An Overview of the Housing and Economic Crisis, Why There Is More Pain to Come, and Two Investment Ideas

Whitney Tilson & Glenn TongueT2 Accredited Fund, LP

Tilson Offshore Fund, Ltd.T2 Qualified Fund, LP

Whitney Tilson & Glenn TongueT2 Accredited Fund, LP

Tilson Offshore Fund, Ltd.T2 Qualified Fund, LP

Value Investing CongressOctober 20, 2009

T2 Partners Management L.P. Manages Hedge Funds and Mutual Funds

and is a Registered Investment Advisor

145 E. 57th Street, 10th FloorNew York, NY 10022

(212) 386-7160Info@T2PartnersLLC.com www.T2PartnersLLC.com

145 E. 57th Street, 10th FloorNew York, NY 10022

(212) 386-7160Info@T2PartnersLLC.com www.T2PartnersLLC.com

3

Disclaimer

THIS PRESENTATION IS FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY AND SHALL NOT BE CONSTRUED TO CONSTITUTE INVESTMENT ADVICE. NOTHING CONTAINED HEREIN SHALL CONSTITUTE A SOLICITATION, RECOMMENDATION OR ENDORSEMENT TO BUY OR SELL ANY SECURITY OR OTHER FINANCIAL INSTRUMENT.

INVESTMENT FUNDS MANAGED BY WHITNEY TILSON AND GLENN TONGUE OWN STOCK IN MANY OF THE COMPANIES DISCUSSED HEREIN. THEY HAVE NO OBLIGATION TO UPDATE THE INFORMATION CONTAINED HEREIN AND MAY MAKE INVESTMENT DECISIONS THAT ARE INCONSISTENT WITH THE VIEWS EXPRESSED IN THIS PRESENTATION.

WE MAKE NO REPRESENTATION OR WARRANTIES AS TO THE ACCURACY, COMPLETENESS OR TIMELINESS OF THE INFORMATION, TEXT, GRAPHICS OR OTHER ITEMS CONTAINED IN THIS PRESENTATION. WE EXPRESSLY DISCLAIM ALL LIABILITY FOR ERRORS OR OMISSIONS IN, OR THE MISUSE OR MISINTERPRETATION OF, ANY INFORMATION CONTAINED IN THIS PRESENTATION.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND FUTURE RETURNS ARE NOT GUARANTEED.

Background on the U.S. Housing Market

5

A Record 10% of Mortgages on 1-to-4 Family Homes Were Delinquent or in Foreclosure as of Q2 2009

Source: National Delinquency Survey, Mortgage Bankers Association; T2 Partners estimates. Note: Delinquencies (60+ days) are seasonally adjusted.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Q4 197

9Q4 1

980

Q4 198

1Q4 1

982

Q4 198

3Q4 1

984

Q4 198

5Q4 19

86Q4 1

987

Q4 198

8Q4 1

989Q4 1

990

Q4 199

1Q4 1

992

Q4 199

3Q4 1

994

Q4 199

5Q4 1

996

Q4 199

7Q4 1

998

Q4 199

9Q4 2

000

Q4 200

1Q4 2

002

Q4 200

3Q4 2

004

Q4 200

5Q4 2

006

Q4 200

7Q4 20

08

Per

cent

age

of H

ome

Loan

s

6

All Types of Loans Are Seeing a Surge in Delinquencies, Led by Subprime

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Q1 199

9Q3 1

999

Q1 200

0Q3 2

000

Q1 200

1Q3 2

001

Q1 200

2Q3 2

002

Q1 200

3Q3 2

003

Q1 200

4Q3 2

004

Q1 200

5Q3 2

005

Q1 200

6Q3 2

006

Q1 200

7Q3 2

007

Q1 200

8Q3 2

008

Perc

ent N

oncu

rrent

Alt AOption ARMJumboSubprimePrimeHome Equity Lines of Credit

Sources: Amherst Securities, LoanPerformance; National Delinquency Survey, Mortgage Bankers Association; FDIC Quarterly Banking Profile;T2 Partners estimates. Note: Prime is seasonally adjusted.

7

$0

$5

$10

$15

$20

$25

$30

$35

Jan-06

Apr-06

Jul-0

6Oct-

06Ja

n-07

Apr-07

Jul-0

7Oct-

07Ja

n-08

Apr-08

Jul-0

8Oct-

08Ja

n-09Apr-0

9Ju

l-09

Oct-09

Jan-10

Apr-10

Jul-1

0Oct-

10

Loan

s w

ith P

aym

ent S

hock

(Bn)

Sources: LoanPerformance, Deutsche Bank; slide from Pershing Square presentation, How to Save the Bond Insurers, 11/28/07.

The Wave of Resets from Subprime Loans Is Mostly Behind Us

We are here

8

The Mortgage Meltdown Has Moved Beyond Subprime

Sources: Federal Reserve Flow of Funds Accounts of the United States, IMF Global Financial Stability Report October 2008, Goldman Sachs Global Economics Paper No. 177, FDIC Quarterly Banking Profile, OFHEO, S&P Leverage Commentary & Data, T2 Partners estimates.

$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 $5.0

CDO/ CLO

Other Consumer

Construction & Development

Option ARM

Auto

Credit Card

Home Equity

Jumbo Prime

High-Yield / Leveraged Loans

Subprime

Commercial & Industrial

Other Corporate

Alt-A

Commercial Real Estate

Prime Mortgage

Amount Outstanding (Trillions)

Subprime is only a small part of the problem

9

Delinquencies of Prime and Alt-A Mortgages Are Soaring

Source: New York Times, 5/24/09.

10

Delinquencies of Prime Mortgages Are Soaring

Source: Mortgage Bankers Association National Delinquency Survey.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Q1 199

9Q3 1

999

Q1 200

0Q3 2

000

Q1 200

1Q3 2

001

Q1 200

2Q3 2

002

Q1 200

3Q3 2

003

Q1 200

4Q3 2

004

Q1 200

5Q3 2

005

Q1 200

6Q3 2

006

Q1 200

7Q3 2

007

Q1 200

8Q3 2

008

Perc

ent N

oncu

rrent

(60+

day

s)

11

Fannie Mae and Freddie Mac Serious Delinquencies Are Soaring

Note: Serious delinquencies are loans that have missed three or more consecutive payments (90+ days).Source: Company filings.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

8/079/0710/0

711/0

712/0

71/082/083/084/085/086/087/088/089/0810/0

811/0

812/0

81/092/093/094/095/096/097/098/09

FannieFreddie

12

15 States With the Highest Prime Mortgage Foreclosure Rates

Source: New York Times, 5/24/09.

13

Two Waves of Losses Are Behind Us…But Three Are Looming

Losses Mostly Behind Us• Wave #1: Borrowers committing (or the victim of) fraud, as well as

speculators, who defaulted quickly. Timing: beginning in late 2006 (as soon as home prices started to fall) into 2008. Mostly behind us.

• Wave #2: Mostly subprime borrowers who defaulted when their mortgages reset due to payment shock. Timing: early 2007 (as two-year teaser subprime loans written in early 2005 started to reset) to the present. Now tapering off as low interest rates mitigate payment shock.

Losses Mostly Ahead of Us• Wave #3: Prime loans (most of which are owned or guaranteed by the

GSEs) defaulting due to job loss and home price declines (i.e., underwater homeowners). Timing: started to surge in early 2008 to the present.

• Wave #4: Jumbo prime, second lien and HELOCs (most of which are on banks’ books) defaulting due to job loss and home price declines/ underwater homeowners. Timing: started to surge in early 2008 to the present.

• Wave #5: Losses among loans outside of the housing sector, the largest of which will be in the $3.5 trillion area of commercial real estate. Timing: started to surge in early 2008 to the present.

14

Existing Homes Sales Have Risen in Recent Months, Leading to a Decline in Inventory – But Inventory Is Still at Double Historical Levels – And Shadow Inventory Lurks

Source: NATIONAL ASSOCIATION OF REALTORS® Existing Home Sales data series; estimates prepared for The Wall Street Journal by LPS Applied Analytics, WSJ, 9/23/09

Months SupplyAnnualized Rate of Existing Home Sales

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Mill

ions

5.1 million units as of the end of August 2009

3

4

5

6

7

8

9

10

11

12

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Mon

ths

3.6 million units, equal to 8.5 months as of the end of August 2009

15

Home Prices Look Affordable Due to Price Declines and Ultra-Low Interest Rates

Source: Case-Shiller, Bureau of Labor Statistics, Amherst Securities.

0

100

200

300

400

500

600

700

800

Inde

x Va

lue

Date

CASE SHILLER USA (1975 = 100)

Modeled Home Prices - Interest Only

Modeled Home Prices - 30yr Fully Amortizing

16

Home Prices Were in an Unprecedented Freefall Until A Bounce in Recent Months

Sources: Standard & Poor’s, OFHEO Purchase-Only Index, NATIONAL ASSOCIATION OF REALTORS® Existing Home Sales data series.

100

120

140

160

180

200

220

Q1 200

0Q3 2

000

Q1 2001

Q3 200

1Q1 2

002

Q3 200

2Q1 2

003

Q3 200

3Q1 2

004Q3 2

004

Q1 200

5Q3 2

005

Q1 200

6Q3 2

006

Q1 200

7Q3 2

007

Q1 200

8Q3 2

008

Q1 2009

S&P/Case-Shiller U.S. National Home Price IndexS&P/Case-Shiller 20-City CompositeOFHEO Purchase-Only IndexNAR Median Sales Price of Existing Homes

17

Recent Signs of Stabilization Are Likely the Mother of All Head Fakes

Rather than representing a true bottom, recent signs of stabilization are likely due to seven factors that are (or are likely to be) short-term:1. Ultra-low interest rates2. The $8,000 tax credit for first-time homebuyers3. More middle- and upper-end homes are being sold (either

voluntarily or via foreclosure), which has the effect of raising the price at which the average home is sold – but more defaults of higher priced homes is very bad news for mortgage holders

4. A decline in resets5. A reduction in the inventory of foreclosed homes6. The FHA is providing massive support to the housing market, in

part by doing extremely risky lending7. Home sales and prices are seasonally strong in April-July due

to tax refunds and the spring selling season

18

Another Wave of Resetting Loans Is On the HorizonThe Last Wave Was Driven By Subprime Loans; This Time, It Will be Option ARMs

Source: Loan Performance, Amherst Securities.

0

5

10

15

20

Total Loan Balance ($Bil)

Option ARM Alt A Prime Subprime

We are here

19

Banks Are Selling Their REO, But Foreclosures Have Plunged By More Than Half, Ballooning the Inventory Pipeline

Source: Loan Performance, Amherst Securities.

0%

5%

10%

15%

20%

25%

Mon

thly Roll Rates (%

)

Non Performing to Foreclosure Foreclosure to REO REO to Liquidation

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

REO 90 Days PLUS Foreclosure

Inventory Pipeline

Non-Performing to ForeclosureREO to Liquidation

Foreclosure to REO

90 Days & Foreclosure

REO

Monthly Roll Rates

20

The Current “Housing Overhang” Is 7 Million Homes –Which Doesn’t Include Any New Defaults, Which Are Running at Approximately 300,000/Month!

Source: Mortgage Bankers Association, Loan Performance, Amherst Securities.

21Source: HUD/FHA, through August 31, 2009, NY Times, 10/8/09.

FHA’s Loan Book Is a Rapidly Growing Disaster17.9% of Loans Are in Some Stage of Default; For 2007 Loans, It’s 32.4%

22

Existing Home Sales Are Highly Seasonal

Source: National Association of Realtors.

23

Existing Home Sales Are Highly Seasonal

Source: National Association of Realtors.

HPA Seasonality Coefficient -- Deviation From Mean

24

Home Prices Bounced From April-July…

Source: S&P Case-Shiller 20-city index.

Sequential Home Prices March 2005-July 2009

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Mar-05

Jun-0

5Sep-0

5Dec

-05Mar-

06Ju

n-06

Sep-06

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Mar-07

Jun-0

7Sep

-07Dec

-07Mar-

08Ju

n-08

Sep-08

Dec-08

Mar-09

Jun-0

9

July 2009: +1.6%

25

…But They Always Bounce in the Spring and Early Summer!

Source: S&P Case-Shiller 20-city index.

Sequential Home Prices February 2000-July 2009

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

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3.0%

Feb-00

Jul-0

0Dec

-00May

-01Oct-

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02Aug

-02Ja

n-03

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3Apr-

04Sep

-04Feb

-05Ju

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8Ju

n-08

Nov-08

Apr-09

Red circles represent April - June each year

26

Outlook for Housing Prices

• We think housing prices will reach fair value/trend line, down 40% from the peak based on the S&P/Case-Shiller national (not 20-city) index, which implies roughly a 10% further decline from where prices were as of the end of Q2 2009

• The key question is whether housing prices will go crashing through the trend line and fall well below fair value. This is a real possibility, though continued massive government subsidies could prevent it. In the long-term, housing prices will likely settle around fair value, but in the short-term prices will be driven both by psychology as well as supply and demand. The recent bounce in home prices has improved psychology, but the supply-demand trends are very unfavorable

– There is a huge mismatch between supply and demand, due largely to the tsunami of foreclosures. In addition, the “shadow” inventory of foreclosed homes already exceeds one year and there will be millions more foreclosures over the next few years, creating a large overhang of excess supply that will likely cause prices to overshoot on the downside, as they did in California

• Therefore, we expect housing prices to decline at least 40% from the peak, bottoming in mid-2010

• We are also quite certain that wherever prices bottom, there will be no quick rebound

– There’s too much inventory to work off quickly, especially in light of the millions of foreclosures over the next few years

– We don’t think the economy is likely to provide a tailwind, as we expect tepid economic growth at best for a number of years

The Current Unemployment Situation Is theMost Severe Since the Great Depression

28

There Have More Than 8 Million Jobs Lost SoFar in This Recession, Though the Monthly Rate of Losses Has Eased in Recent Months

Source: Bureau of Labor Statistics.

-1000

-800

-600

-400

-200

0

200

400

600

Jan-9

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n-98

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n-00

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n-08

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9

Cha

nge

in N

onfa

rm P

ayro

ll Em

ploy

men

t (00

0s)

There have been job losses every month since

December 2007

150,000 jobs/month are required to absorb new entrants to the workforce and prevent

unemployment from rising

29

The Unemployment Rate Continues to Rise, Reaching 9.8% in September

Source: Bureau of Labor Statistics.

If part-time and discouraged workers are factored in, the unemployment rate would have been 17.0% in September. The labor force participation rate was 65.2%, the lowest in 22 years. Finally, the average work week hit a record low of 33.0 hours. To return to the average of 33.8 hours would be the equivalent of three million new jobs not created.

3%

4%

5%

6%

7%

8%

9%

10%

11%

Jan-7

0Ja

n-73

Jan-7

6Ja

n-79

Jan-8

2Ja

n-85

Jan-8

8Ja

n-91Ja

n-94

Jan-97

Jan-0

0Ja

n-03

Jan-0

6Ja

n-09

Une

mpl

oym

ent R

ate

30

Chronic Unemployment Is Skyrocketing

Source: Labor Department, WSJ, 10/3/09.

35.6%

31

The Average Weeks Unemployed is 26.2

Source: Labor Department, WSJ, 10/3/09.

26.2

32

The Percentage of Unemployed Not on Temporary Layoff Has Risen to 54%

Source: Labor Department, WSJ, 10/3/09.

54%

33

The Proportion of Unemployed Whose Unemployment Benefits Have Expired Has Soared

Source: Labor Department, http://ows.doleta.gov/unemploy/claimssum.asp.

0%

10%

20%

30%

40%

50%

60%

Jun-72

Mar-73

Dec-73

Sep-74

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S D f L b h // d l / l / l i

34

There Are Now Six Unemployed People for Every Job Opening

Source: Bureau of Labor Statistics, NY Times, 9/27/09.

35

5.2% of All Jobs Have Disappeared, Far Worse Than Any of the Past Five Recessions

Source: Bureau of Labor Statistics; John Burns Real Estate Consulting.

-5.5%

-4.5%

-3.5%

-2.5%

-1.5%

-0.5%

0 6 12 18 24 30 36 42 48

Months after pre-recession peak

1980 2001 - 051990 - 931974 - 76

2007- present

1981 - 83

Consumer Spending, Which Accounts for 70% of GDP, Is Weak and Likely to Remain So

37

Consumer Confidence Has Rebounded Somewhat But Remains Low

Note: 1985=100. Source: The Conference Board (www.pollingreport.com/consumer.htm)

0

20

40

60

80

100

120

140

160

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Con

sum

er C

onfid

ence

Inde

x

38

Total Consumer Credit Is Falling Sharply

Source: Federal Reserve Board, WSJ, 10/9/09.

Total Consumer Credit Outstanding(Change From Year Earlier)

Down $119 billion or 4.6% from its peak in 7/08. Down $12 billion in August, a 5.8% seasonally

adjusted annual rate, the seventh straight month of declines, the longest stretch since 1991.

Total Amount of Revolving and NonrevolvingConsumer Credit Outstanding

39

Household Credit Market Debt Outstanding Has Declined for the First Time Since This Was Measured Beginning in the Early 1950s

Source: St. Louis Fed.

40

The Percentage of Banks Tightening Standards for Consumer Loans Has Risen Sharply

Source: Federal Reserve Board Senior Loan Officer Opinion Survey on Bank Lending Practices, July 2009.

The U.S. Savings Rate Hit a 15-Year High of 6.9% in May, but Fell to 3.0% in AugustThis is good news in the long run, but could be a severe economic headwind in the short run, given that consumer spending is 2/3 of GDP

Source: Paul Kedrosky’s blog, 6/26/09; http://paul.kedrosky.com/archives/2009/06/the_black_swan.html; www.bea.gov/newsreleases/national/pi/2009/pi0709.htm.41

Peaked

Household Liabilities as a Percentage of Disposable Income Remains Very High

Source: U.S. Federal Reserve, WSJ, 10/13/09.42

Peaked 1991: 90%

Peak: 138%

2000: 101%

Today: 129%

Investment Idea #1Short the Homebuilders Via the

iShares Dow Jones US Home Construction ETF (ITB)

Housing Starts, Completions and Sales Are At or Near All-Time Lows

Source: Commerce Department, data through 9/09.44

A slight rebound in starts and sales in recent months

200

400

600

800

1000

1200

1400

1600

1800

2000

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

Seas

onal

ly A

djus

ted

Ann

ual R

ate

(000

s)

StartsCompletionsNew Homes Sold

There Is an Enormous Inventory Glut of New HomesThe Average New Home Has Been on the Market for 12.9 Months

Source: Census Bureau, through 8/09.45

2

4

6

8

10

12

14

Jan-9

0Ja

n-91

Jan-9

2Ja

n-93

Jan-9

4Ja

n-95

Jan-9

6Ja

n-97

Jan-9

8Ja

n-99

Jan-0

0Ja

n-01

Jan-0

2Ja

n-03

Jan-0

4Ja

n-05

Jan-0

6Ja

n-07

Jan-0

8Ja

n-09

Med

ian

Age

(mon

ths

Vacant Housing Stock Creates an Enormous Inventory Overhang

Source: Census BureauSource: Census Bureau, Moody’s Economy.com.

46

1.1-1.5 million excess units, equal to 2-3 years of existing home sales

Nearly 6% of Homes Built This Decade Are Vacant

Source: Census BureauSource: Census Bureau, through Q4 2008.

47

5.9%

2.0%

April 2000 to presentMarch 2000 or earlier

Vacancy Rate By Date of Construction

Unlike Past Housing Downturns, New Home Sales Have Fallen Far More Than Existing Home Sales

Source: National Assoc. of Realtors (existing sales) and Census Bureau (new sales), both via Haver Analytics; chart from the New York Times, 6/27/09; manually updated through 8/09. 48

A slight rebound from March-August

New homes sales fell 76% from the peak; still down 69% through August

Debt-to-Equity Ratio ofMajor Homebuilders

Source: Census BureauSource: Company filings.

49

0.00 0.00

0.170.26

0.48 0.53 0.55 0.59 0.64

0.99

1.40

1.97

-0.5

0.0

0.5

1.0

1.5

2.0

NVR MDC TOL RYL MTH DHI LEN MHO PHM BHS KBH SPF BZH HOV

6.76

-11.98

Inventory-to-Equity Ratio ofMajor Homebuilders

Source: Census BureauSource: Company filings.

50

0.300.50

1.331.50 1.56 1.55

1.80

1.461.71

2.10

3.123.37

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

NVR MDC TOL RYL MTH DHI LEN MHO PHM BHS KBH SPF BZH HOV

8.74

-12.89

Price-to-Book Ratio ofMajor Homebuilders

Source: Census BureauSource: Company filings.

51

2.69

1.76

1.21

1.621.41

1.55

1.08

0.70

1.27

0.39

1.97

2.43

1.37

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

NVR MDC TOL RYL MTH DHI LEN MHO PHM BHS KBH SPF BZH HOV-3.09

Investment Idea #2Iridium (IRDM)

53

Overview

• Iridium is the world’s only communication provider with the ability to provide real-time voice and data communications over 100% of the earth’s service by virtue of the company’s 66-satellite low-earth orbit (LEO) constellation. In addition, Iridium is one of the few satellite operators with the ability to provide effective voice, machine-to-machine (M2M), and high-speed data services.

• One of two major players in Global Satellite Communications industry• Single subscriber device works worldwide• Motorola spent $5 billion launching satellites in late 1990s• Filed for bankruptcy in 1999 with only 50,000 customers due to too much

debt and clunky phones that didn’t work inside buildings

Iridium Serves Many Different Markets

Source: Company presentation, 6/09.54

55

A Highly Attractive Business

• Growing market share in a growing industry• Huge barriers to entry• US Department of Defense is an anchor customer (22% of

revenues in Q2 ‘09)• Very high and rapidly expanding margins• New products and applications

Iridium’s Market Share Has Grown Rapidly

Source: Company presentation, 9/08.56

Iridium Has Shown Extraordinary Growth in Subscribers

Source: Company filings.57

Up 24% YOY in Q2 ’09 to 347,000 subscribers

Iridium Has Shown Extraordinary Growth in Revenue and Operational EDITDA

Source: Company filings.58

In Q2 ’09, revenue was only up 1% due to weak equipment sales, but Operational EBITDA rose 32% and net income grew 53%.

Subscriber Growth Has Been Driven by Commercial and Machine-to-Machine

Source: Stifel Nicolaus, company filings.59

Iridium’s Stock Has Tumbled Since It Began Trading a Few Weeks Ago

Source: BigCharts.com.60

61

Why Is Iridium Out of Favor?

• SPAC structure– Many SPAC shareholders were just in it for the cash payout

upon consummation of a deal and are now selling• Many warrant owners are shorting the stock

– Iridium tried to mitigate technical issues:• Retired 30.5 million $7 warrants• Issued 16 million new shares• Repurchased15.9 million shares

• Large future funding requirement for Iridium NEXT• Dismal record of early telecom satellite networks• Prior bankruptcy

62

Iridium Came Public Via a SPAC Transaction

• SPACs have very poor track records in general• But Iridium was acquired by a SPAC (Special Purpose

Acquisition Company) controlled by Greenhill, a top quality private equity sponsor

• The deal price was negotiated during the market meltdown last fall (deal was announced 9/23/08), then the price was reduced in April and warrant dilution was cut back in July

63

Iridium NEXT

• Current satellite constellation will need to be replaced starting in 2014– Backwards compatible (existing customers will not need to

replace equipment)– Improved capacity and data rates

• Total cost: $2.7 billion– Satellites: $1.9 billion– Launch: $0.6 billion– Other: $0.2 billion

• Funding– Internally generated cash flow– Debt– Equity– Revenue offsets (hosted payloads)

Iridium’s Cap Ex Requirements Will Rise to Fund Iridium Next, and Then Fall

Source: Stifel Nicolaus estimates.64

Iridium Should Be Able to Fund Iridium NEXT From Cash Flow, Hosted Payloads and Warrant Conversion

Source: Raymond James estimates.65

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Valuation

Share price (10/19/09): $8.38Shares outstanding: 68.2 million$7 warrants 13.5 million$11.50 warrants 14.4 millionMarket cap: $572 millionLess cash: $80 millionEnterprise value: $492 million

2009 EBITDA (E) $130EV/EBITDA: 3.8x

Iridium’s Operational EBITDA is Projected to Double in Only Three Years

Source: Raymond James estimates.67

We Expect a Mid-20% IRR on This Investment for Many Years to Come

Source: T2 Partners estimates.68

Stock Price Based on EV/EBITDA MultiplesMultiple 2016 2017 2018

8 $25.36 $31.20 $37.779 $29.05 $35.22 $42.10

10 $32.74 $39.25 $46.43IRRMultiple 2016 2017 2018

8 21% 21% 24%9 23% 23% 26%

10 26% 25% 28%

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Drivers of Stock Price Appreciation

• Low current valuation multiple (40% discount to closest public comp, Inmarsat)

• Rapid growth in earnings• Removal of legacy SPAC investors• Warrant holders finish hedging (shorting the stock)• Removal of uncertainty overhang related to future capital

expenditures