TELECOMMUNICATIONS
Micah Martin
11/26/2013
Agenda






Overview
AT&T
Verizon
T-Mobile
SBA Communications
Recommendation
Agenda

Overview

AT&T
Verizon
T-Mobile
SBA Communications
Recommendation




Telecom Weight

As of market close, S&P weight= 2.63%
 SIM
weight= 1.96%
 We are underweight 67 basis points

Our weight of 1.96% is only one company:
Makeup of S&P 500 Telecom Sector

As of market close, the S&P 500 weights of
the 8 companies in the telecom sector were:
Company Name
S&P 500 Weight
AT&T
1.17%
Verizon
0.89%
American Tower
0.19%
Crown Castle International
0.15%
CenturyLink
0.11%
L-3 Communications
0.06%
Windstream Holdings
0.03%
Frontier Communications
0.03%
Total
2.63%
5-Year Sector Valuation
Absolute Basis
High
Low
Median
Current
P/Trailing E
23.8
9.7
16.9
20.4
P/Forward E
22.0
10.5
15.9
14.8
P/B
2.5
1.3
1.8
2.5
P/S
1.4
0.9
1.2
1.3
P/CF
6.3
3.6
5.1
5.9
High
Low
Median
Current
P/Trailing E
1.6
0.68
1.2
1.2
P/Forward E
1.7
0.79
1.2
0.97
P/B
1.1
0.7
0.8
1.0
P/S
1.4
0.8
1.0
0.9
P/CF
0.7
0.4
0.6
0.5
Relative to SPX
Telecom Dividend Yield

Dividend Yield by
Sector as of
7/31/2013
Source: S&P
Mergers & Acquisitions

In the last year:
 AT&T
acquired LEAP wireless
 T-Mobile acquired MetroPCS
 Softbank acquired Sprint
 Verizon acquired Vodafone’s stake in Verizon
 Crown Castle obtained LT leases for 9,100 of
AT&T’s European towers
 American Tower acquired Global Tower Partners
My Sector Recommendation

I recommend that the SIM portfolio remain
underweight telecoms relative to the S&P 500.




Valuations are not compelling
US market is nearing saturation with greater than 100%
wireless penetration
Margins/pricing pressure
Risks:



Growth in data usage would offset the diminishing number
of new users
Investors seeking high-yielding stocks could continue to
push up prices
US telecom stocks could pursue aggressive expansion
overseas
My Stock Recommendation
Company
Current
Price
Target
Price
Upside/
Downside
Recommendation
Original
SIM Weight
Remaining
SIM Weight
AT&T
$35.28
$27.23
-22.8%
Do Nothing
-
-
Verizon
$50.05
$42.53
-15.0%
Do Nothing
-
-
T-Mobile
$26.34
$26.52
0.7%
Sell 96bp
1.96%
1.0%
SBA Comm.
$85.72
$50.06
-41.6%
Do Nothing
-
-

Taking the SIM Telecom weight down from 1.96% to 1.0%
would result in being 163bp underweight the S&P 500.
Agenda

Overview

AT&T

Verizon
T-Mobile
SBA Communications
Recommendation



Business Overview


AT&T is the largest telecommunications company in
North America
It has both wireless and wireline services
 Wireless=
primarily cell phone service
 Wireline= household phones, U-verse broadband
Segment as % of AT&T's Revenues
2010
2011
2012
Wireless
47%
50%
52%
Wireline
50%
47%
47%
Other
3%
3%
1%
Total
100%
100%
100%
AT&T Business Drivers





Consumer Spending
Growth of Wireless Customers
Higher ARPU due to Network Investment
Increased U-verse Expansion
Acquisitions
AT&T 5-Year Performance
Absolute Return
Return Relative to S&P 500
AT&T 5-Year Financials
AT&T 5-Year Valuation Multiples
Absolute Basis
High
Low
Median
Current
P/Trailing E
16.6
8.5
12.7
14.7
P/Forward E
15.5
9.5
12.4
13.6
P/B
2.3
1.4
1.6
2.1
P/S
1.8
1.2
1.4
1.5
P/CF
7.0
3.9
5.3
6.1
High
Low
Median
Current
P/Trailing E
1.2
0.62
0.89
0.88
P/Forward E
1.2
0.71
0.91
0.89
P/B
1.0
0.60
0.80
0.80
P/S
1.8
1.0
1.2
1.0
P/CF
0.80
0.40
0.60
0.50
Relative to SPX
AT&T DCF
AT&T (T)
(in millions)
Analyst: Micah Martin
11/26/2013
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2013E
128,708
% Grow th
Operating Income
Operating Margin
Interest and Other
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Total Capex % of sales
Free Cash Flow
13,490
10.5%
3,861
3.0%
3,153
30.5%
6,476
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
14,164
10.8%
3,931
3.0%
3,330
29.0%
6,903
7%
20,593
20,966
2015E
133,661
2.0%
15,009
11.2%
4,010
3.0%
3,557
30.0%
7,442
7.8%
21,386
2016E
136,334
2.0%
14,997
11.0%
4,090
3.0%
3,163
29.0%
7,744
4.1%
20,450
2017E
139,061
2.0%
15,297
11.0%
4,172
3.0%
3,226
29.0%
7,899
2.0%
20,859
2018E
141,842
2.0%
16,312
11.5%
4,255
3.0%
3,496
29.0%
8,560
8.4%
21,276
2019E
144,679
2.0%
16,638
11.5%
3,617
2.5%
3,776
29.0%
9,245
8.0%
21,702
2020E
147,572
2.0%
17,709
12.0%
3,689
2.5%
3,925
28.0%
10,094
9.2%
20,660
2021E
150,524
2.0%
18,063
12.0%
3,763
2.5%
4,004
28.0%
10,296
2.0%
21,073
2022E
153,534
2.0%
19,192
12.5%
3,838
2.5%
4,299
28.0%
11,054
7.4%
21,495
2023E
156,605
2.0%
19,576
12.5%
3,915
2.5%
4,385
28.0%
11,276
2.0%
21,925
16.0%
16.0%
16.0%
15.0%
15.0%
15.0%
15.0%
14.0%
14.0%
14.0%
14.0%
495
524
556
545
556
567
579
590
602
614
626
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
20,593
16.0%
6,971
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
131,040
1.8%
% Grow th
Add Depreciation/Amort
2014E
8.5%
2.0%
20,966
16.0%
7,427
6.5%
60,895
82,605
143,500
3.75%
28.7
22.2
7.7
6.4
21,386
16.0%
7,998
7.7%
42%
58%
100%
26.9
20.8
7.4
6.2
20,450
15.0%
8,289
3.6%
20,859
15.0%
8,455
2.0%
21,276
15.0%
9,128
8.0%
Shares Outstanding
Current Price $
Implied equity value/share $
Upside/(Downside) to DCF
25.0
19.3
7.2
6.0
Debt
Cash
Cash/share
21,702
15.0%
9,824
7.6%
5,270.0
35.28
27.23
-22.8%
76,780
1,370
0.26
20,660
14.0%
10,684
8.8%
21,073
14.0%
10,898
2.0%
21,495
14.0%
11,669
0.4%
21,925
14.0%
11,902
7.1%
2.0%
Terminal Value
Free Cash Yield
Terminal P/E
Terminal EV/EBITDA
186,769
6.37%
16.6
6.3
AT&T DCF Sensitivity Analysis
Terminal Discount Rate
AT&T Target Price Sensitivity Analysis
$27.23
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
0.0%
$24.64
$23.06
$21.65
$20.40
$19.27
$18.26
$17.34
$16.50
$15.74
0.5%
$25.64
$23.90
$22.38
$21.03
$19.82
$18.73
$17.76
$16.87
$16.06
Terminal FCF Growth Rate
1.0%
1.5%
2.0%
$26.78 $28.09 $29.62
$24.86 $25.96 $27.23
$23.20 $24.12 $25.18
$21.73 $22.51 $23.41
$20.42 $21.10 $21.86
$19.26 $19.84 $20.49
$18.21 $18.72 $19.28
$17.27 $17.71 $18.20
$16.42 $16.80 $17.23
2.5%
$31.44
$28.71
$26.40
$24.43
$22.72
$21.23
$19.91
$18.74
$17.70
3.0%
$33.61
$30.45
$27.83
$25.60
$23.70
$22.06
$20.62
$19.35
$18.22
3.5%
$36.27
$32.55
$29.51
$26.98
$24.84
$23.00
$21.42
$20.03
$18.81
4.0%
$39.59
$35.11
$31.53
$28.60
$26.16
$24.10
$22.33
$20.80
$19.47
AT&T- Bull vs. Bear Case

Bull
 Company
has a wide moat
 Strong dividend yield
 Stable cash flows

Bear
 Unsure
where future growth will come from
 Increased competition in wireless space
 Wireline business continues to drag on growth
AT&T Catalysts/Risks

Catalysts
 Possible
major acquisition in Europe or elsewhere
internationally
 Increased penetration of U-verse

Risks
 Dividend
growth could slow
 Wireline business could drop faster than expected
Agenda

Overview
AT&T

Verizon

T-Mobile
SBA Communications
Recommendation



Verizon Business Overview

Verizon is the largest wireless carrier in North
America, but also has a presence in wireline as well
 Wireless
is the key business
 Wireline is, among other things, FiOS
Verizon Segment % of Revenue
2010
2011
2012
Wireline
39.4%
36.7%
34.4%
Wireless
60.6%
63.3%
65.6%
Verizon Business Drivers


Consumer Spending
Increase in Wireless Pentration
 Bundling


tablets/phones/etc.
Higher ARPU due to higher network quality
Verizon FiOS
Verizon 5-Year Performance
Absolute Return
Return Relative to S&P 500
Verizon 5-Year Financials
Verizon Valuation Multiples
Absolute Basis
High
Low
Median
Current
P/Trailing E
22.4
10.5
16.7
19.1
P/Forward E
18.4
10.4
15.0
14.6
P/B
4.6
1.6
2.7
4.1
P/S
1.3
0.7
1.0
1.2
P/CF
6.6
3.1
4.6
6.0
High
Low
Median
Current
P/Trailing E
1.5
0.64
1.2
1.1
P/Forward E
1.4
0.67
1.1
0.96
P/B
1.9
0.80
1.2
1.6
P/S
1.2
0.6
0.8
0.8
P/CF
0.7
0.3
0.5
0.5
Relative to SPX
Verizon DCF
Verizon (VZ)
(in millions)
Analyst: Micah Martin
11/26/2013
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2013E
120,480
% Grow th
Operating Income
Operating Margin
Interest and Other
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Total Capex % of sales
Free Cash Flow
13,752
11.4%
2,597
2.2%
4,194
30.5%
6,961
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
14,371
11.5%
2,623
2.1%
4,500
31.3%
7,248
4%
16,625
16,791
2015E
130,311
4.0%
15,108
11.6%
2,649
2.0%
5,000
33.1%
7,459
2.9%
16,959
2016E
135,523
4.0%
15,450
11.4%
2,710
2.0%
4,459
35.0%
8,280
11.0%
18,296
2017E
140,944
4.0%
16,209
11.5%
2,819
2.0%
4,686
35.0%
8,703
5.1%
19,027
2018E
146,582
4.0%
16,857
11.5%
2,932
2.0%
4,874
35.0%
9,051
4.0%
19,789
2019E
151,713
3.5%
17,447
11.5%
3,034
2.0%
5,044
35.0%
9,368
3.5%
20,481
2020E
157,022
3.5%
18,058
11.5%
3,140
2.0%
5,221
35.0%
9,696
3.5%
21,198
2021E
161,733
3.0%
18,599
11.5%
3,235
2.0%
5,378
35.0%
9,987
3.0%
21,834
2022E
165,776
2.5%
19,064
11.5%
3,316
2.0%
5,512
35.0%
10,237
2.5%
21,551
2023E
169,092
2.0%
19,446
11.5%
3,382
2.0%
5,622
35.0%
10,441
2.0%
21,982
13.8%
13.4%
13.0%
13.5%
13.5%
13.5%
13.5%
13.5%
13.5%
13.0%
13.0%
(1,021)
(1,056)
(1,093)
(949)
(987)
(1,026)
(1,062)
(1,099)
(1,132)
(1,160)
(1,184)
0.8%
16,337
13.6%
6,228
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
125,299
4.0%
% Grow th
Add Depreciation/Amort
2014E
8.5%
2.0%
0.8%
16,500
13.2%
6,483
4.1%
57,396
64,253
121,650
4.35%
20.6
17.5
6.1
5.4
0.8%
16,665
12.8%
6,660
2.7%
47%
53%
100%
19.7
16.8
5.9
5.2
0.7%
16,940
12.5%
8,687
30.4%
0.7%
17,618
12.5%
9,126
5.1%
0.7%
18,323
12.5%
9,491
4.0%
Shares Outstanding
Current Price $
Implied equity value/share $
Upside/(Downside) to DCF
19.2
16.3
5.8
5.1
Debt
Cash
Cash/share
0.7%
18,964
12.5%
9,823
3.5%
2,860.0
50.05
42.53
-15.0%
99,140
57,360
20.06
0.7%
19,628
12.5%
10,167
3.5%
0.7%
20,217
12.5%
10,472
3.0%
0.7%
20,722
12.5%
9,905
0.7%
21,982
13.0%
9,258
-5.4%
-6.5%
Terminal Value
Free Cash Yield
Terminal P/E
Terminal EV/EBITDA
145,276
6.37%
13.9
4.5
Verizon DCF Sensitivity Analysis
Terminal Discount Rate
Verizon Target Price Sensitivity Analysis
$42.53
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
0.0%
$38.90
$36.55
$34.46
$32.59
$30.91
$29.38
$27.99
$26.73
$25.57
0.5%
$40.33
$37.77
$35.50
$33.49
$31.69
$30.06
$28.59
$27.25
$26.03
Terminal FCF Growth Rate
1.0%
1.5%
2.0%
2.5%
$41.97 $43.85 $46.05 $48.65
$39.15 $40.72 $42.53 $44.65
$36.67 $38.00 $39.52 $41.27
$34.49 $35.62 $36.90 $38.36
$32.55 $33.52 $34.61 $35.84
$30.81 $31.65 $32.58 $33.63
$29.25 $29.97 $30.78 $31.68
$27.83 $28.46 $29.16 $29.94
$26.54 $27.09 $27.70 $28.38
3.0%
$51.76
$47.16
$43.31
$40.05
$37.25
$34.82
$32.69
$30.80
$29.13
3.5%
$55.57
$50.16
$45.72
$42.02
$38.88
$36.18
$33.84
$31.78
$29.96
4.0%
$60.34
$53.83
$48.62
$44.35
$40.78
$37.75
$35.15
$32.89
$30.91
Verizon- Bull vs. Bear Case

Bull
 Leader
in wireless market
 Strong, locked-in cash flows

Bear
 Increased
competition/pricing pressure
 Higher leverage after acquiring Vodafone’s stake
Verizon Catalysts/Risks

Catalysts
 Could
raise dividend to bring it more in line with AT&T
 Developing cell network in key cities

Risks
 Debt
load is high, so ability to perform any major
acquisitions will be low
 Tied very closely to the United States consumer
Agenda

Overview
AT&T
Verizon

T-Mobile

SBA Communications
Recommendation



T-Mobile Business Overview




Unlike Verizon and AT&T, T-Mobile does not offer
wireline service
They offer both postpaid and prepaid phone
service
T-Mobile is roughly 80% owned by Deutsche
Telekom
Recently they acquired MetroPCS, a large prepaid
phone carrier
T-Mobile Business Drivers

Increasing subscribers (primary driver)
 Seeking
to grow market share in both prepaid and
postpaid segments


Seeking to be the “Uncarrier” and take market
share from AT&T/Verizon
Increasing wireless device penetration
T-Mobile 5-Year Performance
Absolute Return
Return Relative to S&P 500
T-Mobile 5-Year Financials
T-Mobile 5-Year Valuation Multiples
Absolute Basis
High
Low
Median
Current
P/Trailing E
106.7
8.2
17.2
101.7
P/Forward E
74.0
9.2
15.5
74.0
P/B
3.0
0.3
1.3
1.4
P/S
2.2
0.3
0.8
0.3
P/CF
22.8
2.4
5.9
22.1
Relative to SPX
High
Low
Median
Current
P/Trailing E
6.6
0.61
1.1
6.1
P/Forward E
4.9
0.73
1.1
4.9
P/B
1.9
0.1
0.6
0.6
P/S
2.9
0.2
0.7
0.2
P/CF
2.1
0.3
0.7
2.0
T-Mobile DCF
T-Mobile USA, Inc (TMUS)
(in millions)
Analyst: Micah Martin
11/26/2013
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2013E
25,617
% Grow th
Operating Income
Operating Margin
Interest and Other
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Total Capex % of sales
Free Cash Flow
897
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
1,533
2015E
28,172
4.7%
2,254
2016E
29,440
4.5%
2,502
2017E
30,617
4.0%
2,756
2018E
31,689
3.5%
2,852
2019E
32,639
3.0%
2,938
3.5%
5.7%
8.0%
8.5%
9.0%
9.0%
9.0%
768
807
845
883
919
951
979
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
38
30.0%
90
4,227
16.5%
3,026
9.0%
1,009
3.0%
34,627
3.0%
3,116
9.0%
1,039
3.0%
35,493
2.5%
3,194
2023E
36,203
2.0%
3,258
9.0%
9.0%
887
905
2.5%
2.5%
493
567
643
665
685
706
727
807
824
35.0%
35.0%
35.0%
35.0%
35.0%
35.0%
35.0%
35.0%
472
916
427%
94.0%
4,438
16.5%
4,648
16.5%
0.3%
0.0%
0.0%
134
3.0%
2022E
35.0%
13
16.0%
33,619
2021E
254
13
4,099
2020E
35.0%
(84)
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
26,898
5.0%
% Grow th
Add Depreciation/Amort
2014E
9.0%
2.0%
4,169
15.5%
754
463.0%
9,910
9,415
19,325
0.70%
51%
49%
100%
214.1
215.5
7.6
7.6
40.7
40.9
6.5
6.5
4,226
15.0%
1,351
79.2%
1,052
14.9%
5,005
17.0%
0
0.0%
4,416
15.0%
1,641
21.5%
1,194
13.5%
5,205
17.0%
0
0.0%
4,593
15.0%
1,806
10.1%
1,236
3.5%
5,387
17.0%
0
0.0%
4,753
15.0%
1,870
3.5%
Shares Outstanding
Current Price $
Implied equity value/share $
Upside/(Downside) to DCF
21.0
21.1
5.6
5.6
Debt
Cash
Cash/share
1,273
3.0%
5,549
17.0%
0
0.0%
4,896
15.0%
1,926
3.0%
728.7
26.34
26.52
0.7%
21,955
2,362
3.24
1,311
3.0%
5,547
16.5%
0
0.0%
5,211
15.5%
1,647
-14.5%
1,350
3.0%
5,713
16.5%
0
0.0%
5,367
15.5%
1,697
3.0%
1,500
11.0%
5,856
16.5%
0
0.0%
5,679
16.0%
1,677
1,530
2.0%
5,792
16.0%
0
0.0%
5,792
16.0%
1,530
-1.2%
-8.8%
Terminal Value
Free Cash Yield
Terminal P/E
Terminal EV/EBITDA
22,288
6.86%
14.6
4.6
T-Mobile DCF Sensitivity Analysis
T-Mobile Target Price Sensitivity Analysis
Terminal Discount Rate
Terminal FCF Growth Rate
$26.52
8.0%
0.0%
$26.17
0.5%
$27.09
1.0%
$28.15
1.5%
$29.37
2.0%
$30.80
2.5%
$32.48
3.0%
$34.50
3.5%
$36.97
4.0%
$40.06
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
$24.62
$23.24
$22.01
$20.89
$19.88
$18.96
$18.12
$17.35
$25.41
$23.92
$22.59
$21.40
$20.32
$19.35
$18.46
$17.65
$26.30
$24.68
$23.24
$21.96
$20.81
$19.78
$18.84
$17.98
$27.32
$25.54
$23.97
$22.59
$21.35
$20.25
$19.25
$18.34
$28.50
$26.52
$24.80
$23.29
$21.96
$20.77
$19.70
$18.74
$29.87
$27.65
$25.75
$24.09
$22.64
$21.35
$20.20
$19.17
$31.49
$28.98
$26.84
$25.01
$23.41
$22.01
$20.77
$19.66
$33.44
$30.54
$28.12
$26.06
$24.29
$22.75
$21.40
$20.20
$35.82
$32.42
$29.63
$27.29
$25.31
$23.60
$22.12
$20.81
T-Mobile- Bull vs. Bear Case

Bull
 Changing
up the wireless competitive dynamics
 Rapidly growing market share
 Owned by parent with deep pockets

Bear
 Need
to be cautious about pricing
 Issuing debt/equity recently; acquisition risk
 Unsure how long their strategy will work
T-Mobile Catalysts/Risks

Catalysts
 Continued
growth in subscribers
 Purchase of more spectrum
 Acquiring a smaller player

Risks
 Poor
capital allocation from their recent capital raise
 Their pricing strategy could backfire on them
Agenda

Overview
AT&T
Verizon
T-Mobile

SBA Communications

Recommendation



SBAC Business Overview

SBA Communications is a wireless tower operator
 This
means that they lease space on their wireless
towers to wireless carriers
 There are really only three players: SBAC, American
Tower, and Crown Castle

Segments
 SBAC
has two segments, but receive practically all
revenue/operating profit from their site-leasing
segment
SBAC Business Drivers

Increased carrier network investment is the primary
business driver
 This
investment arises from increased consumer wireless
data usage and higher demanded network quality


Availability of towers to purchase
Ability to maximize their tower usage by having
more than one tenant on each tower
SBAC 5-Year Performance
Absolute Return
Return Relative to S&P 500
SBAC 5-Year Financials
SBAC 5-Year Valuation Multiples
Absolute Basis
High
Low
Median
Current
P/Trailing E
N/M
N/M
N/M
N/M
P/Forward E
N/M
N/M
N/M
N/M
P/B
38.3
3.9
13.6
17.0
P/S
10.0
3.9
7.5
7.7
P/CF
37.5
12.4
27.4
20.0
Relative to SPX
High
Low
Median
Current
P/Trailing E
N/M
N/M
N/M
N/M
P/Forward E
N/M
N/M
N/M
N/M
P/B
17.7
2.2
5.8
6.6
P/S
7.9
4.7
6.2
5.0
P/CF
4.3
1.7
3.0
1.8
SBAC DCF
SBA Communications (SBAC)
(in thousands)
Analyst: Micah Martin
11/26/2013
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2013E
1,287,362
% Grow th
Operating Income
Operating Margin
Interest and Other
Interest % of Sales
Taxes
Ef f ective Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Organic CapEx
Organic Cap Ex % of Sales
Acquisitions CapEx
Acquisitions CapEx % of Sales
Subtract Cap Ex
Total Capex % of sales
Free Cash Flow
277,244
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
295,581
2015E
1,432,447
3.1%
358,474
2016E
1,606,030
12.1%
481,809
2017E
1,801,311
12.2%
558,407
2018E
2,029,572
2019E
2,287,632
12.7%
12.7%
649,463
754,919
2020E
2,454,788
7.3%
834,628
2021E
2,768,109
12.8%
968,838
2022E
3,122,478
12.8%
1,124,092
2023E
3,185,672
2.0%
1,178,699
21.5%
21.3%
25.0%
30.0%
31.0%
32.0%
33.0%
34.0%
35.0%
36.0%
37.0%
(341,151)
(354,291)
(322,301)
(337,266)
(324,236)
(324,731)
(320,268)
(319,122)
(304,492)
(312,248)
(238,925)
26.5%
25.5%
22.5%
21.0%
18.0%
16.0%
14.0%
13.0%
11.0%
10.0%
7.5%
(1,917)
(1,761)
3.0%
3.0%
(65,824)
(60,472)
-8.1%
514,945
555,751
1,085
3.0%
37,259
-161.6%
544,330
4,336
3.0%
140,206
276.3%
610,291
7,025
3.0%
227,145
62.0%
666,485
9,742
13,040
3.0%
3.0%
314,990
421,611
38.7%
33.8%
730,646
800,671
15,465
3.0%
500,040
18.6%
859,176
19,930
3.0%
644,416
28.9%
968,838
24,355
3.0%
787,489
22.2%
1,092,867
234,943
25.0%
704,830
-10.5%
273,968
40.0%
40.0%
38.0%
38.0%
37.0%
36.0%
35.0%
35.0%
35.0%
35.0%
8.6%
(4,687)
(1,275)
(538)
(3,212)
(3,603)
(4,059)
(4,575)
(4,910)
(5,536)
(6,245)
(6,371)
0.4%
0.1%
0.0%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
(128,736)
(88,824)
(89,577)
(99,795)
(101,374)
(111,934)
(126,388)
(128,499)
(130,779)
(133,242)
(33,773)
10.0%
6.4%
6.3%
6.2%
5.6%
5.5%
5.5%
5.2%
4.7%
4.3%
1.1%
(257,472)
(149,600)
(161,184)
(447,309)
(522,067)
(620,453)
(660,739)
(769,975)
(845,973)
(928,051)
(239,339)
30.6%
29.7%
7.5%
(976,752) (1,061,292)
(273,112)
20.0%
10.8%
11.3%
27.9%
29.0%
30.6%
28.9%
31.4%
(386,209)
(238,424)
(250,761)
(547,104)
(623,440)
(732,387)
(787,128)
(898,474)
30.0%
17.2%
17.5%
34.1%
34.6%
36.1%
34.4%
36.6%
58,225
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
1,389,378
7.9%
% Grow th
Add Depreciation/Amort
2014E
9.0%
2.0%
255,580
338.9%
2,549,260
4,304,367
6,853,627
0.50%
37%
63%
100%
(178.3)
(104.1)
21.7
15.5
(194.1)
(113.3)
20.2
14.5
330,289
29.2%
200,182
-39.4%
266,588
33.2%
309,189
430,579
16.0%
39.3%
Shares Outstanding
Current Price $
Intrinsic Value/Share $
Downside to DCF
315.0
183.9
19.0
13.6
Debt
Cash
Cash/Share
136,912
85.72
50.06
-41.6%
5,648,328
189,409
1.38
455,832
5.9%
35.3%
630,966
38.4%
34.0%
812,819
8.6%
699,314
28.8%
-14.0%
Terminal Value
Free Cash Yield
Terminal P/E
Terminal EV/EBITDA
10,190,002
6.86%
14.5
10.8
SBAC DCF Sensitivity Analysis
Terminal Discount Rate
SBA Communications Target Price Sensitivity Analysis
$ 50.06
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
0.0%
$49.25
$45.71
$42.59
$39.82
$37.33
$35.10
$33.09
$31.26
$29.60
0.5%
$51.38
$47.52
$44.13
$41.14
$38.47
$36.09
$33.95
$32.02
$30.27
Terminal FCF Growth Rate
1.0%
1.5%
2.0%
2.5%
$53.81 $56.62 $59.90 $63.77
$49.56 $51.89 $54.59 $57.73
$45.86 $47.82 $50.06 $52.64
$42.61 $44.27 $46.15 $48.30
$39.74 $41.16 $42.75 $44.56
$37.19 $38.40 $39.76 $41.29
$34.90 $35.96 $37.12 $38.43
$32.85 $33.76 $34.77 $35.89
$31.00 $31.79 $32.67 $33.64
3.0%
$68.41
$61.44
$55.66
$50.78
$46.62
$43.03
$39.90
$37.15
$34.72
3.5%
$74.09
$65.90
$59.22
$53.67
$49.00
$45.01
$41.56
$38.56
$35.92
4.0%
$81.19
$71.35
$63.50
$57.09
$51.78
$47.29
$43.46
$40.16
$37.27
SBAC- Bull vs. Bear Case

Bull
 Stable
cash flows
 Barriers to entry are incredibly high
 Stand to gain by wireless carriers’ network investment

Bear
 Stock
is priced as if it will continue its growth
 Leverage is incredibly high
 Weak competitive position in contrast to its two
competitors
SBAC Catalysts/Risks

Catalysts
 Higher
interest rates
 Competitors’ beating out SBAC for acquisitions
 Technological risks

Risks
 Carriers
could invest more in their networks than
consensus is expecting
 Multiple expansion could occur upon REIT conversion
 Government could release more spectrum
Agenda

Overview
AT&T
Verizon
T-Mobile
SBA Communications

Recommendation




My Stock Recommendation
Company
Current
Price
Target
Price
Upside/
Downside
Recommendation
Original
SIM Weight
Remaining
SIM Weight
AT&T
$35.28
$27.23
-22.8%
Do Nothing
-
-
Verizon
$50.05
$42.53
-15.0%
Do Nothing
-
-
T-Mobile
$26.34
$26.52
0.7%
Sell 96bp
1.96%
1.0%
SBA Comm.
$85.72
$50.06
-41.6%
Do Nothing
-
-

Taking the SIM Telecom weight down from 1.96% to 1.0%
would result in being 163bp underweight the S&P 500.
What Questions Do You Have?