AT&T Pitchbook Team Pepper Waves

• The acquisition of DirecTV is accretive to AT&T’s business• EBITDA and operating income margins have stayed pretty consistent, which means AT&T

has controlled its costs very well • Current trends affecting AT&T include

• Increased market penetration for wireless and broadband subscribers in Latin America• Regulatory changes in Mexico will be beneficial for AT&T’s Mexico segment• Media company consolidation• Increased focus on the Internet of Things

• Strategic Transaction Advice• Axtel• AMC Networks• PTC

Executive Summary at&t

Company Overview

Company Overview

2010 2011 2012 2013 2014120,000

122,000

124,000

126,000

128,000

130,000

132,000

134,000

Historical Total Revenue

Total Revenue

ⁱAT&T shifted their core business from wireline to wireless as they recognized the slower growth in the landline industry.

• With a market capitalization of $205.4 billion, AT&T is the biggest telecommunication company in the industry.

• Wireless, Wireline, Advertising Solutions were the main revenue drivers of 2014.

• With the purchase of DirecTV in 2015, their revenue streams have become more diversified and more international.

Financial Metrics (in $m) 2014 2013Total Revenue 132,447.00$ 128,752.00$ Total Assets 292,829.00$ 277,787.00$ EBITDA 40,795.00$ 41,061.00$ Cash and Near Cash 8,603.00$ 3,339.00$ Diluted EPS 3.26$ 1.94$ Net Debt/EBITDA 1.8x 1.7x

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

2010 2011 2012 2013 2014

Revenue Driver (Before DirectTV)

Wireless Wirelineⁱ Adv n Other

at&t

• Before the acquisition of DirecTV, AT&T’s main segments were Wireless and Wireline (56% and 44%). But landline (Wireline) revenues have been declining, so the company has shifted its focus towards Wireless subscribers.

• In order to increase its growth potential and decrease its revenue headwinds, the company should expand to new markets.

• DirectTV brings about this diversification, but the next key strategy will be the long term cost savings that result from the synergies between U-Verse and DirecTV.

• Furthermore, expected revenue from the International segment will only be about 2% of total revenue. We believe there is still a lot of growth potential in this segment.

44%

34%

2%

20%0%

Revenue (Expected 2015)

Wireless Wireline International DirectTV Adv & other

Sources: Strategy Analytics & fiercewireless.com

Business Model at&t

• We picked a very conservative sales growth rate (3.1%) because of the competitive nature of the industry (Wireless and Wireline in North America will be more consolidated further in the near future to compete against companies offering slightly different services)

• The EBITDA margin and operating income margin has been stabilizing around 30% and 18% so we kept the same margins for our forecasts

• The fixed asset turnover has been decreasing as a result of the recent acquisitions, but management should expect the ratio to improve in the near future as the cost savings are realized.0.7

0.72

0.74

0.76

0.78

0.8

0.82

0.84

0.86

0.88

2010201120122013201420152016201720182019

Fixed Asset Turnover

Fixed Asset Turnover

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2010201120122013201420152016201720182019

Net Profit Margin

EBITDA Margin

Operating IncomeMargin

Operating Analysis at&t

0.000 0.500 1.000 1.500 2.000

AT&T

Verizon

T-Mobile

Sprints

Current Ratio (2014)

AT&T

Verizon

T-Mobile

Sprints

0.000 0.200 0.400 0.600 0.800 1.000

AT&T

Verizon

T-Mobile

Sprints

Quick Ratio (2014)

AT&T

Verizon

T-Mobile

Sprints

0.000

0.200

0.400

0.600

0.800

1.000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

AT&T Liquidity Ratio (10yr)

Current Ratio Quick Ratio Cash Ratio

• In 2014, AT&T’s current ratio is slightly low at 0.859. However, AT&T is a mature company so we don’t believe there is a risk of the company not being able to pay down current obligations.

• The quick ratio (0.620) is also lagging. However, we don’t believe this will be a permanent situation.

• The 10 year liquidity ratios, which include both the historical and forecasted values, show that the ratios will increase around 18% and will be stable overtime.

• For our forecast, the current liability increased as a result of additional operating expenses from the recent acquisitions.

Liquidity Analysis at&t

• The Debt/Asset ratio is good as it’s lower than industry average. That means the increase of our debt from the recent acquisitions will be offset by a higher proportion of assets (i.e. Higher PPE & Cash)

• The Debt/Equity ratio is within the reasonable industry range. For future AT&T transaction targets, we recommend using less debt financing and more financing from equity.

• The current portion of long term debt spiked between 2014 and 2015 because we kept current portion at 7% of total debt and total debt jumped as a result of the acquisition of DirecTV.

*Industry Average is from Morningstar Financial

• Debt/EBITDA ratio is good as it’s lower than industry average. The current debt level doesn’t adversely affect our earning power.

• The Op. CF/Total Debt is lower than what we would like but again, we’re not worried that AT&T is not able to pay down its debt.

Debt Capacity 2014 2015 Ind AvgDebt/Assets 0.25 0.31 0.35Debt/Equity 0.85 0.94 0.87Current Assets/Current Liability 0.86 0.69 0.93Debt/EBITDA 1.80 2.50 2.88Cashflow Ops/Total Debt 0.43 0.32 72.81

Debt Capacity at&t

• The main competitor in the industry based on market cap is Verizon Communications Inc.

• The other two competitors in the wireless industry are T-Mobile and Sprint Corporation

• Based on historical CAGR, AT&T falls slightly behind Verizon

• Based just on Wireless Revenues CAGR (5yr), AT&T beat Sprint

• The Wireless industry is very competitive so smaller, more nimble competitors have a better chance of disrupting the industry

0.00% 20.00% 40.00% 60.00%

AT&T

T-Mobile

Sprint

Wireless Revenue CAGR (5yr)

AT&T

T-Mobile

Sprint

0.00% 1.00% 2.00% 3.00% 4.00%

AT&T

Verizon

Total Revenue (CAGR 5yr)

AT&T

Verizon

47%

42%

7% 4%

Market Capⁱ (in $b)

AT&T

Verizon

T-Mobile

Sprint

ⁱ As on 11/24/2015

Competitors at&t

• Net Income’s CAGR for the previous five years is -6.06%. After acquisitions and with AT&T’s new strategy, forecasted CAGR is 0.46% realizing management’s plans for a turnaround

• The top two graphs show that AT&T’s decision to purchase DirecTV is favorable the company’s future growth.

• In addition, the new company strategy for better international market penetration (ie. Latin America and DirectTV) will bring diversification and additional growth. This will be discussed further under valuation analysis.

0.00%0.50%1.00%1.50%2.00%2.50%3.00%

AT&T

AT&T Projection

Total Revenue CAGR (NTM 5yr)

AT&T

AT&T Projection

-8.00% -6.00% -4.00% -2.00% 0.00% 2.00%

AT&T

AT&T Projection

Net Income CAGR (NTM 5yr)

AT&T

AT&T Projection

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

2015 2016 2017 2018 2019 2020

Revenue Driver (After DirectTV)

Wireless Wireline International DirectTV Adv & other

Acquisition Effect at&t

• AT&T Share Price: $33.75 (10/25/2015) • Very well balanced Capital Structure 46%

Debt and 54% Equity Financing• The top 10 institutions owned about

22.23% of the equity ownership.

54%46%

Capital Structure

Total Debt Total Common Stock

Top 10 holders % TotalVanguard Group, Inc. 5.7State Street Corp 4.09Evercore Trust Company, N.A. 3.31BlackRock Fund Advisors 2.61Capital Research Global Investors 1.65Northern Trust Investments, N.A. 1.23Fidelity Management and Research Company 1.02Berkshire Hathaway Inc 0.96Dimensional Fund Advisors, Inc. 0.84Geode Capital Management, LLC 0.82Total: Top 10 institutions 22.23

55%

45%

Ownership by type

Institutional Ownership Non Institutional Ownershipⁱ

ⁱ Non Institutional Ownership includes the insider portion of 0.036% or total shares ($44m).

Shareholder Ownership at&t

Valuation Overview

Based on EV/Rev Based on EV/EBITDA Based on EV/Rev Based on EV/EBITDAComparables $36.94 $42.24 $43.51 $50.48Precedents $48.04 $35.70 $31.75 $29.79

Combined Entity Fair Value per ShareSegmented Fair Value per Share

Perpetuity Model Multiple ModelDCF $41.48 $40.16

Valuation Overview at&t

0

500

1000

1500

2000

2500

0

5

10

15

20

25

30

35

40

2010/1/4 2011/1/4 2012/1/4 2013/1/4 2014/1/4 2015/1/4

AT&T S&P500

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80

EV/EBITDA (Combined)

EV/EBITDA (Segmented)

EV/ Revenue (Combined)

EV/ Revenue (Segmented)

Precedent Transactions

EV/EBITDA (Combined)

EV/EBITDA (Segmented)

EV/ Revenue (Combined)

EV/ Revenue (Segmented)

Comparables

3-7x Exit Multiple

Discounted Cash Flow

$21.08 $59.24

$9.37 $50.09

$23.64 $60.21

$33.12 $54.26

$34.65 $65.58

$25.79 $67.23

$24.53 $57

$25.67 $53.9

$19.23 $46.35

Current Price=$33.75 Fair Price=$40

• AT&T shares are currently about 20% higher than what they were 5 years ago. This comes at a time when the market for wireless consumers has been fully saturated and wireline revenues are decreasing.

• AT&T continues to stand out among its peers through innovation and strategic acquisitions that help add value for its shareholders.

• Based on analysis of AT&T’s discounted cash flows, precedent transactions in relevant industries, and comparables in the space, we find AT&T to be undervalued at current levels.

Comparables and Precedent Transactions Inclusion Criteria at&t

• Because AT&T has such a large market cap, we only looked at companies that had a larger than segment average market cap

• We also looked at EV/EBITDA, EV/Revenue, P/E to find comparable measurements to AT&T

Comparables

Precedent Transactions

• Since AT&T is a large company we looked at transactions involving higher than average EV per segment to make it more comparable to AT&T

• We also chose transactions that were more recent if possible because recent transactions hold more weight• We also chose transactions based on whether the buyer company’s share price increased to gauge market

sentiment on such transactions

Segmented Combined Entity

EV/Rev EV/EBITDA EV/Rev EV/EBITDA

Company Name NTM NTM NTM NTM(all figures presented in USD millions, except per share figures or where noted)Integrated Telecom

Verizon 2.3x 6.4x

WirelessT-Mobile 1.5x 5.9x 1.5x 5.9x

AT&T Metric $84,692 $30,405Implied Enterprise Value 130,042 179,446

WirelineComcast 2.6x 7.6x 2.6x 7.6xTime Warner Cable 3.1x 8.9x 3.1x 8.9x

Wireline Average 2.8x 8.3xAT&T Metric $62,173 $17,732Implied Enterprise Value 175,074 147,176

SatelliteDish 2.2x 11.5x 2.2x 11.5x

AT&T Metric $16,318 $4,016Implied Enterprise Value 36,084 46,138

Combined Average 2.3x 8.1xAT&T Metric $163,183 $52,152

Total Enterprise Value 341,200 372,703 380,288 421,720- Debt (126,930) (126,930) (126,930) (126,930)- Preferred & Other (965) (965) (965) (965)+ Cash 6,202 6,202 6,202 6,202

Equity Value 219,507 251,010 258,595 300,027Shares Outstanding (millions) 5,943 5,943 5,943 5,943Fair Value Share Price $36.94 $42.24 $43.51 $50.48

Comparables-Valuation Overview at&t

Segmented Combined EntityEV/Revenue EV/EBITDA EV/Revenue EV/EBITDA

Target LTM LTM LTM LTM(all figures presented in USD millions, except per share figures or where otherwise noted)

US WirelessCellco Partnership 3.8x 9.7x 3.8x 9.7xAT&T Metric 72,204 24,643Implied Enterprise Value 274,937 239,845

US WirelineVirgin Media 2.1x 5.2x 2.1x 5.2xAT&T Metric 53,005 14,371Implied Enterprise Value 111,430 74,921

SatelliteDirecTV 1.5x 5.9x 1.5x 5.9xAT&T Metric 13,912 3,255Implied Enterprise Value 20,806 19,117

Latin America TelecomTele Norte Leste Participacoes S.A. 1.3x 3.5x

TV & MediaAOL 1.6x 9.7xBelo Corp. 3.1x 8.4x

Combined Average 2.2x 7.1xAT&T Metric 139,121 42,269

Total Enterprise Value $407,172 $333,883 $310,375 $298,720- Debt (126,930) (126,930) (126,930) (126,930)- Preferred & Other (965) (965) (965) (965)+ Cash 6,202 6,202 6,202 6,202

Equity Value $285,479 $212,190 $188,682 $177,027Shares Outstanding (millions) 5,943 5,943 5,943 5,943Fair Value Share Price $48.04 $35.70 $31.75 $29.79

Precedents-Valuation Overview at&t

Valuation($ in millions of U.S. dollars except per share amounts) Projected Fiscal Years Ending December 31Free Cash Flows 2015 2016 2017 2018 2019 2020EBIT * (1-tax rate) 19,809 20,387 20,999 21,648 22,336 23,064

Depreciation And Amortization 19,763 20,417 21,107 21,834 22,600 23,407

Other - - - - - -

Capex (27,421) (28,221) (29,069) (29,968) (30,920) (31,928)

Net change in working capital 3,639 51 197 209 223 237

Free cash flows to the firm (FCFF) 15,789 12,633 13,233 13,723 14,239 14,780

Years to Discount 0.17 1.17 2.17 3.17 4.17 5.17

Cost of Capital 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Discount Factor 0.99 0.94 0.90 0.86 0.82 0.78

PV Free cash flows to the firm (FCFF) 15,662 11,936 11,909 11,764 11,626 11,495

FCFF Fair Value Perpetuity Method FCFF Fair Value Multiple MethodGrown TV FCFF 14,928 EBITDA Multiple 5.0x

Terminal Value 374,508 Last forecast EBITDA 58,890

Present Value of Terminal Value 291,261 Terminal Value 294,450

Terminal Value as % of Total Value 79.7% Present Value of Terminal Value 283,515

Present Value of Forecast FCF 74,391 Terminal Value as % of Total Value 79.2%Forecast Period as % of Total Value 20.3% Present Value of Forecast FCF 74,391

Enterprise Value 365,652 Forecast Period as % of Total Value 20.8%- Debt (hardcoe as of valuation date) (125,446) Enterprise Value 357,907+ Cash (hardcoe as of valuation date) 6,202 - Debt (hardcoe as of valuation date) (125,446)

Net Debt 119,244 + Cash (hardcoe as of valuation date) 6,202

Equity Value (Market Cap) 246,408 Net Debt 119,244

Shares outstanding 5,943 Equity Value (Market Cap) 238,663Fair value share price 41.46 Shares outstanding 5,943

Fair value share price 40.16

Discounted Cashflow Valuation Overview at&t

Levered Finance Analysis

• With a $20 billion cap on funding new acquisitions in the near future, at&t has to choose its new projects carefully.

• Some of AT&T’s ratios are not optimal when compared with its industry. The Debt/Equity ratio should be brought in line with the rest of the industry so management should use limited debt to finance further acquisitions.

• We decided to use 35% Debt and 65% Equity financing and schedule the debt to be fully repaid within 10 years. With this capital structure, at&t can successfully add value to their firm increasing FCF/Share, Equity/Share while maintaining an acceptable Net Debt/Adjusted EBITDA (2.48x in 2020).

•We used an Interest Rate of 4.8%. This is derived from dividing the historical Long Term Interest by Long Term Debt. We expect current interest rates to be similar with AT&T’s historical interest rate of about 5% due to the fact that AT&T has the ability to pay down their debt obligations and continue to maintain a good bond rating.

•We used a purchase price multiple of 7.5x to reflect the average EV/EBITDA of precedent transactions in TV&Media and Latin America because we believe that AT&T has the best opportunity to add value for its shareholders in these two segments.

Levered Finance Overview at&t

Transaction Opportunities

Trends (Latin America) at&t

0%

5%

10%

15%

2014* 2015* 2016* 2017* 2018* 2019* 2020*

4G Wireless in Latin America

4G Wireless

0%

20%

40%

60%

80%

2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020*

4G Wireless in Northern America

4G Wireless

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014

in %

Share of Mobile Internet Subscriptions to Mobile Telephone Subscriptions

Latin America

Mexico

USA

• 4G Mobile Wireless penetration in Latin America is only around 5% in 2015, it’s expected to be 14% by 2020. In North America, the 4G Wireless industry is expected to be consolidated further and the long term growth rate will decrease.

• The bottom graph showcases the percent share of mobile Internet to mobile telephone subscriptions. In Latin America, we see upward sloping trends. That means more people will be using the Internet.

• On the other hand, in the US, the share of mobile

Internet subscriptions to mobile telephone subscriptions has evened out. This means that the mobile Internet industry is maturing and will have smaller but more constant growth rates.

Sources: Jefferies & Company, Euromonitor portal

Trends (Domestic) at&t

• Internet of Things to generate over $1Bn in review for AT&T this year. • AT&T moving towards integration of technology with its businesses and on how to

leverage Internet of Things (IoT) within its network• Mid tier media company consolidation• Creation of original content• Content availability across multiple platforms• Cable company acquisitions of media companies

Target Buys at&t

Target Buy #1 at&t

Company Overview

• Axtel, S.A.B. de C.V has just merged with Alestra. Together, they provide telephone, television services and broadband connections. Axtel has been showing strength in liquidity, debt capacity and operating performance ratios.

• Revenue drivers: • Local wireless services: $179.84 million.• Internet & Video: $80.96 million. (14% increase from

prev. year)• Data & Network: $114.93 million

• Axtel has invested $2.60 billion in infrastructure, covering 200 cities with Axtel connectivity services, 94 thousand subscribers for Axtel TV services and 908 thousand telephone lines in services

Financial Overview(2014)

• Strategic: Grows AT&T’s broadband and TV subscriber base in Latin America

• Operational: Potential synergies with AT&T’s Mexico Telecom business and DirecTV’s Latin America business

Target Buy #2 at&t

Company Overview

• Provides original programming through AMC, WE tv, Sundance Channel among others.

• Recently acquired 49.9% of BBC America

Financial Overview(2014)

• Acquisition of AMC Networks will allow AT&T to become a player in the media industry providing original content and leveraging it across multiple platforms.

• Strategic: Make AT&T a player in the media industry. Develop, own, and distribute original content across multiple platforms. Initial investments into content development can lead to huge returns in the future through distribution agreements.

• Operational: Adds EBITDA of over $600Mn to the entertainment segment which includes expected DirecTV EBITDA of $7.8Bn

Target Buy #3 at&t

Company Overview• Develops and delivers technology solutions,

comprised of software and services to help businesses operate more effectively in a connected world.

• Acquired Axeda, which has a partnership with AT&T to develop software to remotely manage and monitor a company’s global assets

• Acquisition of PTC will allow AT&T to leverage all of PTC’s sensor technology, software, and connectivity into IoT solutions for its customers. Technology can be applied to consumer products also.

• Strategic: Consolidates AT&T’s position as the industry leader in IoT design and implementation fueling future growth in the segment.

• Operational: Synergies with Business Solutions and potential leverage into Consumer Mobility.

Financial Overview(2014)

Appendix I: Team Overview

Team Overview

Pepper Waves consists of three Master of Science in Applied Finance students from Pepperdine’s Graziadio School of Business and Management. Reinaldo Johari earned his BBA in Finance at Texas A&M University, is a CFA Level 1 candidate and has a strong interest in Investment Management and Social Investment Entrepreneurship. He is also an active member of the CFA Society (Los Angeles). YueCong (Marco) Zhang graduated from North China Electric Power University with a BA in Financial Management. He has been investing in both the Chinese and American markets for the past five years. His passion is in Investment Banking. Peter Hsiung received his BA in Economics from the University of Maryland and has interned at an Insurance Asset Management firm. He is part of the Finance Club on campus and coordinates Wall Street Prep activities for the students. After business school, Peter would like to work in Investment Banking.  

Reinaldo Johari Peter Hsiung YueCong Zhang

Appendix II: Model Outputs

Discounted Cashflow Model

DCF Summary - Operating ModelCashflow Forecast

*All dollar amounts in millions 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020EWireless Revenues 58,500 63,215 66,763 69,899 73,992 77,988 82,199 86,638 91,316 96,247 101,444Wireline Revenues 61,300 60,140 59,567 58,814 58,425 57,864 57,286 56,713 56,146 55,584 55,029DirecTV Revenues - - - - - 32,448 33,518 34,625 35,767 36,947 38,167International Revenues - - - - - 3,000 3,300 3,630 3,993 4,392 4,832Advertising (discontinued) / Other Revenues 4,480 3,368 1,104 39 30 23 18 14 10 8 6Total Revenues 124,280 126,723 127,434 128,752 132,447 171,323 176,321 181,619 187,232 193,179 199,477Revenue Growth - 2.0% 0.6% 1.0% 2.9% 29.4% 2.9% 3.0% 3.1% 3.2% 3.3%Wireless Expenses (36,185) (41,282) (43,296) (44,508) (48,924) (51,566) (54,350) (57,285) (60,379) (63,639) (67,076)Wireline Expenses (41,879) (41,360) (41,207) (41,638) (42,471) (42,064) (41,643) (41,226) (40,814) (40,406) (40,002)DirecTV Expenses - - - - - (24,599) (25,410) (26,249) (27,115) (28,010) (28,934)International Expenses - - - - - (2,838) (3,122) (3,434) (3,777) (4,155) (4,571)Advertising (discontinued) / Other Expenses (3,889) (3,115) (1,797) (1,545) (257) (18) (14) (11) (8) (6) (5)Total Operating Costs (81,953) (85,757) (86,300) (87,691) (91,652) (121,084) (124,540) (128,206) (132,094) (136,217) (140,588)Wireless EBITDA 22,315 21,933 23,467 25,391 25,068 26,422 27,848 29,352 30,937 32,608 34,369Wireline EBITDA 19,421 18,780 18,360 17,176 15,954 15,801 15,643 15,486 15,332 15,178 15,027DirecTV EBITDA - - - - - 7,849 8,108 8,376 8,652 8,938 9,233International EBITDA - - - - 162 178 196 216 237 261Advertising (discontinued) / Other EBITDA 591 253 (693) (1,506) (227) 5 4 3 2 2 1Total EBITDA 42,327 40,966 41,134 41,061 40,795 50,238 51,781 53,413 55,139 56,963 58,890

EBITDA Growth - (3.2%) 0.4% (0.2%) (0.6%) 23.1% 3.1% 3.2% 3.2% 3.3% 3.4%EBITDA Margin 34.1% 32.3% 32.3% 31.9% 30.8% 29.3% 29.4% 29.4% 29.4% 29.5% 29.5%Wireless EBITDA Growth (1.7%) 7.0% 8.2% (1.3%) 5.4% 5.4% 5.4% 5.4% 5.4% 5.4%Wireline EBITDA Growth (3.3%) (2.2%) (6.4%) (7.1%) (1.0%) (1.0%) (1.0%) (1.0%) (1.0%) (1.0%)DirecTV EBITDA Growth 3.3% 3.3% 3.3% 3.3%International EBITDA Growth 10.0% 10.0%Advertising / Other EBITDA Growth (23.1%) (23.1%) (23.1%) (23.1%) (23.1%)Wireless EBITDA Margin 38.1% 34.7% 35.1% 36.3% 33.9% 33.9% 33.9% 33.9% 33.9% 33.9% 33.9%Wireline EBITDA Margin 31.7% 31.2% 30.8% 29.2% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3%DirecTV EBITDA Margin 24.2% 24.2% 24.2% 24.2% 24.2% 24.2%International EBITDA Margin 5.4% 5.4% 5.4% 5.4% 5.4% 5.4%Advertising / Other EBITDA Margin 13.2% 7.5% (62.8%) (3861.5%) (756.7%) 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%

DCF Summary - Capital StructureCashflow Forecast

*All dollar amounts in millions 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020ETotal EBITDA 42,327 40,966 41,134 41,061 40,795 50,238 51,781 53,413 55,139 56,963 58,890Capex (19,530) (20,110) (19,465) (20,944) (21,199) (27,421) (28,221) (29,069) (29,968) (30,920) (31,928)Tax 1,162 (2,532) (2,900) (9,224) (3,442) (9,230) (8,782) (8,992) (9,246) (9,459) (9,763)Working Capital and Other Adjustments (8,267) (3,954) 3,286 3,501 (1,383) (29,237) 51 197 209 223 237Free Cashflows 15,692 14,370 22,055 14,394 14,771 (15,651) 14,828 15,548 16,134 16,807 17,436

Cashflow for Debt Service 15,692 14,370 22,055 14,394 14,771 (15,651) 14,828 15,548 16,134 16,807 17,436Interest Expense (2,994) (3,535) (3,444) (3,940) (3,613) (4,103) (6,272) (6,614) (6,888) (7,338) (7,588)Isssurance / Repayment of Long-term Debt (7,059) 362 4,753 9,138 5,633 24,005 6,841 5,480 8,985 5,007 6,884Interest Income and Other Items 2,438 1,033 886 1,238 1,827 - - - - - -Cashflow Available for Equity Distributions 8,077 12,230 24,250 20,830 18,618 4,251 15,397 14,414 18,231 14,476 16,732Equity Issuance / Repurchase and Equity Items (465) (214) (12,186) (12,663) (3,802) 672 (9,002) (2,150) (1,599) (2,092) (1,762)Dividends (incl. distributions of cash balance) (9,916) (10,172) (10,241) (9,696) (9,552) (5,757) - (14,369) (15,724) (13,260) (14,267)Net Cashflows (2,304) 1,844 1,823 (1,529) 5,264 (834) 6,395 (2,105) 908 (876) 703

Ending Cash Balance 1,437 3,045 4,868 3,339 8,603 7,769 14,165 12,060 12,968 12,092 12,795Ending Debt Balance 64,515 64,753 69,843 74,767 82,062 125,446 132,287 137,767 146,752 151,760 158,643Ending Net Debt Balance 63,078 61,708 64,975 71,428 73,459 117,677 118,123 125,707 133,784 139,668 145,848

Net Debt to EBITDA - 1.5 x 1.6 x 1.7 x 1.8 x 2.3 x 2.4 x 2.2 x 2.0 x 1.9 x 1.6 x

Basic shares outstanding (millions) 5,913 5,928 5,801 5,368 5,205 5,924 5,924 5,924 5,924 5,924 5,924Diluted shares outstanding (millions) 5,938 5,950 5,821 5,385 5,221 5,943 5,943 5,943 5,943 5,943 5,943Diluted adjusted earnings (loss) per share 3.91$ 2.91$ 2.96$ 1.94$ 3.26$ 3.05$ 2.91$ 2.97$ 3.05$ 3.12$ 3.21$ Dividend per share(diluted) 1.68$ 1.72$ 1.75$ 1.78$ 1.84$ 0.97$ -$ 2.42$ 2.65$ 2.23$ 2.40$ Free cashflow per share (diluted) 2.28$ 2.27$ 3.35$ 2.17$ 2.49$ (3.32)$ 1.44$ 1.50$ 1.56$ 1.59$ 1.66$ Equity cashflow per share (diluted) 2.55$ 2.03$ 4.22$ 3.09$ 3.88$ 0.72$ 2.59$ 2.43$ 3.07$ 2.44$ 2.82$

DCF Summary - Valuation ResultsCashflow Forecast

*All dollar amounts in millions 2015E 2016E 2017E 2018E 2019E 2020EFree cash f low s to the f irm (FCFF) 15,662 11,936 11,909 11,764 11,626 11,495

Enterprise Value EBITDA Multiple Method Enterprise Value Perpetual Growth Method WACC AssumptionsEBITDA Multiple 5.0x Perpetual grow th of f irm cash f low s 1.00% Valuation date 1-Nov-15Terminal Year EBITDA 58,890

10-yr US government bond rate2.0%

Present Value of Terminal Value 283,515 Present Value of Terminal Value 291,261 Expected market return 8.5%

Present Value of Forecast FCF 74,391 Present Value of Forecast FCF 74,391 Market risk premium 6.5%Enterprise Value 357,907 Enterprise Value 365,652 Beta 0.75

- Debt (125,446) - Debt (125,446) CAPM cost of equity 6.9%+ Cash 6,202 + Cash 6,202 Cost of debt 5.0%

Equity Value (Market Cap) 238,663 Equity Value (Market Cap) 246,408 Tax rate 35.0%

Shares outstanding 5,943 Shares outstanding 5,943 After tax cost of debt 3.3%Fair value share price $40.16 Fair value share price $41.46 Target gearing 52.1%

WACC 5.0%

Operating AssumptionsAssumption Key Metric JustificationTotal Revenue(CAGR '16-'20)

3.1% Consolidated from management guidance for each segment which is based on case package

Wireless Revenue(CAGR '16-'20)

5.4% Used average sales growth from 2012-2014

Wireline Revenue(CAGR '16-'20)

(1.0)% Used average sales growth from 2012-2014

International Revenue(CAGR '16-'20)

10.0% Based on current 10Q, management expects total revenue will be much more diversified and international will bethe fasted growing segment

DIRECTV Revenue(CAGR '16-'20)

3.3% Based on case package: appendix A, pg. 11, forecasted CAGR

Total EBITDA(CAGR '16-'20)

3.3% Based on growth in revenues and expenses

Wireless EBITDA(CAGR '16-'20)

5.4% Assumed constant expense to revenue ratio so if revenues grew by 5.4% then expenses will grow by 5.4%

Wireline EBITDA(CAGR '16-'20)

(1.0)% Assumed constant expense to revenue ratio so if revenues decreased by 1% then expenses will decrease by1%

International EBITDA(CAGR '16-'20)

10.0% Assumed constant expense to revenue ratio so if revenues increased by 10% then expenses will increase by10%

DIRECTV EBITDA(CAGR '16-'20)

3.3% Assumed constant expense to revenue ratio so if revenues increased by 3.3% then expenses will increase by3.3%

Capex (% of revenue)(Average '16-'20)

16.0% Based on historical capex to revenue ratio

Valuation AssumptionsAssumption Key Metric JustificationBeta 0.75 Based on Valueline Research reportRisk-free Rate 2.0% 10-yr US treasury constant maturity rate at October 2nd, 2015Cost of Debt (pre-tax) 5.0% Based on Case PackagePerpetual Growth Rate 1.0% As a mature company in a mature industry, growth rate is tempered

Exit Multiple 5.0xPotential buyers of AT&T will want a conservative EV/EBITDA multiple. This multiple is valued without thecontrol premium

Leveraged Finance

Standalone Cashflow ProjectionForecast

2015 2016 2017 2018 2019 2020

A. Standalone Cashflows Revenues 8,889 9,067 9,248 9,433 9,622 Operating Costs (6,222) (6,165) (6,196) (6,226) (6,254) EBITDA 2,667 2,901 3,052 3,207 3,368 Revenue Growth 2.0% 2.0% 2.0% 2.0%EBITDA Growth (initial synergies ramp) 8.8% 5.2% 5.1% 5.0%EBITDA Margin 32.0% 33.0% 34.0% 35.0%

Taxes (349) (431) (484) (539) (596) Capex (889) (907) (925) (943) (962) Change in Working Capital (1) (11) (11) (11) (11) Operating Cashflows 1,427 1,553 1,632 1,714 1,798 Interest Expense (336) (309) (281) (251) (220) Principal Repayment (562) (589) (617) (647) (678) Debt Issuance Debt 35% 7,000 - - - - Equity Issuance Equity 65% 13,000 - - - - Purchase Price Multiple 7.5x (20,000) - - - - Equity Cashflows 530 655 734 816 900 Dividends Paid 530 655 734 816 900 Residual Cashflows 1,059 1,311 1,469 1,632 1,801

B. Key Metrics Incremental Debt Opening Balance 7,000 6,438 5,850 5,233 4,586 Incremental Debt Issued - - - - - Incremental Principal Paid (562) (589) (617) (647) (678) Incremental Debt Closing Balance 6,438 5,850 5,233 4,586 3,908 Incremental Interest Expense 336 309 281 251 220 Net Debt / EBITDA 2.41x 2.02x 1.71x 1.43x 1.16x

Incremental Diluted Shares Issued (millions) 391 391 391 391 391 Free Cashflow per Share 3.65$ 3.97$ 4.17$ 4.38$ 4.59$ Equity Cashflow per Share 1.35$ 1.67$ 1.88$ 2.08$ 2.30$

Corporate Cashflow ProjectionsForecast

2015 2016 2017 2018 2019 2020A. Corporate Cashflows (Pre-Transaction)

Corporate Revenues 176,321 181,619 187,232 193,179 199,477 Corporate Opex (124,540) (128,206) (132,094) (136,217) (140,588) Corporate EBITDA 51,781 53,413 55,139 56,963 58,890

Corporate Capital Expenditures, Working Capital and Taxes (36,953) (37,865) (39,004) (40,156) (41,454) Corporate Operating Cashflows 14,828 15,548 16,134 16,807 17,436

Corporate Net Debt Flow s 569 (1,134) 2,097 (2,330) (704) Corporate Equity Cashflows 15,397 14,414 18,231 14,476 16,732

B. Corporate Cashflows (Pro-Forma) Corporate Revenues 176,321 181,619 187,232 193,179 199,477 Incremental Revenues 8,889 9,067 9,248 9,433 9,622 Proforma Revenues 185,210 190,685 196,480 202,612 209,099

Corporate EBITDA 51,781 53,413 55,139 56,963 58,890 Incremental EBITDA 2,667 2,901 3,052 3,207 3,368 Proforma EBITDA 54,448 56,315 58,191 60,170 62,257

Corporate Capital Expenditures, Working Capital and Taxes (36,953) (37,865) (39,004) (40,156) (41,454) Incremental Capital Expenditures, Working Capital and Taxes (1,239) (1,349) (1,420) (1,494) (1,570) Proforma Operating Cashflows 16,256 17,101 17,766 18,520 19,233

Corporate Net Debt Flow s 569 (1,134) 2,097 (2,330) (704) Incremental Debt Service (898) (898) (898) (898) (898) Combined Debt Flow s (329) (2,032) 1,199 (3,228) (1,602)

Proforma Equity Cashflows 15,927 15,069 18,965 15,292 17,632

C. Key Metrics Existing Diluted Shares Outstanding (millions) 5,943 5,943 5,943 5,943 5,943 Free Cashflows per Share (Pre-Transaction) 2.50$ 2.62$ 2.71$ 2.83$ 2.93$ Equity Cashflows per Share (Pre-Transaction) 2.59$ 2.43$ 3.07$ 2.44$ 2.82$ Incremental Diluted Shares Issued (millions) 391 391 391 391 391 Combined Total Cumulative Diluted Shares Outstanding (millions) 6,334 6,334 6,334 6,334 6,334 Free Cashflows per Share (Pro-Forma) 2.57$ 2.70$ 2.80$ 2.92$ 3.04$ Equity Cashflows per Share (Pro-Forma) 2.51$ 2.38$ 2.99$ 2.41$ 2.78$ Corporate Net Debt (Closing Balance) 118,123 125,707 133,784 139,668 145,848 Corporate Net Debt / EBITDA Ratio (Pre-Transaction) 2.28x 2.35x 2.43x 2.45x 2.48x Incremental Debt (Closing Balance) 6,438 5,850 5,233 4,586 3,908 Combined Total Corporate Net Debt (Closing Balance) 124,561 131,557 139,017 144,254 149,757 Corporate Net Debt / EBITDA Ratio (Pro-Forma) 2.29x 2.34x 2.39x 2.40x 2.41x

Trading Comparables

Company Name Market EV (1) Net Debt EV/Revenue (3) EV/EBITDA (3) P/E (3) EBITDA CAGR (3) Revenue CAGR (3) EBITDA WACC

Cap. (1) / EV 2014A LTM NTM 2016E 2014A LTM NTM 2016E 2014A LTM NTM 2016E 3-Yr Hist 2-Yr Fcst 3-Yr Hist 2-Yr Fcst %(all figures presented in USD millions, except per share figures or where noted)

Integrated TelecomVerizon USD 187,860 297,407 36.4% 2.3x 2.3x 2.3x 2.3x 6.9x 6.6x 6.4x 6.4x 19.1x 12.1x 11.7x 11.6x 7.4% 0.9% 4.3% 0.3% 34.5% 5.7%Shaw Communuications CAD 9,217 13,458 29.7% 2.8x 3.0x 3.2x 3.2x 6.6x 6.8x 7.4x 7.3x 13.2x 14.9x 14.5x 14.2x (4.7%) 1.0% (5.2%) 0.3% 43.2% 5.4%Rogers Communications CAD 20,672 33,811 38.9% 2.9x 3.1x 3.3x 3.2x 7.7x 8.2x 8.6x 8.5x 17.9x 18.2x 17.7x 17.5x (7.2%) 2.8% (6.5%) 1.8% 38.1% 4.5%Telus Corporation CAD 19,967 27,069 26.2% 2.5x 2.6x 2.8x 2.7x 7.1x 7.3x 7.8x 7.5x 18.2x 17.3x 16.9x 15.6x (4.5%) 4.9% (4.0%) 3.0% 35.1% 5.2%BCE INC. CAD 49,020 64,148 23.1% 3.4x 3.5x 3.9x 3.9x 8.8x 8.9x 9.8x 9.6x 21.4x 19.8x 22.4x 21.5x (6.3%) 2.7% (6.5%) 1.4% 39.5% 4.9%

Integrated Telecom Average 57,347 87,179 30.9% 2.8x 2.9x 3.1x 3.0x 7.4x 7.6x 8.0x 7.9x 17.9x 16.5x 16.6x 16.1x -3.1%* 2.4% (3.6%) 1.4% 38.1% 5.1%

WirelessT-Mobile USD 33,768 52,934 36.2% 1.8x 1.7x 1.5x 1.5x 9.1x 8.1x 5.9x 5.8x 133.5x 44.2x 27.2x 19.9x 14.3% 20.7% 86.4% 7.4% 20.3% 5.8%Sprint USD 19,365 49,020 60.5% 1.4x 1.5x 1.5x 1.5x 7.2x 13.1x 6.4x 6.4x N/A neg neg neg 9.6% 18.8% (0.7%) (1.0%) 11.1% 5.4%US Cellular Corp USD 3,151 4,103 22.9% 1.1x 1.0x 1.0x 1.0x 8.9x 5.5x 6.2x 6.0x neg neg neg neg (3.7%) 5.3% (3.5%) 0.9% 18.9% 7.4%

Wireless Average 18,761 35,352 39.9% 1.4x 1.4x 1.3x 1.3x 8.4x 8.9x 6.1x 6.1x 133.5x 44.2x 27.2x 19.9x 6.7%* 15.0% 27.4% 2.4% 16.8% 6.2%

WirelineCenturyLink Inc. USD 15,561 36,104 56.9% 2.0x 2.0x 2.0x 2.0x 5.3x 5.5x 5.2x 5.4x 20.3x 21.2x 10.8x 11.5x (2.9%) (1.2%) (0.9%) 0.0% 37.1% 5.6%Frontier Communications USD 6,121 15,223 59.8% 3.2x 2.9x 2.7x 2.8x 7.8x 7.7x 5.2x 5.4x 40.3x 32.2x neg neg 1.2% 15.6% 3.6% 14.7% 38.1% 6.1%Consolidated Communications USD 1,085 2,450 55.5% 3.9x 3.4x 3.1x 3.1x 10.2x 9.4x 7.7x 7.8x 61.4x 31.8x 27.2x 26.4x 21.5% 0.5% 18.1% (1.4%) 35.6% 5.6%Telephone and Data Systems USD 2,857 4,909 31.0% 1.0x 1.0x 0.9x 0.9x 7.6x 5.0x 5.3x 5.1x neg neg neg 59.4x (2.2%) 3.9% (1.0%) 1.4% 19.2% 6.4%Comcast USD 151,218 196,363 22.3% 2.9x 2.7x 2.6x 2.5x 8.6x 8.1x 7.6x 7.5x 19.0x 19.2x 17.3x 16.6x 7.2% 5.4% 5.5% 4.5% 33.3% 7.0%Charter Communications USD 20,287 41,307 50.9% 4.5x 4.4x 4.1x 3.9x 13.4x 13.2x 11.5x 11.0x neg neg 182.9x 104.7x 9.0% 9.9% 9.2% 7.8% 33.1% 6.2%Time Warner Cable USD 51,883 74,898 30.7% 3.3x 3.2x 3.1x 3.0x 9.4x 9.3x 8.9x 8.5x 25.4x 25.8x 25.8x 23.5x 2.0% 6.2% 3.5% 5.9% 34.6% 6.2%Cablevision Systems Corp USD 9,071 17,300 47.5% 2.7x 2.7x 2.6x 2.6x 9.6x 9.5x 9.5x 9.2x 27.8x 52.2x 38.2x 35.3x 2.6% 1.6% 2.3% 1.1% 27.8% 4.9%

Wireline Average 32,261 48,569 44.3% 2.9x 2.8x 2.6x 2.6x 9.0x 8.5x 7.6x 7.5x 32.4x* 30.4x* 50.4x* 39.6x* 4.8% 5.2% 5.0% 4.2% 32.3% 6.0%

SatelliteDish USD 28,653 33,921 15.4% 2.3x 2.3x 2.2x 2.2x 11.7x 11.3x 11.5x 11.6x 30.2x 24.9x 36.7x 35.3x 10.6% (1.6%) 4.6% 1.7% 20.2% 7.4%

Satellite Average 28,653 33,921 15.4% 2.3x 2.3x 2.2x 2.2x 11.7x 11.3x 11.5x 11.6x 30.2x 24.9x 36.7x 35.3x 10.6% (1.6%) 4.6% 1.7% 20.2% 7.4%

Cumulative Average 86,459 102,782 28.5% 4.0x 3.9x 3.8x 3.7x 12.0x 11.9x 10.2x 10.1x 45.2x 29.6x 35.9x 28.6x 7.7% 6.1% 8.9% 3.8% 31.1% 6.7%

AT&T USD 204,275 325,759 37.1% 2.5x 2.3x 2.0x 1.9x 8.0x 7.7x 6.2x 6.1x 27.9x 13.3x 11.9x 11.9x 4.5% 7.2% 5.0% 8.1% 30.4% 5.2%

Segmented Combined Entity

Company Name EV/Rev Yes EV/EBITDA Yes EV/Rev Yes EV/EBITDA Relevance to Target Valuation

Incl.? NTM Incl.? NTM Incl.? NTM Incl.? NTM

Integrated TelecomVerizon Yes 2.3x Yes 6.4x The biggest in Integrated Telecom. Shaw Communuications No 0.0x No 0.0x Not a large company. Has negative historical EBITDARogers Communications No 0.0x No 0.0x Not a large company. Has negative historical EBITDATelus Corporation No 0.0x No 0.0x Not a large company. Has negative historical EBITDABCE INC. No 0.0x No 0.0x Not a large company. Has negative historical EBITDA

WirelessT-Mobile Yes 1.5x Yes 5.9x Yes 1.5x Yes 5.9x The biggest in Wireless by market capSprint No 0.0x No 0.0x No 0.0x No 0.0x SmallUS Cellular Corp No 0.0x No 0.0x No 0.0x No 0.0x Too small

Wireless Average 1.5x 5.9xAT&T Metric (4) $84,692 $30,405Implied Enterprise Value 130,042 179,446

WirelineCenturyLink Inc. No 0.0x No 0.0x No 0.0x No 0.0x Too smallFrontier Communications No 0.0x No 0.0x No 0.0x No 0.0x Too smallConsolidated Communications No 0.0x No 0.0x No 0.0x No 0.0x Too smallTelephone and Data Systems No 0.0x No 0.0x No 0.0x No 0.0x Too smallComcast Yes 2.6x Yes 7.6x Yes 2.6x Yes 7.6x One of tw o biggest in Wireline by market capCharter Communications No 0.0x No 0.0x No 0.0x No 0.0x Too smallTime Warner Cable Yes 3.1x Yes 8.9x Yes 3.1x Yes 8.9x One of tw o biggest in Wireline by market capCablevision Systems Corp No 0.0x No 0.0x No 0.0x No 0.0x Too small

Wireline Average 2.8x 8.3xAT&T Metric (4) $62,173 $17,732Implied Enterprise Value 175,074 147,119

SatelliteDish Yes 2.2x Yes 11.5x Yes 2.2x Yes 11.5x Only relevant satellite company. Similar EV/Revenue

Satellite Average 2.2x 11.5xAT&T Metric (4) $16,318 $4,016Implied Enterprise Value 36,084 46,138

Combined Average 2.3x 8.1xAT&T Metric $163,183 $52,152

Total Enterprise Value 341,200 372,703 380,288 421,720- Debt (126,930) (126,930) (126,930) (126,930)- Preferred & Other (965) (965) (965) (965)+ Cash 6,202 6,202 6,202 6,202

Equity Value 219,507 251,010 258,595 300,027Shares Outstanding (millions) 5,943 5,943 5,943 5,943Fair Value Share Price $36.94 $42.24 $43.51 $50.48

Precedents

Segmented Combined EntityEV/Revenue EV/EBITDA EV/Revenue EV/EBITDA

Target Incl.? LTM Incl.? LTM Incl.? LTM Incl.? LTM Relevance to Target Valuation(all figures presented in USD millions, except per share figures or where otherwise noted)

US WirelessCellco Partnership Yes 3.8x Yes 9.7x Yes 3.8x Yes 9.7x Biggest Implied EV in the segment and one of the most recent transactionsLeap Wireless No 0.00 No 0.00 No 0.00 No 0.00 Implied EV, Revenue, and EBITDA is too smallClearw ire No 0.00 No #VALUE! No 0.00 No #VALUE! Implied EV, Revenue, and EBITDA is too smallSprint No 0.00 No 0.00 No 0.00 No 0.00 Revenue is relatively small Alltel No 0.00 No 0.00 No 0.00 No 0.00 Transaction happened too long agoSunCom Wireless No 0.00 No 0.00 No 0.00 No 0.00 Transaction happened too long ago

US Wireless Average 3.8x 9.7xAT&T Metric 72,204 24,643Implied Enterprise Value 274,937 239,845

US WirelineTW Telecom No 0.0x No 0.0x No 0.0x No 0.0x Implied EV, Revenue, and EBITDA is too smallCharter Communications No 0.0x No 0.0x No 0.0x No 0.0x Implied EV, Revenue, and EBITDA is too smallBresnan Broadband No 0.0x No 0.0x No 0.0x No 0.0x Implied EV, Revenue, and EBITDA is too smallVirgin Media Yes 2.1x Yes 5.2x Yes 2.1x Yes 5.2x Biggest Implied EV in the segment and one of the most recent transactionsAtlantic Broadband Finance No 0.0x No 0.0x No 0.0x No 0.0x Implied EV, Revenue, and EBITDA is too smallInsight Communications No 0.0x No 0.0x No 0.0x No 0.0x Implied EV, Revenue, and EBITDA is too smallQw est Communications No 0.0x No 0.0x No 0.0x No 0.0x Transaction happened too long agoBellSouth Corporation No 0.0x No 0.0x No 0.0x No 0.0x Transaction happened too long agoVerizon Business Global No 0.0x No 0.0x No 0.0x No 0.0x Transaction happened too long agoAT&T Corp. No 0.0x No 0.0x No 0.0x No 0.0x Transaction happened too long ago

US Wireline Average 2.1x 5.2xAT&T Metric 53,005 14,371Implied Enterprise Value 111,430 74,921

SatelliteDirecTV Yes 1.5x Yes 5.9x Yes 1.5x Yes 5.9x Biggest Implied EV in the segment and one of the most recent transactionsHughes Communications No 0.0x No 0.0x No 0.0x No 0.0x Implied EV, Revenue, and EBITDA is too small

US Wireline Average 1.5x 5.9xAT&T Metric 13,912 3,255Implied Enterprise Value 20,806 19,117

Latin America TelecomColumbus Communications No 0.00 No 0.00 Implied EV, Revenue, and EBITDA is too smallTelefonos de Mexico No 0.00 No 0.00 Implied EV, Revenue, and EBITDA is too smallTele Norte Leste Participacoes S.A. Yes 1.3x Yes 3.5x Biggest Implied EV in the segment and one of the most recent transactionsAmerica Telecom No 0.00 No 0.00 Transaction happened too long ago

TV & MediaAOL Yes 1.6x Yes 9.7x Biggest Implied EV in the segment (how ever, transaction rejected by regulators) look belowLIN Media No 0.00 No 0.00 Implied EV, Revenue, and EBITDA is too smallAstral Media Inc. No 0.00 No 0.00 Implied EV, Revenue, and EBITDA is too smallNBCUniversal Media Yes 3.1x Yes 8.4x Because biggest transaction in space w as rejected, w e averaged it w ith the next biggestBelo Corp. No 0.00 No 0.00 Implied EV, Revenue, and EBITDA is too small

Combined Average 2.2x 7.1xAT&T Metric 139,121 42,269

Total Enterprise Value $407,172 $333,883 $310,375 $298,720- Debt (126,930) (126,930) (126,930) (126,930)- Preferred & Other (965) (965) (965) (965)+ Cash 6,202 6,202 6,202 6,202

Equity Value $285,479 $212,190 $188,682 $177,027Shares Outstanding (millions) 5,943 5,943 5,943 5,943Fair Value Share Price $48.04 $35.70 $31.75 $29.79

Target Buyer Transaction

Company Type Company Type EV (1) Date Year Rationale Impl. EV Revenue EBITDA Revenue EBITDA(all figures presented in USD millions, except per share figures or where otherwise noted)

US WirelessCellco Partnership (Verizon Wireless)Wireless Verizon Integrated 297,407 September 2, 2013 2013 Consolidation 288,889 75,868 29,682 3.8x 9.7xLeap Wireless Wireless AT&T Integrated 278,293 July 12, 2013 2013 Market Consolidation 1,200 3,051 467 0.4x 2.6xClearw ire Wireless Sprint Wireless 49,020 December 13, 2012 2012 Market Consolidation 6,127 1,260 (405) 4.9x neg'Sprint Wireless SoftBank Integrated 149,070 October 15, 2012 2012 Diversif ication 29,346 35,404 4,479 0.8x 6.6xAlltel Wireless Cellco Partnership Integrated N/A June 6, 2008 2008 Market Consolidation 6,063 9,040 3,201 0.7x 1.9xSunCom Wireless Wireless T-Mobile Wireless 52,934 September 12, 2007 2007 Market Consolidation 1,600 920 151 1.7x 10.6x

US Wireless Average 2.1x 6.3x

US WirelineTW Telecom Wireline Level 3 Communications Integrated 28,786 June 16, 2014 2014 Market Consolidation 5,800 1,591 518 3.6x 11.2xCharter Communications Wireline Liberty Media Media 27,009 March 19, 2013 2013 Market Consolidation 2,600 7,504 2,644 0.3x 1.0xBresnan Broadband Wireline Charter Communications OperatingWireline N/A February 7, 2013 2013 Market Consolidation 1,600 509 163 3.1x 9.8xVirgin Media Wireline Liberty Global Wireline 84,033 February 5, 2013 2013 Diversif ication 13,200 6,279 2,532 2.1x 5.2xAtlantic Broadband Finance Wireline Cogeco Cable Wireline 4,888 July 18, 2012 2012 Diversif ication 1,400 329 145 4.3x 9.7xInsight Communications Wireline Time Warner Cable Wireline 74,635 August 15, 2011 2011 Market Consolidation 3,000 1,064 369 2.8x 8.1xQw est Communications Wireline CenturyLink Wireline 36,104 April 22, 2010 2010 Market Consolidation 20,792 12,104 4,027 1.7x 5.2xBellSouth Corporation Wireline AT&T Integrated 278,293 March 6, 2006 2006 Consolidation 79,780 20,547 8,772 3.9x 9.1xMCI (Verizon Business Global) Wireline Verizon Integrated 297,407 February 14, 2005 2005 Consolidation 6,600 18,914 2,075 0.3x 3.2xAT&T Corp. Wireline SBC Communications Wireline N/A January 30, 2005 2005 Consolidation 16,000 30,537 6,507 0.5x 2.5x

US Wireline Average 2.3x 6.5x

SatelliteDirecTV Satellite AT&T Integrated 278,293 May 18, 2014 2014 Diversif ication 47,900 32,029 8,156 1.5x 5.9xHughes Communications Satellite EchoStar Satellite 5,045 February 14, 2011 2011 Market Consolidation 1,300 1,043 209 1.2x 6.2x

Satellite Average 1.4x 6.0x

Latin America TelecomColumbus Communications Latin America Telecom Cable & Wireless CommunicationsIntegrated 7,732 November 6, 2014 2014 Diversif ication 1,900 505 213 3.8x 8.9xTelefonos de Mexico Latin America Telecom America Movil Latin America Telecom 95,227 August 1, 2011 2011 Market Consolidation 9,694 8,040 3,193 1.2x 3.0xTele Norte Leste Participacoes Latin America Telecom Oi Latin America Telecom 10,592 May 24, 2011 2011 Market Consolidation 22,909 17,810 6,614 1.3x 3.5xAmerica Telecom Latin America Telecom America Movil Latin America Telecom 95,227 November 9, 2006 2006 Consolidation 36,304 12,490 4,036 2.9x 9.0x

Latin America Telecom Average 2.3x 6.1x

TV & MediaAOL Media Verizon Integrated 297,407 May 12, 2015 2015 Diversif ication 4,200 2,569 433 1.6x 9.7xLIN Media Media Media General Media 4,141 March 31, 2014 2014 Market Consolidation 1,400 702 175 2.0x 8.0xAstral Media Media Bell Media Media N/A March 16, 2012 2012 Market Consolidation 3,334 1,033 334 3.2x 10.0xBelo Corp. Media TEGNA Media 10,594 June 13, 2013 2013 Market Consolidation 2,200 719 262 3.1x 8.4xNBCUniversal Media Media Comcast Wireline 196,363 February 12, 2013 2013 Diversif ication 34,082 23,812 4,290 1.4x 7.9x

TV & Media Average 2.3x 8.8x

AT&T 2.0x 8.8x

LTM EV/LTM (2)