" means the total market value of a company's equity. "Merger" means the merger of CCI Acquisition with and into the Company. "Merger Agreement" means the Agreement and Plan of Merger dated as of December 27, 1994, as amended, among the Company, GTE, Contel, and CCI Acquisition. "Merger Consideration" means $25.50 per Class A Share in cash, without interest, subject to backup withholding taxes. "Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith Incorporated. "Merrill Opinion Letter" means the opinion letter of Merrill Lynch presented to the board of directors of GTE on December 27, 1994. "mobiles" means vehicle-mounted telephones. "MSAs" means metropolitan statistical areas. "MSA Partnerships" means limited partnerships of which the Company is a general partner, which limited partnerships own cellular systems. "MTAs" means Major Trading Areas. "MTSO" means a mobile telephone switching office. "NewVector" means US WEST NewVector Group, Inc. "New Subsidiary" means, in connection with alternatives considered by GTE to effectuate a merger of the Company and a subsidiary of Contel, a subsidiary of Contel into which the Company would merge. "non-clustered RSA net POPs" means POPs that are not clustered RSA net POPs. "NYNEX" means NYNEX Mobile Communications Company. "Omnibus Act" means the Omnibus Budget Reconciliation Act of 1993. "Option Plan" means the 1987 Key Employee Stock Plan of the Company. "PaineWebber" means PaineWebber Incorporated. "PaineWebber Opinion Letter" means the opinion letter of PaineWebber presented to the board of directors of GTE on December 27, 1994. "P/E multiple" means a price/earnings multiple. "POPs" means the population of a market area multiplied by the Company's percentage ownership in the cellular system serving that market. "portables" means hand-held radio telephones. "Record Date" means March 16, 1995. "RF" means analog radio frequency. "roamers" means cellular users who are customers of other carriers but who are visiting and wish to use their cellular phone in the Company's service area. 60 62 "RSAs" means rural service areas. "RSA Partnerships" means limited or general partnerships of which the Company is either the general or managing partner, which partnerships own cellular systems in RSAs. "SEC" means the Securities and Exchange Commission. "Section 262" means Section 262 of the DGCL. "Services Agreement" means the agreement dated May 1, 1991, as amended, between GTE Mobile and the Company. "Southeast Properties" means the cellular telephone properties previously owned by McCaw Cellular Communications, Inc. in Kentucky, Alabama and Tennessee. "Special Committee" means a special committee of three independent directors of the Company appointed by the Board to negotiate the Merger on behalf of Class A Stockholders and make a recommendation to the Board in connection with the transaction. "Stipulation" means the stipulation entered into by GTE and Contel and approved by the CPUC which resulted in the approval of the GTE/Contel Merger on an interim basis. "Surviving Corporation" means the Company, the corporation that will survive the Merger. "TDMA" means Time Division Multiple Access. "Terminal Value" means the estimated value of a business beyond the final year of a projected period. 61 63 INDEX TO EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE - ---------------- ------------------------------------------------------------------ ------------ EXHIBIT A -- AGREEMENT AND PLAN OF MERGER, AS AMENDED.......................... A-1 EXHIBIT B -- OPINION OF LAZARD FRERES & CO..................................... B-1 EXHIBIT C-1 -- OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED..... C-1-1 EXHIBIT C-2 -- OPINION OF PAINEWEBBER INCORPORATED............................... C-2-1 EXHIBIT D -- DELAWARE GENERAL CORPORATION LAW SECTION 262...................... D-1 EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL CELLULAR INC...................................................... E-1
64 EXHIBIT A AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER dated as of December 27, 1994 (the "Agreement") among GTE Corporation, a New York corporation ("GTE"), Contel Corporation, a Delaware corporation and a wholly-owned subsidiary of GTE ("Contel"), Contel Cellular Acquisition Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Contel, and Contel Cellular Inc., a Delaware corporation (the "Company"). R E C I T A L S WHEREAS, Contel has adopted a plan of liquidation; WHEREAS, GTE, through its wholly-owned subsidiary, Contel, is presently the beneficial owner of all of the outstanding shares of Class B Common Stock of the Company (as defined below); WHEREAS, Contel desires to acquire beneficial ownership of the remaining equity interest in the Company (the "Acquisition"), and has caused Purchaser to be formed to accomplish such purpose; WHEREAS, Contel and Purchaser intend to accomplish the Acquisition through a merger of Purchaser with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth herein; and WHEREAS, the respective Boards of Directors of Purchaser and the Company and the Special Committee appointed by the Board of Directors of the Company to consider the Acquisition have approved the Merger upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINED TERMS The following terms used in this Agreement shall have the following meanings: "Acquisition" has the meaning set forth in the recitals hereto. "Actions" has the meaning set forth in Section 6.2 hereof. "Certificates" has the meaning set forth in Section 3.2(b) hereof. "Class A Common Stock" means the Class A Common Stock of the Company, par value $1.00 per share. "Class B Common Stock" means the Class B Common Stock of the Company, par value $1.00 per share. "Commission" means the Securities and Exchange Commission and/or any other governmental entity which administers either the Securities Act or the Exchange Act. "Common Stock" means the Class A Common Stock and Class B Common Stock. "Company" has the meaning set forth in the preamble hereto. "Constituent Corporations" has the meaning set forth in Section 2.1 hereof. "Contel" has the meaning set forth in the preamble hereto. "Depositary" has the meaning set forth in Section 3.2 hereof. "DGCL" means the Delaware General Corporation Law. "Dissenting Shares" has the meaning set forth in Section 3.1 hereof. "Effective Time" has the meaning set forth in Section 2.2 hereof. A-1 65 "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "GTE" has the meaning set forth in the preamble hereto. "Indemnified Parties" has the meaning set forth in Section 6.2 hereof. "Indemnitor" has the meaning set forth in Section 6.2 hereof. "Information Statement" means the information statement on Form 14C relating to the Merger, as amended or supplemented, to be prepared and circulated as contemplated by Section 6.3 hereof. "Merger" has the meaning set forth in the recitals hereto. "Merger Consideration" has the meaning set forth in Section 2.4 hereof. "Permitted Investments" has the meaning set forth in Section 3.2 hereof. "Purchaser" has the meaning set forth in the preamble hereto. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Stockholder Materials" has the meaning set forth in Section 6.3 hereof. "Surviving Corporation" has the meaning set forth in Section 2.1 hereof. "Transaction Statement" means the transaction statement on Form 13e-3 relating to the Merger, as amended or supplemented, to be prepared and circulated as provided in Section 6.3 hereof. ARTICLE II THE MERGER SECTION 2.1 The Merger. Upon the terms and subject to the conditions hereof, and in accordance with the applicable provisions of the DGCL, Purchaser shall be merged with and into the Company. The Company shall continue as the surviving corporation (the "Surviving Corporation") in the Merger and the separate corporate existence of Purchaser shall cease (Purchaser and the Company are sometimes referred to herein as the "Constituent Corporations"). From and after the Effective Time, the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, and shall be responsible and liable for all of the liabilities and obligations, of each of the Constituent Corporations, all as set forth in Section 259 of the DGCL. SECTION 2.2 Effective Time. The Merger shall be consummated by filing with the Secretary of State of Delaware a Certificate of Merger executed in accordance with the relevant provisions of the DGCL. The Merger shall become effective at the time of filing with the Secretary of State of Delaware of a Certificate of Merger. The date and time when the Merger shall become effective is herein referred to as the "Effective Time." SECTION 2.3 Closing. Upon the terms and subject to the conditions hereof, as soon as practicable after the execution of the written consents of shareholders contemplated by Sections 6.3(b) and (c) hereof, the Company and Purchaser shall file the Certificate of Merger in accordance with Section 2.2 hereof, and the Company and Purchaser shall take all such other and further actions as may be required by law to make the Merger effective. SECTION 2.4 Conversion of Shares of Common Stock. (a) Each share of Class A Common Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares, if any, and shares of Class A Common Stock held by the Company, Purchaser, Contel or GTE) shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and shall cease to exist and shall be converted into the right to receive cash in the amount of $25.50 in accordance with Section 3.2 hereof. The A-2 66 consideration to be paid in respect of each share of Class A Common Stock in accordance with the foregoing is hereinafter referred to as the "Merger Consideration." (b) Each share of Class A Common Stock held by the Company, Purchaser, Contel or GTE immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and cease to exist, without any conversion thereof and without any Merger Consideration being paid with respect thereto. (c) Each share of Class B Common Stock issued and outstanding immediately prior to the Effective Time shall by virtue of the Merger, and without any action on the part of the holder thereof, be converted into one newly issued share of the Class B Common Stock of the Surviving Corporation. SECTION 2.5 Cancellation of Purchaser Capital Stock. Each share of common stock of Purchaser issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger, and without any action on the part of the holder thereof, be cancelled and cease to exist, without any conversion thereof and without any Merger Consideration being paid with respect thereto. SECTION 2.6 Certificate of Incorporation. The Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation, until thereafter amended. SECTION 2.7 By-Laws. The By-Laws of the Company, as in effect immediately prior to the Effective Time, shall be the By-Laws of the Surviving Corporation, until thereafter amended. SECTION 2.8 Directors. The directors of the Company at the Effective Time shall be the directors of the Surviving Corporation and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided by law. SECTION 2.9 Officers. The officers of the Company at the Effective Time shall be the initial officers of the Surviving Corporation, all such officers to hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided by law. SECTION 2.10 Further Assistance. If at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or thing are necessary, desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in, to or under any of the rights, properties or assets of the Constituent Corporations acquired or to be acquired as a result of the Merger, or (ii) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of the Constituent Corporations, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of the Constituent Corporations, all such other acts and things necessary, desirable or proper to vest, perfect or confirm its right, title or interest in, to or under any of the rights, properties or assets of the Constituent Corporations acquired or to be acquired as a result of the Merger and otherwise to carry out the purposes of this Agreement. ARTICLE III DISSENTING SHARES; EXCHANGE AND PAYMENT FOR SHARES SECTION 3.1 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of Class A Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by a stockholder who has the right (to the extent such right is available by law) to demand and receive payment of the fair value of such holder's stock pursuant to Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into the right to receive the Merger Consideration provided for in Section 2.4(a) of this Agreement (unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost such right under the DGCL, as the case may be), but the holder thereof shall A-3 67 only be entitled to such rights as are granted by Delaware law. If such holder shall have so failed to perfect or shall have effectively withdrawn or lost such right, such holder's shares of Class A Common Stock shall thereupon be deemed to have been converted at the Effective Time into the right to receive the Merger Consideration without any interest thereon. If the holder of any shares of Class A Common Stock shall become entitled to receive payment for such shares pursuant to Section 262 of the DGCL, such payment shall be made by the Surviving Corporation. SECTION 3.2 Payment for Shares. Prior to the Effective Time, Purchaser shall or, in the event Purchaser shall fail to do so, GTE shall: (a) designate a bank or trust company to act as Depositary in the Merger (the "Depositary") and Purchaser or GTE shall enter into a mutually acceptable agreement with the Depositary pursuant to which, after the Effective Time, the Depositary will distribute the Merger Consideration on a timely basis and (b) according to the terms of the agreement with Depositary, deposit or cause to be deposited with the Depositary cash in the aggregate amount required with respect to the conversion of shares of Class A Common Stock at the Effective Time pursuant to Section 2.4(a) hereof. Pending distribution of the cash deposited with the Depositary, Purchaser may from time to time direct the Depositary to invest such cash, provided that such investments (i) shall be (A) obligations of (or guaranteed by) the United States of America or its agencies or instrumentalities, (B) commercial paper obligations receiving the highest rating from either Moody's Investors Services, Inc. or Standard & Poor's Corporation, (C) certificates of deposit, bank repurchase agreements or bankers acceptances on interest bearing accounts of commercial banks with capital exceeding $250 million (collectively, "Permitted Investments") or (D) money market funds that are required by their most current prospectus to have at least 80% of their assets invested in Permitted Investments and (ii) shall have maturities that will not prevent or delay payments to be made pursuant to this section. (b) As soon as practicable after the Effective Time, the Depositary shall be instructed to mail to each record holder (other than any holder of Dissenting Shares, the Company, Purchaser, Contel and GTE) of a certificate or certificates that immediately prior to the Effective Time represented shares of Class A Common Stock (the "Certificates") a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss shall pass, only upon proper delivery of the Certificates to the Depositary) and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender to the Depositary of a Certificate, together with such letter of transmittal duly executed and completed in accordance with the instructions thereon, the holder of such Certificate shall be entitled to receive in exchange therefor consideration equal to the number of shares of Class A Common Stock represented by such Certificate multiplied by the Merger Consideration and such Certificate shall forthwith be cancelled. No interest will be paid or accrued on the Merger Consideration. All distributions to holders of Certificates shall be subject to any applicable income tax withholding. If the Merger Consideration is to be distributed to a person other than the person in whose name the Certificate surrendered is registered, it shall be a condition of such distribution that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer (including signature guarantees if required by Purchaser) and that the person requesting such distribution shall pay any transfer or other taxes required by reason of such distribution to a person other than the registered holder of the Certificate surrendered or, in the alternative, establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. After one hundred and eighty (180) days following the Effective Time, the Surviving Corporation shall be entitled to require the Depositary to deliver to it any cash (including any interest received with respect thereto) that it has made available to the Depositary and that has not been disbursed to holders of Certificates, and thereafter such holders shall be entitled to look to the Surviving Corporation only as general creditors thereof with respect to the cash payable upon due surrender of their Certificates. The Surviving Corporation shall pay all charges and expenses, including those of the Depositary, in connection with the distribution of the Merger Consideration for shares of Class A Common Stock. Until surrendered in accordance with the provisions of this Section 3.2, each Certificate (other than Certificates representing Dissenting Shares or shares of Class A Stock held by the Company, Purchaser, Contel or GTE) shall represent for all purposes the right to receive consideration equal to the Merger Consideration multiplied by the number of shares of Class A Common Stock evidenced by such A-4 68 Certificate. From and after the Effective Time, holders of Certificates immediately prior to the Merger shall have no right to vote or to receive any dividends or other distributions with respect to any shares of Class A Common Stock that were theretofore represented by such Certificates, other than any dividends or other distributions payable to holders of record as of a date prior to the Effective Time, and shall have no other rights in respect thereof other than as provided herein or by law. (c) From and after the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of the shares of Class A Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation, other than Certificates in respect of Dissenting Shares, the rights to which have been perfected or not withdrawn or lost under the DGCL, they shall be cancelled and exchanged for Merger Consideration as provided in this Article III. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Purchaser, Contel and GTE as follows: SECTION 4.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has the requisite corporate power to carry on its business as now conducted. SECTION 4.2 Authority Relative to this Agreement. The Company has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company, and no other corporate proceeding on the part of the Company is necessary to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby (other than the approval of stockholders of the Company required to consummate the Merger). This Agreement has been duly executed and delivered by the Company and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. ARTICLE V REPRESENTATIONS AND WARRANTIES OF CONTEL, GTE AND PURCHASER SECTION 5.1 Representations and Warranties of Purchaser Purchaser represents and warrants to the Company as follows: (a) Organization and Qualification. It is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite corporate power to carry on its business as now conducted. (b) Authority Relative to this Agreement. It has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by it and the consummation by it of the transactions contemplated hereby have been duly authorized by its Board of Directors, and no other corporate proceeding on its part is necessary to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby (other than the approval of its stockholders required to consummate the Merger). This Agreement has been duly executed and delivered by it and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. A-5 69 (c) No Prior Activities. It has not incurred, nor will it incur, directly or through any subsidiary, any liabilities or obligations, except those incurred in connection with its organization or with the negotiation of this Agreement and the consummation of the transactions contemplated hereby, including the Merger. Except as set forth in the previous sentence, it has not engaged, directly or through any subsidiary, in any business activities of any type or kind whatsoever, or entered into any agreements or arrangements with any person or entity. SECTION 5.2 Representations and Warranties of GTE and Contel. Contel and GTE each represents and warrants to the Company as follows: (a) Organization and Qualification. It is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite corporate power to carry on its business as now conducted. (b) Authority Relative to this Agreement. It has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by it and the consummation by it of the transactions contemplated hereby have been duly authorized by its Board of Directors, and no other corporate proceeding on its part is necessary to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by it and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. ARTICLE VI COVENANTS SECTION 6.1 Conduct of Business of the Company. Except as otherwise expressly provided in this Agreement, from the date of this Agreement to the Effective Time, the Company will conduct its business in the ordinary course. SECTION 6.2 Indemnification, Etc. The Company shall indemnify and hold harmless, and, after the Effective Time, the Surviving Corporation and GTE (the Company, the Surviving Corporation and GTE, for the purpose of this Section 6.2 being the "Indemnitor") will indemnify and hold harmless, each present and former director and officer of the Company (the "Indemnified Parties") against any losses, claims, damages, liabilities, costs, expenses, judgments and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation (collectively, "Actions") arising out of or pertaining to any action or omission occurring prior to the Effective Time (including without limitation, any Actions which arise out of or relate to the transactions contemplated by this Agreement) to the full extent permitted under the DGCL (and the Indemnitor will advance reasonable expenses to each such person to the full extent so permitted); provided, however, that any determination required to be made with respect to whether an Indemnified Party's conduct complied with the standards set forth in the DGCL shall be made in accordance with the DGCL, and the Indemnitor shall pay the reasonable fees and expenses incurred in connection with such determination. If any such Action is brought against any Indemnified Party (whether arising before or after the Effective Time), (a) the Indemnified Parties may retain counsel reasonably satisfactory to them and the Indemnitor, (b) the Indemnitor shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received, and (c) the Indemnitor and the Indemnified Parties will cooperate in the vigorous defense of any such matter, provided, that the Indemnitor shall not be liable for any such settlement effected without its written consent, which consent, however, shall not be unreasonably withheld. Any Indemnified Party wishing to claim indemnification under this Section 6.2, upon learning of any such Action shall notify the Indemnitor thereof and shall deliver to the Indemnitor an undertaking to repay any amounts advanced pursuant hereto when and if a court of competent jurisdiction shall ultimately determine, after exhaustion of all avenues of appeal, that such Indemnified Party was not entitled to indemnification under this Section. The Indemnified Parties as a group may retain only one law firm in each jurisdiction to represent A-6 70 them with respect to any such matter unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties. GTE and Purchaser agree to cause to be maintained in effect the present policy of directors' and officers' liability insurance (or an equivalent policy) covering those persons who are currently covered by such policy for three years from the Effective Time. This Section 6.2 shall survive consummation of the Merger. SECTION 6.3 Stockholders' Approval; SEC Filings. (a) Subject to the terms and conditions contained herein, this Agreement and the transactions contemplated hereby shall be submitted by the Company and Purchaser to their respective stockholders for approval. Promptly after the execution of this Agreement, the Company and Purchaser shall together, or pursuant to an allocation of responsibility to be agreed upon between them, (i) use their best efforts to obtain all information required to be included in the Information Statement, the Transaction Statement and related materials (the "Stockholder Materials"), (ii) prepare and file with the Commission the Stockholder Materials, (iii) use all reasonable efforts to have the Stockholder Materials cleared by the Commission as promptly as practicable, and (iv) promptly following clearance by the Commission, mail the Stockholders Materials to shareholders of the Company. Purchaser and the Company also shall take any action required to be taken under state blue sky or securities laws or the rules and regulations of any securities exchanges or markets on which their securities are listed for trading in connection with transactions contemplated hereby including the Merger. The Information Statement and the Transaction Statement shall, when first mailed to the stockholders of the Company and as amended or supplemented thereafter, comply as to form in all material respects with all applicable requirements of federal securities laws. Purchaser and the Company shall each furnish to the other and their counsel all such information as may be required to prepare the Stockholders Materials. All such information provided and to be provided by Purchaser and the Company respectively, for use in the Stockholder Materials shall, on the date the Information Statement or Transaction Statement is first mailed to the Company's stockholders and as amended or supplemented thereafter, be true and correct in all material respects and shall not omit to state any material fact necessary in order to make such information in light of the circumstances in which it was given not misleading, and the Company and the Purchaser each agree to correct any information provided by it for use in the Information Statement or Transaction Statement which shall have become false or misleading in any material respect. (b) Subject to the terms and conditions set forth in the next sentence, GTE, the Company and Contel agree that Contel shall execute a written consent as majority shareholder of the Company approving this Agreement and the Merger. Such consent shall be executed by Contel only after the passage of any waiting periods, following the mailing of the Stockholders' Materials to the stockholders of the Company, required for compliance with the Securities Act, the Exchange Act, the DGCL and any other laws, rules or regulations applicable to Company. (c) Contel shall also execute a written consent as majority shareholder of Purchaser approving this Agreement and the Merger. Such consent shall be executed concurrently with the execution of the consent referred to in paragraph (b). Section 6.4 Consents. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, and to cooperate with each other in connection with the foregoing, including using commercially reasonable efforts to (i) obtain all necessary waivers, consents and approvals from other parties to loan agreements, leases and other contracts, (ii) obtain all necessary consents, approvals and authorizations as are required to be obtained under any federal, state or foreign law or regulations, (iii) defend all lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated hereby, (iv) lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby, and (v) effect all registrations and filings necessary to consummate the transactions contemplated hereby. A-7 71 ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER The respective obligations of each party to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) This Agreement and the transactions contemplated hereby shall have been approved by any necessary vote of the stockholders of the Company and Purchaser in accordance with applicable law and Sections 6.3(b) and (c); (b) No statute, rule, regulation, executive order, decree or injunction (preliminary or permanent) shall have been enacted, entered, promulgated or enforced by any federal or state court of competent jurisdiction in the United States or other governmental authority which prohibits the consummation of the Merger and remains in effect after GTE, the Company and Purchaser shall have used all commercially reasonable efforts to lift any injunction; (c) No consents of or filings with any governmental entity shall be required for consummation of the Merger which have not been obtained or filed; and (d) The Special Committee of the Board of Directors of the Company shall not have modified or rescinded its recommendation with respect to the Merger. ARTICLE VIII TERMINATION; AMENDMENT; WAIVER SECTION 8.1 Termination. This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time notwithstanding approval thereof by the stockholders of the Company, but prior to the Effective Time: (a) by mutual written consent of each of Purchaser and the Company; or (b) by Purchaser or the Company if any court of competent jurisdiction in the United States or other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and non-appealable; or (c) by Purchaser or the Company if the Merger does not occur within 120 days of the date of this Agreement unless the Merger shall not have occurred primarily as the result of a delay occasioned by review of filings by regulatory agencies. SECTION 8.2 Effect of Termination. In the event of the termination and abandonment of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become void and have no effect, without liability on the part of any party or its directors, officers, stockholders or partners. SECTION 8.3 Amendment. This Agreement may be amended by action taken by Purchaser and the Company at any time, provided that following approval of this agreement by the shareholders of Company or Purchaser any amendment of this Agreement shall be subject to compliance with Section 251(d) of the DGCL. The prior approval of a majority of the members of the Special Committee shall be required in connection with any amendment or modification by or on behalf of the Company. This Agreement may not be amended, modified or supplemented except by an instrument in writing signed on behalf of the party against whom enforcement is sought. SECTION 8.4 Extension; Waiver. At any time prior to the Effective Time, the parties may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document, certificate or writing delivered pursuant hereto or (iii) waive compliance with any of the agreements or conditions contained herein, except as otherwise provided by law and except that the provisions of Section 6.2 hereof shall not be waived. A-8 72 Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing on behalf of such party, and, in the case of an extension or waiver by the Company, if such extension or waiver has been approved by a majority of the members of the Special Committee. ARTICLE IX MISCELLANEOUS SECTION 9.1 Survival of Representations, Warranties and Agreements. The representations, warranties and agreements made herein shall not survive beyond the Effective Time, except for the agreements set forth in Sections 2.10, 3.1, 3.2 and 6.2. SECTION 9.2 Entire Agreement; Assignment. This Agreement (a) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties or any of them with respect to the subject matter hereof, and (b) shall not be assigned by operation of law or otherwise; provided that Purchaser may assign its rights and obligations to any wholly owned, direct or indirect subsidiary, but no such assignment shall relieve Purchaser of its obligations hereunder if such assignor does not perform such obligations. SECTION 9.3 Validity. The validity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. SECTION 9.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by cable, telegram or telex, or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses or at such other addresses as shall be specified by the parties by like notice. (i) if to the Purchaser, to: Marianne Drost, Secretary CCI Acquisition Corporation One Stamford Forum Stamford, CT 06904 with a copy to: Jeffrey Rosen O'Melveny & Myers 555 Thirteenth Street, N.W. Suite 500 West Washington, DC 20004 (ii) if to the Company, to: Marianne Drost Contel Cellular Inc. c/o GTE Corporation One Stamford Forum Stamford, CT 06904 with a copy to: W. Leslie Duffy Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 A-9 73 (iii) if to Contel, to: Marianne Drost, Secretary Contel Corporation One Stamford Forum Stamford, CT 06904 (iv) if to GTE, to: Marianne Drost, Secretary GTE Corporation One Stamford Forum Stamford, CT 06904 SECTION 9.5 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflict of laws thereof. SECTION 9.6 Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. SECTION 9.7 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement, except as expressly provided in Section 6.2 (which is intended to be for the benefit of the persons referred to therein and may be enforced by such persons). SECTION 9.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. SECTION 9.9 Expenses. All costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. SECTION 9.10 Specific Performance. The parties hereto agree that if for any reason any party hereto shall have failed to perform its obligations under this Agreement, then any other party hereto seeking to enforce this Agreement against such non-performing party shall be entitled to specific performance and injunctive and other equitable relief, and the parties hereto further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief. This provision is without prejudice to any other rights that any party hereto may have against any other party hereto for any failure to perform its obligations under this Agreement. A-10 74 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the day and year first above written. CONTEL CELLULAR INC. By: /s/ DENNIS WHIPPLE -------------------------------------- Title: President CONTEL CELLULAR ACQUISITION CORPORATION By: /s/ MARIANNE DROST -------------------------------------- Title: Secretary CONTEL CORPORATION By: /s/ MARIANNE DROST -------------------------------------- Title: Secretary GTE CORPORATION By: /s/ JAMES MURPHY -------------------------------------- Title: Vice President and Treasurer A-11 75 FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER First Amendment to the Agreement and Plan of Merger dated as of January 27, 1995 (the "First Amendment") among GTE Corporation, a New York corporation ("GTE"), Contel Corporation, a Delaware corporation and a wholly-owned subsidiary of GTE ("Contel"), Contel Cellular Acquisition Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Contel, and Contel Cellular Inc., a Delaware corporation (the "Company"). RECITALS WHEREAS, GTE, Contel, Purchaser and the Company have entered into an Agreement and Plan of Merger dated as of December 27, 1994 (the "Agreement"); WHEREAS, GTE, Contel, Purchaser and the Company desire to amend the Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: Section 1. Definitions. All capitalized terms used herein shall have the meaning ascribed to them in the Agreement. Section 2. Amendment of Section 2.3. Section 2.3 of the Agreement is hereby amended in its entirety to read as follows: Upon the terms and subject to the conditions hereof, as soon as practicable after the execution of the written consents of shareholders contemplated by Sections 6.3(b) and (c) hereof and after the passage of waiting periods required for compliance with the Securities Act, the Exchange Act, the DGCL and any other rules or regulations applicable to the Company, the Company and Purchaser shall file the Certificate of Merger in accordance with Section 2.2 hereof, and the Company and Purchaser shall take all such other and further actions as may be required by law to make the Merger effective. Section 3. Amendment of Section 6.3(b). Section 6.3(b) of the Agreement is hereby amended in its entirety to read as follows: (b) GTE, the Company and Contel agree that Contel shall execute a written consent as majority shareholder of the Company approving this Agreement and the Merger as soon as practicable after the execution of this Agreement. The Agreement, as amended hereby, shall remain in full force and effect and shall constitute the agreement of the parties. A-12 76 IN WITNESS WHEREOF, each of the parties has caused this First Amendment to be executed on its behalf by its officers thereunto duly authorized, all as of the day and year first above written. CONTEL CELLULAR INC. By: /s/ DENNIS WHIPPLE -------------------------------------- Title: President CONTEL CELLULAR ACQUISITION CORPORATION By: /s/ MARIANNE DROST -------------------------------------- Title: Secretary CONTEL CORPORATION By: /s/ MARIANNE DROST -------------------------------------- Title: Secretary GTE CORPORATION By: /s/ JAMES MURPHY -------------------------------------- Title: Vice President and Treasurer By: /s/ MARIANNE DROST -------------------------------------- Title: Secretary A-13 77 SECOND AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER Second Amendment to the Agreement and Plan of Merger dated as of March 10, 1995 (the "Second Amendment") among GTE Corporation, a New York corporation ("GTE"), Contel Corporation, a Delaware Corporation and a wholly-owned subsidiary of GTE ("Contel"), Contel Cellular Acquisition Corporation, a Delaware Corporation ("Purchaser") and a wholly-owned subsidiary of Contel, and Contel Cellular Inc., a Delaware Corporation (the "Company"). RECITALS WHEREAS, GTE, Contel, Purchaser and the Company have entered into an Agreement and Plan of Merger dated as of December 27, 1994, which Agreement was amended pursuant to the First Amendment to the Agreement and Plan of Merger dated as of January 27, 1995 (as amended, the "Agreement"); and WHEREAS, GTE, Contel, Purchaser and the Company desire further to amend the Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: Section 1. Definitions. All capitalized terms used herein shall have the meanings ascribed to them in the Agreement. Section 2. Amendment of Section 2.4. Section 2.4 of the Agreement is hereby amended in its entirety to read as follows: SECTION 2.4 CONVERSION OF SHARES OF COMMON STOCK. (a) Each share of Class A common Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares, if any, and shares of Class A Common Stock held by the company, Purchaser, Contel or GTE) shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and retired and shall cease to exist as issued and outstanding shares and shall be converted into the right to receive cash in the amount of $25.50 in accordance with Section 3.2 hereof. The consideration to be paid in respect of each share of Class A Common Stock in accordance with the foregoing is hereinafter referred to as the "Merger Consideration." (b) Each share of Class A Common Stock held by the Company, Purchaser, Contel or GTE immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and retired and cease to exist as an issued and outstanding share, without any conversion thereof and without any Merger Consideration being paid with respect thereto. (c) The shares of Class B Common Stock shall not be changed or converted in the Merger, and each share of Class B Common Stock issued and outstanding immediately prior to the Effective Time shall continue to be outstanding subsequent to the Effective Time as one share of Class B Common Stock of the Surviving Corporation. The Agreement, as amended hereby, shall remain in full force and effect and shall constitute the agreement of the parties. A-14 78 IN WITNESS WHEREOF, each of the parties has caused this Second Amendment to be executed on its behalf by its officers thereunto duly authorized, all as of the day and year first above written. CONTEL CELLULAR INC. By: /s/ DENNIS WHIPPLE -------------------------------------- Title: President CONTEL CELLULAR ACQUISITION CORPORATION By: /s/ MARIANNE DROST -------------------------------------- Title: Secretary CONTEL CORPORATION By: /s/ MARIANNE DROST -------------------------------------- Title: Secretary GTE CORPORATION By: /s/ JAMES MURPHY -------------------------------------- Title: Vice President and Treasurer By: /s/ MARIANNE DROST -------------------------------------- Title: Secretary A-15 79 EXHIBIT B OPINION OF LAZARD FRERES & CO. [LAZARD FRERES & CO. LETTERHEAD] As of December 30, 1994 Special Committee of the Board of Directors Contel Cellular Inc. c/o Contel Corporation 375 Park Avenue, 24th Floor New York, NY 10152 Dear Members of the Special Committee: You have requested our opinion as to the fairness, from a financial point of view, to the holders of the Class A Common Stock, par value $1.00 per share (the "Common Stock") of Contel Cellular Inc. ("CCI"), other than GTE Corporation ("GTE"), Contel Corporation ("Contel") and their affiliates, of the consideration to be received by such holders in the proposed merger (the "Merger") of CCI and a subsidiary of Contel. We understand that the Merger is to be effected pursuant to an Agreement and Plan of Merger, to be entered into among GTE, Contel, a subsidiary of Contel, and CCI, a draft of which, dated December 29, 1994, has been furnished to us (the "Merger Agreement"). The terms of the Merger Agreement provide, among other things, that each share of Common Stock (other than any shares of Common Stock held by stockholders who properly exercise and perfect stockholder appraisal rights, if any, under the General Corporation Law of the State of Delaware, and any shares held by CCI, GTE, Contel or such subsidiary of Contel, all of which shall be canceled), will be converted into the right to receive cash in the amount of $25.50. We understand that GTE beneficially owns all of the issued and outstanding shares of Class B Common Stock, par value $1.00 per share, of CCI, which represents approximately ninety percent (90%) of the issued and outstanding equity of CCI. In connection with this opinion, we have, among other things: (i) reviewed the terms and conditions of the Merger Agreement; (ii) analyzed certain historical business and financial information relating to CCI, including the Annual Reports to Stockholders and Annual Reports on Form 10-K of CCI for each of the fiscal years ended December 31, 1991 through 1993, and Quarterly Reports on Form 10-Q of CCI for the quarters ended March 31, June 30, and September 30, 1994; (iii) reviewed certain financial forecasts and other data provided to us by CCI relating to CCI; (iv) held discussions with members of the senior managements of CCI and GTE with respect to the businesses and prospects of CCI and its strategic objectives; (v) reviewed public information with respect to certain other companies in lines of businesses we believe to be generally comparable to the businesses of CCI; (vi) reviewed the financial terms of certain recent business combinations involving companies in lines of businesses we believe to be generally comparable to CCI, and in other industries generally; (vii) reviewed the financial terms of certain recent business combinations we believe to be comparable in certain respects to the proposed Merger; (viii) reviewed the historical stock prices and trading volumes of the Common Stock; and (ix) conducted such other financial studies, analyses and investigations as we deemed appropriate. B-1 80 We understand that CCI and an affiliate of GTE propose to exchange certain cellular assets owned by each of them for certain cellular assets owned by a publicly-held company (the "Cellular Exchange"). We have received a copy of a letter dated December 19, 1994 from GTE's Senior Vice President -- Finance addressed to GTE's financial advisors, Merrill Lynch & Co. and PaineWebber Incorporated, regarding the Cellular Exchange to the effect that it is an exchange of equivalent assets and, accordingly, is value neutral to CCI. We have neither received nor reviewed any other information regarding the Cellular Exchange, including any financial projections or any other non-public financial information prepared by GTE or CCI. With your consent, we have assumed that the Cellular Exchange involves the exchange of assets with substantially equivalent value and, accordingly, will have an immaterial effect, if any, on CCI. For purposes of this opinion, with your concurrence, we have ascribed no value to CCI's rights under either (i) that certain Third Restated Competition Agreement dated March 14, 1991, among Contel, GTE and CCI, or (ii) that certain Services Agreement dated May 1, 1991, as amended, by and between GTE Mobile Communications Service Corporation and CCI. We have not reviewed any proxy or information statement or similar document that may be prepared for use in connection with the proposed Merger. In addition, we were not asked by the Special Committee (the "Special Committee") of the Board of Directors of CCI to solicit third party indications of interest in acquiring all or any part of CCI, nor did we seek any such offers. We have relied upon the accuracy and completeness of the foregoing financial and other information and have not assumed any responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets of CCI. With respect to financial forecasts, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of management of CCI as to the future financial performance of CCI. We assume no responsibility and express no view as to such forecasts or the assumptions on which they are based. Further, our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof. In rendering our opinion, we have assumed that the actual Agreement and Plan of Merger entered into among the parties thereto will be identical in all material respects to the Merger Agreement, that the Merger will be consummated on the terms described in the Merger Agreement, without any waiver of any material terms or conditions by CCI and that obtaining the necessary regulatory approvals for the Merger will not have an adverse effect on CCI. Lazard Freres & Co. has acted as financial advisor to the Special Committee in connection with the proposed Merger and will receive a fee for our services, a substantial portion of which is payable upon rendering this opinion. Based on and subject to the foregoing, we are of the opinion that the consideration to be received by the holders of the Common Stock (other than GTE, Contel or any of their affiliates) is fair to such holders from a financial point of view. Very truly yours, LAZARD FRERES & CO. B-2 81 EXHIBIT C-1 OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED [MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED LETTERHEAD] December 27, 1994 Board of Directors GTE Corporation One Stamford Forum Stamford, CT 06904 Attention: J. Michael Kelly Gentlemen: Contel Corporation, a Delaware corporation ("Contel") and a wholly-owned subsidiary of GTE Corporation (the "Company"), CCI Acquisition Company, a Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Contel, and Contel Cellular Inc., a Delaware corporation (the "Subject Company"), propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant to which the Purchaser will be merged into the Subject Company in a transaction (the "Merger") in which each share of the Subject Company's Class A Common Stock, par value $1.00 per share (the "Shares"), will be converted into the right to receive $25.50 in cash per Share. You have asked us whether, in our opinion, the proposed cash consideration to be paid for the Shares pursuant to the Merger is fair to the Company from a financial point of view. In arriving at the opinion set forth below, we have, among other things: (1) Reviewed the Subject Company's Annual Reports, Forms 10-K and related financial information for the five fiscal years ended December 31, 1993 and the Subject Company's Forms 10-Q and the related unaudited financial information for the quarterly periods ending March 31, 1994, June 30, 1994 and September 30, 1994; (2) Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets and prospects of the Subject Company, furnished to us by the Subject Company; (3) Conducted discussions with members of senior management of the Subject Company concerning its businesses and prospects; (4) Reviewed the historical market prices and trading activity for the Shares and compared them with that of certain publicly traded companies which we deemed to be reasonably similar to the Subject Company; (5) Compared the results of operations of the Subject Company with that of certain companies which we deemed to be reasonably similar to the Subject Company; (6) Compared the proposed financial terms of the transactions contemplated by the Agreement with the financial terms of certain other mergers and acquisitions which we deemed to be relevant; (7) Considered the pro forma effect of the Merger on the Company's capitalization ratios, earnings and cash flow; (8) Considered a discounted cash flow analysis based on future cash flows that management of the Subject Company expects the Subject Company to generate; (9) Reviewed a draft of the Agreement dated December 20, 1994; and C-1-1 82 (10) Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as we deemed necessary, including our assessment of general economic, market and monetary conditions. In preparing our opinion, we have relied on the accuracy and completeness of all information supplied or otherwise made available to us by the Subject Company, and we have not assumed any responsibility to independently verify such information or undertaken an independent appraisal of the assets of the Subject Company. With respect to the financial forecasts furnished by the Subject Company, we have assumed that they have been reasonably prepared and reflect the best currently available estimates and judgment of the Subject Company's management as to the expected future financial performance of the Subject Company. This opinion does not address the relative merits of the Merger and any other transactions or business strategies discussed by the Board of Directors of the Company as alternatives to the Merger or the decision of the Board of Directors of the Company to proceed with the Merger. In rendering this opinion, we have not been engaged to act as an agent or fiduciary of the Company's equity holders or any other third party. We have, in the past, provided financial advisory services to the Subject Company and have received fees for the meeting of such services. On the basis of, and subject to the foregoing, we are of the opinion that the proposed cash consideration to be paid pursuant to the Merger is fair to the Company from a financial point of view. Very truly yours, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ ALAIN LEBEC ------------------------ ALAIN LEBEC Managing Director Investment Banking Group C-1-2 83 EXHIBIT C-2 OPINION OF PAINEWEBBER INCORPORATED [PAINEWEBBER LETTERHEAD] December 27, 1994 [PAINEWEBBER LOGO] Board of Directors GTE Corporation One Stamford Forum Stamford, CT 06904 Attention: J. Michael Kelly Gentlemen: Contel Corporation, a Delaware corporation ("Contel") and a wholly-owned subsidiary of GTE Corporation (the "Company"), CCI Acquisition Company, a Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Contel, and Contel Cellular Inc,. a Delaware corporation (the "Subject Company"), propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant to which the Purchaser will be merged into the Subject Company in a transaction (the "Merger") in which each share of the Subject Company's Class A Common Stock, par value $1.00 per share (the "Shares"), will be converted into the right to receive $25.50 in cash per Share. You have asked us whether, in our opinion, the proposed cash consideration to be paid for the Shares pursuant to the Merger is fair to the Company from a financial point of view. In arriving at the opinion set forth below, we have, among other things: (1) Reviewed the Subject Company's Annual Reports, Forms 10-K and related financial information for the five fiscal years ended December 31, 1993 and the Subject Company's Forms 10-Q and the related unaudited financial information for the quarterly periods ending March 31, 1994, June 30, 1994, and September 30, 1994; (2) Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets and prospects of the Subject Company; (3) Conducted discussions with members of senior management of the Subject Company concerning its businesses and prospects; (4) Reviewed the historical market prices and trading activity for the Shares and compared them with that of certain publicly traded companies which we deemed to be reasonably similar to the Subject Company; (5) Compared the results of operations of the Subject Company with that of certain companies which we deemed to be reasonably similar to the Subject Company; (6) Compared the proposed financial terms of the transactions contemplated by the Agreement with the financial terms of certain other mergers and acquisitions which we deemed to be relevant; (7) Considered the pro forma effect of the Merger on the Company's capitalization ratios, earnings and cash flow; (8) Considered a discounted cash flow analysis based on future cash flows that management of the Subject Company expects the Subject Company to generate; (9) Reviewed a draft of the Agreement dated December 20, 1994; and C-2-1 84 (10) Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as we deemed necessary, including our assessment of general economic, market and monetary conditions. In preparing our opinion, we have relied on the accuracy and completeness of all information supplied or otherwise made available to us by the Subject Company, and we have not assumed any responsibility to independently verify such information or undertaken an independent appraisal of the assets of the Subject Company. With respect to the financial forecasts furnished by the Subject Company, we have assumed that they have been reasonably prepared and reflect the best currently available estimates and judgment of the Subject Company's management as to the expected future performance of the Subject Company. This opinion does not address the relative merits of the Merger and any other transactions or business strategies discussed by the Board of Directors of the Company as alternatives to the Merger or the decision of the Board of Directors of the Company to proceed with the Merger. In rendering this opinion, we have not been engaged to act as an agent or fiduciary of the Company's equity holders or any other third party. We have, in the past, provided financial advisory services to the Company and have received fees for the rendering of such services. On the basis of, and subject to the foregoing, we are of the opinion that the proposed cash consideration to be paid pursuant to the Merger is fair to the Company from a financial point of view. Very truly yours, PAINEWEBBER INCORPORATED C-2-2 85 EXHIBIT D DELAWARE GENERAL CORPORATION LAW SECTION 262 SEC. 262. APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to sec.228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of his shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to sec.251, 252, 254, 257, 258, 263 or 264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the holders of the surviving corporation as provided in subsection (f) of sec.251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under sec.253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a D-1 86 provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of his shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of his share. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to sec.228 or 253 of this title, the surviving or resulting corporation, either before the effective date of the merger or consolidation or within 10 days thereafter, shall notify each of the stockholders entitled to appraisal rights of the effective date of the merger or consolidation and that appraisal rights are available for any or all of the shares of the constituent corporation, and shall include in such notice a copy of this section. The notice shall be sent by certified or registered mail, return receipt requested, addressed to the stockholder at his address as it appears on the records of the corporation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of the notice, demand in writing from the surviving or resulting corporation the appraisal of his shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his shares. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw his demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after his written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 D-2 87 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publications shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing of such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such directions, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders, entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted his certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that he is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded his appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of his demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of the Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. D-3 88 EXHIBIT E DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL CELLULAR INC. 1. Directors and Executive Officers of GTE Corporation. The following table sets forth the name, business address, present principal occupation and the other material occupations, positions, offices or employments for the past five years (if applicable) of each director and executive officer of GTE Corporation, a New York corporation ("GTE"). Each director and executive officer of GTE is a citizen of the United States. GTE, through its subsidiaries, provides local telephone service, cellular mobile telephone service, directories, and other telecommunications related products and services. GTE also has subsidiaries which offer financial and related services primarily to GTE operating companies. The address of GTE's principal executive offices is One Stamford Forum, Stamford, Connecticut 06904.
PREVIOUS MATERIAL NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS - ----------------------------------- ------------------------------ ------------------------- GTE -- DIRECTORS Edwin L. Artzt..................... Chairman of the Board and Not applicable The Procter & Gamble Company Chief Executive Officer of The One Procter & Gamble Plaza Procter & Gamble Company Cincinnati, OH 45202-3315 James R. Barker.................... Chairman of the Interlake Not applicable Mormac Marine Group, Inc. Steamship Co.; Vice Chairman Three Landmark Square of Mormac Marine Group, Inc.; Stamford, CT 06901 Vice Chairman of Moran Towing Company Edward H. Budd..................... Chairman of the Board of the Chairman of Travelers The Travelers Insurance Companies Executive Committee and Insurance Group, Inc. One Tower Square Director of The Travelers from January 1994 to Hartford, CT 06138-1100 Insurance Group, Inc. September 1994. Chairman of The Travelers, Inc. since 1982 Kent B. Foster..................... Vice Chairman of GTE and Not applicable GTE President of GTE Telephone 600 Hidden Ridge, HQE04J17 Operations Group Irving, TX 75308 James L. Johnson................... Chairman Emeritus of GTE since Chairman and Chief 600 Hidden Ridge 1992 Executive of GTE since Irving, TX 75038 1988 Richard W. Jones................... Business Consultant, Not applicable Business Consultant PaineWebber Incorporated PaineWebber Incorporated 725 S. Figueroa Street Suite 4100 Los Angeles, CA 90017 James L. Ketelsen.................. Retired Chairman of Tenneco Chairman and Chief Tenneco Inc. Inc. since 1992 Executive Officer of Tenneco Building Tenneco Inc. since 1978 1010 Milam Street Houston, TX 77002 Charles R. Lee..................... Chairman and Chief Executive President and Chief GTE Officer of GTE since 1992 Operating Officer of GTE One Stamford Forum since 1989 Stamford, CT 06904
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PREVIOUS MATERIAL NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS - ----------------------------------- ------------------------------ ------------------------- Michael T. Masin................... Vice Chairman of GTE since Managing Partner of the GTE 1993 New York office of the One Stamford Forum law firm of O'Melveny & Stamford, CT 06904 Myers and a partner with that firm since 1977 Sandra O. Moose.................... Senior Vice President and Not applicable The Boston Consulting Group, Inc. Chair of the East Coast as 135 E. 57th Street well as New York Office New York, NY 10022 Administrator and Director of The Boston Consulting Group, Inc. Russell E. Palmer.................. Chairman and Chief Executive Dean, The Wharton School, The Palmer Group Officer of The Palmer Group University of 3600 Market Street since 1990 Pennsylvania from 1983 Philadelphia, PA 19104 until 1990 Howard Sloan....................... Private Investor Not applicable 375 Park Avenue New York, NY 10152 Robert D. Storey................... Partner with the Cleveland law Partner with the Thompson, Hine & Flory firm of Thompson, Hine & Flory Cleveland law firm of 1100 National City Bank Bldg. since 1993 McDonald, Hopkins, Burke 629 Euclid Avenue & Haber Co., L.P.A. since Cleveland, OH 44114 1971 James W. Walter.................... Chairman of Walter Industries, Not applicable Walter Industries, Inc. Inc. 1500 N. Dale Mabry Highway Tampa, FL 33607 Charles Wohlstetter................ Vice Chairman of GTE since Chairman of the Board of 375 Park Avenue 1991 Contel Corporation since New York, NY 10152 1960
GTE -- EXECUTIVE OFFICERS Charles R. Lee..................... See prior entry See prior entry GTE One Stamford Forum Stanford, CT 06904 Charles Wohlstetter................ See prior entry See prior entry GTE 375 Park Avenue New York, NY 10152 Kent B. Foster..................... See prior entry See prior entry GTE 600 Hidden Ridge Irving, TX 75308 Michael T. Masin................... See prior entry See prior entry GTE One Stamford Forum Stanford, CT 06904 Nicholas L. Trivisonno............. Executive Vice President - Senior Vice President - GTE Strategic Planning and Group Finance since 1989 One Stamford Forum President of GTE since 1993 Stamford, CT 06904
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PREVIOUS MATERIAL NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS - ----------------------------------- ------------------------------ ------------------------- William P. Barr.................... Senior Vice President and Partner in the Washington GTE General Counsel of GTE since D.C. office of the law One Stamford Forum 1994 firm of Shaw, Pittman, Stamford, CT 06904 Potts & Trowbridge since 1993; Attorney General of the United States from 1991 to 1993; previously Deputy Attorney General of the United States Bruce Carswell..................... Senior Vice President - Human Not applicable GTE Resources and Administration One Stamford Forum of GTE Stamford, CT 06904 J. Michael Kelly................... Senior Vice Vice President and GTE President - Finance of GTE Controller of GTE since One Stamford Forum since 1994 December 1991; Vice Stamford, CT 06904 President - Finance and Business Development for GTE Telecommunications Products and Services Group since 1991; Vice President and Controller for Contel Corporation since 1990 John P.Z. Kent..................... Vice President - Taxes of GTE Not applicable GTE One Stamford Forum Stamford, CT 06904 James Murphy....................... Vice President and Treasurer Not applicable GTE of GTE One Stamford Forum Stamford, CT 06904 G. Bruce Redditt................... Vice President - Public Vice President - Public GTE Affairs and Communications of Affairs for the Telephone One Stamford Forum GTE since 1994 Operations Group of GTE Stamford, CT 06904 Service Corporation since 1991, previously Vice President - Corporate Communications for Contel Corporation Samuel F. Shawhan, Jr.............. Vice President - Government Not applicable GTE Affairs of GTE 1850 M Street, N.W. Washington, D.C. 20036 William D. Wilson.................. Vice President and Controller Area Vice President - GTE of GTE since 1994 General Manager for the One Stamford Forum East Area of the Stamford, CT 06904 Telephone Operations Group of GTE Service Corporation since 1993; previously Vice President - Business Planning for the Telephone Operations Group of GTE Service Corporation Marianne Drost..................... Secretary of GTE Not applicable GTE One Stamford Forum Stamford, CT 06904
E-3 91 2. Directors and Executive Officers of Contel Corporation. The following table sets forth the name, business address, present principal occupation and the other material occupations, positions, offices or employments for the past five years (if applicable) of each director and executive officer of Contel Corporation, a Delaware corporation ("Contel"). Each director and executive officer of Contel is a citizen of the United States. Contel, through its subsidiaries, provides telecommunications products and services. The address of Contel's principal executive offices is One Stamford Forum, Stamford, Connecticut 06904. CONTEL CORPORATION -- DIRECTORS Bruce Carswell..................... See prior entry See prior entry Contel Corporation One Stamford Forum Stamford, CT 06904 Charles R. Lee..................... See prior entry See prior entry Contel Corporation One Stamford Forum Stamford, CT 06904 Nicholas L. Trivisonno............. See prior entry See prior entry Contel Corporation One Stamford Forum Stamford, CT 06904
CONTEL CORPORATION -- EXECUTIVE OFFICERS J. Michael Kelly................... See prior entry See prior entry President Contel Corporation One Stamford Forum Stamford, CT 06904 James Murphy....................... See prior entry See prior entry Vice President and Treasurer Contel Corporation One Stamford Forum Stamford, CT 06904 Marianne Drost..................... See prior entry See prior entry Secretary Contel Corporation One Stamford Forum Stamford, CT 06904
3. Directors and Executive Officers of Contel Cellular Acquisition Corporation. The following table sets forth the name, business address, present principal occupation and the other material occupations, positions, offices or employments for the past five years (if applicable) of each director and executive officer of Contel Cellular Acquisition Corporation, a Delaware corporation ("CCI Acquisition"). Each director and executive officer is a citizen of the United States. CCI Acquisition was incorporated in December 1994 for the purpose of acquiring the Company and has not engaged in any business activities other than those relating to the Merger. The address of CCI Acquisition's principal executive office is One Stamford Forum, Stamford, Connecticut 06904.
PREVIOUS MATERIAL NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS - ----------------------------------- ------------------------------ ------------------------- CCI ACQUISITION -- DIRECTORS J. Michael Kelly................... See prior entry See prior entry CCI Acquisition One Stamford Forum Stamford, CT 06904
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PREVIOUS MATERIAL NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS - ----------------------------------- ------------------------------ ------------------------- James Murphy....................... See prior entry See prior entry CCI Acquisition One Stamford Forum Stamford, CT 06904 Marianne Drost..................... See prior entry See prior entry CCI Acquisition One Stamford Forum Stamford, CT 06904
CCI ACQUISITION -- EXECUTIVE OFFICERS J. Michael Kelly................... See prior entry See prior entry President CCI Acquisition One Stamford Forum Stamford, CT 06904 James Murphy....................... See prior entry See prior entry Vice President and Treasurer CCI Acquisition One Stamford Forum Stamford, CT 06904 Marianne Drost..................... See prior entry See prior entry Secretary CCI Acquisition One Stamford Forum Stamford, CT 06904
4. Directors and Executive Officers of Contel Cellular Inc. The following table sets forth the name, business address, present principal occupation and the other material occupations, positions, offices or employments (if applicable) for the past five years of each director and executive officer of Contel Cellular Inc., a Delaware corporation (the "Company"). Each director and executive officer of the Company is a citizen of the United States. The Company, through its subsidiaries and through partnerships, provides or participates in the provision of cellular telephone service in various areas throughout the United States. The address of the Company's principal executive offices is 245 Perimeter Center Parkway, Atlanta, Georgia 30346. COMPANY -- DIRECTORS
PREVIOUS MATERIAL NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS - ----------------------------------- ------------------------------ ------------------------- Leo Jaffe.......................... Chairman Emeritus of Columbia Not applicable 425 East 58th Street Pictures, Inc. New York, NY 10022 James L. Johnson................... See prior entry See prior entry 600 Hidden Ridge Irving, TX 75038 Robert LaBlanc..................... President of Robert E. LaBlanc Not applicable 323 Highland Avenue Associates, Inc. Ridgewood, NJ 07450 Charles R. Lee..................... See prior entry See prior entry GTE One Stamford Forum Stamford, CT 06904 Michael T. Masin................... See prior entry See prior entry GTE One Stamford Forum Stamford, CT 06904
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PREVIOUS MATERIAL NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS - ----------------------------------- ------------------------------ ------------------------- Russell E. Palmer.................. See prior entry See prior entry The Palmer Group 3600 Market Street Philadelphia, PA 19104 Irwin Schneiderman................. Senior Counsel of the law firm Not applicable Cahill Gordon & Reindel of Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Nicholas L. Trivisonno............. See prior entry See prior entry GTE One Stamford Forum Stamford, CT 06904 James W. Walter.................... See prior entry See prior entry Walter Industries Inc. 1500 N. Dale Mabry Highway Tampa, FL 33607 Dennis L. Whipple.................. President and Chief Executive Vice President - Marketing Contel Cellular Inc. Officer of the Company since and Business Planning for 245 Perimeter Center Parkway 1991 GTE Mobile from April 1990 Atlanta, GA 30346 to March 1991; previously General Manager - Florida of GTE Mobilnet Charles Wohlstetter................ See prior entry See prior entry 375 Park Avenue New York, NY 10152-0192 COMPANY -- EXECUTIVE OFFICERS Dennis L. Whipple.................. See prior entry See prior entry President and Chief Executive Officer Contel Cellular Inc. 245 Perimeter Center Parkway Atlanta, GA 30346 Theodore J. Carrier................ Treasurer and Chief Financial Controller of the Company Treasurer and Chief Financial Officer of the Company since Officer 1991 Contel Cellular Inc. 245 Perimeter Center Parkway Atlanta, GA 30346 Pamela F. Lopez.................... Vice President - Marketing of Marketing and Vice President - Marketing the Company since 1993 Distribution Manager of Contel Cellular Inc. the Company's National 245 Perimeter Center Parkway Region since 1991; Atlanta, GA 30346 previously Regional Agent Manager in the Company's Virginia operation Randall L. Crouse.................. Vice President - Network Director - Technology Vice President - Network Operations Operations of the Company Projects for GTE Mobile Contel Cellular Inc. since 1993 from 1991 to 1993; 245 Perimeter Center Parkway previously Director - Atlanta, GA 30346 Advanced Technology Planning for GTE Mobile Jay M. Rosen....................... Vice President, Government Vice President and Secretary Affairs and General Counsel, Associate General Contel Cellular Inc. Telecommunications Products Counsel - GTE Electrical One Stamford Forum and Services Group of GTE Products and Governmental Stamford, CT 06904 Service Corporation since 1991 Systems Group
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PREVIOUS MATERIAL NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS - ----------------------------------- ------------------------------ ------------------------- Laura E. Binion.................... General Counsel and Assistant Corporate Counsel of General Counsel and Assistant Secretary of the Company since Contel Secretary 1991 Contel Cellular Inc. 245 Perimeter Center Parkway Atlanta, GA 30346
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