Question-and-Answer Session
Operator
(Operator Instructions)
Tony Navarra
Hello, operator. We are not hearing you on this end so can you just proceed with the first question please.
Operator
Your first question comes from the line of Jonathan Catherine (ph) with JP Morgan (ph). Please proceed.
Jonathan Catherine - JPMorgan
Hi. Good evening, two quick questions if I may. I'm wondering if you could give us a little bit more contexts for how you get to the $0.30 to $0.40 in spectrum value under the arrangement you have with Open Range.
In terms of what we determined, where you end up with, at high end of that range or low end of that range? And what some of your assumptions are? I'm wondering, if could also give us an idea of what the trends were for subscribers in Simplex versus Duplex? That'll be very helpful. Thanks.
Fuad Ahmad
Okay. Jonathan, the answer to the first question is that this is a relatively complicated spectrum arrangement and it involves both fixed and variable payments over a primary term of 30 years. And so in order to get to the calculation of $0.30 to $0.40 you have to make certain assumptions about the cost of capital of Open Range and the rate at which they add subscribers to their system. I'm using the numbers that they have used underpinning their arrangements for their debt deal. The calculations at varying discount rates between 8% and 12% yield between $0.30 and $0.40/MHz-POP.
Jonathan Catherine - JPMorgan
So, that 12% discount rate you end up with $0.30/MHz-POP.
Fuad Ahmad
Right. Although their cost of capital is substantially lower than that. It's actually about 8%, because the debt is at a very good interest rate.
Jonathan Catherine - JPMorgan
Okay. And can you give us a little bit context for, when you negotiated these terms with open range. How you came about, how you came to the conclusion that this $0.30 to $0.40 is a fair market base rate?
Fuad Ahmad
I'm doing with a good deal of discussion around that issue as you might imagine. And we all looked at a series of databases everything from arm's length transactions in the world marketplace through and including our auction data for the last several auctions and pass to that data for both its urban and its world characters.
And ultimately, reached an agreement between the two company's on just an arm's-length negotiated basis.
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