EFTA01385481.pdf

January 2018 HY Corporate Credit HY Multi Sector.Media. Cable & Satellite In addition to building out existing licenses, mobile operators may also have In lust a few than years the the opportunity to scoop up more spectrum in the coming years, particularly in focus ofcenters on spectrum has the mid-to-high band frequencies. The FCC has previously explored auctioning gone from low and mid band to off 150 MHz of 3.5 GHz although the process hasn't progressed and timing is mid and high band and ultra- unclear. The FCC has agreed to auction off various mmWave bands (>28 GHZ and higher). Most recently, Intelsat and Intel jointly responded to an FCC N0l high band frequent Not too seeking to offer a commercial solution to freeing up some of its valuable C- long ago Sprint's 26 GHz band spectrum 500 MHz of C-band (3.7-4.2 GHz), but FCC has yet to weigh in spectrum was considered on the proposal or set out a path forward. As we can see, the focus on mid-to- commercially challenged now it high-band fits nicely with the carriers eyes set on 56 so we expect is in a sweet spot conversations around freeing up more of those frequencies to heat up throughout the year. Competitive Landscape: Since the last round of major M&A in the wireless Verizon end AT&T have been industry back in 2013, which established the current 4-player national dragged into the world of truly landscape we know today, the market has not only seen stiff competition, but unlimited data and are re-pridng a material shift in the way management teams have done business. T-Mobile's Un-carrier initiatives created device financing plans, altered funding options, their existing base ofARPU: and unleashed a slew of plan offerings that has pressured ARPUs for years. Sprint and T-Mobile positioned themselves in the market as the mobile The industry has seemingly taken companies with the best value, which opened up more GBs I $, and eventually a pause In terms of Its led the Big-2 to offer Unlimited plans at price points below existing plans while competitive intendw, bringing also eliminating overages, which had a large impact especially in 1H17. about more rational behavior While it has been a difficult few years across the industry, lately we've seen with respect topridng. more rational behavior with respect to pricing. Sprint, who considers itself the "price leader" in the industry, implemented a price increase in CY3Q17 with the intent of raising prices again in corning quarters. Management has spoken of service revenue inflection in the back-end of 2018 so we expect Sprint's pricing to continue to improve from here. T-Mobile's pricing has been generally stable all year and any future pressure in coming quarters will likely come from contra-revenue items such as the recent Netflix add-on. We expect T-Mobile to remain disciplined in pricing as it seeks to achieve its FCF CAGR guidance of 45-48% over the next 3 years. After taking big hits early on in the Unlimted adoption and no overages phase, the Big-2 are moderating as well. Wireless CPI trends have been more of less stable since April 2017 so the carrier specific anecdotes and broader sentiments are being reflected in the macro data. The other sources of competition that are really coming into view now are the It remains to be seen whether cable companies. Three of the four largest cable companies in the US now abS's entry Into wireless wail have some sort of agreements in place with a nationwide carrier to offer wireless services over their network. In our opinion, the most at risk are the allow It to truly grow revenue Big-2 given their dominant market share in many geographies. The arrival of a (offense) or simply Mt lower competing service utilizing the same infrastructure could put new pressure on chum In the bundle (defense). the likes of Verizon and AT&T, particularly since cable is primarily utilizing the Either way, cable seems to be quad-play bundle to extend the lifetime value of customers and reduce churn here to stay as opposed to chase profits. Still at the center of the discussion around the future of wireless is DISH DISH all feeb threat* of a Network. Another year goes by and DISH acquires more spectrum (low band mystery, with much of its forum auction in January 2017) but also still keeps its strategy around a 5G broadband network fairly mysterious. While we now know of their intention to plans all shrouded In secrecy. build a narrowband loT network, even this is likely a temporary step along an We do that let the beck half of evolutionary path to rolling out a true wireless 5G network of the future. 2018 k a sensible timeline Chatter from earlier in the year on potential partners for DISH are not worth around whkt we might see repeating here. Our experience with the company over many years tells us more concrete for aroundDISH', that talk surrounding DISH is never spurred by the company itself as senior plans for the Mum &Its wirekes management is notoriously tight-lipped with everyone about anything strategic. When will we know more? Well, our best guess does lead us to the back half broadband SG network of 2018. With 5G standards progressing through 3GPP for both consumer as Page 208 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086767 CONFIDENTIAL SDNY_GM_00232951 EFTA01385481