December 19 2013

Telecom Services 2014 Outlook ndash Fundamental Challenges Strategic Ques-tions

Fundamental challenges and strategic actions may drive choppy returns in rsquo14 The stock market may trend higher while Telecom earnings revisions roll over though an improving economy and yields provide downside support However yields hover near post crisis lows and risks arenrsquot fully dis-counted

Key value drivers for 2014 (MampA regulation wire-less wars and macro) raise big fundamental and strategic questions Get ready for a volatile year and potential 1Q underperformance with several important catalysts FCF pressures are a risk as the spectrum land grab heats up the end of bonus depreciation drives cash taxes higher payout ratios increase leverage levels trend above historical levels and rising interest rates makes Telecom less attractive (but reduces the pension OPEB burden) A LTE arms race continues keeping capex elevated and squeezing free cash flow further Looming regulatory issues drive strategic un-certainty most importantly around wireless MampA as investors focus on unlocking shareholder value

Wireless maturation is one key challenge weighing on growth Churn trends should remain mixed as the list of competitive catalysts continues to grow empha-sizing the next leg of growth beyond smartphones We continue to view Canada as a wireless safe haven with wireless postpaid driving continued growth Towers remain attractive on higher wireless network spend while at a discount to REITs despite strong AFFO per share growth

In US wireline network investment has been a differentiator and content wars are a growing risk as Telcos attempt to compete more effectively with Cable Wireless substitution remains a long-term threat and enterprise demand has yet to improve while competition weighs on data center names driving valuations to re-rate lower

TOP PICKS FOR 2014

Towers SBA Communications (SBAC)

Growth CyrusOne (CONE)

Yield Bell Canada (BCE) and CenturyLink (CTL)

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research As a result investors should be aware that the firm may have a conflict of interest that could affect the objec-tivity of Morgan Stanley Research Investors should consider Morgan Stanley Research as only a single factor in making their investment decision

For analyst certification and other important disclosures refer to the Disclosure Section located at the end of this report

Morgan Stanley amp Co LLC Simon Flannery

SimonFlannerymorganstanleycom +1 212 761 6432

John Mark Warren CFA JohnMWarrenmorganstanleycom +1 212 761 0430

Daniel Rodriguez +1 212 761 6648

Armintas Sinkevicius +1 212 761 3270

Lisa Lam +1 212 761 4487

M O R G A N S T A N L E Y R E S E A R C H

N O R T H A M E R I C A

Industry View

In-Line

2

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Telecom Services Recommendations

Source Thomson Reuters Morgan Stanley Research Note Base case price target BCE and Rogersrsquo price target is in Canadian dollars For valuation methodology and risks associated with any price targets above please email morganstanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock

Bear Base Bull

US Telecom Services Equity Telco Base Base Div Total 2013 Trading Themes

Company Name Ticker Rtg Price Cap Mkt Cap Case Rtn Yld Rtn Secular Dividend Wireless Total Return12182013 ($) ($B) () ($) () () () Growth Support Pressure 車裸珞

CenturyLink Inc CTL OW 3184 188 3 400 26 70 33 Crown Castle Corp CCI OW 7220 241 4 890 23 NA 23 American Tower Corp AMT OW 7822 309 5 910 16 15 18 CyrusOne Inc CONE OW 2183 05 0 250 15 30 18 BCE Inc BCE OW 4528 351 6 500 10 52 16 Endurance International Group H EIGI OW 1403 18 0 160 14 NA 14 SBA Communications SBAC OW 8587 110 2 970 13 NA 13 Rogers Communications Inc RCI OW 4733 190 3 510 8 37 11 TELUS Corp T OW 3644 227 4 380 4 40 8 Equinix Inc EQIX EW 17042 85 1 2070 21 NA 21 ATampT Inc T EW 3438 1811 31 370 8 54 13 Intelsat SA I EW 2220 23 0 250 13 NA 13 Rackspace Hosting Inc RAX EW 3761 53 1 410 9 NA 9 Cincinnati Bell Inc CBB EW 349 07 0 35 0 NA 0 Leap Wireless LEAP EW 1725 14 0 170 -1 NA -1 Frontier Communications Corp FTR EW 470 47 1 40 -15 91 -6 tw telecom inc TWTC EW 2984 43 1 280 -6 NA -6 T-Mobile US Inc TMUS EW 2725 218 4 250 -8 NA -8 Level 3 Communications Inc LVLT EW 3060 68 1 280 -8 NA -8 Inteliquent IQNT EW 1126 04 0 90 -20 22 -18 Telephone amp Data Systems TDS UW 2459 25 0 240 -2 20 0 Windstream Corp WIN UW 819 49 1 70 -15 126 -2 US Cellular Corporation USM UW 4029 21 0 350 -13 NA -13 Sprint Nextel Corporation S UW 895 352 6 50 -44 NA -44 Gogo Inc GOGO UW 2591 22 0 135 -48 NA -48 Verizon Communications VZ ++ 4847 1387 24 ++ ++ 44 ++

Un

der

wei

gh

tO

verw

eig

ht

Eq

ual

wei

gh

t

3

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Telecom Services 2014 Outlook

Morgan Stanley is acting as financial advisor and providing financing services to Verizon Communications Inc (Verizon) in relation to their definitive agreement with Vodafone Group Plc (Vodafone) to acquire Vodafones US group with the principal asset of 45 percent of Verizon Wireless as announced on September 2 2013

The proposed transaction is subject to the consent of Verizon and Vodafone shareholders required federal regulatory approvals and other customary closing conditions This report and the information provided herein is not intended to (i) pro-vide voting advice (ii) serve as an endorsement of the proposed transaction or (iii) result in the procurement withholding or revocation of a proxy or any other action by a security holder

Verizon has agreed to pay fees to Morgan Stanley for its services including transaction fees and financing fees that are subject to the consummation of the proposed transaction Please refer to the notes at the end of the report

Morgan Stanley is currently acting as financial advisor to Google Inc (Google) with respect to its proposed stock dividend as announced on April 12 2012 Certain aspects of the proposal are subject to approval by Googles shareholders Google has agreed to pay fees to Morgan Stanley for its financial advice Please refer to the notes at the end of the report

4

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Fundamental challenges and strategic actions may drive choppy returns in 2014hellip

Source Thomson Reuters Morgan Stanley ResearchPriced as of 121813

16

-9

32

8

-34

3

12

1

12

5

3

-40 -20 0 20 40

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

SampP TELCO ABSOLUTE ANNUAL PERFORMANCE

bull Telecom relative price performance vs the SampP 500 has historically rebounded majority of the time the following year after a +20 underperformance the prior year

bull Telecom has delivered 5 consecutive years of absolute positive price returns

RELATIVE PRICE PERFORMANCE

-295

-125

-231

-120

185

-208

-09-06

494970

08-05

-222

-400

-300

-200

-100

00

100

200

300

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

SampP Telco Over SampP 500

Relative and Absolute Price Performance

5

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom could be relatively less favored

Source Company data Morgan Stanley Research FactsetNote Sector recommendations from MS US Equity Strategist Adam Parker Click here for US Equity Strategy teamrsquos 2014 outlook US Equity Strategy 2014 for 2014

SampP 500 Sector WeightsAs of December 2013

181162

132 125108 104 101

34 30 24

0

5

10

15

20

Tec

hnol

ogy

Fin

anci

als

Hea

lth C

are

Dis

cret

iona

ry

Ind

ustr

ials

Ene

rgy

Sta

ples

Mat

eria

ls

Util

ities

Tel

ecom

Morgan Stanley Sector Recommendations As of December 2013

(6)

(4)

(2)

0

2

4

6

Hea

lth C

are

Tec

hno

log

y

Ma

teri

als

Fin

an

cial

s

Ind

ust

rial

s

Util

ities

Te

leco

ms

Dis

cre

tiona

ry

En

erg

y

Sta

ple

sOverweights - Health Care Technology MaterialsMarket-Weights - Financials Industrials Utilities TelecomsUnderweights - Staples Energy Discretionary

6

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The stock market may trend higherhellip

Source Factset Thomson Reuters Morgan Stanley Research From US Equity Strategist Adam Parker SampP 500 priced as of 12182013

Morgan Stanley 12-Month SampP 500 Price Target Methodology

Probability Scenario Upside EPS Landscape of Scenario 2013E 2014E 2015E Multiple Target (Downside)

Bull Case 20 1115 1226 1349 179x 2414 333Growth 8 10 10

Base Case 60 1094 1160 1229 164x 2014 112Growth 6 6 6

Bear Case 20 1073 1020 1020 149x 1519 (161)

Growth 4 (5) 0

Current SampP 500 Price 1811

7

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom earnings revisions roll overhellip

Source Thomson Reuters Morgan Stanley Research Note Revisions calculated as ( FY2 Up revisions ndash Down for the last 3 months) of FY2 Estimates for SampP 500 for the last 3 months Data as of 121213

Telecommunication Services Revisions

-13

(80)

(60)

(40)

(20)

0

20

40

60

00 01 02 03 04 05 06 07 08 09 10 11 12 13

SampP 500 Revisions

-9

(80)

(60)

(40)

(20)

0

20

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13

8

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Though an improving economyhellip

Source Thomson Reuters Morgan Stanley Research Note Estimates as of 1222013 from our US Economics team led by Vincent Reinhart

28

16

26 27

2012 2013E 2014E 2015E

GDP GROWTH (YY CHANGE)

8174

6760

2012 2013E 2014E 2015E

UNEMPLOYMENT (EOP)

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

2

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Telecom Services Recommendations

Source Thomson Reuters Morgan Stanley Research Note Base case price target BCE and Rogersrsquo price target is in Canadian dollars For valuation methodology and risks associated with any price targets above please email morganstanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock

Bear Base Bull

US Telecom Services Equity Telco Base Base Div Total 2013 Trading Themes

Company Name Ticker Rtg Price Cap Mkt Cap Case Rtn Yld Rtn Secular Dividend Wireless Total Return12182013 ($) ($B) () ($) () () () Growth Support Pressure 車裸珞

CenturyLink Inc CTL OW 3184 188 3 400 26 70 33 Crown Castle Corp CCI OW 7220 241 4 890 23 NA 23 American Tower Corp AMT OW 7822 309 5 910 16 15 18 CyrusOne Inc CONE OW 2183 05 0 250 15 30 18 BCE Inc BCE OW 4528 351 6 500 10 52 16 Endurance International Group H EIGI OW 1403 18 0 160 14 NA 14 SBA Communications SBAC OW 8587 110 2 970 13 NA 13 Rogers Communications Inc RCI OW 4733 190 3 510 8 37 11 TELUS Corp T OW 3644 227 4 380 4 40 8 Equinix Inc EQIX EW 17042 85 1 2070 21 NA 21 ATampT Inc T EW 3438 1811 31 370 8 54 13 Intelsat SA I EW 2220 23 0 250 13 NA 13 Rackspace Hosting Inc RAX EW 3761 53 1 410 9 NA 9 Cincinnati Bell Inc CBB EW 349 07 0 35 0 NA 0 Leap Wireless LEAP EW 1725 14 0 170 -1 NA -1 Frontier Communications Corp FTR EW 470 47 1 40 -15 91 -6 tw telecom inc TWTC EW 2984 43 1 280 -6 NA -6 T-Mobile US Inc TMUS EW 2725 218 4 250 -8 NA -8 Level 3 Communications Inc LVLT EW 3060 68 1 280 -8 NA -8 Inteliquent IQNT EW 1126 04 0 90 -20 22 -18 Telephone amp Data Systems TDS UW 2459 25 0 240 -2 20 0 Windstream Corp WIN UW 819 49 1 70 -15 126 -2 US Cellular Corporation USM UW 4029 21 0 350 -13 NA -13 Sprint Nextel Corporation S UW 895 352 6 50 -44 NA -44 Gogo Inc GOGO UW 2591 22 0 135 -48 NA -48 Verizon Communications VZ ++ 4847 1387 24 ++ ++ 44 ++

Un

der

wei

gh

tO

verw

eig

ht

Eq

ual

wei

gh

t

3

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Telecom Services 2014 Outlook

Morgan Stanley is acting as financial advisor and providing financing services to Verizon Communications Inc (Verizon) in relation to their definitive agreement with Vodafone Group Plc (Vodafone) to acquire Vodafones US group with the principal asset of 45 percent of Verizon Wireless as announced on September 2 2013

The proposed transaction is subject to the consent of Verizon and Vodafone shareholders required federal regulatory approvals and other customary closing conditions This report and the information provided herein is not intended to (i) pro-vide voting advice (ii) serve as an endorsement of the proposed transaction or (iii) result in the procurement withholding or revocation of a proxy or any other action by a security holder

Verizon has agreed to pay fees to Morgan Stanley for its services including transaction fees and financing fees that are subject to the consummation of the proposed transaction Please refer to the notes at the end of the report

Morgan Stanley is currently acting as financial advisor to Google Inc (Google) with respect to its proposed stock dividend as announced on April 12 2012 Certain aspects of the proposal are subject to approval by Googles shareholders Google has agreed to pay fees to Morgan Stanley for its financial advice Please refer to the notes at the end of the report

4

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Fundamental challenges and strategic actions may drive choppy returns in 2014hellip

Source Thomson Reuters Morgan Stanley ResearchPriced as of 121813

16

-9

32

8

-34

3

12

1

12

5

3

-40 -20 0 20 40

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

SampP TELCO ABSOLUTE ANNUAL PERFORMANCE

bull Telecom relative price performance vs the SampP 500 has historically rebounded majority of the time the following year after a +20 underperformance the prior year

bull Telecom has delivered 5 consecutive years of absolute positive price returns

RELATIVE PRICE PERFORMANCE

-295

-125

-231

-120

185

-208

-09-06

494970

08-05

-222

-400

-300

-200

-100

00

100

200

300

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

SampP Telco Over SampP 500

Relative and Absolute Price Performance

5

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom could be relatively less favored

Source Company data Morgan Stanley Research FactsetNote Sector recommendations from MS US Equity Strategist Adam Parker Click here for US Equity Strategy teamrsquos 2014 outlook US Equity Strategy 2014 for 2014

SampP 500 Sector WeightsAs of December 2013

181162

132 125108 104 101

34 30 24

0

5

10

15

20

Tec

hnol

ogy

Fin

anci

als

Hea

lth C

are

Dis

cret

iona

ry

Ind

ustr

ials

Ene

rgy

Sta

ples

Mat

eria

ls

Util

ities

Tel

ecom

Morgan Stanley Sector Recommendations As of December 2013

(6)

(4)

(2)

0

2

4

6

Hea

lth C

are

Tec

hno

log

y

Ma

teri

als

Fin

an

cial

s

Ind

ust

rial

s

Util

ities

Te

leco

ms

Dis

cre

tiona

ry

En

erg

y

Sta

ple

sOverweights - Health Care Technology MaterialsMarket-Weights - Financials Industrials Utilities TelecomsUnderweights - Staples Energy Discretionary

6

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The stock market may trend higherhellip

Source Factset Thomson Reuters Morgan Stanley Research From US Equity Strategist Adam Parker SampP 500 priced as of 12182013

Morgan Stanley 12-Month SampP 500 Price Target Methodology

Probability Scenario Upside EPS Landscape of Scenario 2013E 2014E 2015E Multiple Target (Downside)

Bull Case 20 1115 1226 1349 179x 2414 333Growth 8 10 10

Base Case 60 1094 1160 1229 164x 2014 112Growth 6 6 6

Bear Case 20 1073 1020 1020 149x 1519 (161)

Growth 4 (5) 0

Current SampP 500 Price 1811

7

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom earnings revisions roll overhellip

Source Thomson Reuters Morgan Stanley Research Note Revisions calculated as ( FY2 Up revisions ndash Down for the last 3 months) of FY2 Estimates for SampP 500 for the last 3 months Data as of 121213

Telecommunication Services Revisions

-13

(80)

(60)

(40)

(20)

0

20

40

60

00 01 02 03 04 05 06 07 08 09 10 11 12 13

SampP 500 Revisions

-9

(80)

(60)

(40)

(20)

0

20

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13

8

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Though an improving economyhellip

Source Thomson Reuters Morgan Stanley Research Note Estimates as of 1222013 from our US Economics team led by Vincent Reinhart

28

16

26 27

2012 2013E 2014E 2015E

GDP GROWTH (YY CHANGE)

8174

6760

2012 2013E 2014E 2015E

UNEMPLOYMENT (EOP)

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of 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houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

3

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Telecom Services 2014 Outlook

Morgan Stanley is acting as financial advisor and providing financing services to Verizon Communications Inc (Verizon) in relation to their definitive agreement with Vodafone Group Plc (Vodafone) to acquire Vodafones US group with the principal asset of 45 percent of Verizon Wireless as announced on September 2 2013

The proposed transaction is subject to the consent of Verizon and Vodafone shareholders required federal regulatory approvals and other customary closing conditions This report and the information provided herein is not intended to (i) pro-vide voting advice (ii) serve as an endorsement of the proposed transaction or (iii) result in the procurement withholding or revocation of a proxy or any other action by a security holder

Verizon has agreed to pay fees to Morgan Stanley for its services including transaction fees and financing fees that are subject to the consummation of the proposed transaction Please refer to the notes at the end of the report

Morgan Stanley is currently acting as financial advisor to Google Inc (Google) with respect to its proposed stock dividend as announced on April 12 2012 Certain aspects of the proposal are subject to approval by Googles shareholders Google has agreed to pay fees to Morgan Stanley for its financial advice Please refer to the notes at the end of the report

4

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Fundamental challenges and strategic actions may drive choppy returns in 2014hellip

Source Thomson Reuters Morgan Stanley ResearchPriced as of 121813

16

-9

32

8

-34

3

12

1

12

5

3

-40 -20 0 20 40

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

SampP TELCO ABSOLUTE ANNUAL PERFORMANCE

bull Telecom relative price performance vs the SampP 500 has historically rebounded majority of the time the following year after a +20 underperformance the prior year

bull Telecom has delivered 5 consecutive years of absolute positive price returns

RELATIVE PRICE PERFORMANCE

-295

-125

-231

-120

185

-208

-09-06

494970

08-05

-222

-400

-300

-200

-100

00

100

200

300

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

SampP Telco Over SampP 500

Relative and Absolute Price Performance

5

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom could be relatively less favored

Source Company data Morgan Stanley Research FactsetNote Sector recommendations from MS US Equity Strategist Adam Parker Click here for US Equity Strategy teamrsquos 2014 outlook US Equity Strategy 2014 for 2014

SampP 500 Sector WeightsAs of December 2013

181162

132 125108 104 101

34 30 24

0

5

10

15

20

Tec

hnol

ogy

Fin

anci

als

Hea

lth C

are

Dis

cret

iona

ry

Ind

ustr

ials

Ene

rgy

Sta

ples

Mat

eria

ls

Util

ities

Tel

ecom

Morgan Stanley Sector Recommendations As of December 2013

(6)

(4)

(2)

0

2

4

6

Hea

lth C

are

Tec

hno

log

y

Ma

teri

als

Fin

an

cial

s

Ind

ust

rial

s

Util

ities

Te

leco

ms

Dis

cre

tiona

ry

En

erg

y

Sta

ple

sOverweights - Health Care Technology MaterialsMarket-Weights - Financials Industrials Utilities TelecomsUnderweights - Staples Energy Discretionary

6

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The stock market may trend higherhellip

Source Factset Thomson Reuters Morgan Stanley Research From US Equity Strategist Adam Parker SampP 500 priced as of 12182013

Morgan Stanley 12-Month SampP 500 Price Target Methodology

Probability Scenario Upside EPS Landscape of Scenario 2013E 2014E 2015E Multiple Target (Downside)

Bull Case 20 1115 1226 1349 179x 2414 333Growth 8 10 10

Base Case 60 1094 1160 1229 164x 2014 112Growth 6 6 6

Bear Case 20 1073 1020 1020 149x 1519 (161)

Growth 4 (5) 0

Current SampP 500 Price 1811

7

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom earnings revisions roll overhellip

Source Thomson Reuters Morgan Stanley Research Note Revisions calculated as ( FY2 Up revisions ndash Down for the last 3 months) of FY2 Estimates for SampP 500 for the last 3 months Data as of 121213

Telecommunication Services Revisions

-13

(80)

(60)

(40)

(20)

0

20

40

60

00 01 02 03 04 05 06 07 08 09 10 11 12 13

SampP 500 Revisions

-9

(80)

(60)

(40)

(20)

0

20

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13

8

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Though an improving economyhellip

Source Thomson Reuters Morgan Stanley Research Note Estimates as of 1222013 from our US Economics team led by Vincent Reinhart

28

16

26 27

2012 2013E 2014E 2015E

GDP GROWTH (YY CHANGE)

8174

6760

2012 2013E 2014E 2015E

UNEMPLOYMENT (EOP)

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

4

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Fundamental challenges and strategic actions may drive choppy returns in 2014hellip

Source Thomson Reuters Morgan Stanley ResearchPriced as of 121813

16

-9

32

8

-34

3

12

1

12

5

3

-40 -20 0 20 40

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

SampP TELCO ABSOLUTE ANNUAL PERFORMANCE

bull Telecom relative price performance vs the SampP 500 has historically rebounded majority of the time the following year after a +20 underperformance the prior year

bull Telecom has delivered 5 consecutive years of absolute positive price returns

RELATIVE PRICE PERFORMANCE

-295

-125

-231

-120

185

-208

-09-06

494970

08-05

-222

-400

-300

-200

-100

00

100

200

300

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

SampP Telco Over SampP 500

Relative and Absolute Price Performance

5

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom could be relatively less favored

Source Company data Morgan Stanley Research FactsetNote Sector recommendations from MS US Equity Strategist Adam Parker Click here for US Equity Strategy teamrsquos 2014 outlook US Equity Strategy 2014 for 2014

SampP 500 Sector WeightsAs of December 2013

181162

132 125108 104 101

34 30 24

0

5

10

15

20

Tec

hnol

ogy

Fin

anci

als

Hea

lth C

are

Dis

cret

iona

ry

Ind

ustr

ials

Ene

rgy

Sta

ples

Mat

eria

ls

Util

ities

Tel

ecom

Morgan Stanley Sector Recommendations As of December 2013

(6)

(4)

(2)

0

2

4

6

Hea

lth C

are

Tec

hno

log

y

Ma

teri

als

Fin

an

cial

s

Ind

ust

rial

s

Util

ities

Te

leco

ms

Dis

cre

tiona

ry

En

erg

y

Sta

ple

sOverweights - Health Care Technology MaterialsMarket-Weights - Financials Industrials Utilities TelecomsUnderweights - Staples Energy Discretionary

6

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The stock market may trend higherhellip

Source Factset Thomson Reuters Morgan Stanley Research From US Equity Strategist Adam Parker SampP 500 priced as of 12182013

Morgan Stanley 12-Month SampP 500 Price Target Methodology

Probability Scenario Upside EPS Landscape of Scenario 2013E 2014E 2015E Multiple Target (Downside)

Bull Case 20 1115 1226 1349 179x 2414 333Growth 8 10 10

Base Case 60 1094 1160 1229 164x 2014 112Growth 6 6 6

Bear Case 20 1073 1020 1020 149x 1519 (161)

Growth 4 (5) 0

Current SampP 500 Price 1811

7

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom earnings revisions roll overhellip

Source Thomson Reuters Morgan Stanley Research Note Revisions calculated as ( FY2 Up revisions ndash Down for the last 3 months) of FY2 Estimates for SampP 500 for the last 3 months Data as of 121213

Telecommunication Services Revisions

-13

(80)

(60)

(40)

(20)

0

20

40

60

00 01 02 03 04 05 06 07 08 09 10 11 12 13

SampP 500 Revisions

-9

(80)

(60)

(40)

(20)

0

20

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13

8

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Though an improving economyhellip

Source Thomson Reuters Morgan Stanley Research Note Estimates as of 1222013 from our US Economics team led by Vincent Reinhart

28

16

26 27

2012 2013E 2014E 2015E

GDP GROWTH (YY CHANGE)

8174

6760

2012 2013E 2014E 2015E

UNEMPLOYMENT (EOP)

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of 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Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

5

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom could be relatively less favored

Source Company data Morgan Stanley Research FactsetNote Sector recommendations from MS US Equity Strategist Adam Parker Click here for US Equity Strategy teamrsquos 2014 outlook US Equity Strategy 2014 for 2014

SampP 500 Sector WeightsAs of December 2013

181162

132 125108 104 101

34 30 24

0

5

10

15

20

Tec

hnol

ogy

Fin

anci

als

Hea

lth C

are

Dis

cret

iona

ry

Ind

ustr

ials

Ene

rgy

Sta

ples

Mat

eria

ls

Util

ities

Tel

ecom

Morgan Stanley Sector Recommendations As of December 2013

(6)

(4)

(2)

0

2

4

6

Hea

lth C

are

Tec

hno

log

y

Ma

teri

als

Fin

an

cial

s

Ind

ust

rial

s

Util

ities

Te

leco

ms

Dis

cre

tiona

ry

En

erg

y

Sta

ple

sOverweights - Health Care Technology MaterialsMarket-Weights - Financials Industrials Utilities TelecomsUnderweights - Staples Energy Discretionary

6

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The stock market may trend higherhellip

Source Factset Thomson Reuters Morgan Stanley Research From US Equity Strategist Adam Parker SampP 500 priced as of 12182013

Morgan Stanley 12-Month SampP 500 Price Target Methodology

Probability Scenario Upside EPS Landscape of Scenario 2013E 2014E 2015E Multiple Target (Downside)

Bull Case 20 1115 1226 1349 179x 2414 333Growth 8 10 10

Base Case 60 1094 1160 1229 164x 2014 112Growth 6 6 6

Bear Case 20 1073 1020 1020 149x 1519 (161)

Growth 4 (5) 0

Current SampP 500 Price 1811

7

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom earnings revisions roll overhellip

Source Thomson Reuters Morgan Stanley Research Note Revisions calculated as ( FY2 Up revisions ndash Down for the last 3 months) of FY2 Estimates for SampP 500 for the last 3 months Data as of 121213

Telecommunication Services Revisions

-13

(80)

(60)

(40)

(20)

0

20

40

60

00 01 02 03 04 05 06 07 08 09 10 11 12 13

SampP 500 Revisions

-9

(80)

(60)

(40)

(20)

0

20

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13

8

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Though an improving economyhellip

Source Thomson Reuters Morgan Stanley Research Note Estimates as of 1222013 from our US Economics team led by Vincent Reinhart

28

16

26 27

2012 2013E 2014E 2015E

GDP GROWTH (YY CHANGE)

8174

6760

2012 2013E 2014E 2015E

UNEMPLOYMENT (EOP)

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

6

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The stock market may trend higherhellip

Source Factset Thomson Reuters Morgan Stanley Research From US Equity Strategist Adam Parker SampP 500 priced as of 12182013

Morgan Stanley 12-Month SampP 500 Price Target Methodology

Probability Scenario Upside EPS Landscape of Scenario 2013E 2014E 2015E Multiple Target (Downside)

Bull Case 20 1115 1226 1349 179x 2414 333Growth 8 10 10

Base Case 60 1094 1160 1229 164x 2014 112Growth 6 6 6

Bear Case 20 1073 1020 1020 149x 1519 (161)

Growth 4 (5) 0

Current SampP 500 Price 1811

7

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom earnings revisions roll overhellip

Source Thomson Reuters Morgan Stanley Research Note Revisions calculated as ( FY2 Up revisions ndash Down for the last 3 months) of FY2 Estimates for SampP 500 for the last 3 months Data as of 121213

Telecommunication Services Revisions

-13

(80)

(60)

(40)

(20)

0

20

40

60

00 01 02 03 04 05 06 07 08 09 10 11 12 13

SampP 500 Revisions

-9

(80)

(60)

(40)

(20)

0

20

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13

8

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Though an improving economyhellip

Source Thomson Reuters Morgan Stanley Research Note Estimates as of 1222013 from our US Economics team led by Vincent Reinhart

28

16

26 27

2012 2013E 2014E 2015E

GDP GROWTH (YY CHANGE)

8174

6760

2012 2013E 2014E 2015E

UNEMPLOYMENT (EOP)

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of 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Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

7

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While Telecom earnings revisions roll overhellip

Source Thomson Reuters Morgan Stanley Research Note Revisions calculated as ( FY2 Up revisions ndash Down for the last 3 months) of FY2 Estimates for SampP 500 for the last 3 months Data as of 121213

Telecommunication Services Revisions

-13

(80)

(60)

(40)

(20)

0

20

40

60

00 01 02 03 04 05 06 07 08 09 10 11 12 13

SampP 500 Revisions

-9

(80)

(60)

(40)

(20)

0

20

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13

8

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Though an improving economyhellip

Source Thomson Reuters Morgan Stanley Research Note Estimates as of 1222013 from our US Economics team led by Vincent Reinhart

28

16

26 27

2012 2013E 2014E 2015E

GDP GROWTH (YY CHANGE)

8174

6760

2012 2013E 2014E 2015E

UNEMPLOYMENT (EOP)

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

8

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Though an improving economyhellip

Source Thomson Reuters Morgan Stanley Research Note Estimates as of 1222013 from our US Economics team led by Vincent Reinhart

28

16

26 27

2012 2013E 2014E 2015E

GDP GROWTH (YY CHANGE)

8174

6760

2012 2013E 2014E 2015E

UNEMPLOYMENT (EOP)

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of 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Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

9

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And yields provide downside support

122

85

68

53 51

40 39 3729 29 28

22 21 19 1915

44

0

2

4

6

8

10

12

14

Win

dstr

eam

Fro

ntie

r

Cen

tury

Link

AT

ampT

BC

E

Ver

izon

Tel

us

Inve

stm

ent

Gra

de

Rog

ers

Cyr

usO

ne

10-Y

ear

Tre

asur

y

10-Y

ear

Mun

icip

al

Inte

lique

nt

TD

S

Cro

wn

Cas

tle

Samp

P50

0

Am

eric

an T

ower

After 238 Tax Pre-Tax Dividend Yield

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Priced as of December 18 2013 Notes American Tower dividend investment grade bond and 10-year Treasury taxed at the 396 income tax rate 10-year municipal bond is tax-free Windstream anticipates that 50 to 60 of the dividend will be treated as non-taxable income

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

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December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

10

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

However yields hover near post crisis lowshellip

Source Thomson Reuters Morgan Stanley Research Bloomberg Priced as of December 18 2013

(20)

(15)

(10)

(05)

00

05

10

15

20

25

30

35

40

45

50

Dec-0

5Ju

n-06

Dec-0

6Ju

n-07

Dec-0

7

Jun-

08Dec

-08

Jun-

09Dec

-09

Jun-

10Dec

-10

Jun-

11Dec

-11

Jun-

12Dec

-12

Jun-

13Dec

-13

RBOC Dividend Yield minus 10 year Treasury Yield

Mean Spread

Buy BondsSell Telecom

5-Yr Mean Spread

295 bps

Sell BondsBuy Telecom

Max Spread 443 bps

Assume 10 yr yields 45

Assume 10 yr yields 50

Current Spread 196 bps

Assume 10 yr yields 40

Assume 10 yr yields 35

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

11

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And risks are not fully discounted

Source Company data Bloomberg Morgan Stanley Research Note Average calculation is a simple average Priced as of 121813Note The companies included in the charts do not reflect MS Telecom Services entire coverage universe given insufficient data

NTM EV EBITDA

185X

172X

154X

106X

100X

98X

96X

94X

89X

88X

86X

84X

81X

80X

76X

70X

70X

60X

60X

57X

55X

51X

189X

123X

55X

78X

86X

174X

74X

71X

42X

66X

69X

56X

59X

52X

59X

36X

00X

00X

85X

190X

188X

00X

0x 5x 10x 15x 20x

SBAC

CCI

AMT

EQIX

LEAP

SampP 500

TWTC

S

AVERAGE

RAX

I

LVLT

CBB

CONE

USM

BCE

RCIB

WIN

T

FTR

CTL

TDS

2013E 2012NTM PE

621X

561X

534X

507X

441X

436X

357X

297X

268X

208X

198X

163X

144X

141X

129X

129X

118X

367X

235X

160X

137X

133X

133X

133X

148X

603X

365X

673X

148X

573X

00X

00X

00X

260X

0x 10x 20x 30x 40x 50x 60x 70x 80x

TWTC

TMUS

LVLT

RAX

EQIX

CONE

AMT

AVERAGE

CBB

FTR

WIN

SampP 500

BCE

IQNT

T

RCIB

CTL

2013E 2012

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

12

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Key value drivers for 2014hellip

1) MampA Regulation

2) Wireless Wars

3) Macro

FCC DoJ EU

ARPU Churn Capex

Fed Bond Yields Tax Policy

WHAT TO WATCHVALUE DRIVERS

Source Morgan Stanley Research

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

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New York NY 10036-8293

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Europe

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Japan

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AsiaPacific

1 Austin Road West

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• Company Models

13

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Raise big fundamental and strategic questions

Consensus View Maybe although growth opportunities provide downside support ndash Risks are

prevalent but valuation implies downside support

Our View Yes ndash We see a confluence of factors that will loom over the wireless industry in 2014 1) Slowing

smartphone penetration gains coupled with wireless penetration above 100 could limit subscriber growth 2)

The unstable competitive equilibrium due to high service plan pricing creates an opportunity for carriers to

implement disruptive pricing and or increase handset subsidies in order to take subscriber share 3) Network

improvements will continue to be important for competitive reasons as carriers search for differentiated

marketing strategies potentially placing upward pressure on capex and opex

Is a Wireless Price War Inevitable

Consensus View No ndash Pending key issues will likely have profound impacts on Telecom

Our View Washington is a wild card ndash As Chairman Wheeler takes over at the FCC we will be watching to

see what his priorities will be We are particularly focused on spectrum policy in terms of keeping the auction

schedule on track spectrum screen and overall position on industry consolidation Other areas of focus

include the ongoing USF ICC reform net neutrality and special access Elsewhere in DC we are focused

on whether Congress will extend bonus depreciation or move to broader based fiscal reform We are also

watching the Fed closely and the trajectory of interest rates

Will the DC Discount Fade

Consensus View Multiples are supported by high dividend yields and hopes for improved profitability

ndash Telecom lagged the market in 2013 and Bellsrsquo PE multiples now trade broadly in line with the historical

average Dividend yields provide downside support while investors are excited by the opportunities at Sprint

and T-Mobile

Our View Free cash flow pressures could drive multiple compression for the sector ndash We are

concerned that several factors will combine to pressure free cash flows in 2014 potentially leading to multiple

compression (1) rising capex spectrum purchases (2) rising cash taxes (3) rising interest rates (4) rising

leverage and (5) rising competition

Could Free Cash Flow Pressures Drive Multiple Compression

Source Morgan Stanley Research

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

14

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Get ready for a volatile year amp potential 1Q underperformancehellip

Source Company data Thomson Reuters Morgan Stanley Research Note MS Telecom relative performance is a simple average Observations reflect the amount of available years that were included in the analysis

STOCK observations

IQNT 6

SBAC 14

LVLT 16

RCIb-T 30

RAX 5

TWTC 14

LEAP 9

EQIX 13

AMT 15

T-T 14

S 28

CCI 15

CBB 30

FTR 30

TDS 30

WIN 8

T 30

VZ 30

USM 25

CTL 30

BCE-T 30

MS COVERAGE 30

UNDERPERFORMANCE OUTPERFORMANCE

33

36

38

40

40

43

44

46

47

50

50

60

60

60

60

63

63

63

64

67

67

60

67

64

63

60

60

57

56

54

53

50

50

40

40

40

38

37

37

36

33

33

40

40

Bells historically

underperform in 1Q

Average Returns (1984-2013)

27

63

-15

99

1Q 2Q-4Q

SampP 500 The Bells

-416 bps Spread

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

15

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With several important catalysts

bull 2014 guidance

bull Shareholder returns (dividends + buybacks)

bull T-Mobile momentum

bull Potential wireless price war

bull MampA (closings and potential deals) and beginning of integration strategy

bull Possible Dish partnership actions

bull Spectrum auctions (Canada and US)

bull REIT conversions PLRs (Crown Castle EQIX)

Source Morgan Stanley Research

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report To our readers in Taiwan Information on securitiesinstruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited (MSTL) Such information is for your reference only The reader should independently evaluate the investment risks and is solely responsible for their investment decisions Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley Information on securitiesinstruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securitiesinstruments MSTL may not execute transactions for clients in these securitiesinstruments To our readers in Hong Kong Information is distributed in Hong Kong by and on behalf of and is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

16

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

FCF pressures are a risk as the spectrum land grab heats uphellip

Source FCC Morgan Stanley Research(1) In Canadian dollars $ per MHzPOPs of $100-200 is a MSe(2) Dish said it would bid 156bn $ per MHzPOPs of $100-200 is a MSe(3) Final rules from the FCC are pending $ per MHzPOPs of $100-200 is a MSe(4) Total MHz to be auctioned is a MSe as the FCC is targeting 120 MHz $ per MHzPOPs of $100-200 is a MSe

Upcoming Spectrum Auctions

Other

- Lightsquared - Dish - DoD Government Spectrum

Potential Total Cash Outlays in 2014 2015

Date Companies Impacted Auctions Country

January 14 2014 BCE Rogers Telus 700 MHz Canada

January 22 2014 Dish H Block US

Late 2014 Big 4 AWS-3 and AWS-4 US

Mid 2015 Big 4 Broadcast Incentive US

2015 2016 BCE Rogers Telus 25 GHz Canada

Auctions Frequency Bands Total MHz MHzPOPs (MM) $ MHzPOPs Auction Value (MM)

700 MHz (Canada) (1) 700 68 2009 $100 $200 $2009 $4017

H Block (2) 1915-1920 1995-2000 10 3130 $100 $200 $3130 $6260

AWS-3 (3) 1755-2180 50 15000 $100 $200 $15000 $30000

AWS-3 (3) 1695-1710 15 4500 $100 $200 $4500 $9000

AWS-4 (3) 2020-2025 5 1500 $100 $200 $1500 $3000

Broadcast Incentive (4) 470-608 614-698 80 24000 $100 $200 $24000 $48000

Total $50139 $100277

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report To our readers in Taiwan Information on securitiesinstruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited (MSTL) Such information is for your reference only The reader should independently evaluate the investment risks and is solely responsible for their investment decisions Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley Information on securitiesinstruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securitiesinstruments MSTL may not execute transactions for clients in these securitiesinstruments To our readers in Hong Kong Information is distributed in Hong Kong by and on behalf of and is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

17

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

The end of bonus depreciation drives cash taxes higherhellip

ATampT Payout From Free Cash Flow

83

65

50

60

70

80

90

2012A 2013E 2014E 2015E 2016E 2017E 2018E

wo Bonus Depr w Bonus Depr

Source Company Data Morgan Stanley Research Assumptions Bonus depreciation at 50 in 2008 2009 2010 2012 and 2013 100 in 2011 100 capex is eligible for bonus depreciation 35 tax rate Calculation uses pre-tax income + capex according to our model Based on 7-year MACRS

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report To our readers in Taiwan Information on securitiesinstruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited (MSTL) Such information is for your reference only The reader should independently evaluate the investment risks and is solely responsible for their investment decisions Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley Information on securitiesinstruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securitiesinstruments MSTL may not execute transactions for clients in these securitiesinstruments To our readers in Hong Kong Information is distributed in Hong Kong by and on behalf of and is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

18

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Payout ratios increasehellip

T53

CTL 68

FTR85

WIN122

BCE-T51

RCIB-T37

Telus40

00x

10x

20x

30x

40x

50x

40 50 60 70 80 90FCF Payout (2014E)

Lev

erag

e (2

014E

)

Bubble size represents dividend yield

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013 Notes FCF = OCF ndash Capex Leverage = Net Debt EBITDA

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of 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is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

19

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Leverage levels trend above historical levelshellip

158x

270x

184x

360x

479x

187x

320x

461x

389x

0x

1x

2x

3x

4x

5x

6x

ATampT T-Mobile Sprint

2012 2013E 2014ENET LEVERAGE (NET DEBT ADJ EBITDA)

(1) (2) (3)

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates(1) Pro-forma for Leap(2) Not pro-forma for recent debt and equity raise(3) Pro-forma for Clearwire in 2013E and 2014E not pro-forma for recent debt raise

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

20

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And rising interest rates makes Telecom less attractivehellip

10-Year Bull | Bear | Base Case Scenarios

10

15

20

25

30

35

40

45

Jan-10 Sep-10 May-11 Jan-12 Oct-12 Jun-13 Feb-14 Oct-14

Base

Bull

Bear

Source Company Data Morgan Stanley Research Bloomberg Priced as of December 18 2013

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

21

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

But reduces the pension OPEB burden

Source Company data Morgan Stanley Research Thomson Reuters 2013E is an MS estimate based on expected increases to the discount rate and actual returns in excess of expected returnsATampTrsquos pension estimate in 2013 also includes the expected contribution of a $91B preferred stake in ATampT Mobility Priced as of December 18 2013

Retirement Liabilities as a of Market Cap

8

4

14

10

14

4

8

27

33

14

16

16

19

9

9

16

20

1

1

0 10 20 30 40 50 60

2013E

2012

2013E

2012

2013E

2012

2013E

2012

2013E

2012

Pension OPEB

T

WIN

FTR

CTL

CBB

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

22

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

A LTE arms race continueshellip

Source Company data Morgan Stanley ResearchNote Sprint excludes Clearwire Verizon currently covers 300M POPs which has been disclosed by the company

LTE COVERED POPS (MM)

201

260

300 300

74

175

275300

50

200

275

210225

0 0 00

80

160

240

320

2011 2012 2013E 2014E

Verizon ATampT

Sprint (ex CLWR) T-Mobile

Big 4 Average

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

23

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Keeping capex elevated and squeezing free cash flow further

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

TELECOM CAPITAL EXPENDITURES ($MM)

40000

45000

50000

55000

60000

65000

70000

2010 2011 2012 2013E 2014E

-13 YY

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

24

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Looming regulatory issues drive strategic uncertaintyhellip

FCC DoJ Courts

Spectrum Auctions

Ongoing USF ICC Transition

Special Access

Net Neutrality

Public Safety Network

MampA

White House Congress

Bonus Depreciation

Corporate Tax Reform

Federal Healthcare Reform

ldquoThe FCCrsquos job is also to promote competitionrdquo

- FCC Chairman Tom Wheeler December 2 2013 at The Ohio State

University

Source Morgan Stanley Research

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report To our readers in Taiwan Information on securitiesinstruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited (MSTL) Such information is for your reference only The reader should independently evaluate the investment risks and is solely responsible for their investment decisions Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley Information on securitiesinstruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securitiesinstruments MSTL may not execute transactions for clients in these securitiesinstruments To our readers in Hong Kong Information is distributed in Hong Kong by and on behalf of and is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

25

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Most importantly around wireless MampAhellip

Source Company data Morgan Stanley Research(1) Company expectation(2) Deal size in Canadian dollars(3) Pivot closed on November 20 2013 and Granite was closed immediately when the deal was announced

MampA Timeline

Deal Date Announced Date Closed Deal Size ($M)

US

1 T-Mobile MetroPCS October 3 2012 May 1 2013 $12700

2 Softbank Sprint October 15 2012 July 9 2013 $21900

3 Sprint USM Divestiture of Midwest Markets November 7 2012 May 16 2013 $480

4 Softbank Sprint Clearwire December 17 2012 July 9 2013 $3900

5 ATampT ATNI (Alltel) January 22 2013 September 2013 $780

6 American Tower Axtel January 24 2013 February 1 2013 $250

7 TDS Baja Broadband February 26 2013 August 1 2013 $268

8 GTT Inteliquent Data Business Divestiture April 30 2013 April 30 2013 $55

9 CenturyLink AppFog June 14 2013 June 14 2013 NA

10 T-Mobile USM AWS Spectrum Purchase June 28 2013 October 1 2013 $308

11 ATampT Leap July 12 2013 1Q14 (1) $3985

12 SBA Communications Oi (2113 Sites) July 15 2013 November 26 2013 $303

13 American Tower NII Holdings August 9 2013 December 9 2013 $861

14 Verizon Vodafones VZW Stake September 2 2013 1Q14 (1) $130000

15 American Tower Global Tower Partners September 6 2013 October 1 2013 $4800

16 TDS MSN Communications October 8 2013 October 8 2013 $40

17 Crown Castle ATampT Towers October 20 2013 4Q13 (1) $4850

18 CenturyLink Tier 3 November 19 2013 November 19 2013 $200

19 SBA Communications Oi (2007 Sites) December 4 2013 1Q14 (1) $645

Canada (2)

20 BCE Astral Media March 16 2012 July 5 2013 $3000

21 Rogers Score Media August 25 2012 April 30 2013 $167

22 Rogers Shaws Mountain Cablevision and AWS Spectrum January 14 2013 May 1 2013 NA (Spectrum Licenses) $700

23 Rogers BLACKIRON Data April 17 2013 April 17 2013 $200

24 Rogers Pivot Data Centres and Granite Networks (3) September 23 2013 November 20 2013 $161

25 Telus Public Mobile October 23 2013 November 29 2013 NA

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of 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India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

26

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As investors focus on unlocking shareholder value

bull MampA (ATampT Leap Softbank Sprint)

bull Divestitures (US Cellular tower sales)

bull Buybacks Return of capital

bull REIT conversion

bull Rising activism

bull Cheap amp available capital

bull Limited organic growth

Stocks to Watch T CBB TDS USM EQIX CCI

Buybacks as a of Current Market Cap

0 5 10 15 20 25

tw telecom

ATampT

Telus

CenturyLink

TDS

Equinix

American Tower

SBA Comm

Rogers Buyback Authorization

Buybacks Completed Under Current Authorization

Source Company data Thomson Reuters Morgan Stanley Research Priced as of 121813

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally 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STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

27

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless maturation is one key challenge weighing on growth

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2010 2011 2012 2013E 2014E

Postpaid Net Adds Prepaid Net AddsRETAIL NET ADDS (000s)

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

Modest rebound in net adds as prepaid Lifeline headwinds subside

and iDEN headwinds abate

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

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December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

28

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Churn trends should remain mixedhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research Estimates

7

-9

0 2

-7

4 4

-4

32

-35

-66

-6

108

189

273

238

171165

117110108

185 193 189

-80

-60

-40

-20

0

20

40

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

20

11

20

12

20

13

E

20

14

E

08

13

18

23

28

YY Change Postpaid Churn

ATampT Sprint (CDMA) T-Mobile (Branded)

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

29

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As the list of competitive catalysts continues to growhellip

bull T-Mobilersquos Un-carrier strategy continues

bull ATampTrsquos Mobile Share service plan price decrease from December 2013

bull Price war potential

bull Sprint Spark (tri-band network) traction and Network Vision completion

bull Dish partnership could materialize

bull IDEN related churn concludes

bull 4G LTE rollouts and densification gain more momentum

bull Spectrum crunch drives capacity headwinds

Source Morgan Stanley Research

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

30

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Emphasizing the next leg of growth beyond smartphones

bull Internet of things

bull ATampT Digital Life

bull Connected autonomous car

bull Machine-to-machine (M2M)

bull Wearable devices ndash Google Glass FitBit

bull Mobile payments

Source Morgan Stanley Research

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

31

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

We continue to view Canada as a wireless safe havenhellip

Source Company data Morgan Stanley Research E=Morgan Stanley Estimate

09

42 43

2017

2221

53

0x

1x

2x

3x

4x

5x

6x

7x

2007

2008

2009

2010

2011

2012

2013

E

2014

EYY POSTPAID SUBSCRIBER GROWTHCANADA OVER US

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

32

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

With wireless postpaid driving continued growth

Source Company data Morgan Stanley Research E=Morgan Stanley EstimateNote Total RGUs are the sum of postpaid subscribers access lines video subscribers and broadband subscribers TELUS video adds exclude reseller adds from BCEmdashwe estimate 15 of subs were reseller

-03

1410

0308 10

54

3630

26 2719

33

48

40

27 29

19

-1

0

1

2

3

4

5

6

20092010

20112012

2013E

2014E

BCE Rogers TELUSRGU YY GROWTH

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

33

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Towers remain attractive on higher wireless network spendhellip

LTE UPGRADED TOWERS

70k

38k 38k 37k

MSe 40k(or 67)

3Q13 26k YE13 5k 2Q13 20k

MSe 20k

12k

12k

17k

0k

20k

40k

60k

80k

ATampT Sprint Clearwire T-Mobile

Cel

l Sit

es

LTE Remaining

ATampT Project VIP+10k cell sites by YE15

Sprint on 25GHZ Spectrum hellip it will be more than 38000 sites that we will be on once

its done

Source Company Data Morgan Stanley Research Sprint plans to have 55k towers Clearwire plans to decommission 43k redundant sites although Sprint ldquomight shut down one tower and replace it with something elserdquo

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

34

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While at a discount to REITshellip

Source Company Data Morgan Stanley Research Thomson Reuters Priced as of December 18 2013Notes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share and growth

TOWER VALUATION RELATIVE TO REITs

American TowerCrown Castle

Data Centers

REITs

SBA Communications

10x

15x

20x

10 15 20 25

AFFO Per Share Growth

P

AF

FO

2014E

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

35

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Despite strong AFFO per share growth

TOWER AFFO PER SHARE GROWTH RELATIVE TO REITs

Data Centers 19

CCI 14

CCI 25

SBAC 21

SBAC 39

Data Centers 12

REITs 21

REITs 11

AMT 17

AMT 36

0

10

20

30

40

2014 2015

Y

Y A

FF

O P

er S

har

e G

row

th

Source Company Data Morgan Stanley ResearchNotes REITs include those covered by Morgan Stanley Data Centers include CONE EQIX DLR COR (Consensus Estimates) DFT (Consensus Estimates) DLR (covered by Vance Edelson) Market weighted AFFO per share growth

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

36

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

In US wireline network investment has been a differentiatorhellip

Source Company Data Morgan Stanley Research Notes ATampT re-stated access lines in 1Q13 through 1Q11 TDS re-stated subscriber metrics 1Q12 through 1Q11 Frontier access line estimates after 3Q12 Windstream represents consumer lines RGU = Revenue Generating Unit = Access Lines + Broadband Subscribers + FTTx Video + Postpaid Subscribers

TELECOM RGUs ( YY GROWTH)

-31

-34-34

-59

-48

-45

-25

-44

-49

-80

-60

-40

-20

00

2010A 2011A 2012A 2013E 2014E

CenturyLink Frontier Windstream

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

37

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And content wars are a growing riskhellip

bull Verizon NFL

bull BT Premier League

bull Rogers NHL

bull Sunday ticket expires in 2014

bull Whatrsquos next

Source Company data Morgan Stanley Research

What to Watch For

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

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December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

38

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

As Telcos attempt to compete more effectively with Cable

MARKET SHARE OF BROADBAND NET ADDS

66

34

24

1019

6

76

9081

94

-20

20

60

100

140

2010A 2011A 2012A 2013E 2014E

Telecom Cable

Source Company Data Morgan Stanley Research Notes Cable companies are covered by Ben Swinburne Cable adds include residential and commercial broadband Cable includes estimates for Cox + others that are not covered

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

39

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Wireless substitution remains a long-term threathellip

Source Blumberg SJ Luke JV Wireless Substitution Early Release of Estimates From the National Health Interview Study January ndash July 2013 National Center for Health Statistics December 2013 Morgan Stanley Research

Wireless Voice Only Households

60

43

5251

46

8

1316

4947

4542

38

34

30

25

20

0

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

o

f U

S H

ou

seh

old

s

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

40

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

And enterprise demand has yet to improvehellip

Source Company data Morgan Stanley Research E=Morgan Stanley Research estimates

E E

-12

-24

06

-23

-44

-74-80

-60

-40

-20

00

202

00

9

20

10

20

11

20

12

20

13

E

20

14

E

T GLOBAL ENTERPRISE REV GROWTH YY

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

49

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

50

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

51

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December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

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December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

41

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

While competition weighs on data center nameshellip

Source Company data Morgan Stanley Research Note DLR is covered by Vance Edelson QTS DFT COR and INXN reflect consensus estimates

REVENUE GROWTH (YY)13

2 17

0

184

218

140

160

122

114

110

172

189

186

142

90

89

113

00

50

100

150

200

250

EQIX RAX CONE QTS COR DLR DFT INXN

2013E 2014E

42

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

42

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Driving valuations to re-rate lower

Source Company data Thomson Reuters Morgan Stanley Research Priced as of December 18 2013

DATA CENTERS - EVEBITDA (NTM)

EQIX 105x

RAX 85xEQIX 3-Yr Avg

100x

RAX 3-Yr Avg 137x

00x

40x

80x

120x

160x

200x

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

EQIX RAXEQIX 3-Yr Avg RAX 3-Yr Avg

43

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

44

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

45

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

47

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

48

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

43

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Secular IT Outsourcing Large enterprises continue to migrate to a variable data center structure via third-party providers

Peer-Leading Top-line Growth Expecting ~19 YY growth in 2014 above the peersrsquo low to mid-teens growth

Multiple Expansion Currently CONE trades at a ~15x discount on an EVEBITDA basis to its data center peers

Demand for Mobile Data Strong leasing trends with four national carriers competing on network quality

Upside to Estimates Given its size and target leverage of 70x to 75x SBA Communications offers the most upside to estimates

CyrusOne (CONE)SBA Communications (SBAC)

GROWTHTOWERS

Source Morgan Stanley Research

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

46

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Top picks for 2014

Return of Capital CenturyLink dividend yields ~7 supported by a ~44 payout of free cash flow in 2014 and lt60 in 2015 The company is through $13 billion through the $20 billion two-year share buyback program and should provide an update on capital allocation in 2013

Revenue Stability CenturyLink expects modest revenue declines in 2014 with stability sometime after 2014

Canadarsquos industry structure is more favorable Canada features better fundamentals than the US market for both wireless and wireline as wireless penetration stands at only 80 versus +100 in the US and Canada has three national players vs four in the US

Potential catalysts ahead Share buybacks and ordividend increases 700 MHz auction Fibe TV rollout Astral deal provides greater than expected earnings and free cash flow accretion Macro trends are better than expected

CenturyLink (CTL)Bell Canada (BCE)

US YIELDCANADIAN YIELD

Source Morgan Stanley Research

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2014 Outlook

December 19 2013

Appendix

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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December 19 2013 Telecom Services

Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

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• Company Models

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Appendix

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

North American Telecommunication Services comps

12182013 Dividend LeverageRating Yield 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2012 Revenue EBITDA

BELLSATampT Inc EW 52 66x 64x 62x 139x 131x 124x 73 62 65 18x 22 22WIRELINECenturyLink OW 68 56x 58x 59x 119x 121x 119x 138 131 118 27x -07 -24Cincinnati Bell EW - 54x 58x 59x 514x NA 3344x NA 32 63 31x -12 -27Frontier Communications Corp EW 85 55x 57x 59x 192x 192x 226x 162 142 113 30x -38 -46Telephone amp Data Systems UW 21 04x 04x 04x NA NA NA 05 NA NA 13x 75 40Windstream Corp UW 122 59x 61x 63x 229x 277x 324x 140 179 176 37x -17 -28WIRELESSLeap Wireless EW - 101x 447x 315x NA NA NA NA NA NA 45x -411 -390T-Mobile US EW - 76x 67x 60x 1129x 396x 220x NA NA 03 28x 18 11Sprint Nextel UW - 113x 92x 83x NA NA NA NA NA NA 50x -05 143US Cellular Corporation UW - 58x 63x 63x 277x NA NA 21 40 58 09x -66 -92TOWERSAmerican Tower Corp OW 13 208x 175x 161x 486x 369x 297x 47 56 64 67x 148 101Crown Castle Corp OW 19 206x 180x 167x 1376x 1214x 492x 52 64 69 71x 138 75SBA Communications OW - 223x 197x 182x NA NA NA 48 57 64 90x 169 75CANADIANSBCE Inc OW 51 75x 72x 71x 151x 140x 132x 81 75 82 24x 19 26Rogers Communications Inc OW 37 71x 70x 68x 142x 133x 128x 72 70 77 22x 23 30TELUS Corp OW 40 75x 280x 288x 190x 607x 650x 62 13 16 17x -354 -351ALTERNATIVE CARRIERSInteliquent EW 22 46x 53x 55x 69x 153x 159x NA NA NA 29x -121 -2414Level 3 Communications Inc EW - 93x 82x 78x NA 369x 209x NA 37 67 55x 19 94tw telecom inc EW - 99x 92x 84x 1334x 1306x 797x 10 06 24 19x 71 64DATA CENTERSCyrusOne OW 29 133x 106x 89x NA 3541x 811x 93 105 136 34x 186 205Equinix Inc EW - 121x 107x 98x 965x 440x 274x 05 17 37 32x 112 110Rackspace Hosting Inc EW - 103x 90x 78x 657x 375x 204x NA 02 12 NA 153 125OTHEREndurance International OW - 167x 152x 129x 297x 241x 160x 74 116 150 98x 96 208Intelsat SA EW - 91x 91x 91x 305x 69x 64x 117 182 139 78x 05 00Gogo Inc UW - 2621x NA 528x NA NA NA 65 93 90 NA 287 631

CAGR 2012E - 2015EEV EBITDA PE FCF Yield

Source Company Data Morgan Stanley Research Thomson Reuters Notes FCF = OCF ndash Capex Market Cap = Stock Price x Diluted Shares Outstanding Wireline Cincinnati Bell leverage includes 69 ownership stake in CyrusOne Frontier + Windstream EBITDA = EBITDA (Ex Pension) ndash Service Cost TDS excludes 85 ownership of US Cellular Wireless Service Revenues Towers Leverage is calculated by annualizing 3Q13 EBITDA free cash flow reflects AFFO yield

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December 19 2013 Telecom Services

M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

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M O R G A N S T A N L E Y R E S E A R C H

2014 Outlook

December 19 2013

Balance sheets in good shape overallTelecom Maturities Leverage and Ratings

Source Company Data Morgan Stanley Research Thomson Reuters Bloomberg Information updated for 3Q13 CenturyLink includes $750M 6750 Senior Notes due 2023 (Nov 14 2013) American Tower includes $15 billion Term Loan (Oct 29 2013) Crown Castle includes debt to acquire the ATampT Towers Endurance is pro-forma for the IPO (Oct 25 2013) and debt (Nov 25 2013) Canada debt includes both USD and CDN issued debt

Leverage Investment3Q13A 2014E 2015E 2016E Moodys SampP Fitch Grade

ATampT (T) 18x 2250 5969 6345 A3 A- A YCenturyLink (CTL) 28x 800 442 1419 Ba1 BB BB+ NFrontier (FTR) 33x 200 202 474 Ba2 BB- BB+ NWindstream (WIN) 37x 0 700 393 Ba3 BB- BB+ NCincinnati Bell (CBB) 56x 0 0 0 B2 B - NTel and Data Syst (TDS) 13x 0 0 0 Baa2 BBB- BBB- YLEAP (LEAP) 55x 248 0 0 B3 B- - NT-Mobile (TMUS) 33x 0 0 0 - BB - NSprint (S) 47x 385 3054 2505 Ba3 BB- B+ NUS Cellular (USM) 08x 0 0 0 Baa2 BBB- BBB- YAmerican Tower (AMT) 48x 0 600 152 Baa3 BBB- BBB YCrown Castle (CCI) 65x 0 0 0 Ba2 BB BB NSBA Communications (SBAC) 67x 459 680 0 Ba3 BB- - NBCE (BCE) CAD$ 23x 0 1000 700 Baa2 BBB+ - YRogers (RCIB) CAD$ 22x 1765 830 1000 Baa1 BBB+ BBB+ YTelus (T) CAD$ 17x 0 499 0 Baa1 BBB+ BBB+ YInteliquent (IQNT) na 0 0 0 - - - Ntw Telecom (TWTC) 26x 0 0 0 Ba3 BB - NLevel 3 (LVLT) 51x 0 775 201 B3 B B NCyrusOne (CONE) 26x 0 0 0 B1 B - NEquinix (EQIX) 29x 396 0 374 Ba3 BB - NRackspace (RAX) na 0 0 0 - - - NEndurance (EIGI) 50x 10 10 10 - - - NIntelsat (I) 74x 0 0 0 B3 B+ - NGogo (GOGO) na 0 0 2 - - - N

Credit RatingsMaturities ($MM)

08x

13x

17x

18x

22x

23x

26x

26x

28x

29x

33x

33x

37x

47x

48x

50x

51x

55x

56x

65x

67x

74x

USM

TDS

Telus

T

Rogers

BCE

TWTC

CONE

CTL

EQIX

TMUS

FTR

WIN

S

AMT

EIGI

LVLT

LEAP

CBB

CCI

SBAC

I

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

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Company Models

Exhibit 1

Intelsat Annual Income Statement ($ in millions) Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

Network Services $1218 $1193 $1197 $1203 $1185 $1232 $1306Media 818 859 890 908 949 994 1008Government 517 524 485 480 479 473 478Other 36 34 30 34 38 41 46______ ______ ______ ______ ______ ______ ______ Total Revenues $2588 $2610 $2602 $2626 $2651 $2740 $2838 Year-over-Year Growth 17 08 -03 09 10 34 36

Direct costs of revenue (exclusive of DampA) $417 $416 $390 $420 $443 $438 $446 Service Gross Margin 839 841 850 840 833 840 843Selling General and Administrative 208 204 290 184 186 192 199 of Revenue 81 78 111 70 70 70 70Losses on derivative financial instruments 25 40 (4) - - - - of Revenue 10 15 -02 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Total Expenses $650 $660 $675 $604 $628 $630 $644

EBITDA $1916 $1940 $1923 $2022 $2022 $2110 $2194 EBITDA Margin 740 743 739 770 763 770 773 Year-over-Year Growth 11 1 -1 5 0 4 4

0 0 0 0 0 0 0Compensation and benefits $9 $9 $28 $0 $0 $0 $0Management fees 25 25 64 - - - - Earnings from previously unconsolidated affiliates 25 - - - - - - Impairment of asset value - - - - - - - (Gain) Loss on derivative financial instruments 25 40 5 - - - - Gain on sale of investment - - - - - - - Non-recurring and other non-cash items 18 6 1 - - - -

______ ______ ______ ______ ______ ______ ______ Adjusted EBITDA $2017 $2020 $2021 $2022 $2022 $2110 $2194 Adj EBITDA Margin 779 774 777 770 763 770 773 Year-over-Year Growth 11 01 01 00 00 43 40

Depreciation amp Amortization $769 $765 $744 $664 $683 $663 $620 of Total Revenue 297 293 286 253 258 242 218 Depreciation 664 673 662 598 630 615 577 of Total Revenue 257 258 254 228 238 224 203 Amortization 106 92 82 66 53 48 43 of Total Revenue 41 35 32 25 20 18 15

Operating Income (Loss) $1169 $1185 $1183 $1358 $1340 $1447 $1574 Operating Margin 452 454 455 517 505 528 555

Interest expense net ($1311) ($1271) ($1119) ($927) ($884) ($895) ($867)Interest income net - - - - - - - Other non-cash expenses (326) (74) - - - - - Other income (expense) net (23) (10) (4) - - - -

______ ______ ______ ______ ______ ______ ______ PreTax income ($491) ($169) $59 $430 $456 $552 $707Benefit for (provision) income taxes 55 20 28 (53) (53) (55) (57) ______ ______ ______ ______ ______ ______ ______ Adj Net Income (Loss) from Contin Operations ($435) ($149) $88 $378 $403 $497 $650

BreakageCall amp feesother expenses net - - (367) (20) - - - Non-controlling interest 11 (16) (27) 00 00 00 00

______ ______ ______ ______ ______ ______ ______ Net income loss (as reported) ($434) ($151) ($282) $358 $403 $497 $650

Average Basic Shares Outstanding 83 83 106 106 106 106 106Average Diluted Shares Outstanding 83 83 117 117 117 117 117Net income (Loss) per share $(523) $(182) $(242) $306 $345 $426 $556Recurring net income share avail to common $(523) $(182) $073 $324 $345 $426 $556

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways 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Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

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Exhibit 2 Intelsat Balance Sheet ($ in millions)

Calendar Year Ending Dec 31 2011 2012 2013E 2014E 2015E 2016E 2017E

ASSETS Cash and cash equivalents $297 $187 $568 $433 $490 $659 $488 Receivables net of allowance 315 282 278 273 268 270 272 Prepaid expenses and other current assets 137 39 51 51 52 54 56 Deferred income taxes 26 95 94 94 94 94 94

______ ______ ______ ______ ______ ______ ______ Total current assets $774 $603 $992 $852 $904 $1077 $910

Satellites and other property and equipment gross $8590 $9218 $9692 $10314 $11114 $11775 $12548 Accumulated depreciation 2447 2862 3884 4482 5112 5727 6304______ ______ ______ ______ ______ ______ ______ Satellites and Other Property and Equipment net $6143 $6355 $5808 $5832 $6002 $6048 $6244

Amortizable intangible assets net $743 $651 $569 $503 $450 $403 $360 Non-amortizable intagible assets 2458 2458 2458 2458 2458 2458 2458 Goodwill 6781 6781 6781 6781 6781 6781 6781 Other assets 458 417 409 409 409 409 409 ______ ______ ______ ______ ______ ______ ______ Total Assets $17357 $17266 $17017 $16836 $17005 $17175 $17163

LIABILITIES amp SHRLDRS EQUITY Current portion of long-term debt $166 $57 $57 $57 $57 $57 $57 Accounts payable and accrued liabilities 193 179 136 93 92 85 80 Taxes payable 12 9 - - - - - Employee related liabilities 43 47 32 32 32 32 32 Customer advances for satellite construction - - - - - - - Accrued interest payable 359 368 414 414 414 414 414 Deferred satellite performance incentives 18 21 22 22 22 22 22 Deferred revenue 65 84 79 79 79 79 79 Other current liabilities 76 73 71 71 71 71 71

______ ______ ______ ______ ______ ______ ______ Total current liabilities $932 $838 $811 $768 $767 $760 $755

Long-term debt net of current portion $15838 $15847 $15398 $14893 $14742 $14362 $13808 Deferred satellite perfromance incentives net of current p 114 173 159 159 159 159 159 Deferred revenue net of current portion 724 834 893 914 876 820 754 Deferred income taxes 265 287 270 284 277 263 251 Accrued retirement benefits 306 299 269 237 195 146 116 Other long-term liabilities 323 300 227 233 239 245 248 Redeemable noncontrolling interest 3 - - - - - -

______ ______ ______ ______ ______ ______ ______ Total liabilities $18505 $18578 $18026 $17487 $17253 $16753 $16091

SHAREHOLDERS EQUITY Common shares $5 $5 $1 $1 $1 $1 $1

Paid in capital 1572 1590 2094 2094 2094 2267 2267 Accumulated deficit (2609) (2755) (3037) (2679) (2277) (1779) (1129) Accumulated other comprehensive income (167) (197) (109) (109) (109) (109) (109)

______ ______ ______ ______ ______ ______ ______ Total Shareholders Equity ($1199) ($1358) ($1050) ($693) ($290) $380 $1030

Noncontrolling interest $51 $46 $42 $42 $42 $42 $42______ ______ ______ ______ ______ ______ ______ Total Liabilities and Equity $17357 $17266 $17017 $16836 $17005 $17175 $17163

Source Company Data Morgan Stanley Research E=Morgan Stanley Research estimates

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Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

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operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report To our readers in Taiwan Information on securitiesinstruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited (MSTL) Such information is for your reference only The reader should independently evaluate the investment risks and is solely responsible for their investment decisions Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley Information on securitiesinstruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securitiesinstruments MSTL may not execute transactions for clients in these securitiesinstruments To our readers in Hong Kong Information is distributed in Hong Kong by and on behalf of and is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

50

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley amp Co LLC andor Morgan Stanley CTVM SA andor Morgan Stanley Mexico Casa de Bolsa SA de CV andor Morgan Stanley Canada Limited As used in this disclosure section Morgan Stanley includes Morgan Stanley amp Co LLC Morgan Stanley CTVM SA Morgan Stanley Mexico Casa de Bolsa SA de CV Morgan Stanley Canada Limited and their affiliates as necessary For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morgan-stanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment repre-sentative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report Simon Flannery Unless otherwise stated the individuals listed on the cover page of this report are research analysts

Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy which is available at wwwmorganstanleycominstitutionalresearchconflictpolicies

Important US Regulatory Disclosures on Subject Companies The following analyst or strategist (or a household member) owns securities (or related derivatives) in a company that he or she covers or recommends in Morgan Stanley Research John Mark Warren - CenturyLink Inc(common or preferred stock) Morgan Stanley policy prohibits research analysts strategists and research associates from investing in securities in their industry as defined by the Global Industry Classification Standard (GICS which was developed by and is the exclusive property of MSCI and SampP) Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger fund distribution or other involuntary acquisition As of November 29 2013 Morgan Stanley beneficially owned 1 or more of a class of common equity securities of the following companies covered in Morgan Stanley Research CenturyLink Inc CyrusOne Inc Equinix Inc Inteliquent Leap Wireless Rackspace Hosting Inc Within the last 12 months Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Level 3 Communications Inc T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp In the next 3 months Morgan Stanley expects to receive or intends to seek compensation for investment banking services from American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from American Tower Corp ATampT Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Hold-ings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Com-munications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has provided or is providing investment banking services to or has an investment banking client rela-tionship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc Verizon Communications Windstream Corp Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc TELUS Corp tw telecom inc Verizon Communications Windstream Corp An employee director or consultant of Morgan Stanley is a director of ATampT Inc Verizon Communications This person is not a research analyst or a member of a research analysts household Morgan Stanley amp Co LLC makes a market in the securities of American Tower Corp ATampT Inc BCE Inc CenturyLink Inc Cincinnati Bell Inc Crown Castle Corp CyrusOne Inc Endurance International Group Holdings Equinix Inc Frontier Communications Corp Gogo Inc Inteliquent Intelsat SA Leap Wireless Level 3 Communications Inc Rackspace Hosting Inc Rogers Communications Inc SBA Communications Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp tw telecom inc US Cellular Corporation Verizon Communications Windstream Corp The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight Equal-weight Not-Rated or Underweight (see definitions below) Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell Investors should carefully read the definitions of all ratings used in Morgan Stanley Research In addition since Morgan Stanley Research contains more complete information concerning the analysts views investors should carefully read Morgan Stanley Re-search in its entirety and not infer the contents from the rating alone In any case ratings (or research) should not be used or relied upon as in-vestment advice An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations

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December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report To our readers in Taiwan Information on securitiesinstruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited (MSTL) Such information is for your reference only The reader should independently evaluate the investment risks and is solely responsible for their investment decisions Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley Information on securitiesinstruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securitiesinstruments MSTL may not execute transactions for clients in these securitiesinstruments To our readers in Hong Kong Information is distributed in Hong Kong by and on behalf of and is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

51

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

Global Stock Ratings Distribution (as of November 30 2013) For disclosure purposes only (in accordance with NASD and NYSE requirements) we include the category headings of Buy Hold and Sell alongside our ratings of Overweight Equal-weight Not-Rated and Underweight Morgan Stanley does not assign ratings of Buy Hold or Sell to the stocks we cover Overweight Equal-weight Not-Rated and Underweight are not the equivalent of buy hold and sell but represent recommended relative weightings (see definitions below) To satisfy regulatory requirements we correspond Overweight our most positive stock rating with a buy rec-ommendation we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations respectively

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count of Total Count

of Total IBC

of Rating Category

OverweightBuy 995 34 313 38 31Equal-weightHold 1283 44 388 47 30Not-RatedHold 109 4 26 3 24UnderweightSell 537 18 99 12 18Total 2924 826 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circum-stances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

Analyst Industry Views Attractive (A) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs the relevant broad market benchmark as indicated below In-Line (I) The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark as indicated below Cautious (C) The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs the relevant broad market benchmark as indicated below Benchmarks for each region are as follows North America - SampP 500 Latin America - relevant MSCI country index or MSCI Latin America Index Europe - MSCI Europe Japan - TOPIX Asia - relevant MSCI country index

Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates are available on the Morgan Stanley Wealth Management disclosure website at wwwmorganstanleycomonlineresearchdisclosures For Morgan Stanley specific disclosures you may refer to wwwmorganstanleycomresearchdisclosures Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley This could create a conflict of interest

Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of American Tower Corp ATampT Inc BCE Inc Cen-turyLink Inc Cincinnati Bell Inc Crown Castle Corp Frontier Communications Corp Intelsat SA Level 3 Communications Inc Rogers Communications Inc Sprint Nextel Corporation T-Mobile US Inc Telephone amp Data Systems TELUS Corp US Cellular Corporation Verizon Communications Windstream Corp Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recom-mendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients Certain but not all Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience For access to all available Morgan Stanley Research please contact your sales representative or go to Matrix at httpwwwmorganstanleycommatrix Any access andor use of Morgan Stanley Research are subject to Morgan Stanleys Terms of Use (httpwwwmorganstanleycomtermshtml) By accessing andor using Morgan Stanley Research you are indicating that you have read and agree to be bound by our Terms of Use (httpwwwmorganstanleycomtermshtml) In addition you consent to Morgan Stanley processing your personal data and using cookies in accordance with our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) including for the purposes of setting your preferences and to collect readership data so that we can deliver better and more personalised service and products to you To find out more information about how Morgan Stanley processes personal data how we use cookies and how to reject cookies see our Privacy Policy and our Global Cookies Policy (httpwwwmorganstanleycomprivacy_pledgehtml) If you do not agree to our Terms of Use andor if you do not wish to provide your consent to Morgan Stanley processing of your personal data or using cookies please do not access our research Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a financial adviser The appropriateness of an investment or strategy will depend on an investors circumstances and objectives The securities in-struments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report To our readers in Taiwan Information on securitiesinstruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited (MSTL) Such information is for your reference only The reader should independently evaluate the investment risks and is solely responsible for their investment decisions Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley Information on securitiesinstruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securitiesinstruments MSTL may not execute transactions for clients in these securitiesinstruments To our readers in Hong Kong Information is distributed in Hong Kong by and on behalf of and is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

52

M O R G A N S T A N L E Y R E S E A R C H

December 19 2013 Telecom Services

operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transac-tions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any securityinstrument or to participate in any particular trading strategy The Important US Regulatory Disclosures on Subject Companies section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1 or more of a class of common equity securities of the companies For all other companies mentioned in Morgan Stanley Research Morgan Stanley may have an investment of less than 1 in securitiesinstruments or derivatives of securitiesinstruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securitiesinstruments or derivatives of securitiesinstruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research Derivatives may be issued by Morgan Stanley or associated persons With the exception of information regarding Morgan Stanley Morgan Stanley Research is based on public information Morgan Stanley makes every effort to use reliable comprehensive information but we make no representation that it is accurate or complete We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company Facts and views presented in Morgan Stanley Research have not been reviewed by and may not reflect information known to professionals in other Morgan Stanley business areas including investment banking personnel Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report To our readers in Taiwan Information on securitiesinstruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited (MSTL) Such information is for your reference only The reader should independently evaluate the investment risks and is solely responsible for their investment decisions Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley Information on securitiesinstruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securitiesinstruments MSTL may not execute transactions for clients in these securitiesinstruments To our readers in Hong Kong Information is distributed in Hong Kong by and on behalf of and is attributable to Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong If you have any queries concerning Morgan Stanley Research please contact our Hong Kong sales representatives Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals licenses verifications andor registrations from the relevant governmental authorities themselves Morgan Stanley Research is disseminated in Brazil by Morgan Stanley CTVM SA in Japan by Morgan Stanley MUFG Securities Co Ltd and for Commodities related research reports only Morgan Stanley Capital Group Japan Co Ltd in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents) in Singapore by Morgan Stanley Asia (Singapore) Pte (Registration number 199206298Z) andor Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from or in connection with Morgan Stanley Research) in Australia to wholesale clients within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited ABN 67 003 734 576 holder of Australian financial services license No 233742 which accepts responsibility for its contents in Australia to wholesale clients and retail clients within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555 holder of Australian financial services license No 240813 which accepts responsibility for its contents in Korea by Morgan Stanley amp Co International plc Seoul Branch in India by Morgan Stanley India Company Private Limited in Indonesia by PT Morgan Stanley Asia Indonesia in Canada by Morgan Stanley Canada Limited which has approved of and takes responsibility for its contents in Canada in Germany by Morgan Stanley Bank AG Frankfurt am Main and Morgan Stanley Private Wealth Management Limited Niederlassung Deutschland regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin) in Spain by Morgan Stanley SV SA a Morgan Stanley group company which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations in the US by Morgan Stanley amp Co LLC which accepts responsibility for its contents Morgan Stanley amp Co International plc authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates Morgan Stanley Private Wealth Management Limited authorized and regulated by the Financial Conduct Authority also disseminates Morgan Stanley Research in the UK Private UK investors should obtain the advice of their Morgan Stanley amp Co Interna-tional plc or Morgan Stanley Private Wealth Management representative about the investments concerned RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc and RMB Investment Advisory (Proprietary) Limited which is wholly owned by FirstRand Limited The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (DIFC Branch) regulated by the Dubai Financial Services Authority (the DFSA) and is directed at Professional Clients only as defined by the DFSA The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client The information in Morgan Stanley Research is being communicated by Morgan Stanley amp Co International plc (QFC Branch) regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA) and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA As required by the Capital Markets Board of Turkey investment information comments and recommendations stated here are not within the scope of investment advisory activity Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses portfolio management companies non-deposit banks and clients Comments and recommendations stated here rely on the individual opinions of the ones providing these com-ments and recommendations These opinions may not fit to your financial status risk and return preferences For this reason to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners Third-party data providers make no warranties or representations relating to the accuracy completeness or timeliness of the data they provide and shall not have liability for any damages relating to such data The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and SampP Morgan Stanley bases projections opinions forecasts and trading strategies regarding the MSCI Country Index Series solely on public information MSCI has not reviewed approved or endorsed these projections opinions forecasts and trading strategies Morgan Stanley has no influence on or control over MSCIs index compilation decisions Morgan Stanley Research or portions of it may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley research is disseminated and available primarily electronically and in some cases in printed form Additional information on recommended securitiesinstruments is available on request Morgan Stanley Research or any portion thereof may not be reprinted sold or redistributed without the written consent of Morgan Stanley Morgan Stanley Research is disseminated and available primarily electronically and in some cases in printed form

Additional information on recommended securitiesinstruments is available on request

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models

copy 2013 Morgan Stanley

M O R G A N S T A N L E Y R E S E A R C H

Industry CoverageTelecom Services

Company (Ticker) Rating (as of)Price (12182013)

Simon Flannery ATampT Inc (TN) E (04242013) $3438American Tower Corp (AMTN) O (03282011) $7822BCE Inc (BCETO) O (11212008) C$4528CenturyLink Inc (CTLN) O (08022011) $3184Cincinnati Bell Inc (CBBN) E (02122013) $349Crown Castle Corp (CCIN) O (11112009) $722CyrusOne Inc (CONEO) O (05282013) $2183Endurance International Group Holdings (EIGIO)

O (11192013) $1403

Equinix Inc (EQIXO) E (05132009) $17042Frontier Communications Corp (FTRO)

E (05072007) $47

Gogo Inc (GOGOO) U (11152013) $2591Inteliquent (IQNTO) E (05062013) $1126Intelsat SA (IN) E (05282013) $222Leap Wireless (LEAPO) E (08072009) $1725Level 3 Communications Inc (LVLTN)

E (09202013) $306

Rackspace Hosting Inc (RAXN) E (11152010) $3761Rogers Communications Inc (RCIbTO)

O (04272005) C$4733

SBA Communications (SBACO) O (03282011) $8587Sprint Nextel Corporation (SN) U (10192009) $895T-Mobile US Inc (TMUSN) E (05032013) $2725TELUS Corp (TTO) O (09232013) C$3644Telephone amp Data Systems (TDSN)

U (02192009) $2459

US Cellular Corporation (USMN) U (11022011) $4029Verizon Communications (VZN) ++ $4847Windstream Corp (WINO) U (11082013) $819tw telecom inc (TWTCO) E (05162013) $2984

Stock Ratings are subject to change Please see latest research for each company Historical prices are not split adjusted

The Americas

1585 Broadway

New York NY 10036-8293

United States

Tel +1 (1) 212 761 4000

Europe

20 Bank Street Canary Wharf

London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6008

Japan

Tel +81 (0) 3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200

• Company Models