Jazztel Foreign IPO Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Jazztel Foreign IPO Case Solution

Introduction:

Jazztel is a one of the leading company in telecommunication and data transmission which has its infrastructure in Spain. Jazztel had its presence worldwide and it focused on main areas, including residential, national as well as international business market.

The Spanish market is very attractive and has competitive international pricing because of interconnection possibilities of national and international Public offering price (Pop).

The challenge faced during expansion was to source the necessary capital for the infrastructure of Portugal operations with the threat of increasing competition in the internet market. Jazztel had to develop the network with cutting-edge competition and the most sophisticated and advanced stage of technology. Along with this, additional capital is required for 3.5 miles of planned, 3800-mile network and the strategic investors are unaware of risk exposure would be faced in the market.

The objective of the case is that the company wants to expand its operations in both Spain and Portugal by financing.For this purpose, the company has to consider Jazztel IPO to NASDAQ or the Madrid Bolsa in order to fund the investment of capital expenditure of about $ 750 million over the next 10 years. The second alternative is by issuing high-yield bonds.

For this purpose, Jazztel team management requires valuing the company with in order to see the fair return in nest 10 years of operations. The value can be calculated by examining the Net Present Value (NPV) and the Value of equity or firm depending on the information available.

Identification of Main Issues/Problems

Jazztel is the first alternative company that provides internet service provider (ISP), the problems sometimes they face regarding reliability because of low-quality voice in IP voice connections and incompatibility with the other services.

The second problem faced by the company would be the funding issue related to the capital expenditure to finance the operations through debtor equity (IPO) foreign market. If the company goes for the debt option, then the company has to pay fixed, or floating rate to the investors from their income from operations as the interest has the priority to be charged from the investors. If the company goes for the IPO process, then the dilution of the company will increase whichwill lead to the decrease in share price as well as the market price per share would decrease.

The third problem faced by the company is to challenge the telephonic S.A (a state owned monopoly), which occupies the 98.5% share of total minutes traffic speed and 93.1% of long term minutes traffic speed.The challenge is to provide high quality integrated voice, and to provide data package at the attractive prices.

Analysis and Evaluation of Issues/Problems:

The problem can be evaluated by considering the key statistics of the company, which includes the annual revenue is in increasing trend which leads to increasing profit through five years from 2001 to 2015. Moreover, the percentages show the change in net income from all five years.

	2001	2002	2003	2004	2005
Sales	319,352	456,368	541,734	581,590	614,387
Net Income	14,695	59,496	69,476	64,059	72,095
		305%	17%	-8%	13%

The company has the high employee base of approximately 374,610 ADSL clients, which makes 94% customer base share and 434,777 voice services customers, 18,116 enterprise customers and 180 wholesale customers' contracts with other operations.

The above information would help to analyze and evaluate the problem and provide valid recommendation to face the problem in the competitive market.

Recommendations on Effective Solutions/Strategies

The company should follow reasonable steps to offer the high quality service with the very attractive and the competitive national and international pricing, it should include:.......................

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