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T E L E C O M S T O C K :   R E C O M M E N D A T I O N

Presentation to FIN 824 (SPRING QUARTER)

Marc Reitter Siddhesh Sankulkar

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Agenda

Page

Current Holdings & Recommended Action

Sector Recommendation Recap

Telecom Stock Recommendation Overview:

1

2

3

America Movil Overview & Analysis 4-10

MetroPCS Overview & Analysis 11-13

Company Risks 14

Action Recommendation 15

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SIM overview: Maintain Overweight PositionSIM overview: Maintain Overweight Position

Sector weights – SIM vs. S&P 500

2

Current holdings:

Current holdings:

S&P 500 overview: S&P 500 overview:

SIM overweight Telecom by

3.43%

SIM overweight Telecom by

3.43%

7.98%

7.94%

6.80%

1.28%

15.61%

10.57%2.97%

21.54%

18.26%

7.06%

Consumer Discretionary

Consumer Staples

Energy

Utilities

Information Technology

Telecom

Industrials

Materials

Financials

Health Care

10.61%

9.36%

9.79%

3.67%

14.98%

3.20%

21.62%

12.14%

11.00%

3.63%

Consumer Discretionary

Consumer Staples

Energy

Utilities

Information Technology

Telecom

Industrials

Materials

Financials

Health Care

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Current HoldingsCurrent Holdings

Current Position – company analysis

3

Source: Yahoo Finance & Bloomberg

RecommendationRecommendation

Sell Windstream

Sell Sprint

Increase position in America Movil

Buy MetroPCS Communications

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Current Average Shares SIM Ticker Current SIM holdings Price unit cost owned weightAMX America Movil $59.10 $34.61 15,900 3.08%S Sprint Nextel Corp. $22.10 $21.01 14,600 1.25%WIN Windstream Corporation $14.92 $13.58 44,618 2.77%

Company overview – America Movil

4

America Movil through its subsidiaries, provides wireless communications services primarily in Latin America.

Operations in 15 countries in the Americas

More than 124 million mobile customers—Dominant position in Mexico and Central America—Third largest Wireless company in Brazil (South America’s largest economy)

Coverage for a combined population of 770 million

Carlos Slim – Owns 65% of the voting rights of America Movil, also is the 3rd richest individual in the world.

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Catalysts – America Movil

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Positioned well throughout Latin America to take advantage of Emerging Markets

—America Movil's economies of scale help it squeeze operating profits out of every market in which it offers service.

Low penetration rates (approximately 43%) throughout Latin America means a cornucopia of subscribers are still out there.

Renewed focus on operating costs—Strict control over overhead costs

Growth via Acquisition—Looking to continue adding assets in the near term as this has been the

means of their growth over the years—Recently acquired Verizon’s Puerto Rico operations—Carlos Slim

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Financial Analysis – America Movil

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StockVal®AMERICA MOVIL SA DE CV ADR (AMX) Price 59.102002 2003 2004 2005 2006 20072002 2003 2004 2005 2006 2007 2008

PRICE2

4

6

10

20

34

60

HI 59LO 4ME 15CU 59GR 56.8%

05-24-200205-25-2007

REVENUE-PER-SHARE3

4

5

6

7

9

11

HI 11LO 3ME 7CU 11GR 43.5%

06-30-200309-30-2006

EARNINGS-PER-SHARE0.4

0.6

0.8

1.0

1.4

1.8

2.4

HI 2.35 LO 0.51 ME 0.86 CU 2.35 GR 60.0%

06-30-200309-30-2006

Financial Analysis – America Movil

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AMX Relative to S&P 500 (SP5A)AMX Relative to S&P 500 (SP5A)

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StockVal®AMERICA MOVIL SA DE CV ADR (AMX) Price 59.102002 2003 2004 2005 2006 2007

PRICE RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd0.6

0.8

1.4

2.0

3.0

4.6

6.8

HI 6.76 LO 0.78 ME 2.22 CU 6.76

05-24-200205-25-2007

REVENUE-PER-SHARE RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd1.0

1.2

1.4

1.6

1.8

2.0

2.4

HI 2.29 LO 1.00 ME 1.66 CU 2.29

06-30-200309-30-2006

EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd1.0

1.2

1.4

1.6

2.0

2.4

2.8HI 2.76 LO 1.00 ME 1.34 CU 2.76 FY1 2.24 FY2 3.07

06-30-200309-30-2006

Valuation Analysis – America Movil

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StockVal®AMERICA MOVIL SA DE CV ADR (AMX) Price 59.102002 2003 2004 2005 2006 20072002 2003 2004 2005 2006 2007 2008

PRICE / YEAR-FORWARD EARNINGS3

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15

18

21

HI 18.5 LO 6.0 ME 11.7 CU 16.1

07-05-200205-25-2007

PRICE / SALES1

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HI 5.39 LO 1.89 ME 2.96 CU 5.39

07-04-200305-25-2007

PRICE / BOOK VALUE0

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HI 10.4 LO 1.8 ME 4.4 CU 10.4

10-04-200205-25-2007

DCF Analysis – America Movil

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Year 2007E 2008E 2009E 2010E 2011E 2012E

Revenue 26,386 32,066 37,862 43,542 47,896 51,249

% Growth 21.53% 18.08% 15.0% 10.0% 7.0%

Operating Income 9,966 12,547 14,659 16,546 16,764 17,937

Operating Margin 37.77% 39.13% 38.72% 38.0% 35.0% 35.0%

Taxes 1,962 2,852 3,372 4,633 4,694 5,022

Tax Rate 27.0% 30.0% 30.0% 28.0% 28.0% 28.0%

Net Income 5,305 6,655 7,867 8,430 8,238 8,815

% Growth 25% 18% 7% -2% 7%

Add Depreciation/Amort 2,732 3,060 3,427 3,483 3,832 4,100

% of Sales 10.35% 9.54% 9.05% 8.00% 8.00% 8.00%

Plus/(minus) Changes WC 956 1,396 1,998 871 958 1,025

% of Sales 3.62% 4.35% 5.28% 2.00% 2.00% 2.00%

Subtract Cap Ex 5,277 4,810 5,679 4,354 4,790 5,125

Capex as a % of sales 20.00% 15.00% 15.00% 10.00% 10.00% 10.00%

Free Cash Flow 3,715 6,301 7,613 8,430 8,238 8,815

YOY growth 70% 21% 11% -2% 7%

Shares Outstanding 1,760 Terminal 216,356

Current Price (as of 5/23) 58.70 P/E 17.5

Implied equity value/share 64.76 EV/EBITDA 7.2

Upside/(Downside) to DCF 10.3% Free Cash Yield 5.71%

Terminal Discount Rate = 11.0%

Terminal FCF Growth = 5.0%

Company overview – MetroPCS Communications

11

MetroPCS began trading on the NYSE on April 19, 2007 following the completion of the company’s IPO

MetroPCS offers wireless service that is designed to extend benefits of mobility to the mass market by offering wireless service that is:

Simple to understand and use Priced competitively with traditional landline service Service allows customers to make unlimited calls within a local calling area

MetroPCS boasts a differentiated low-cost wireless subscriber model with approximately 3.4 million subscribers.

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Source: Company reports

Catalysts – MetroPCS Communications

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Maintaining low operating expense is Key for MetroPCS success

Continue with the “Market Clustering” strategy in densely populated areas with limited cell sites which minimizes network expenses

—Core Markets: Atlanta, Dallas/Ft. Worth, Detroit, Miami, San Francisco, Sacramento, Tampa/Sarasota/Orlando, and Los Angeles

Continue to minimize marketing costs with low handset subsidies, owing to the absence of service contracts.

— Consumers pay flat monthly fee for unlimited use within service area— The company sells its products and services to customers indirectly

through approximately 2,000 independent retail outlets under the MetroPCS brand, as well as directly through 95 company-operated retail stores

Continue with the “Market Clustering” strategy in densely populated areas with limited cell sites which minimizes network expenses

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DCF Analysis – MetroPCS Communications

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(Mill$) ForecastYear 2007E 2008E 2009E 2010E 2011E 2012E

Revenue 2,225 2,502 2,813 2,884 3,036 3,184 % Growth 12.45% 12.45% 2.51% 5.30% 4.87%

Operating Income 663.9 1,056.8 1,322.3 1,366.8 1,463.5 1,562.8 Operating Margin 29.84% 42.25% 47.01% 47.40% 48.20% 49.08%

Interest and Other- net (316.0) (41.7) (140.6) (144.2) (151.8) (159.2) Interest % of Sales -14.20% -1.67% -5.00% -5.00% -5.00% -5.00%

Taxes 135.7 395.9 460.8 476.8 511.6 547.4 Tax Rate 39.0% 39.0% 39.0% 39.0% 39.0% 39.0%Equity Income, net - - - - - - % of sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net Income 212.2 619.2 720.8 745.8 800.1 856.2 % Growth 192% 16% 3% 7% 7%

Add Depreciation/Amort 163.5 233.5 317.5 331.6 349.2 366.2 % of Sales 7.35% 9.33% 11.29% 11.50% 11.50% 11.50% % of Capex 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Plus/(minus) Changes WC 422.7 475.3 478.2 530.6 558.7 585.9 % of Sales 19.0% 19.0% 17.0% 18.4% 18.4% 18.4%Subtract Cap Ex 1,250.8 1,250.8 562.6 576.7 546.5 573.2 Capex % of sales 56.23% 50.00% 20.00% 20.00% 18.00% 18.00%

Free Cash Flow (452.4) 77.2 953.9 1,031.3 1,161.5 1,235.1 YOY growth -117% 1135% 8% 13% 6%

Shares Outstanding 369.1 Terminal 25,581.5 Current Price 35.01 P/E 31.2 Implied equity value/share 42.95 EV/EBITDA 14.0 Upside/(Downside) to DCF 22.7% Free Cash Yield 5.83%Terminal Discount Rate = 9.0%Terminal FCF Growth = 3.0%

Company Risks

14

America MovilAmerica Movil

MetroPCS CommunicationsMetroPCS Communications

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Primary risk continues to be execution risk and competitive response form national carriers

Build-out of 40 million Points of Presence (Towers and Connection Points) in the FCC Auction 66 markets by early 2009

Increased churn due to an economic downturn

The possibility of a dilutive acquisition

Country Risk Primarily in Brazil and Mexico—Brazil's local monetary policy is a bit nonexistent and its tax laws are draconian.—Lack of transparency in financial reporting is concerning.

Currency risk and associated inflation concerns throughout Latin America

Intense competition from Rival Telefonica (Acquired 2nd largest company in Brazil)

Rising penetration rates throughout Latin America

Action Recommendation

Sell 100% Windstream & Sprint

Action Scenario 1 – Use 50% proceeds to buy AMX and 50% proceeds to buy PCS

Action Scenario 2 – Use 75% proceeds to buy AMX and 25% proceeds to buy PCS

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Current Holdings Shares Owned Market Price Market ValueSprint 14,600 $22.10 $322,660Winstream 44,618 $14.92 $665,701America Movil 15,900 $59.10 $939,690

Action Scenario 1 % Upside Total HoldingIncrease AMX 8,362 $59.10 10.3% $1,433,870Buy PCS 14,115 $35.01 22.7% $494,180

Action Scenario 2 % Upside Total HoldingIncrease AMX 6,271 $59.10 10.3% $1,310,325Buy PCS 3,529 $35.01 22.7% $123,545

Questions?

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