Background of the Transaction
In January 2008, representatives of SK Telecom and EarthLink contacted Dan Schulman, the Company’s Chief Executive Officer, about strategic opportunities regarding the Company and Helio. The Company and Helio entered into a confidentiality agreement on January 24, 2008 concerning a commercial relationship and possible transaction between the parties. At the ensuing regularly scheduled meeting of the Company’s Board of Directors, held February 12, 2008, David Messenger, Chief Administrative & Corporate Development Officer of the Company, discussed a proposed transaction with the Board of Directors.

On February 15, 2008, Mr. Schulman met with Sung Won Suh, Executive Vice President, Global Strategy and Investment of SK Telecom, and Sky Dayton, Chairman of the Board of Helio, at the Company’s Warren, New Jersey headquarters and discussed a possible combination transaction in greater detail. The following week, on February 21, 2008, Mr. Messenger and John Feehan, Chief Financial Officer of the Company, met with representatives of Helio and SK Telecom management in Los Angeles, California to assess Helio’s recent performance and three-year business plan, and to obtain information relating to Helio’s data services, handset development and technical platforms.

On February 29, 2008, in a meeting at Company headquarters among Messrs. Schulman, Messenger, and Peter Lurie, General Counsel of the Company, and representatives of Helio, Inc., SK Telecom and EarthLink, the parties continued discussions and entered into a new confidentiality agreement regarding a possible transaction involving each of the parties. The parties thereafter commenced their respective due diligence reviews and began negotiating the terms of a definitive purchase agreement and related agreements. Concurrently with these negotiations, executives of the respective parties continued to engage in ongoing conversations relating to data sharing by the parties. In March 2008, the Company engaged Simpson, Thacher & Bartlett LLP as its legal advisor for the transaction.
Messrs. Schulman, Feehan and Messenger met with representatives of SK Telecom, EarthLink and Helio at the annual convention of Cellular Telephone Industry Association (CTIA) in Las Vegas, Nevada held during the first week of April 2008 to discuss different proposals relating to deal structure, consideration and the potential inclusion of additional parties to the negotiations. The following week, on April 9 and 10, 2008, Company executives met with Helio and EarthLink executives in Los Angeles. Bear Stearns, as financial advisor to the Company, and Montgomery & Co., as financial advisor to Helio, SK Telecom and EarthLink, participated in the meetings, which concerned ongoing diligence efforts, the technical platforms of the respective parties, potential deal terms and future growth opportunities. On April 14, 2008, the parties met to discuss the contemplated transaction and potential retailer arrangements with representatives of one of the Company’s key retail partners.
On April 17, 2008, at a special meeting of the Company’s Board of Directors held by teleconference, Messrs. Schulman, Messenger and Lurie provided the Board of Directors with an overview of the proposed transaction. In his presentation, Mr. Schulman examined the Company’s competitive environment and position, the valuation of Helio, strategic alternatives to the transaction and integration risks. Mr. Messenger discussed the proposed transaction in detail, offering an overview of Helio’s mobile voice and data services, financial situation and operating metrics, and noting possible opportunities a business combination would offer the Company. Mr. Messenger also reviewed advantages and disadvantages of expanding the scope of the deal to include one of the Company’s retail partners and an investment fund. Mr. Lurie discussed the transaction structure and the regulatory approval process. After an involved discussion in which the members of the Board of Directors thoroughly discussed the details of the proposed transaction, valuation, strategic alternatives and integration plans and risks, the Board of Directors agreed to consider the transaction further and reconvene to discuss valuation and the possible addition of the Virgin Group, as the Company’s major stockholder, to the deal structure. On the same day, legal advisors from SK Telecom, Helio and the Company met to discuss transaction structure and the proposed purchase agreement.

On April 18, 2008, representatives of SK Telecom met in London, England with Robert Samuelson, a Director of the Company and representative of the Virgin Group, to discuss possible terms for joint investment by SK Telecom and the Virgin Group in a combined company, in addition to options relating to the Company’s corporate structure after the acquisition of Helio and investment by SK Telecom and the Virgin Group.

The Board reconvened over the weekend of April 20, 2008 and reviewed extensive business and financial modeling presented by Messrs. Schulman and Messenger. In the course of an involved discussion of the opportunities and risks presented by the proposed transaction, Mr. Schulman noted that the success of the transaction would depend, in part, on the revision of the terms of the Company’s Amended and Restated PCS Services Agreement with Sprint (NYSE: S) Nextel to allow the Company to offer postpaid services. Based on the discussions, the Board unanimously agreed to proceed with negotiations to acquire Helio, subject to an appropriate analysis of the risks posed by any transaction to the Company and its shareholders.

Representatives of SK Telecom and the Virgin Group met again in the company of their respective financial advisors on April 21 and April 22, 2008 to continue discussions, and on April 24, 2008, the Board of Directors of SK Telecom reviewed the proposed terms.

Beginning on April 25, 2008, representatives of the Company began meeting with representatives of various additional parties to discuss their possible inclusion as investors in the combined company. These discussions, which continued until the beginning of June, included representatives of the Company, Helio, the Virgin Group, SK Telecom, EarthLink, one of the Company’s retail partners and an investment fund.

On April 25, 2008, the Company contacted Deutsche Bank Securities, Inc. (“Deutsche Bank”) to discuss retaining Deutsche Bank as its new financial advisor for the transaction in light of the developments at Bear Stearns at that time. The Company subsequently engaged Deutsche Bank as its financial advisor pursuant to an engagement letter dated April 28, 2008. On April 28, 2008, the Board held a special meeting to which representatives of Deutsche Bank were invited and at which Messrs. Schulman and Messenger reviewed the state of negotiations, the strategic objectives of the contemplated negotiations and alternatives to its completion. The Board concurred that the Company would benefit from adding Helio’s ability to offer postpaid services and agreed that the Company should (i) meet with lenders under the Company’s existing amended and restated credit agreement among the Operating Partnership, the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, dated as of July 19, 2006 (as amended, supplemented and otherwise modified from time to time, the “Senior Credit Agreement”) and existing subordinated credit agreement among the Operating Partnership and the Lenders party thereto, dated as of July 19, 2006 (the “Revolving Credit Facility”) to negotiate more favorable terms based upon the expected outcome of the proposed transaction and (ii) continue the discussions with a key retail partner of the Company.

On May 13, 2008, representatives of SK Telecom publicly denied any negotiations between SK Telecom and the Company. In order to correct the record and appropriately inform investors, each of SK Telecom and the Company issued a press release the following day acknowledging that discussions between the Company and SK Telecom relating to possible strategic opportunities were taking place.
The Board revisited the transaction on May 15, 2008 at its regularly scheduled meeting following the Company’s Annual Meeting of Stockholders. Mr. Messenger and representatives of Deutsche Bank updated the Board of Directors on the status of all ongoing negotiations (i) among SK Telecom, EarthLink and the Company relating to Helio, (ii) among the Company and its lenders under the Senior Credit Agreement and Revolving Credit Facility, (iii) between the Company and Sprint in regard to the terms of the PCS Services Agreement, and (iv) between the Company and a key retail partner. The Board of Directors authorized further negotiations in each regard, and considered strategic alternatives in each case.

Negotiations to expand the deal structure and terms to include one of the Company’s retail partners and another investment fund were abandoned at the beginning of June. Negotiations with SK Telecom, EarthLink and Helio continued over the course of the following weeks, including a meeting on June 3, 2008 between Messrs. Schulman and Messenger and representatives of SK Telecom at Deutsche Bank’s offices in New York City. Having reached agreement in principle on key terms, on June 9, 2008 the Company commenced discussions with its lenders in regard to obtaining lender consents to the contemplated transactions. The following day, Company management reported to a special meeting of the Company’s Board of Directors that agreement had been reached among the parties as to the terms of a proposed transaction. The parties agreed to mitigate consequent integration risks by having Helio agree to adhere to a previously proposed transitional business plan that would reduce its operating costs prior to closing and substantially increase accretion for stockholders. Representatives of Deutsche Bank presented their financial analysis with respect to the proposed transaction and noted that, based upon the financial information made available to them, the proposed transaction would be accretive to the Company stockholders.

Over the course of the following week, consents to the transaction were obtained from a majority of the Company’s lenders, SK Telecom agreed (concomitant to the contemplated combination transaction) to join as a lender and the Virgin Group agreed to increase its commitment under the Revolving Credit Facility. As a result, the Company would have access to additional funds under the Revolving Credit Facility and improve its projected performance relative to certain financial covenants under the Senior Credit Agreement. Agreement was also reached with each of SK Telecom and the Virgin Group to secure additional investments of $25 million each in exchange for shares of Series A Preferred Stock. These funds would be used to retire a portion of the debt outstanding under the Senior Credit Agreement, reducing the Company’s leverage and improving its projected performance relative to certain financial covenants in that agreement. Management reported these developments to the Board of Directors at a special meeting convened for such purposes on June 18, 2008, and the Board of Directors agreed to review the final terms of the transaction and reconvene the following week.

On June 25, 2008, Deutsche Bank reviewed with our Board of Directors its financial analysis of the proposed transaction and the Board of Directors appointed a special transaction committee to review and, if advisable, approve the acquisition and related transactions. The special transaction committee met on June 27, 2008 and, after receiving an oral opinion, which was based on and subject to various factors and assumptions stated therein, from Deutsche Bank, which was subsequently confirmed by delivery of a written opinion, dated June 27, 2008, as to the fairness, from a financial point of view, to us as of such date of the consideration to be paid by us and the Operating Partnership in the transaction, and reviewing the final proposed terms, approved the contemplated transactions.”