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10 July 2018
Americas/United States
Equity Research
Integrated Telecommunication Services
AT&T (T)
Rating UNDERPERFORM
Price (06-Jul-18, US$) 32.68 INITIATION
Target price (US$) 29.00
52-week price range (US$)
Market cap(US$ m)
39.51 - 31.40
239,414
Convergence Conglomerate – Will It Work?
Enterprise value (US$ m) 415,278
Target price is for 12 months. ■ We initiate coverage of AT&T (T) with an Underperform rating and $29
Research Analysts target price, 11% downside.
Douglas Mitchelson
212 325 7542 ■ Our Thesis: AT&T has become the first Communications company to bring
[email protected] “Convergence” in-house, owning leading businesses in connectivity, pay TV
Brian Russo and media. Are they well positioned? Did they buy the right businesses?
212 325 7539
[email protected]
The outlook for wireline and pay video looks very challenged to us; media will
Meghan Durkin
ultimately need greater scale, needs to shift to global direct-to-consumer
212 325-7742 distribution (taking margins down), and we see elevated execution risk under
[email protected] AT&T’s ownership; and wireless, while stabilizing, remains mature, including
Grant Joslin meaningful 5G revenue unlikely to materialize near-to-mid term. With its top
212 325 2789
[email protected]
line challenged, capital deployment becomes the focus. We do not see
capex moderating given new spectrum band & 5G buildouts, while the
balance sheet has been levered up pursuing inorganic growth and T’s FCF is
mostly dedicated to paying its dividend. Thus, we see little opportunity to use
capital to improve its low returns or offset operational challenges.
■ Key Debates: Current & future wireless competitive intensity (TMUS/Sprint;
Cable MVNOs); the path of wireless capital intensity, especially as 5G is
deployed; competitive positioning for 5G & when revenue from 5G might
materialize; execution on TWX (convergence & cost synergies); and if and
when DirecTV and legacy wireline (DSL, POTS) declines will moderate.
■ Valuation: AT&T trades at 7.0x ‘19e EV/EBITDA and 9.6x Adj. P/E, though
Adj. EPS benefits from adjustments. AT&T’s dividend yield stands at 6.3%,
supporting shares (65% FCF payout, limiting FCF flexibility). Our $29 CYE’18
target is derived via DCF, using a 9% cost of equity, 4% pre-tax cost of debt
and 0% terminal growth. Risks to our Underperform include: outperforming
on postpaid net adds or TWX deal synergies, a stronger economy helping
business services, or capex moderating despite heading into 5G.
Share price performance Financial and valuation metrics
Year 12/17A 12/18E 12/19E 12/20E
EPS (CS adj.) (US$) 3.05 3.40 3.36 3.26
Prev. EPS (US$) - - - -
P/E rel. (%) 50.1 54.8 61.0 69.3
Revenue (US$ m) 160,546.0 173,402.8 187,017.9 186,974.2
EBITDA (US$ m) 49,282.0 55,608.5 59,636.1 58,993.9
EV/EBITDA (current) 7.2 6.4 5.9 6.0
Net debt (US$ m) 113,848 175,864 165,858 155,063
ROIC (%) 16.14 6.50 7.66 7.76
On 06-Jul-2018 the S&P 500 INDEX closed at 2759.82 Number of shares (m) 7,326.00 IC (current, US$ m) 255,855.00
Daily Jul07, 2017 - Jul06, 2018, 07/07/17 = US$36.98 Net debt (12/17A, US$ m) 113,848.0 EV/IC (x) 1.1
Quarterly EPS Q1 Q2 Q3 Q4 Net debt/tot cap (12/17A, %) 80.2 Dividend (12/17A, US$ m) 8.0
2017A 0.74 0.79 0.74 0.78 Source: Company data, Thomson Reuters, Credit Suisse estimates
2018E 0.85 0.80 0.90 0.82
2019E 0.82 0.85 0.88 0.81
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit
Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware
that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report
as only a single factor in making their investment decision.
10 July 2018
AT&T (T)
Price (06 Jul 2018): US$32.68; Rating: UNDERPERFORM; Target Price: 29.00; Analyst: Douglas Mitchelson
Income Statement 12/17A 12/18E 12/19E 12/20E Company Background
Revenue (US$ m) 160,546.0 173,402.8 187,017.9 186,974.2 AT&T is a US provider of wireless and wireline services to
EBITDA (US$ m) 49,282 55,609 59,636 58,994 businesses and consumers, and operates a television and movie
Depr. & amort. (24,387) (24,231) (23,029) (22,699) studio.
EBIT (US$) 20,949 31,094 36,639 36,890
Net interest exp (6,300) (8,015) (8,224) (8,401) Blue/Grey Sky Scenario
PBT (US$) 15,139 26,439 30,188 30,303
Income taxes 14,708 (6,051) (6,943) (6,970)
Profit after tax 29,847 20,388 23,245 23,333
Minorities (397) (388) (407) (428)
Reported net income (US$) 29,450 20,000 22,838 22,905
Other NPAT adjustments 10,628 (3,399) (1,892) (1,089)
Adjusted net income 18,822 23,400 24,730 23,994
Cash Flow 12/17A 12/18E 12/19E 12/20E
Cash flow from operations 39,151 45,148 47,232 49,307
CAPEX (21,550) (23,423) (23,538) (23,578)
Free cashflow to the firm 17,601 21,725 23,694 25,730
Cash flow from investments (20,371) (68,906) (22,438) (23,578)
Net share issue(/repurchase) (430) (134) 0 0
Dividends paid (12,038) (14,050) (14,787) (14,935)
Cashflow from financing activities 25,930 (16,082) (21,153) (28,239)
Change in cash 44,710 (39,840) 3,640 (2,510)
Balance Sheet (US$) 12/17A 12/18E 12/19E 12/20E
Cash & cash equivalents 50,498 10,739 14,379 11,869
Account receivables 16,522 31,681 30,806 28,385
Other current assets 12,126 17,455 17,542 17,389
Total fixed assets 125,222 130,807 133,805 136,692
Investment securities 1,560 6,603 6,603 6,603
Total assets 444,097 533,029 536,391 532,185
Total current liabilities 81,389 79,752 77,253 75,420
Shareholder equity 140,861 191,708 201,266 209,664 Our Blue Sky Scenario (US$) 43.00
Total liabilities and equity 444,097 533,029 536,391 532,185 Better postpaid phone subs drives total core rev declines of -1.4%
Net debt 113,848 175,864 165,858 155,063 Y/Y in '18 and +1.0% in '19 (vs. base case -2.4% and 0%, resp). The
scenario also contemplates 2019 EBITDA margins of 32.4% (vs.
Per share 12/17A 12/18E 12/19E 12/20E
31.9% base case), as less promotional discounting lifts ARPUs and
No. of shares (wtd avg) 6,181 6,889 7,368 7,368 AT&T realizes merger synergies faster than we expect. We believe
CS adj. EPS 3.05 3.40 3.36 3.26
this faster growth would resresult in a higher valuation of 12.1x times
Prev. EPS (US$)
2019 earnings, which equates to a $43 target.
Dividend (US$) 1.96 1.99 2.01 2.03
Free cash flow per share 2.85 3.15 3.22 3.49
Earnings 12/17A 12/18E 12/19E 12/20E Our Grey Sky Scenario (US$) 25.00
Sales growth (%) (2.0) 8.0 7.9 (0.0) Worse postpaid phone sub performance drives total core rev
EBIT growth (%) (14.0) 48.4 17.8 0.7 declines of -3.4% Y/Y in '18 and -1.0% in '19 (vs. base case -2.4%
Net profit growth (%) 7.3 24.3 5.7 (3.0) and 0%, resp). The scenario also contemplates 2019 EBITDA
EPS growth (%) 7.5 11.5 (1.2) (3.0) margins of 31.4% (vs. 31.9% base), as more promotional
EBITDA margin (%) 30.7 32.1 31.9 31.6 discounting impacts ARPUs and AT&T merger synergies are
EBIT margin (%) 13.0 17.9 19.6 19.7 realized slower than we expect. We believe this slower growth would
Pretax margin (%) 9.4 15.2 16.1 16.2 result in a lower valuation of 8.0x times 2019 earnings, which
Net margin (%) 11.7 13.5 13.2 12.8 equates to a $25 target.
Valuation 12/17A 12/18E 12/19E 12/20E
Share price performance
EV/EBITDA (x) 7.2 6.4 5.9 6.0
P/E (x) 10.7 9.6 9.7 10.0
Returns 12/17A 12/18E 12/19E 12/20E
ROIC (%) 16.1 6.5 7.7 7.8
Gearing 12/17A 12/18E 12/19E 12/20E
Net debt/equity (%) 80.2 91.2 81.9 73.6
Quarterly EPS Q1 Q2 Q3 Q4
2017A 0.74 0.79 0.74 0.78
2018E 0.85 0.80 0.90 0.82
2019E 0.82 0.85 0.88 0.81
On 06-Jul-2018 the S&P 500 INDEX closed at 2759.82

Daily Jul07, 2017 - Jul06, 2018, 07/07/17 = US$36.98
Source: Company data, Thomson Reuters, Credit Suisse estimates
AT&T (T) 2
10 July 2018
Table of contents
Executive Summary 4
Investment Thesis in Charts 6
Valuation 13
Forecast Summary 18
PEERs 21
Financial Statements 22
Investment Risks 2825
AT&T (T) 3
10 July 2018
Executive Summary
AT&T has been repositioned into a Communications conglomerate unlike any other, with
$77b of wireless revenue, $40b of wireline revenue, $40b of pay TV revenue and $31b of
media revenue (2018e proforma). In an attempt to diversify away from what had been a
declining wireless/wireline business, AT&T purchased pay TV business DirecTV on the
cusp of a secular shift to on-demand and streaming skinny video bundles; the satellite-
based distributor was well positioned for neither shift. Similarly, the conglomerate’s media
business, previously called Time Warner, was purchased after years of efforts by Time
Warner management to drive margins while holding back on ramping investment in the
content and global direct-to-consumer streaming services that will define the future of the
media business. Overall, we see operating challenges for each of AT&T’s businesses,
whether just maturity for wireless, outright declines in wireline and Pay TV, or the need for
significant investment to transition media.
Perhaps management will successfully leverage its collection of communications
businesses to drive enhanced customer acquisition, retention, or pricing, and our forecast
will prove too bearish. We certainly accept the near-term risk that purchase price
accounting for the Time Warner acquisition, when finalized, will drive non-cash EPS
upgrades. At the same time, we saw no discernable negative impact to Time Warner’s
media businesses when they were separated from Time Warner Cable. It is also not clear
that DirecTV has meaningfully impacted AT&T’s wireless market share. Access to
Comcast’s cheap capital and Comcast cable marketing efforts helped reinvigorate
NBCUniversal’s business, but it is not clear to us that owning NBCUniversal has ever
substantially helped Comcast sell video, broadband and voice subscriptions. Also, in
contrast with AT&T/TWX, Comcast had senior media executive Steve Burke waiting in the
wings ready to take over NBCU, and NBCU was Comcast’s only major acquisition in that
timeframe (not to mention NBCU was acquired at a very attractive price and its results at
the time were depressed after years of poor management and the recession).
Advertising is offered as another major convergence catalyst, and AT&T does have an
incredible amount of data to leverage from its wireless customers that could be used for
targeted advertising. However, Turner and DirecTV do not have enough addressable
inventory for targeted advertising to be material in the short- to mid-term. Ultimately, our
view remains that all video will be streamed in the future, so there is certainly a long-term
opportunity to sell 100% of ad inventory on a targeted basis, potentially driving material
upside to monetization (that is, if advertisers are willing to start shifting direct marketing
spending back to advertising at that point). At the same time, in a 100% streaming world,
Turner would have to invest very aggressively in content to compete; it is not clear that
upside in targeted advertising will offset a more competitive environment.
Overall, we are struggling to see how management will be able to meaningfully improve
what HOLT® indicates are sub-par returns on invested capital, currently running below the
Company’s cost of capital. With top-line challenged and limited upside to margins post
deal-synergies, deployment of capital becomes the focus. As noted earlier, we do not see
capex moderating given new spectrum band & 5G buildouts, while the balance sheet has
already been levered up pursuing inorganic growth and FCF is mostly dedicated to paying
its dividend. Thus, we see little opportunity to use capital to improve AT&T’s low returns or
offset operational challenges.
Interestingly, HOLT® is indicating that the market is discounting returns remaining stable
for AT&T, while at the same time investors are expecting deteriorating returns for major
wireless (Verizon), pay TV (Comcast) and media (Disney) companies. Perhaps this
indicates that investors believe any revenue challenges will be made up for via cost cuts,
AT&T (T) 4
10 July 2018
that convergence synergies will be substantial and sustainable, or that AT&T’s position in
wireless is superior to Verizon’s. We have a more conservative posture on each of these
issues (for a more detailed look at our thoughts on wireless competition and 5G, please
see our Verizon initiation, Wireless Focus Starting to Pay Dividends).
Overall, with returns currently below AT&T’s cost of capital, operational challenges and
little excess capital with which to create value, and with 11% downside to our $29 target
price, we are initiating AT&T with an Underperform rating.
AT&T (T) 5
10 July 2018
Investment Thesis in Charts

Figure 1: The Convergence Conglomerate – AT&T is the first to bring a major connectivity, pay TV and
media company together into one conglomerate
Revenue Composition - 2018E
AT&T Verizon Comcast Charter

5% 5%
7% Pay TV
Media
17% /Other 25%
Wireless
Media Pay TV
Wireless Media
39% Wireline (ex-video) 39% 39% Pay TV
18% Wireline Wireline (ex-video) Wireline (ex-video) Wireline
Wireless Video
ex-Video Media Wireline
Media & Other Video Video
Media ex-Video
Wireless Video Wireless
18% Pay TV Int'l & Other 60%
Wireline
70% ex-Video
Wireline
ex-Video 35%
21%
Source: Company data, Credit Suisse estimates
Figure 2: The growth outlook for AT&T’s business

segments are either challenged or flattish
2-YR EBITDA Growth
2018E Revenue Contribution
15% 17% 25% 39%
2.0%
1.5%
-2.5%
-7.8%
Business Wireline Warner Media Entertainment Wireless
Source: Company data, Credit Suisse estimates. Warner Media pro forma for full year
AT&T (T) 6
10 July 2018
Figure 3: For wireless, the competitive environment Figure 4: …though the industry is mature
appears to have stabilized…
Big 4 Wireless Service Revenue ($Bs) and % Y/Y Chg U.S. Wireless Handsets (Bs) and % Y/Y
3%
$43.4 $43.3 $43.7 $43.6 $42.2 $42.5 $43.2 306.7 304.7 305.5 310.4
2% 302.1
300
$34 2.4% 3%
1.9%
250
1%
1.9%
$14 1.0% 2%
1.7%
0.2%
200 1.6% 1.5%
0% 2%
-$6 150
1%
-1% 100
-$26
-1.8%
1%
-1.3% 50
-2%
-$46
0 0%
-2.4% 2014 2015 2016 2017 2018E
-$66 -2.7% -3% Handsets
per Household 2.49 2.50 2.47 2.46 2.49
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18E 3Q18E
Source: Big 4 = VZ, T, S, TMUS. Company data, Credit Suisse and consensus estimates. Source: Company data, U.S. Census, Credit Suisse estimates
Figure 5: …and we forecast continued wireless

pricing pressure for AT&T (and the industry)
hampering growth in the future
Total Mobility Revenue ($Bs) % Y/Y
$72.8 $71.3 $73.9 $75.3 $76.2 $75.7

$80 6%
$60
4%
5.0%
$40
2%
$20
2.0%
$0
1.1% 0%
($20) -0.6%
-2%
($40)
-1.2%
-2.0%
-4%
($60)
($80) -6%
2016 2017 2018E 2019E 2020E 2021E
Figure 6: For Pay TV, as negative/low margin streaming Pay TV services gain market share (virtual MVPDs),
DirecTV’s U.S. traditional subscriber declines are leading to significant U.S. pay TV EBITDA declines…
Traditional Video Subs (MMs) % Y/Y U.S. Pay TV EBITDA ($Bs) % Y/Y
30 26.3 25.4 25.3 7%
24.1 23.1 21.7 20.4
$10
$8.4 20%
19.1 5% $7.6
20 $8
$6.4 15%
$5.8
$6 $4.9
3% $4.1 10%
10
$4
1% 5%
$2
0
$0 0%
-0.3% -1%
(10) -0.5% ($2)

-5%
-3%
($4)
-10%
(20) ($6)
-5%
-4.7% -4.2% -9.9% -10.2% -15%
($8)
-5.7% -6.2% -15.3% -15.2%
(30) -6.2% -7%
($10) -16.6% -20%
2014 2015 2016 2017 2018E 2019E 2020E 2021E 2016 2017 2018E 2019E 2020E 2021E
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
AT&T (T) 7
10 July 2018
Figure 7: For wireline, total company-wide wireline

remains challenging as well, even including fiber
services growth accelerating
Total Wired Revenue ($Bs) % Y/Y
$60
$46.1 $43.5 9%
$39.9 $38.4 $37.5 $36.8
$40
$20 4%
$0
-1%
-1.7%
($20) -2.4%
-2.9% -3.7%
-6%
($40)
-5.6%
($60) -8.5% -11%
2016 2017 2018E 2019E 2020E 2021E
Source: Company data, Credit Suisse estimates. Total Wired = Business Fixed Strategic
Services, Consumer High-Speed Internet, Business Legacy Voice/Data, Business Other &
Equipment, Consumer Legacy Voice/Data, Consumer VoIP & Other
Figure 8: Looking at the Warner Media businesses, Figure 9: Turner affiliate revenue is normalizing after
HBO is a terrific business and has been benefitting from benefitting in 2016-2018 from a major distributor renewal
its renewal cycle with key distributors, though Game of cycle, advertising remains challenged as audiences
Thrones ends in 2019 and it will likely have to start move online, it is underinvested in entertainment content
ramping original spending to keep up with Netflix and needs to shift its business model to direct-to-
consumer global streaming, a significant margin impact
HBO EBITDA ($Bs) % Y/Y Turner EBITDA ($Bs) % Y/Y
$4 20% 29.7% $4.8 $4.8 $5.0 $4.9
$4.7
$3.0
$3.1 $5 $4.3 $4.6 15%
$2.9 18%
$3.8
$3 $4 $3.4 $3.3
$2.6 16% 10%
$3
$3 $2.3 14%
10.3%
$2
$2.0 $2.0 3.0% 5%
$1.8 $1.9 12% 7.3% 2.0% 2.4% 0.1%
$2 12.6% $1
$1.6 13.6% 10% 3.7%
$0 0%
$2
11.9%
10.4% 8% ($1)
8.5% -1.4% -5%
$1 6% ($2)
5.8% 4% ($3)
-10%
$1 4.9% 4.3%
3.5% 2% ($4)
2.5% ($5) -12.1% -15%
$0 0%
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E
AT&T (T) 8
10 July 2018
Figure 10: Warner Brothers is an important leading Figure 11: Overall, we believe Warner Media growth
Hollywood studio, though retaining talent could be is going to slow dramatically (outside any purchase
challenging under AT&T ownership and given price accounting one-time boosts)
competition with digital companies, margin-driven growth
the past few years is winding down, top-line has barely
grown with few new franchises developed, and long-term
value might be maximized by its content shifting from
sold to third-parties to self-distribution on a direct-to-
consumer streaming service.
Warner Brothers Revenue ($Bs) EBITDA Margin Warner Media EBITDA ($Bs) % Y/Y
15.8% $9.8 $9.8
$15 $9.5 $9.7
$14.1 24%
$7.6 $8.3 $8.9
$13.9 $13.9 $9
$7.0 13%
$14
$13.6 $13.7 $6.3 $6.6 9.0%
22%
$14 7.1% 6.5% 8%
$13.0 $13.0 $4 11.0% 3.5%
20%
$13
$12.5 0.5% 3%
$13 $12.3 18% 3.4%

$12.0 16.0% 16.2% 15.1% ($1) -2%
16%
$12
14.3% -1.1%
-7%
$12 15.5% 14% -5.6%
($6)
13.9% 14.1%
$11 13.5% 13.1% 13.8% 12% -12%
$11 10% ($11) -17%
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E
Figure 12: Looking across its businesses, and

notwithstanding the outcome of purchase price
accounting adjustments for the Time Warner
acquisition that could boost EPS (but not FCF), we
expect core EPS growth is unlikely for AT&T.
Diluted, Adj. EPS % Y/Y
$4.00
$3.40 $3.35 $3.25
15%
$3.05
$3.00
11.5%
10%
$2.00
7.5%
5%
$1.00
$0.00 0%
($1.00) -1.2%
-3.0% -5%
($2.00)
-10%
($3.00)
($4.00) -15%
2017 2018E 2019E 2020E
AT&T (T) 9
10 July 2018
Is 5G the elixir? No, revenue opportunities are too

far out
Figure 13: 5G handset availability (3GPP) expected 2H19 to 1H20 timeframe
Pocket Router Smartphone CPE Laptop
1H18 2H18 1H19 2H19 1H20
39 GHz
Ultra-High Band
(mmWave)
28 GHz
4.5 GHz
High Band
2.3-4.5 GHz 3.5 GHz
2.6 GHz
Low - Mid Band FDD bands

<2.3 GHz (600 MHz lead band)
Source: Ericsson, Credit Suisse. Note the figure shows device availability for Non-Standalone 5G NR, with the exception of the 3.5GHz band,
where Standalone is also shown.
Figure 14: New network technologies take time to Figure 15: There are many potential 5G use cases,
ramp (by 2021 only 12% of wireless connections will but the timing and validity of their business cases
likely be via 5G-enabled devices) are debatable for each
U.S. Wireless Network Adoption Curves (% of mobile connections) Segment 5G Use Case
2G 3G 4G 5G
100% Fixed • Fixed Wireless
• Remote Surgery
90%
• Remote Construction Equipment
80%
53% of large mobile
Mobile • Faster Speeds, Lower Latency network operator
70% • AR / VR executives see no
60% • Real-time Translation
near term business
• UHD Video
50%
• Drone Delivery case for 5G
40% • Connected Vehicles - Bain & Company,
June 2018
30% • Connected Highways
Internet of
20% Things (IoT) • Smart Cities
• Self-Managing Agriculture
10%
• Industrial Automation
0%
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
Source: Recon Analytics, Ericsson, Credit Suisse estimates Source: Credit Suisse, Bain & Company
AT&T (T) 10
10 July 2018
Figure 16: Will 5G drive competitive differentiation? Everyone is “first”….
“We are deploying innovative 5G technology such as Massive

MIMO, as we prepare to launch the FIRST 5G mobile network in
Sprint
the first half of 2019”
- Marcelo Claure, then Sprint CEO, 5/2/18
“So, look, with 5G, our goal is to be the FIRST company in the
United States to have standards based mobile 5G service this
AT&T
year”
- David Christopher, AT&T Chief Mobility Officer, 6/5/18
“So we're going nationwide, coast-to-coast, and we'll be the
FIRST one with the national 5G deployment […] while our
T-Mobile
competitors just simply can't do that”
- Mike Sievert, T-Mobile Chief Operating Officer, 2/8/18
“And just like as we got into 4G, look forward to competing with
Verizon other people in 5G. I think we're going to deploy FIRST.”
- Matthew Ellis, Verizon CFO, 2/27/18
That leaves capital intensity and capital deployment

as key drivers for the stock
Figure 17: We see increased capex in at least ’18
and ’19 on new wireless bands + fiber build
commitments + finishing new TWX HQ, returning to
historical levels thereafter.
CapEx, Net ($Bs) % of Revenue
$30 30%
25.2 26.1
24.3
$25
22.4 23.3 25%
21.4 21.8
20.0
$20 20%
16.2%
$15 15%
13.6% 13.6% 14.5% 14.0% 13.0% 12.5%

$10 13.7% 10%
$5 5%
$0 0%
2014 2015 2016 2017 2018E 2019E 2020E 2021E
Source: Company data, Credit Suisse estimates. CapEx is net of FirstNet reimbursements.
AT&T (T) 11
10 July 2018
Figure 18: Our leverage forecast is above mgmt. Figure 19: …and dividends are using the bulk of
targets… AT&T’s free cash flow
Net Leverage CS Forecast Mgmt. Target Dividend per Share Dividend Payout Ratio (% of FCF)
$3 100%
3.0x 90%
2.8x $1.96 $1.99 $2.01
2.6x 2.6x $1.92
2.5x $2 80%
2.3x 2.3x 2.3x 70%

2.5x 70% 68%
$2 60%
65% 62%
1.7x 50%
1.8x $1 40%
30%
$1 20%
10%
$0 0%
2016 2017 2018E 2019E

2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E
Source: Company data, Credit Suisse estimates. Uses Adj. EBITDA, 2018 pro forma for full Source: Company data, Credit Suisse estimates
year of TimeWarner.
Figure 20: Overall, with returns currently below

AT&T’s cost of capital, operational challenges and
little excess capital with which to create value, and
with 11% downside to our $29 target price, we are
initiating AT&T with an Underperform rating
Cash Flow Return on Investment Cost of Capital
6.3%
5.5% 5.8%
5.2% 5.4% 5.3% 5.3%
4.8%
5.3%
4.7% 4.8% 4.7%
4.4% 4.5% 4.5%
3.7%
2010 2011 2012 2013 2014 2015 2016 2017
Source: HOLT®. CFROI® is an approximation of the economic return, or an estimate of the

average real internal rate of return, earned by a firm on the portfolio of projects that constitute
its operating assets. A firm's CFROI can be directly compared against its real cost of capital
(the investors' real discount rate) to see if the firm is creating economic wealth.
AT&T (T) 12
10 July 2018
Valuation
AT&T trades at 7.0x ‘19e EV/EBITDA and 9.6x Adj. P/E, though Adj. EPS benefits from
numerous adjustments. AT&T’s dividend yield stands at 6.3% (a 65% payout of FCF),
supporting the share price. Our $29 CYE’18 target is derived via DCF, using a 9% cost of
equity, 4% pre-tax cost of debt and 0% terminal growth.
Figure 21: AT&T valuation perspectives

17x AT&T 1-Yr Forward P/E
15x
±1 Std Dev
13x
11x
10-Yr Avg 12.4x

9x
7x
5x
Jun '08 Jun '09 Jun '10 Jun '11 Jun '12 Jun '13 Jun '14 Jun '15 Jun '16 Jun '17 Jun '18
30x
10%
Media and Telecom PEG EA
AT&T Dividend Yield PEG=1
9% 25x SIRI
8%
FOXA*
7% 20x
Forward P/E
FB
6% GOOGL ATVI
5% 15x DIS
TMUS*
4% CMCSA
VZ CBS
3% T 10x
AMCX* VIAB
2% DISCA
5x
1%
T Dividend Yield 10Y Treasury Yield
0%
1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 0x
-5% 0% 5% 10% 15% 20% 25% 30%
3-YR EPS CAGR '18e-'21e *Consensus EPS and Growth
Source: Company data, Credit Suisse estimates, Thomson Reuters
AT&T (T) 13
10 July 2018
Figure 22: AT&T valuation analysis

Calendar Year 2018E 2019E 2020E 2021E 2022E 2023E '18-'23
MMs, except per share
Closing price on: 07/06/18 $32.68 $32.68 $32.68 $32.68 $32.68 $32.68
Fully Diluted Shares, EOP 7,349 7,349 7,349 7,349 7,349 7,349 0.0%
Public Equity Value 240,181 240,181 240,181 240,181 240,181 240,181
Debt, EOP 186,603 180,237 166,932 151,165 141,706 133,550

Less: Cash, EOP (10,739) (14,379) (11,869) (6,766) (8,435) (10,669)
Net Debt, EOP 175,864 165,858 155,063 144,399 133,271 122,881 -6.9%
• Gross Leverage 3.4x 3.0x 2.8x 2.6x 2.5x 2.4x
• Net Leverage 3.2x 2.8x 2.6x 2.5x 2.3x 2.2x
Investments / JVs (4,182) (4,349) (4,523) (4,704) (4,892) (5,087)

Minority stakes in cons. entities 224 233 242 252 262 273
Less: Option proceeds 0 0 0 0 0 0
Pension/OPEB, net of tax 18,578 18,578 18,578 18,578 18,578 18,578
Total Hidden Value 14,621 14,463 14,298 14,127 13,949 13,763 -1.2%
Enterprise Value 430,666 420,501 409,542 398,707 387,401 376,825 -2.6%
EBITDA, CS 55,609 59,636 58,994 57,497 56,852 55,200 -0.1%

EV / EBITDA Multiple 7.7x 7.1x 6.9x 6.9x 6.8x 6.8x
• At CS Target Price 7.3x 6.6x 6.5x 6.5x 6.3x 6.3x
CapEx 25,223 26,138 24,298 23,258 22,273 21,418 -3.2%

EBITDA less CapEx 30,385 33,498 34,696 34,239 34,578 33,782 2.1%
Unlevered CF Multiple 7.9x 7.2x 6.9x 7.0x 6.9x 7.1x
EPS, CS $3.40 $3.36 $3.26 $3.10 $2.99 $2.79 -3.9%

P/E Multiple 9.6x 9.7x 10.0x 10.5x 10.9x 11.7x
• At CS Target Price 8.5x 8.6x 8.9x 9.3x 9.7x 10.4x
Free Cash Flow 21,725 23,694 25,730 25,748 26,364 25,778 3.5%
FCF per Share $3.15 $3.22 $3.49 $3.49 $3.58 $3.50 2.1%
FCF Yield 9.0% 9.9% 10.7% 10.7% 11.0% 10.7%
FCF Multiple 10.4x 10.2x 9.4x 9.4x 9.1x 9.3x
Dividends 14,050 14,787 14,935 15,084 15,235 15,387 1.8%

Dividends as % of FCF 64.7% 62.4% 58.0% 58.6% 57.8% 59.7%
Dividends per Share $1.91 $2.01 $2.03 $2.05 $2.07 $2.09 1.8%
Dividend Yield 5.8% 6.2% 6.2% 6.3% 6.3% 6.4%
AT&T (T) 14
10 July 2018
Figure 23: AT&T Discounted Cash Flow Analysis

$MMs, except per share amounts
Equity Cost of Equity Sum of Free Cash Flow at PV 119,670 Price Target Sensitivity Analysis
Target Price $29.00 Risk Free Rate 3.50% Terminal Value (6.2% discount rate) 282,409
Fully Diluted Shares 7,349 Equity Risk Premium 6.00% Enterprise Value 402,079 2018 Equity Value Per Share
Equity Value 213,135 Beta 0.9 Enterprise Value / '18E EBITDA Terminal Growth
Equity Weight 51% Cost of Equity 9.14% -1.3% -0.3% 0.7%
Debt, Year End '18E (186,603) W 5.2% $31 $38 $49
A
Debt Cost of Debt Cash, Year End '18E 10,739 C 6.2% $23 $29 $36
Debt (Year End '18E) 205,182 Wtd Avg Interest Rate 4.32% Other C 7.2% $18 $22 $27
Preferred Stock - Cost of Debt after tax 3.20% Net Asset Value 226,215
Debt Value 205,182 Terminal Value EBTIDA Multiple
Debt Weight 49% WACC 6.2% Non-consolidated assets 4,182 Terminal Growth
Investments / JVs (224) -1.3% -0.3% 0.7%
Options / Warrant Proceeds 0 W 5.2% 6.9x 8.2x 10.1x
A
Calendar Year 2019E 2020E 2021E 2022E 2023E Pension, net of tax (18,578) C 6.2% 5.9x 6.9x 8.3x
EBITDA 59,636 58,994 57,497 56,852 55,200 Total Asset Value 211,594 C 7.2% 5.2x 6.0x 7.0x
Less: CapEx (26,138) (24,298) (23,258) (22,273) (21,418)
Less: Cash Taxes (3,475) (3,636) (3,734) (3,711) (8,783) Shares Outstanding (Year End '18E) 7,349 Terminal Value FCF Multiple
Less: Working Capital Chg (3,311) (858) (310) (203) - Option Shares 0 Terminal Growth
Free Cash Flow 26,712 30,202 30,194 30,664 24,999 Fully Diluted Shares Out 7,349 -1.3% -0.3% 0.7%
W 5.2% 15.1x 18.0x 22.3x
A
2018 PV of FCF 25,147 26,766 25,191 24,084 18,483 Market Value per Share $28.79 C 6.2% 13.1x 15.3x 18.2x
Discounted at 6.2% Target Price per Share $29 C 7.2% 11.6x 13.2x 15.4x
Sum of discounted FCF 119,670
Terminal value @ 2023 381,959 Closing Price on 7/6/18 $32.68
Difference vs. Target -11.3%
AT&T (T) 15
10 July 2018
HOLT Valuation Analysis

Figure 24: AT&T HOLT Valuation Analysis
Relative Wealth Chart, Asset Growth & TSR Operating Drivers
10 40
8 30
CFROI %
Sales Growth
6 20
4 10
2 0
0 -10
1997 2000 2003 2006 2009 2012 2015 2018 2021 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
40 50
HOLT Operating Margin

Asset Growth (%)
30 40
20 30
10 20
0 10
-10 0
1997 2000 2003 2006 2009 2012 2015 2018 2021 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
150 0.4
Total Shareholder Return
0.3
Asset Turns
100
0.2
50
0.1
0 0
1997 2000 2003 2006 2009 2012 2015 2018 2021 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
HOLT Economic PE (10-year) Cash Deployed (10-year)
30 80,000
70,000
Cash Deployed ($M)
25
HOLT Economic PE
60,000
20 50,000
15 40,000
30,000
10
20,000
5
10,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
T Telecom U.S. Market Dividends Net Share Repurchase Capex R&D Exp Int Exp M&A
Spread between T & U.S. Market (10-year) CFROI® Revisions by Quarter (5-year)
10 0.8
8
0.6
CFROI Revisions (bps)
6
0.4
4
Spread
2 0.2
0 0.0
-2
-0.2
-4
-0.4
-6
Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Spread (Premium / Discount) 3 Month CFROI Revisions
Source: HOLT
AT&T (T) 16
10 July 2018
Scenario Analysis
■ Blue Sky ($43 Price Target): Our $43 Blue Sky scenario valuation is based on better
postpaid phone subscriber performance that drives company core revenue declines
of -1.4% Y/Y in 2018 and +1.0% in 2019 (against the base case -2.4% and 0%,
respectively). The scenario also contemplates 2019 EBITDA margins of 32.4% (vs.
31.9% base case), as less promotional discounting lifts ARPUs and AT&T realizes
merger synergies faster than we expect. We believe this faster growth would result in a
higher valuation of 12.1x times 2019 earnings, which equates to a $43 target.
■ Grey Sky ($25 Price Target): Our $25 Blue Sky scenario valuation is based on worse
postpaid phone subscriber performance that drives total core revenue declines of -
3.4% Y/Y in 2018 and -1.0% in 2019 (against the base case -2.4% and 0%,
respectively). The scenario also contemplates 2019 EBITDA margins of 31.4% (vs.
31.9% base case), as more promotional discounting impacts ARPUs and AT&T merger
synergies are realized slower than we expect. We believe this slower growth would
result in a lower valuation of 8.0x times 2019 earnings, which equates to a $25 target.
AT&T (T) 17
10 July 2018
Forecast Summary
Figure 25: CS Estimates vs Consensus
CS FORECAST VS. STREET
MMs, except EPS 2Q18E 3Q18E 4Q18E 2018E 2019E 2020E CAGR
Revenue CS 39,629 45,579 50,157 173,403 187,018 186,974 3.8%
Consensus 39,323 46,103 49,682 172,981 186,163 186,939 4.0%
Difference +0.8% -1.1% +1.0% +0.2% +0.5% +0.0%
Adj. EBITDA CS 13,219 15,353 14,595 55,609 59,636 58,994 3.0%

Consensus 13,287 15,060 14,348 56,150 59,863 60,755 4.0%
Difference -0.5% +1.9% +1.7% -1.0% -0.4% -2.9%
EPS CS $ 0.80 $ 0.90 $ 0.82 $ 3.40 $ 3.36 $ 3.26 -2.1%

Consensus $ 0.82 $ 0.93 $ 0.83 $ 3.38 $ 3.51 $ 3.58 3.0%
Difference -$0.02 -$0.04 -$0.00 +$0.02 -$0.15 -$0.33
Source: Company data, Credit Suisse estimates, Thomson Reuters
AT&T (T) 18
10 July 2018
Figure 26: AT&T Forecast Summary

Subs 000s, $MMs 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18E 3Q18E 4Q18E 2016 2017 2018E 2019E 2020E 2021E '18-'23
Consolidated AT&T
Revenue 39,365 39,837 39,668 41,676 38,038 39,629 45,579 50,157 163,786 160,546 173,403 187,018 186,974 185,348 1.0%
% Y/Y - Core -2.9% -1.7% -3.0% -0.4% -3.4% -3.6% -3.1% 0.4% 11.6% -2.0% -2.4% -0.1% 0.0% -0.9%
OpEx 26,374 26,367 27,223 35,246 25,843 26,278 30,343 35,615 113,592 115,210 118,078 127,350 127,385 126,723 1.3%
% Y/Y -1.7% -3.7% -2.4% 12.0% -2.0% -0.3% 11.5% 1.0% 13.4% 1.4% 2.5% 7.9% 0.0% -0.5%
EBITDA 12,564 13,033 12,410 11,275 12,442 13,219 15,353 14,595 50,700 49,282 55,609 59,636 58,994 57,497 -0.1%
% Y/Y - Core -2.1% 0.7% -5.6% -4.2% -1.0% -1.2% 0.5% 8.1% 7.6% -2.8% 1.4% -0.3% -1.1% -2.5%
% Margin 31.9% 32.7% 31.3% 27.1% 32.7% 33.4% 33.7% 29.1% 31.0% 30.7% 32.1% 31.9% 31.6% 31.0%
EPS $0.74 $0.79 $0.74 $0.78 $0.85 $0.80 $0.90 $0.82 $2.83 $3.05 $3.40 $3.36 $3.26 $3.10 -3.9%
% Y/Y 3.3% 10.2% -0.4% 17.6% 15.2% 1.7% 22.2% 5.6% 5.4% 7.5% 11.5% -1.2% -3.0% -4.7%
CapEx 6,015 5,208 5,268 5,338 6,118 5,994 6,238 6,873 22,408 21,829 25,223 26,138 24,298 23,258 -3.2%
% Y/Y 28.8% -4.8% -9.4% -17.3% 1.7% 15.1% 18.4% 28.8% 12.0% -2.6% 15.5% 3.6% -7.0% -4.3%
% of Revenue 15.3% 13.1% 13.3% 12.8% 16.1% 15.1% 13.7% 13.7% 13.7% 13.6% 14.5% 14.0% 13.0% 12.5%
FCF 3,203 3,734 5,863 4,801 2,829 5,592 7,276 6,028 16,936 17,601 21,725 23,694 25,730 25,748 3.5%
% Y/Y -0.9% -22.8% 13.1% 30.2% -11.7% 49.8% 24.1% 25.6% 6.8% 3.9% NM NM 8.6% 0.1%
Dividends 3,009 3,012 3,009 3,008 3,070 3,660 3,660 3,660 11,797 12,038 14,050 14,787 14,935 15,084 1.8%
Buybacks 156 278 - (4) 134 - - - 366 430 134 - - -
Total Capital Return 3,165 3,290 3,009 3,004 3,204 3,660 3,660 3,660 12,163 12,468 14,184 14,787 14,935 15,084 1.6%
% of FCF 98.8% 88.1% 51.3% 62.6% 113.3% 65.5% 50.3% 60.7% 71.8% 70.8% 65.3% 62.4% 58.0% 58.6%
Net Debt 118,365 118,038 114,780 113,848 114,174 180,248 178,232 175,864 113,448 175,864 165,858 155,063 144,399
Net Leverage 2.3x 2.3x 2.3x 2.3x 2.3x 3.7x 3.4x 3.2x 2.3x 3.2x 2.8x 2.6x 2.5x
Total Mobility
Subs Postpaid Phone 64,710 64,578 64,337 64,623 64,498 64,593 64,543 64,856 65,193 64,623 64,856 64,997 64,878 64,540 -0.4%
% Y/Y -1.9% -1.7% -1.5% -0.9% -0.3% 0.0% 0.3% 0.4% -1.8% -0.9% 0.4% 0.2% -0.2% -0.5%
Net Adds (348) (89) (97) 329 (22) 126 50 344 (878) (205) 497 405 144 (74)
Postpaid Other Devices 12,225 12,424 12,697 12,886 12,933 12,992 13,306 13,546 12,179 12,886 13,546 14,203 14,753 15,258 3.6%
% Y/Y 15.3% 12.8% 10.1% 6.6% 5.8% 4.6% 4.8% 5.1% 13.8% 5.8% 5.1% 4.8% 3.9% 3.4%
Net Adds 157 216 214 212 71 76 255 263 1,996 799 665 649 551 505
Prepaid 13,844 14,187 15,136 15,335 15,671 15,877 15,982 16,220 13,536 15,335 16,220 16,830 17,232 17,450 1.7%
% Y/Y 13.7% 12.3% 16.1% 13.3% 13.2% 11.9% 5.6% 5.8% 17.2% 13.3% 5.8% 3.8% 2.4% 1.3%
Net Adds 282 267 324 140 241 125 21 156 1,575 1,013 544 372 211 46
ARPUPostpaid Phone $58.09 $58.30 $58.29 $57.33 $53.07 $54.37 $55.27 $55.67 $59.45 $58.00 $54.60 $55.48 $55.48 $54.93
Postpaid Other Devices $24.45 $23.89 $24.32 $23.44 $21.38 $20.98 $21.34 $20.84 $26.19 $24.02 $21.14 $19.84 $19.23 $18.94
Prepaid $38.27 $37.50 $35.82 $35.03 $34.78 $34.73 $35.08 $34.65 $38.63 $36.58 $34.83 $34.91 $34.39 $33.88
Reseller & Connected Devices
$5.79 $5.82 $5.68 $5.29 $4.57 $4.62 $4.62 $4.42 $6.22 $5.64 $4.55 $4.16 $4.00 $3.88
% Y/Y Postpaid Phone -2.4% -2.5% -2.3% -2.6% -8.6% -6.7% -5.2% -2.9% -1.7% -2.4% -5.9% 1.6% 0.0% -1.0%
Postpaid Other Devices -11.4% -8.8% -7.3% -5.6% -12.5% -12.2% -12.2% -11.1% -13.5% -8.3% -12.0% -6.1% -3.1% -1.5%
Prepaid 1.4% -3.2% -10.0% -8.0% -9.1% -7.4% -2.1% -1.1% 5.4% -5.3% -4.8% 0.2% -1.5% -1.5%
Reseller & Connected Devices -5.1% -8.4% -10.6% -12.7% -21.2% -20.7% -18.8% -16.6% -7.3% -9.3% -19.3% -8.5% -4.0% -3.0%
Revs Postpaid Phone 11,319 11,306 11,272 11,090 10,279 10,528 10,706 10,805 46,872 44,987 42,318 43,132 43,235 42,651 -0.5%
% Y/Y -4.2% -4.3% -3.8% -3.7% -9.2% -6.9% -5.0% -2.6% -4.1% -4.0% -5.9% 1.9% 0.2% -1.3%
Postpaid Other Devices 895 883 916 900 828 816 842 840 3,550 3,594 3,326 3,279 3,341 3,410 1.5%
% Y/Y 0.3% 1.7% 1.7% 1.3% -7.5% -7.6% -8.1% -6.7% 7.9% 1.2% -7.5% -1.4% 1.9% 2.1%
Prepaid 1,572 1,577 1,575 1,601 1,618 1,643 1,676 1,674 5,834 6,325 6,611 6,937 7,028 7,049 0.6%
% Y/Y 17.0% 9.4% 2.9% 5.5% 2.9% 4.2% 6.4% 4.5% 25.1% 8.4% 4.5% 4.9% 1.3% 0.3%
Reseller & Connected Devices752 768 778 752 679 720 754 753 3,129 3,049 2,905 3,091 3,282 3,396 4.0%
% Y/Y 1.3% -3.0% -3.9% -4.4% -9.8% -6.3% -3.1% 0.2% 4.6% -2.6% -4.7% 6.4% 6.2% 3.5%
Equipment 2,629 2,984 2,895 4,886 3,952 4,084 3,896 6,784 13,435 13,394 18,716 18,897 19,278 19,233 0.8%
% Y/Y -16.7% -1.0% -10.3% 21.0% 50.3% 36.9% 34.6% 38.8% -3.1% -0.3% 39.7% 1.0% 2.0% -0.2%
Total Mobility 17,167 17,518 17,436 19,228 17,355 17,792 17,874 20,855 72,821 71,349 73,876 75,335 76,164 75,740 0.2%
% Y/Y -4.4% -2.3% -4.2% 2.5% 1.1% 1.6% 2.5% 8.5% -1.2% -2.0% 3.5% 2.0% 1.1% -0.6%
EBITDA 7,169 7,321 7,323 6,281 7,253 7,508 7,579 7,437 28,935 28,094 29,776 30,370 30,705 30,268 -0.4%
% Y/Y -2.2% -1.4% -2.3% -6.1% 1.2% 2.6% 3.5% 18.4% 3.7% -2.9% 6.0% 2.0% 1.1% -1.4%
% of revenue 41.8% 41.8% 42.0% 32.7% 41.8% 42.2% 42.4% 35.7% 39.7% 39.4% 40.3% 40.3% 40.3% 40.0%
AT&T (T) 19
10 July 2018
Figure 27: AT&T Forecast Summary, continued

Subs 000s, $MMs 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18E 3Q18E 4Q18E 2016 2017 2018E 2019E 2020E 2021E '18-'23
Entertainment
Subscribers
Linear Video 25,032 24,681 24,296 24,089 23,902 23,582 23,312 23,075 25,265 24,089 23,075 21,749 20,397 19,124 -7.0%
% Y/Y -1.2% -2.4% -3.9% -4.7% -4.5% -4.5% -4.1% -4.2% -0.5% -4.7% -4.2% -5.7% -6.2% -6.2%
Net Adds (233) (351) (385) (207) (187) (320) (270) (237) (133) (1,176) (1,014) (1,326) (1,352) (1,273)
DirecTV Now 339 491 787 1,155 1,467 1,837 2,187 2,487 267 1,155 2,487 3,819 4,761 5,613 22.7%
% Y/Y 332.7% 274.1% 177.9% 115.3% 332.6% 115.3% 53.6% 24.7% 17.9%
Net Adds 72 152 296 368 312 370 350 300 267 888 1,332 1,332 942 852
HSI: IP 13,130 13,242 13,367 13,462 13,616 13,641 13,666 13,761 12,888 13,462 13,761 14,060 14,262 14,462 1.2%
% Y/Y 4.7% 5.1% 4.8% 4.5% 3.7% 3.0% 2.2% 2.2% 4.3% 4.5% 2.2% 2.2% 1.4% 1.4%
Net Adds 242 112 125 95 154 25 25 95 532 574 299 299 202 200
DSL + POTS 6,697 6,317 5,960 5,662 5,351 5,067 4,801 4,582 7,144 5,662 4,582 3,731 3,094 2,600 -15.7%
% Y/Y -22.5% -22.0% -21.4% -20.7% -20.1% -19.8% -19.4% -19.1% -22.5% -20.7% -19.1% -18.6% -17.1% -16.0%
Net Adds (447) (380) (357) (298) (311) (284) (265) (219) (2,072) (1,482) (1,080) (851) (637) (494)
VOIP Voice 5,470 5,439 5,337 5,222 5,105 4,999 4,852 4,712 5,425 5,222 4,712 4,241 3,865 3,563 -7.9%
% Y/Y 4.7% 2.6% -0.8% -3.7% -6.7% -8.1% -9.1% -9.8% 4.1% -3.7% -9.8% -10.0% -8.9% -7.8%
Net Adds 45 (31) (102) (115) (117) (106) (147) (140) 213 (203) (510) (471) (377) (301)
ARPULinear Video $118.2 $121.2 $123.5 $126.7 $113.4 $116.7 $119.7 $125.4 $119.79 $122.33 $118.75 $121.72 $124.16 $126.64 2.1%
DirecTV Now $14.00 $27.12 $26.42 $26.49 $28.00 $27.67 $27.91 $28.26 $24.96 $27.98 $29.47 $30.65 $32.18 5.1%
HSI: IP $49.81 $48.70 $48.00 $46.94 $46.27 $45.77 $45.37 $45.17 $49.32 $48.35 $45.64 $45.17 $45.62 $46.53 1.6%
DSL + POTS $50.86 $51.48 $51.53 $52.20 $49.58 $50.20 $50.24 $50.89 $49.53 $51.49 $50.20 $51.71 $53.26 $54.86 3.0%
VOIP Voice $37.08 $36.48 $36.07 $37.25 $33.63 $33.20 $33.18 $34.64 $39.80 $36.72 $33.65 $32.64 $31.67 $30.72 -3.0%
% Y/Y Linear Video 1.8% 3.5% 4.5% 1.1% -4.1% -3.7% -3.0% -1.0% 6.2% 2.1% -2.9% 2.5% 2.0% 2.0%
DirecTV Now 2.0% 5.6% 6.7% 12.1% 5.3% 4.0% 5.0%
HSI: IP 3.3% -1.7% -3.7% -5.5% -7.1% -6.0% -5.5% -3.8% 7.3% -2.0% -5.6% -1.0% 1.0% 2.0%
DSL + POTS 3.7% 3.9% 3.8% 4.4% -2.5% -2.5% -2.5% -2.5% 6.9% 3.9% -2.5% 3.0% 3.0% 3.0%
VOIP Voice -9.0% -9.6% -8.9% -3.4% -9.3% -9.0% -8.0% -7.0% -3.0% -7.7% -8.3% -3.0% -3.0% -3.0%
Revs Video 9,020 9,153 9,200 9,355 8,359 8,536 8,676 9,013 36,460 36,728 34,583 34,208 33,352 32,422 -2.9%
% Y/Y 1.3% 2.1% 1.9% -2.2% -7.3% -6.7% -5.7% -3.7% 79.9% 0.7% -5.8% -1.1% -2.5% -2.8%
HSI 1,941 1,927 1,916 1,890 1,878 1,871 1,858 1,858 7,472 7,674 7,466 7,552 7,753 8,020 2.9%
% Y/Y 7.7% 3.2% 1.3% -1.0% -3.2% -2.9% -3.0% -1.7% 13.2% 2.7% -2.7% 1.2% 2.7% 3.4%
POTS Voice & DSL Revenue
1,056 1,005 949 910 819 784 744 716 4,829 3,920 3,063 2,561 2,181 1,874 -13.8%
% Y/Y -19.6% -19.2% -18.8% -17.6% -22.4% -22.0% -21.6% -21.3% -18.3% -18.8% -21.9% -16.4% -14.8% -14.1%
VoIP Voice & Equipment 606 597 583 590 521 503 490 497 2,534 2,376 2,011 1,757 1,540 1,369 -11.1%
% Y/Y -5.0% -6.3% -8.0% -5.6% -14.0% -15.7% -15.9% -15.8% 1.0% -6.2% -15.3% -12.7% -12.3% -11.1%
Total Entertaiment 12,623 12,682 12,648 12,745 11,577 11,695 11,768 12,084 51,295 50,698 47,124 46,078 44,826 43,685 -2.7%
% Y/Y -0.3% -0.2% -0.6% -3.5% -8.3% -7.8% -7.0% -5.2% 45.3% -1.2% -7.0% -2.2% -2.7% -2.5%
EBITDA 3,022 3,124 2,695 2,437 2,638 2,746 2,390 2,190 11,957 11,278 9,964 9,278 8,466 7,704 -8.4%
% Y/Y -1.9% -0.6% -9.9% -11.2% -12.7% -12.1% -11.3% -10.1% 72.1% -5.7% -11.7% -6.9% -8.8% -9.0%
% of revenue 23.9% 24.6% 21.3% 19.1% 22.8% 23.5% 20.3% 18.1% 23.3% 22.2% 21.1% 20.1% 18.9% 17.6%
Wireline: Business Solutions

Revs IP Broadband 2,974 3,028 3,087 3,138 3,138 3,161 3,215 3,261 11,431 12,227 12,775 13,321 13,893 14,386 3.8%
% Y/Y 8.1% 8.0% 6.0% 5.9% 5.5% 4.4% 4.1% 3.9% 9.6% 7.0% 4.5% 4.3% 4.3% 3.5%
Voice and Data 3,549 3,424 3,344 3,252 2,839 2,778 2,713 2,641 15,908 13,569 10,971 9,822 8,805 7,970 -9.7%
% Y/Y -17.2% -15.1% -14.3% -11.8% -20.0% -18.9% -18.9% -18.8% -14.0% -14.7% -19.1% -10.5% -10.4% -9.5%
Service & Equipment 878 921 918 1,061 839 881 860 997 3,943 3,778 3,577 3,390 3,292 3,224 -2.6%
% Y/Y -3.8% -5.1% -8.2% 0.1% -4.4% -4.4% -6.3% -6.0% 10.8% -4.2% -5.3% -5.2% -2.9% -2.1%
Total Wireline 7,401 7,373 7,349 7,451 6,816 6,819 6,788 6,900 31,282 29,574 27,323 26,533 25,989 25,580 -1.7%
% Y/Y -6.9% -5.6% -5.9% -3.4% -7.9% -7.5% -7.6% -7.4% -3.7% -5.5% -7.6% -2.9% -2.1% -1.6%
EBITDA 2,695 2,737 2,678 2,824 2,756 2,796 2,742 2,829 11,179 10,934 11,123 10,934 10,580 10,285 -2.4%
% Y/Y -5.7% -1.3% -5.5% 4.1% 2.3% 2.2% 2.4% 0.2% -5.7% -2.2% 1.7% -1.7% -3.2% -2.8%
% of revenue 36.4% 37.1% 36.4% 37.9% 40.4% 41.0% 40.4% 41.0% 35.7% 37.0% 40.7% 41.2% 40.7% 40.2%
International
Revs Wireless 588 665 736 824 671 711 701 757 2,373 2,813 2,839 3,108 3,423 3,604 5.8%
% Y/Y 9.5% 9.7% 26.5% 27.2% 14.1% 6.9% -4.8% -8.2% 21.6% 18.5% 0.9% 9.5% 10.1% 5.3%
Video 1,341 1,361 1,363 1,391 1,354 1,212 1,206 1,228 4,910 5,456 5,000 5,125 5,207 5,248 0.7%
% Y/Y 18.7% 11.4% 5.1% 10.3% 1.0% -11.0% -11.5% -11.7% 128.3% 11.1% -8.4% 2.5% 1.6% 0.8%
Total Int'l 1,929 2,026 2,099 2,215 2,025 1,922 1,907 1,985 7,283 8,269 7,839 8,233 8,630 8,852 2.6%
% Y/Y 15.7% 10.8% 11.7% 16.0% 5.0% -5.1% -9.1% -10.4% 77.5% 13.5% -5.2% 5.0% 4.8% 2.6%
EBITDA 170 254 162 279 221 217 113 136 453 865 687 885 1,040 1,132 11.5%
% Y/Y 115.2% 141.9% -32.2% 830.0% 30.0% -14.4% -30.4% -51.4% 163.4% 90.9% -20.6% 28.8% 17.6% 8.9%
% of revenue 8.8% 12.5% 7.7% 12.6% 10.9% 11.3% 5.9% 6.8% 6.2% 10.5% 8.8% 10.7% 12.1% 12.8%
AT&T (T) 20
10 July 2018
PEERs
PEERs is a global database that captures unique information about companies within the
Credit Suisse coverage universe based on their relationships with other companies – their
customers, suppliers and competitors. The database is built from our research analysts’
insight regarding these relationships. Credit Suisse covers over 3,000 companies globally.
These companies form the core of the PEERs database, but it also includes relationships
on stocks that are not under coverage. For more information, see our November 2016
PEERs report: A Chain Reaction: Supply Chain Strategies.
Figure 28: AT&T PEERs map
Source: Credit Suisse PEERs
AT&T (T) 21
10 July 2018
Financial Statements
Figure 29: AT&T Income Statement
$MMs except per share 2015 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18 2Q18E 3Q18E 4Q18E 2018E 2019E 2020E
Revenue 146,801 163,786 39,365 39,837 39,668 41,676 160,546 38,038 39,629 45,579 50,157 173,403 187,018 186,974
Core % Y/Y 10.8% 11.6% -2.9% -1.7% -3.0% -0.4% -2.0% -3.4% -3.6% -3.1% 0.4% -2.4% -0.1% 0.0%
Consensus 39,307 39,323 46,103 49,682 172,981 186,163 186,939
Operating Expenses 100,127 113,231 26,374 26,367 27,223 35,246 115,210 25,843 26,278 30,343 35,615 118,078 127,350 127,385
% Y/Y 0.1% 13.1% -1.7% -3.7% -2.4% 13.3% 1.7% -2.0% -0.3% 11.5% 1.0% 2.5% 7.9% 0.0%
% of revenue 68.2% 69.1% 67.0% 66.2% 68.6% 84.6% 71.8% 67.9% 66.3% 66.6% 71.0% 68.1% 68.1% 68.1%
Rpt'd EBITDA 46,639 50,194 12,991 13,470 12,445 6,430 45,336 12,195 13,351 15,236 14,543 55,325 59,668 59,589
Adj. EBITDA 47,130 50,700 12,564 13,033 12,410 11,275 49,282 12,442 13,219 15,353 14,595 55,609 59,636 58,994
Core % Y/Y 7.8% 7.6% -2.1% 0.7% -5.6% -4.2% -2.8% -1.0% -1.2% 0.5% 8.1% 1.4% -0.3% -1.1%
% of revenue 32.1% 31.0% 31.9% 32.7% 31.3% 27.1% 30.7% 32.7% 33.4% 33.7% 29.1% 32.1% 31.9% 31.6%
Consensus 13,200 13,287 15,060 14,348 56,150 59,863 60,755
D&A 22,016 25,847 6,127 6,147 6,042 6,071 24,387 5,994 6,003 6,127 6,107 24,231 23,029 22,699
Other (+ Rev Rec) - - - - - - - - - - - - - -
Non-Recurring 35 361 - - - - - - - - - - - -
Operating Income 24,623 24,347 6,864 7,323 6,403 359 20,949 6,201 7,348 9,109 8,436 31,094 36,639 36,890
% of revenue 16.8% 14.9% 17.4% 18.4% 16.1% 0.9% 13.0% 16.3% 18.5% 20.0% 16.8% 17.9% 19.6% 19.7%
Interest Expense Gross 4,120 4,910 1,293 1,395 1,686 1,926 6,300 1,771 2,086 2,086 2,073 8,015 8,224 8,401
Other (+Interest Income) (52) 277 (20) 128 246 264 618 1,702 587 514 519 3,321 1,734 1,775
Equity Income 79 98 (173) 14 11 20 (128) 9 9 8 13 39 39 39
Income Before Taxes 20,530 19,812 5,378 6,070 4,974 (1,283) 15,139 6,141 5,858 7,545 6,895 26,439 30,188 30,303
Income Taxes 6,944 6,479 1,804 2,056 1,851 (20,419) (14,708) 1,382 1,347 1,735 1,586 6,051 6,943 6,970
% Effective Rate 33.8% 32.7% 33.5% 33.9% 37.2% NM NM 22.5% 23.0% 23.0% 23.0% 22.9% 23.0% 23.0%
Net Income Pre-Minorities 13,586 13,333 3,574 4,014 3,123 19,136 29,847 4,759 4,511 5,810 5,309 20,388 23,245 23,333
Less: Minority Interest (342) (357) (105) (99) (94) (99) (397) (97) (97) (97) (97) (388) (407) (428)
Net Income: GAAP 13,244 12,976 3,469 3,915 3,029 19,037 29,450 4,662 4,414 5,713 5,212 20,000 22,838 22,905
% Y/Y 109.2% -2.0% -8.8% 14.9% -9.0% 681.2% 127.0% 34.4% 12.7% 88.6% -72.6% -32.1% 14.2% 0.3%
Diluted EPS: GAAP $2.35 $2.10 $0.56 $0.63 $0.49 $3.08 $4.76 $0.75 $0.65 $0.78 $0.71 $2.90 $3.10 $3.11
Adjustments 1,936 4,562 1,101 964 1,519 (14,212) (10,628) 599 1,024 913 863 3,399 1,892 1,089
Net Income: Adj. 15,180 17,538 4,570 4,879 4,548 4,825 18,822 5,261 5,438 6,626 6,075 23,400 24,730 23,994
% Y/Y 14.6% 15.5% 3.2% 10.0% -0.5% 17.6% 7.3% 15.1% 11.5% 45.7% 25.9% 24.3% 5.7% -3.0%
Diluted EPS: Adj. $2.69 $2.83 $0.74 $0.79 $0.74 $0.78 $3.05 $0.85 $0.80 $0.90 $0.82 $3.40 $3.36 $3.26
% Y/Y 6.0% 5.4% 3.3% 10.2% -0.4% 17.6% 7.5% 15.2% 1.7% 22.2% 5.6% 11.5% -1.2% -3.0%
Consensus $0.87 $0.82 $0.93 $0.83 $3.38 $3.51 $3.58
AT&T (T) 22
10 July 2018
Figure 30: AT&T Balance Sheet

$MMs, Calendar Year 2015 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18 2Q18E 3Q18E 4Q18E 2018E 2019E 2020E
Cash & Equivalents 5,121 5,788 14,884 25,617 48,499 50,498 50,498 48,872 7,955 9,971 10,739 10,739 14,379 11,869
Receivables 16,532 16,794 15,078 14,997 15,876 16,522 16,522 16,290 26,019 29,586 31,681 31,681 30,806 28,385
Prepaid expenses 1,072 1,555 1,418 1,371 1,258 1,369 1,369 1,335 1,268 1,459 1,605 1,605 1,613 1,496
Other Current Assets 13,267 14,232 14,347 11,562 10,724 10,757 10,757 12,008 12,523 14,403 15,850 15,850 15,929 15,893
Current Assets 35,992 38,369 45,727 53,547 76,357 79,146 79,146 78,505 47,765 55,418 59,875 59,875 62,727 57,642
PP&E (net) 124,450 124,899 125,292 126,184 126,462 125,222 125,222 125,124 129,092 129,672 130,807 130,807 133,805 136,692
Goodwill 104,568 105,207 105,593 105,546 105,668 105,449 105,449 105,482 184,991 184,991 184,991 184,991 184,991 184,991
Licenses 93,093 94,176 94,617 95,864 96,071 96,136 96,136 96,556 96,556 96,556 96,556 96,556 96,556 96,556
Customer lists and relationships 18,208 14,243 13,366 12,414 11,573 10,676 10,676 9,878 16,516 15,660 14,805 14,805 12,814 11,207
Other Intangible assets, net 9,409 8,441 8,295 7,980 7,775 7,464 7,464 7,201 7,036 6,823 6,609 6,609 6,111 5,709
Investments in Equity Affiliates 1,606 1,674 1,551 1,615 1,627 1,560 1,560 2,623 6,603 6,603 6,603 6,603 6,603 6,603
Other Assets 15,346 16,812 17,462 17,645 18,332 18,444 18,444 20,943 32,784 32,784 32,784 32,784 32,784 32,784
Total Assets 402,672 403,821 411,903 420,795 443,865 444,097 444,097 446,312 521,343 528,507 533,029 533,029 536,391 532,185
Current Portion of Debt 7,636 9,832 12,681 10,831 8,551 38,374 38,374 29,322 29,322 29,322 29,322 29,322 29,322 29,322
Accounts Payable 30,372 31,138 27,120 26,471 28,928 34,470 34,470 31,569 33,636 37,625 39,176 39,176 36,662 36,035
Advanced billing and deposits 4,682 4,519 4,493 4,371 4,503 4,213 4,213 5,081 4,204 4,855 5,698 5,698 5,706 5,095
Accrued Taxes 2,176 2,079 3,384 3,331 2,703 1,262 1,262 1,534 1,051 1,214 1,425 1,425 1,427 1,274
Dividends Payable 2,950 3,008 3,012 3,008 3,008 3,070 3,070 3,074 3,048 3,520 4,131 4,131 4,137 3,694
Current Liabilities 47,816 50,576 50,690 48,012 47,693 81,389 81,389 70,580 71,262 76,535 79,752 79,752 77,253 75,420
Long-term Debt 118,515 113,681 120,568 132,824 154,728 125,972 125,972 133,724 158,881 158,881 157,281 157,281 150,915 137,610
Deferred Income Taxes 56,181 60,128 61,100 61,926 64,381 43,207 43,207 45,730 46,843 47,824 48,720 48,720 52,189 55,522
Postemployment benefit obligation 34,262 33,578 33,404 31,422 31,231 31,775 31,775 30,116 29,976 29,836 29,696 29,696 28,896 28,096
Other noncurrent Liabilities 22,258 21,748 21,160 20,753 19,723 19,747 19,747 19,117 24,716 24,716 24,716 24,716 24,716 24,716
Common Stock 6,495 6,495 6,495 6,495 6,495 6,495 6,495 6,495 6,495 6,495 6,495 6,495 6,495 6,495
Additional paid-in capital 89,763 89,604 89,411 89,471 89,527 89,563 89,563 89,404 127,640 127,640 127,640 127,640 127,640 127,640
Retained Earnings / Accumulated deficit
33,671 34,734 35,175 36,067 36,074 52,029 52,029 55,018 55,869 58,018 59,667 59,667 68,125 76,523
Treasury Stock (12,592) (12,659) (12,400) (12,697) (12,716) (12,714) (12,714) (12,432) (12,432) (12,432) (12,432) (12,432) (12,432) (12,432)
AOCI 5,334 4,961 5,160 5,389 5,580 5,488 5,488 7,404 10,938 9,838 10,338 10,338 11,438 11,438
Noncontrolling interest 969 975 1,140 1,133 1,149 1,146 1,146 1,156 1,156 1,156 1,156 1,156 1,156 1,156
Total Equity 123,640 124,110 124,981 125,858 126,109 142,007 142,007 147,045 189,665 190,715 192,864 192,864 202,422 210,820
Total Liabilities & Equity 402,672 403,821 411,903 420,795 443,865 444,097 444,097 446,312 521,343 528,507 533,029 533,029 536,391 532,185
AT&T (T) 23
10 July 2018
Figure 31: AT&T Cash Flow Statement

$MMs except per share 2015 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18 2Q18E 3Q18E 4Q18E 2018E 2019E 2020E
Net Income 13,687 13,333 3,574 4,014 3,123 19,136 29,847 4,759 4,511 5,810 5,309 20,388 23,245 23,333
D&A 22,016 25,847 6,127 6,147 6,042 6,071 24,387 5,994 6,003 6,127 6,107 24,231 23,029 22,699
Undistributed loss (earnings) from equity affiliates (49) (37) 182 (15) 4 3 174 (2) - - - (2) - -
Provision for uncollectable accounts 1,416 1,474 393 402 421 426 1,642 438 400 400 400 1,638 1,600 1,600
Deferred income tax expense 4,117 2,947 480 484 2,290 (19,194) (15,940) 1,222 1,113 981 896 4,212 3,469 3,333
Net loss (gain) from sale of investments 91 (169) 61 (49) (126) (168) (282) 2 - - - 2 - -
Loss (gain) on pension benefits (2,152) 1,024 - (259) - 1,517 1,258 (930) - 500 500 70 - -
Asset abandonments and impairments 35 361 - - - 2,914 2,914 - - - - - - -
Retirement benefit funding (735) (910) (140) (140) (140) (646) (1,066) (140) (140) (140) (140) (560) (800) (800)
Other 1,712 (2,414) (497) (544) (379) 269 (1,151) (288) - - - (288) - -
Working Capital (4,258) (2,112) (962) (1,098) (121) (451) (2,632) (2,108) (800) (763) (872) (4,543) (3,311) (858)
Cash from Operations 35,880 39,344 9,218 8,942 11,114 9,877 39,151 8,947 11,086 12,914 12,201 45,148 47,232 49,307
Capex, Gross (20,015) (22,408) (6,015) (5,208) (5,268) (5,338) (21,829) (6,118) (5,994) (6,238) (6,873) (25,223) (26,138) (24,298)
FirstNet Reimbursements - - - - 17 262 279 - 500 600 700 1,800 2,600 720
Net Capex (20,015) (22,408) (6,015) (5,208) (5,251) (5,076) (21,550) (6,118) (5,494) (5,638) (6,173) (23,423) (23,538) (23,578)
Acquisitions, net of cash (30,759) (2,959) (162) 1,386 (70) (31) 1,123 (234) (42,849) (1,600) - (44,683) - -
Dispositions 83 646 6 45 5 3 59 56 - - - 56 1,100 -
Sale (purchase) of investments 1,545 506 - - (2) (2) (4) (116) - - - (116) - -
Other 2 - - - - 1 1 (740) - - - (740) - -
Cash from Investing (49,144) (24,215) (6,171) (3,777) (5,318) (5,105) (20,371) (7,152) (48,343) (7,238) (6,173) (68,906) (22,438) (23,578)
Debt Raise (Paydown) 23,926 (683) 9,386 8,609 18,457 2 36,454 (2,346) 0 - (1,600) (3,946) (6,366) (13,305)
Change in Treasury stock (net) (126) (366) (156) (278) - 4 (430) (134) - - - (134) - -
Dividends (10,200) (11,797) (3,009) (3,012) (3,009) (3,008) (12,038) (3,070) (3,660) (3,660) (3,660) (14,050) (14,787) (14,935)
Buybacks - - - - - -
Other (3,818) (1,616) (172) 249 1,638 229 1,944 2,048 - - - 2,048 - -
Cash from Financing 9,782 (14,462) 6,049 5,568 17,086 (2,773) 25,930 (3,502) (3,660) (3,660) (5,260) (16,082) (21,153) (28,239)
Impact of FX - - - - - - - - - - - - - -
Cash, Begin 8,603 5,121 5,788 14,884 25,617 48,499 5,788 50,498 48,872 7,955 9,971 50,498 10,739 14,379
Change in Cash (3,482) 667 9,096 10,733 22,882 1,999 44,710 (1,707) (40,917) 2,016 768 (39,840) 3,640 (2,510)
Resticted Cash 81
Cash, End 5,121 5,788 14,884 25,617 48,499 50,498 50,498 48,872 7,955 9,971 10,739 10,739 14,379 11,869
Free Cash Flow

Cash From Operations 35,880 39,344 9,218 8,942 11,114 9,877 39,151 8,947 11,086 12,914 12,201 45,148 47,232 49,307
CapEx (20,015) (22,408) (6,015) (5,208) (5,251) (5,076) (21,550) (6,118) (5,494) (5,638) (6,173) (23,423) (23,538) (23,578)
Free Cash Flow 15,865 16,936 3,203 3,734 5,863 4,801 17,601 2,829 5,592 7,276 6,028 21,725 23,694 25,730
% Y/Y 60.2% 6.8% -0.9% -22.8% 13.1% 30.2% 3.9% -11.7% 49.8% 24.1% 25.6% 23.4% 9.1% 8.6%
FCF per shr $2.81 $2.74 $0.52 $0.60 $0.95 $0.78 $2.85 $0.46 $0.83 $0.99 $0.82 $3.15 $3.22 $3.49
% Y/Y 48.1% -2.6% -0.8% -22.7% 13.3% 30.2% 4.1% -11.6% 36.7% 4.1% 5.3% 10.7% 2.0% 8.6%
AT&T (T) 24
AT&T (T)
Appendix
Figure 32: Credit Suisse Cable Networks Ratings Dashboard – AT&T / Turner Networks
AT&T - Turner Nets Standard Calendar Years Standard Calendar Quarters Nielsen Calendar Weeks (M-Su 6a-6a)
Demo 2015 2016 2017 1Q17 2Q17 3Q17 4Q17 1Q18 2Q QTD 4/1 4/8 4/15 4/22 4/29 5/6 5/13 5/20 5/27 6/3
Average Commercial Audience (000s), Target Demo

TBS NETWORK P18-49 340 310 276 315 270 252 269 269 240 341 308 238 223 228 247 228 224 209 233
TURNER NETWORK TELEVISION P18-49 314 306 259 277 332 192 235 255 406 248 237 322 533 484 444 391 413 441 377
CNN P25-54 134 199 239 252 240 250 217 219 207 204 189 248 209 194 197 174 222 160 177
ADULT SWIM P18-34 450 393 338 364 329 345 316 325 306 329 333 308 296 328 313 307 287 280 299
TRUTV P18-49 118 120 116 128 110 118 109 117 88 117 81 75 82 80 79 95 92 85 91
THE CARTOON NETWORK P2-11 468 367 293 301 313 297 259 230 200 265 246 198 189 183 170 173 163 188 240
HLN P25-54 118 114 99 106 99 99 90 91 92 83 81 88 79 96 88 92 96 91 94
BOOMERANG P2-11 90 68 57 59 57 58 53 54 41 51 58 48 46 51 48 46 44 39 30
Average Commercial Audience (000s), Target Demo -- % Change Y/Y

TBS NETWORK P18-49 -4% -9% -11% -11% -13% -8% -12% -15% -12% 18% 18% -16% -16% -17% -11% -18% -16% -15% -17%
TURNER NETWORK TELEVISION P18-49 -13% -3% -15% -15% -15% -25% -4% -8% 6% -1% 6% 2% 0% 15% -21% 16% -12% 29% 63%
CNN P25-54 13% 49% 20% 33% 40% 17% -3% -13% -21% -14% -29% -3% -9% -10% -6% -30% -25% -34% -29%
ADULT SWIM P18-34 -7% -13% -14% -15% -18% -9% -13% -11% -6% 2% -3% -9% -11% 3% 1% -4% -10% -13% -13%
TRUTV P18-49 -17% 2% -3% 1% -6% -2% -5% -9% -23% -11% -24% -31% -17% -23% -19% -10% -16% -34% -28%
THE CARTOON NETWORK P2-11 3% -22% -20% -15% -18% -25% -23% -24% -34% -5% -16% -43% -33% -32% -37% -34% -42% -43% -31%
HLN P25-54 15% -3% -13% -16% -15% -6% -16% -14% -11% -19% -21% -15% -22% -2% -11% -6% -5% -13% -4%
BOOMERANG P2-11 41% -24% -16% -18% -16% -22% -12% -8% -20% -18% -3% -19% -18% -4% -13% -12% -27% -33% -48%
Average Commercial Audience (000s), Target Demo -- Δ CHANGE

TBS NETWORK P18-49 (15) (30) (34) (39) (42) (21) (35) (46) (34) 51 46 (44) (44) (47) (29) (51) (44) (38) (48)
TURNER NETWORK TELEVISION P18-49 (45) (8) (47) (49) (59) (65) (11) (22) 22 (2) 14 6 - 62 (121) 55 (56) 98 146
CNN P25-54 15 65 40 63 69 37 (7) (33) (55) (33) (77) (8) (20) (21) (12) (75) (75) (83) (72)
ADULT SWIM P18-34 (35) (57) (55) (63) (71) (35) (47) (39) (21) 5 (9) (29) (36) 9 3 (14) (31) (41) (46)
TRUTV P18-49 (25) 2 (4) 1 (7) (2) (6) (11) (26) (14) (25) (33) (17) (24) (18) (10) (18) (43) (36)
THE CARTOON NETWORK P2-11 12 (101) (74) (55) (69) (99) (76) (71) (103) (13) (48) (149) (94) (85) (98) (88) (117) (143) (110)
HLN P25-54 15 (4) (15) (20) (18) (6) (17) (15) (11) (20) (21) (15) (22) (2) (11) (6) (5) (13) (4)
BOOMERANG P2-11 26 (22) (11) (13) (11) (16) (7) (5) (10) (11) (2) (11) (10) (2) (7) (6) (16) (19) (28)
Source: Nielsen NNTV, Company data, Credit Suisse estimate; QTD is program level data 4/1/18-6/3/18 vs 4/1/17-6/3/17; QTD and most recent two weeks are set to Live+SD ratings and as commercial ratings are reported on a two week delay
10 July 2018
25
AT&T (T)
Figure 33: Credit Suisse Cable Networks Ratings Dashboard – AT&T / Turner Networks Page 2
AT&T - Turner Nets Standard Calendar Years Standard Calendar Quarters Nielsen Calendar Weeks (M-Su 6a-6a)
Demo 2015 2016 2017 1Q17 2Q17 3Q17 4Q17 1Q18 2Q QTD 4/1 4/8 4/15 4/22 4/29 5/6 5/13 5/20 5/27 6/3
Commercial Duration -- % Change Y/Y

TBS NETWORK P18-49 -1% -6% 0% -3% -1% 0% 3% 3% 2% 4% 0% 1% 1% 2% 3% 1% 4% 4% 3%
TURNER NETWORK TELEVISION P18-49 3% -3% -3% -6% -4% -4% 0% 1% 1% -3% -1% 0% -1% 1% 0% 4% 0% 4% 2%
CNN P25-54 6% 0% -4% -4% -5% -1% 9% 10% 9% 12% 15% 1% 2% 0% 9% 17% 19% 12% 9%
ADULT SWIM P18-34 3% 0% 1% -1% 1% 0% 7% 0% 1% -2% 1% 1% -1% 1% 0% 0% 1% 1% 3%
TRUTV P18-49 -2% -2% 1% -8% -5% 4% 12% 9% 11% 12% 8% 9% 9% 10% 14% 13% 12% 12% 13%
THE CARTOON NETWORK P2-11 -2% 1% -2% -2% -1% 0% -5% 0% -1% -2% -19% 3% 6% 4% -1% -1% -1% 0% -3%
HLN P25-54 2% 1% -1% -3% -1% 0% 1% 7% 7% 10% 10% 7% 11% 6% 11% 5% 2% 5% 2%
BOOMERANG P2-11 130% 0% 71% 28% 17% 14% 5% 3% 0% 1% -7% 6% 0% 0% 0% 0% 0% 0% 0%
AT&T - Turner Nets 4% -2% 2% -2% -1% 1% 4% 5% 4% 5% 3% 3% 4% 3% 6% 6% 6% 6% 4%
Commercial Viewing Time (Billions of Minutes), Target Demo

TBS NETWORK P18-49 44.4 38.3 34.1 9.4 8.4 8.0 8.3 8.3 5.3 0.8 0.7 0.6 0.5 0.6 0.6 0.6 0.6 0.5 0.6
TURNER NETWORK TELEVISION P18-49 36.5 34.4 28.1 7.4 9.1 5.2 6.4 6.9 8.0 0.5 0.5 0.7 1.2 1.1 0.9 0.9 0.9 0.9 0.8
CNN P25-54 15.6 23.2 26.6 6.6 6.7 7.0 6.4 6.3 4.4 0.5 0.5 0.5 0.5 0.4 0.5 0.4 0.5 0.4 0.4
ADULT SWIM P18-34 16.6 14.5 12.5 3.3 3.1 3.2 3.0 3.0 2.0 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
TRUTV P18-49 11.0 11.0 10.7 2.7 2.4 2.9 2.7 2.7 1.5 0.2 0.1 0.1 0.2 0.1 0.2 0.2 0.2 0.2 0.2
THE CARTOON NETWORK P2-11 23.1 18.3 14.3 3.6 3.8 3.7 3.2 2.8 1.7 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
HLN P25-54 14.8 14.5 12.4 3.2 3.1 3.2 2.9 2.9 2.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
BOOMERANG P2-11 3.1 2.3 3.3 0.8 0.8 0.9 0.8 0.8 0.4 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0
AT&T - Turner Nets 165.3 156.5 142.1 37.2 37.4 34.0 33.5 33.6 25.5 2.8 2.6 2.6 3.0 2.9 2.8 2.7 2.8 2.6 2.7
Commercial Viewing Time (Billions of Minutes), Target Demo -- % Change Y/Y

TBS NETWORK P18-49 -4.8% -13.9% -11.0% -13.6% -13.9% -7.5% -8.6% -12.2% -10.6% 21.8% 17.1% -14.8% -15.6% -15.3% -7.8% -17.8% -12.8% -12.1% -14.5%
TURNER NETWORK TELEVISION P18-49 -9.8% -5.8% -18.3% -20.0% -18.6% -28.0% -4.6% -7.5% 6.5% -3.5% 5.3% 1.4% -0.7% 15.7% -21.2% 20.8% -11.8% 33.5% 67.2%
CNN P25-54 18.9% 48.5% 14.8% 27.7% 32.8% 16.6% 6.0% -4.7% -14.0% -3.3% -18.5% -2.1% -7.3% -10.1% 2.9% -18.6% -10.8% -26.2% -22.3%
ADULT SWIM P18-34 -4.4% -12.7% -13.4% -15.5% -16.5% -9.0% -7.2% -10.5% -5.8% -0.3% -2.0% -8.0% -12.0% 3.5% 1.3% -4.0% -8.6% -12.0% -10.3%
TRUTV P18-49 -18.9% -0.7% -2.7% -6.9% -11.1% 2.5% 6.4% -0.5% -14.0% 0.1% -17.3% -24.3% -9.3% -15.3% -7.5% 1.8% -6.0% -25.8% -19.4%
THE CARTOON NETWORK P2-11 0.4% -20.9% -21.8% -17.0% -19.0% -24.9% -26.8% -23.8% -35.0% -6.9% -32.2% -41.3% -29.1% -29.1% -37.3% -34.1% -42.3% -43.1% -33.4%
HLN P25-54 17.0% -2.5% -14.0% -18.7% -16.4% -5.7% -15.3% -7.9% -4.7% -11.2% -12.9% -8.2% -13.3% 3.4% -1.3% -1.0% -2.8% -7.9% -2.1%
BOOMERANG P2-11 223.2% -24.4% 43.0% 4.7% -1.8% -10.9% -7.4% -5.7% -19.8% -17.0% -10.6% -13.8% -17.8% -3.9% -12.8% -11.5% -26.7% -32.9% -48.3%
REVENUE-WEIGHTED CHANGE -3.1% -1.9% -9.2% -8.7% -7.9% -9.6% -5.2% -9.2% -7.0% 3.8% -0.2% -8.9% -9.9% -3.4% -9.7% -4.6% -12.4% -4.1% 6.5%
Source: Nielsen NNTV, Company data, Credit Suisse estimate; QTD is program level data 4/1/18-6/3/18 vs 4/1/17-6/3/17; QTD and most recent two weeks are set to Live+SD ratings and as commercial ratings are reported on a two week dela. Revenue-
weighted change uses SMI revenue data; calculated as sum of Y/Y change * contribution to total advertising revenue for each network.
10 July 2018
26
AT&T (T)
Figure 34: Warner Bros Film Slate, CY18 and CY19

1Q18 2Q18 3Q18 4Q18
Paddington 2 1/12/18 Rampage 4/20/18 The Nun 7/13/18 A Star is Born (2018) 10/5/18
12 Strong 1/19/18 Life of the Party 5/11/18 Teen Titans Go! To The Movies 7/27/18 Mowgli 10/19/18
The 15:17 to Paris 2/9/18 Ocean's 8 6/8/18 The Meg 8/10/18 Fantastic Beasts: The Crimes of Grindelwald 11/16/18
Game Night 2/23/18 Tag 6/15/18 Crazy Rich Asians 8/17/18 Aquaman 12/21/18
Tomb Raider 3/16/18 Untitled New Line Horror Film 9/7/18 Untitled WB Event Film #2 (2018) 12/25/18
Ready Player One 3/29/18 Smallfoot 9/28/18
1Q19 2Q19 3Q19 4Q19

The LEGO Movie 2 2/8/19 Shazam! 4/5/19 Untitled WB Event Film I (2019) 8/2/19 Wonder Woman 2 11/1/19
Isn't It Romantic 2/14/19 Minecraft 5/24/19 It: Chapter 2 9/6/19 Margie Claus 11/15/19
Godzilla 2 3/22/19 Shaft (2019) 6/14/19 Untitled WB Event Film II (2019) 9/27/19
The Goldfinch 10/11/19
10 July 2018
27
10 July 2018
Investment Risks
Risks to our price target and rating that are specific to AT&T include:
■ Outperformance of postpaid wireless subscribers: In our view, one of the most

significant drivers of operating performance among AT&T’s many businesses is the
postpaid wireless business. The potential outperformance of these subscribers vs. our
forecast represents upside risk.
■ Warner Media performs better than we expect: We are skeptical on the revenue
synergies projected by AT&T relating to their digital advertising initiatives, and to the
extent these initiatives bear fruit it could represent upside risk.
■ Business services outperforms: AT&T’s business service customer spending is

correlated to overall economic health, and to the extent that a stronger than expected
economy, improved business outlook or tax cuts influence businesses to spend more
could benefit AT&T and represents upside risk.
■ Moderating capital intensity: We are wary that the oncoming shift to 5G wireless
technology represents a need for continuous capital investment, however the extent to
which capital intensity moderates for AT&T vs. our forecast represents upside risk.
AT&T (T) 28
10 July 2018
Companies Mentioned (Price as of 06-Jul-2018)

ADTRAN Inc (ADTN.OQ, $15.5)
AT&T (T.N, $32.68, UNDERPERFORM, TP $29.0)
American Tower Corp. (AMT.N, $145.81)
BlackBerry (BB.TO, C$13.0)
Charter Communications (CHTR.OQ, $304.43)
Citrix Systems Inc. (CTXS.OQ, $106.57)
Comcast Corp. (CMCSA.OQ, $33.58)
Deutsche Telekom (DTEGn.F, €13.815)
Dish Network (DISH.OQ, $34.99)
Juniper Networks (JNPR.N, $27.96)
Samsung Electronics (005930.KS, W44,900)
Sprint Corp (S.N, $5.63)
T-MOBILE (TMUS.OQ, $61.14)
Verizon Communications (VZ.N, $51.48)
WideOpenWest, Inc. (WOW.N, $11.0)
Disclosure Appendix
Analyst Certification
I, Douglas Mitchelson, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and
securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this report.
3-Year Price and Rating History for AT&T (T.N)
T.N Closing Price Target Price

Date (US$) (US$) Rating
23-Jul-15 33.93 38.00 O
24-Jul-15 34.29 40.00
02-Aug-16 43.16 R
18-Oct-17 35.71 NC
* Asterisk signifies initiation or assumption of coverage.
Effective July 3, 2016, NC denotes termination of coverage.
O U T PERFO RM
REST RIC T ED
N O T C O V ERED
As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analys t's coverage universe which
consists of all companies covered by the analyst within the relevant sector, with Outperforms represent ing the most attractive, Neutrals the less attractive, and
Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total
return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representin g the
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less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that
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valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
AT&T (T) 29
10 July 2018
Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
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Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 48% (62% banking clients)
Neutral/Hold* 37% (57% banking clients)
Underperform/Sell* 13% (51% banking clients)
Restricted 2%
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Target Price and Rating

Valuation Methodology and Risks: (12 months) for AT&T (T.N)
Method: Our $29 target price and Underperform rating are derived via DCF, using a 9% cost of equity, 4% pre-tax cost of debt and 0% terminal
growth
Risk: Risks to our Underperform rating and $29 target price include: outperforming on postpaid net adds or TWX deal synergies, a stronger
economy helping business services, or capex moderating despite heading into 5G
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures/view/selectArchive for the definitions of abbreviations
typically used in the target price method and risk sections.
See the Companies Mentioned section for full company names
Credit Suisse currently has, or had within the past 12 months, the following as investment banking client(s): T.N
Credit Suisse provided investment banking services to the subject company (T.N) within the past 12 months.
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banking, securities-related: T.N
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Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
AT&T (T) 30
10 July 2018
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This research report is authored by:
Credit Suisse Securities (USA) LLC .................................................................. Douglas Mitchelson ; Brian Russo ; Meghan Durkin ; Grant Joslin
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AT&T (T) 31
10 July 2018
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AT&T (T) 32

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10 July 2018

On 06-Jul-2018 the S&P 500 INDEX closed at 2759.82

Source: Company data, Thomson Reuters, Credit Suisse estimates

Investment Thesis in Charts 6

Investment Risks 2825

Investment Thesis in Charts

AT&T Verizon Comcast Charter

Source: Company data, Credit Suisse estimates

Figure 2: The growth outlook for AT&T’s business

15% 17% 25% 39%

Business Wireline Warner Media Entertainment Wireless

Figure 5: …and we forecast continued wireless

$72.8 $71.3 $73.9 $75.3 $76.2 $75.7

2016 2017 2018E 2019E 2020E 2021E

Source: Company data, Credit Suisse estimates

(10) -0.5% ($2)

Figure 7: For wireline, total company-wide wireline

($60) -8.5% -11%

2016 2017 2018E 2019E 2020E 2021E

$13 $12.3 18% 3.4%

$11 10% ($11) -17%

Figure 12: Looking across its businesses, and

2017 2018E 2019E 2020E

Source: Company data, Credit Suisse estimates

Is 5G the elixir? No, revenue opportunities are too

1H18 2H18 1H19 2H19 1H20

Low - Mid Band FDD bands

Figure 16: Will 5G drive competitive differentiation? Everyone is “first”….

“We are deploying innovative 5G technology such as Massive

Source: Company data, Credit Suisse estimates

That leaves capital intensity and capital deployment

13.6% 13.6% 14.5% 14.0% 13.0% 12.5%

2014 2015 2016 2017 2018E 2019E 2020E 2021E

2.3x 2.3x 2.3x 70%

2016 2017 2018E 2019E

Figure 20: Overall, with returns currently below

Cash Flow Return on Investment Cost of Capital

2010 2011 2012 2013 2014 2015 2016 2017

Source: HOLT®. CFROI® is an approximation of the economic return, or an estimate of the

Figure 21: AT&T valuation perspectives

10-Yr Avg 12.4x

Source: Company data, Credit Suisse estimates, Thomson Reuters

Figure 22: AT&T valuation analysis

Debt, EOP 186,603 180,237 166,932 151,165 141,706 133,550

Investments / JVs (4,182) (4,349) (4,523) (4,704) (4,892) (5,087)

Enterprise Value 430,666 420,501 409,542 398,707 387,401 376,825 -2.6%

EBITDA, CS 55,609 59,636 58,994 57,497 56,852 55,200 -0.1%

CapEx 25,223 26,138 24,298 23,258 22,273 21,418 -3.2%

EPS, CS $3.40 $3.36 $3.26 $3.10 $2.99 $2.79 -3.9%

Dividends 14,050 14,787 14,935 15,084 15,235 15,387 1.8%

Source: Company data, Credit Suisse estimates

Figure 23: AT&T Discounted Cash Flow Analysis

Source: Company data, Credit Suisse estimates

HOLT Valuation Analysis

HOLT Operating Margin

Adj. EBITDA CS 13,219 15,353 14,595 55,609 59,636 58,994 3.0%

EPS CS $ 0.80 $ 0.90 $ 0.82 $ 3.40 $ 3.36 $ 3.26 -2.1%

Figure 26: AT&T Forecast Summary

Source: Company data, Credit Suisse estimates