1. 1 Wireless Telephone Data Networks - Yesterday, Today and Tomorrow and How to Value It Kevin Snow AT&T December 4, 2012

2. History Wireless Networks were voice centric, extremely limited data 1G – Analog - voice 2G – Digital – voice CDPD for data, 1 Adam 12 – police running license plate #s – CDMA, GSM, TDMA 2.5G –Digital – circuit switch voice + data (3x dial up) – 1XRTT-CDMA; GSM-GPRS/EDGE; TDMA – DEAD* 3G – Broadband Data (DSL speed but voice via circuit switch) – CDMA-EVDO & RevA, UMTS-HSPA * Acronym for DEAD – none – literally means dead 2

3. Current Data centric but still with circuit switched voice 3.5G – Broadband Data (cable modem speed, voice via circuit; – UMTS-HSPA+, CDMA EVDO-Rev B, not deployed ) AT&T is double trouble, has 2 circuit switch networks –GSM & UMTS – That will both transition to LTE VOLTe – And now three data networks – EDGE/HSPA+ transitioning to LTE 4G – Broadband Data (cable modem+ speed, voice as packet - VOLTe LTE (some carriers have not yet deployed VOLTe) – GSM-UMTS path To LTE – CDMA path to EVDO Rev C – DBA* so LTE * DBA Acronym (Dead Before Arrival) – never will be deployed 3

4. Characteristics of the Wireless Industry Highly competitive Not regulated as to prices or rates of return Rapidly changing technology due to competition & customer demand for more service capability Declining voice demand Messaging at risk from various data apps Exploding demand for high volume data due to smart phones and computer applications 4

5. 5 Where We Are Voice Network –A circuit switched TDM network – based on a mature technology –A reliable infrastructure optimized to support circuit voice –Difficult to support non circuit voice applications –Circuit switch/TSI based infrastructure is harder to scale Data Network –A packet switched network – based on emerging technology –Optimized for non-delay sensitive (best effort) applications –Support data/audio/video as data application –Packet based infrastructure offers greater scalability Two separate networks, each designed/optimized to support different applications (AT&T actually 5 different networks including LTE) Even without 4G, technology has advanced where the circuit switch Voice Network is being replaced TRFO (transcoder free operation) MPLS (multi-protocol layered system) We are already packetizing all switches and any new switch builds are 100% packet DACS are sunsetted and 5E class switches are planned for removal

6. Network Overview The current AT&T network is comprised of different generations of equipment installed over more than a decade. A high level view of the current AT&T Mobility network is represented below: 6

7. 7 State of the Industry Approaching Maturity, Growth is Slowing Except for Data – Over-penetration Mid Year 2012 321,716,905 Total Connections (CTIA Estimate) – Customers with two or more mobile devices M2M – Increased usage Data Usage Up Double Digits During last 12 month period Innovation – Robust data networks – New product Streaming Video Wireless house/security/more wireless car apps coming Industry Convergence Highly Competitive – Consolidation

8. 8 Mobile Wireless Internet Access Subscribers and Devices in Use [1] [1] AT&T 3 rd Q 2012 – 18.3 percent growth in wireless data revenues, up more than $1 billion versus the year-earlier quarter Strong smartphone sales of 6.1 million postpaid Smartphones represented 81 percent of postpaid device sales. 63.8 percent of AT&Ts postpaid subscribers had smartphones, up from 52.6 percent, a year earlier and up 1.4 million from the second quarter. AT&Ts ARPU for smartphones is twice that of non-smartphone subscribers [1] [1] Commission estimates based on Form 477 data. Mobile wireless Internet access subscribers include subscribers whose device and subscription plan allow them to access to the lawful Internet content of their choice at over 200 kbps in at least one direction.

9. 9 Mobile Data Service Adoption Rates Among Cell Phone Users [1] [1] [1] Mobile Access 2010, at 7; Wireless Internet Use, at 16.

10. Total Wireless Data Traffic (CTIA) 10

11. 11 Data Evolution 2G systems, some limited circuit switch data was possible Cell sites had CDPD cabinets, maximum speed 19.6 kb/s, ran in reality no more than 14.4 kb/s, very little revenue with it Depending on the chosen technology- – 2002/2003/2004 – CDMA carriers 1X RTT(2.5G) – GPRS them EDGE – GSM carriers that incorporated packet data at a maximum speed of 144 kb/s, ran at approximately 90kb/s Use of 2.5G packet data grew significantly into 4 th Q 2006 and has declined since to almost zero Broadband data (3G-EVDO) is currently experiencing tremendous growth but has started its rapid decline 2010 – 4G LTE launched Verizon Late 2011 launched AT&T

12. DEPRECIATION & TRENDING TABLES THAT ARE APPLIED TO WIRELESS EQUIPMENT DO NOT TAKE INTO ACCOUNT TECHNOLOGY DIFFERENCES OR PRICING DECLINES OF ELECTRONICS. APPLICATION OF TYPICAL DEPRECIATION & TRENDING TABLES TO THE HISTORICAL ACQUISITION COSTS WOULD RESULT IN THE ABOVE 2G EQUIPMENT HAVING A HIGHER VALUE PER UNIT OF CAPACITY THAN 3G EQUIPMENT THAT WOULD OPERATE FAR MORE EFFICIENTLY AND HAVE GREATER FUNCTIONALITY. Switching Equipment (Note rows of equipment replaced by 1 cabinet) 12

13. NOT ONLY GENERATION TO GENERATION, BUT WITHEN A GENERATION GSM BASE STATION UMTS BASE STATION UMTS NODE B LTE - ENODE B Base Station/Cell Site RF Changing Technology/Smaller, less expensive/more 13

14. GSM BASE STATION 6 foot refrigerator size cabinet 14

15. UMTS BASE STATION First Type of UMTS deployed – also a 6 foot sized refrigerator cabinet – Had more than double the capacity of the GSM and also did broadband data 15

16. New UMTS – NODE B A one-one ½ foot plug in that takes the place of an entire 6 foot cabinet 16

17. LTE E-NODE B LTE – a two foot cabinet (outside cabinet) that is 50% vacant (the equipment only is 1 foot high) Has more than double the capacity of even the UMTS Node B and is capable of doing voice as a data packet 17

18. LTE and New UMTS (inside configuration) LTE and UMTS mounted together in a rack – UMTS about 1.5feet high – LTE about 1 foot high 18

19. New UMTS Close up of the 1.5 foot high equipment 19

20. LTE Close up of the 1 foot high LTE 20

21. Current – Future 4G LTE Buildouts LTE – Long Term Evolution – 4G radio technology of choice for ALL – Standardized under 3GPP – All-IP IMS core network supports LTE What is 4G: – Fourth Generation System – Comprehensive IP Solution – Voice, Data, Streamed Multimedia can be given to users Anytime & Anywhere, ALL IP SYSTEM – Based on OFDMA Capabilities – Minimum 100 Mbits/sec indoors & outdoors, premium quality & high security Technologies – WiMax (IEEE 802.16e) going, going ………….gone – LTE (Long Term Evolution (3GPP) – UMB (Ultra Mobile Broadband, formerly EV-DO Rev C, 3GPP2 ) Officially DOA (dead on arrival – actually DBA – dead before arrival 21

22. 22 Verizon's 4G LTE Rollout Will Be Complete By Mid-2013 - Verizon's 4G LTE Rollout Will Be Complete By Mid-2013 - On an investor call earlier this morning, Verizon Wireless CFO Fran Shammo said that the carrier's buildout of its 4G LTE network will be completed by mid-2013. This is after an earlier estimate of the end of 2013, putting the company a full six months ahead of schedule. Right now, Verizon's LTE network already covers 250 million people; And as we know, Verizon will also begin its VoLTE (voice over LTE) rollout some time before the end of 2013, which will almost certainly make it America's first VoLTE network of any substantial size. This puts Verizon on the fast track to begin phasing out its CDMA equipment Verizon Wireless CTO Nicola Palmer announced that 35 percent of the carrier's overall data traffic traveled over its LTE network at the end of September 2012. She said that in "a few months" a majority of the carrier's traffic would be transmitted over its LTE network. Palmer said it took Verizon eight years to reach this milestone with its 3G CDMA network, but it only took the carrier two years to reach the goal with its LTE network

23. SPRINT : Customers in Atlanta, Baltimore, Dallas/Fort Worth, Houston, Kansas City, San Antonio and Waco are already experiencing 4G LTE service. Stay tuned - over 100 new markets are expected to launch in the coming months.over 100 new markets T-Mobile, MetroPCS Deal Is About LTE The merger of T-Mobile and MetroPCS is foremost about an LTE network and all it enables, Deutsche Telekom (DT) and MetroPCS, in the opening paragraph of an Oct. 3 statement announcing a "definitive agreement" to merge the small but notable carrier with DT's American brand, T-Mobile, First, they said, the transaction will create a "clear-cut technology path to one common LTE network."statementa "definitive agreement" to mergetechnology Long Term Evolution technology is critical to T-Mobile's ability to compete against the nation's top three carriers; is necessary for it to offer an Apple iPhone; and is the only network technology that it has in common with MetroPCS, as the latter's legacy network is based on Code Division Multiple Access (CDMA) technology. While T-Mobile has said it will begin offering LTE in early 2013, MetroPCS, which in Sept. 2010 jumped ahead of Verizon to offer the first commercial LTE deployment, completed its LTE rollout in March 2011. In August 2012, MetroPCS was the world's first carrier to offer voice- over LTE. 23

24. 24 NOT ONLY THE BIG BOYS (and GIRLS) US CellularUS Cellular announced on Wednesday that it will increase its LTE network coverage by 30 new markets on November 5th. Tier 2 carrier U.S. Cellular is accelerating its plans to deploy LTE. The company, which had originally planned to deploy the next-generation technology in 2012, announced it will deploy LTE in 24 markets by November, covering approximately 25 percent to 30 percent of its total subscriber base. The company will outfit around 1,250 cell sites with LTE using its 700 MHz spectrum. Leap's LTE rollout to start next week October 10, 2012 SAN DIEGO--Cricket provider Leap Wireless (NASDAQ:LEAP) plans to begin turning on its LTE network starting next week. The carrier said it will flip the switch on one LTE market next week and will then announce additional markets in November.NASDAQ:LEAP Leap spokesman Greg Lund said the carrier plans to have 21 million POPs covered by year-end and two-thirds of its current network footprint covered with LTE by 2015. Cellular South details network enhancements ahead of LTE launch August 19, 2011 | Cellular South said its plan to deploy an LTE network late this year is on schedule.. Cellular South plans to launch an LTE network in 700 MHz spectrum in the fourth quarter of 2011. Cellular South intends to use Voice over LTE technology and will continue its LTE deployment into 2012.

25. 25 Radio Interface Progression 200520062007200820092010 LTE 1.25-20 MHz 100/50 Mbps HSPA+ 2x 5 MHz FDD 40/10 Mbps 850/1900 MHz HSUPA 2x 5 MHz FDD 14.4/5.8 Mbps 850/1900 MHz WiMAX HSDPA 2x 5 MHz FDD 14.4/2.0 Mbps 850/1900 MHz WCDMA 2x 5 MHz FDD 0.384/0.384 Mbps 850/1900 MHz EV-DO Rev 0 2x 1.25 MHz FDD 2.4/0.15 Mbps (DL/UL) 850/1900 MHz EV-DO Rev A 2x 1.25 MHz FDD 3.1/1.8 Mbps 850/1900 MHz EV-DO Rev B 1.25-20 MHz FDD 4.9/1.8 Mbps 850/1900 MHz EV-DO Rev C (UMB) (DBA) 1.25-20 MHz FDD 70+/30+ Mbps 850/1900 MHz Fixed WiMAX 1x 10 MHz TDD 15/5.3 Mbps 2.5/5.8 GHz Mobile WiMAX 1x 10 MHz TDD 14/5.3 Mbps 2.5 GHz Mobile WiMAX 1x 10 MHz TDD 32/7 Mbps 2.5 GHz Cellular Radio Interface Note: All speeds are theoretical maximums. Device and deployment configurations will constrain attainable throughput capabilities.

26. 26 LTE Transforms Wireless Access and Core Networks to All-IP e 26 |

27. 27 For a 3G to 4G OFDMA migration, a ~2-3 year phased transition period can be planned, where both technologies are deployed (to ease subscriber migration). – This requires separate spectrum to be assigned to 3G and 4G technologies – 3G traffic will initially grow, peak, and ultimately decline as 4G traffic grows – 4G traffic will then take off and continue after migration – Efficient spectrum utilization is very important during this migration period 3G to 4G Migration: Efficient Spectrum Migration Time Total Traffic 3G traffic 4G traffic 10MHz spectrum utilization 3G spectrum (carriers) 4G spectrum (carriers) - +4G +1 4G 1.4MHz Re-scale to 3MHz 4G 5MHz 4G Re-scale to 10MHz 4G 5MHz 3G provides a smooth, efficient spectrum migration to 4G To leverage OFDM benefits, a minimum starting bandwidth of 5 MHz is recommended. Smaller allocations are possible.

28. 28 What Does LTE Mean to End Users & Service Providers? Technology innovation significantly improves performance, which translates to better quality of experience for the end user Performance Improvement Impact to End UserImpact to Service Provider INCREASED SPECTRAL EFFICIENCY Uplink: 2.00-2.25x vs. 3G Downlink: 1.25x vs. 3G Lower costs – flat fee pricing Can buy the same amount of spectrum and pump more data to users, or less spectrum to maintain the same level of data usage Reduced cost per bit FASTER SPEEDS Uplink: 2.00-2.25x vs. 3G Downlink: 3x vs. 3G Peak rate = 100 Mbps Faster downloads of multi-media Better experience with blended services More ways to splice bandwidth: Same # of users with more bandwidth/user or more users with same bandwidth per user INCREASED VOICE CAPACITY 10 MHz: 2x vs. 3G Better voice quality Support more voice users REDUCED LATENCY < 50 ms Faster reactions when gaming Better voice, video telephony Can reuse applications across wireless and wireline More capacity for VoIP and TCP-based applications Comparisons based on average aggregate performance

29. 29 Spectral Efficiencies Signalling Data Rate (Mbps), R Channel Width (MHz), BLink Efficiency (bit/s/Hz), R/BReuse factor, KSystem Efficiency (bit/s/Hz/sector), R/B/K AMPS0.0096–0.030.327 x 30.015 GSM0.013 x 8 = 0.104Pk0.20.524 x 30.043 EDGE0.384 Pk0.21.924 x 30.16 cdmaOne0.0096Av1.2288*0.007810.0078 x 13 = 0.1 1xRTT0.0096Av1.2288*0.007810.0078 x 26 = 0.2 1xEV-DO1.100Av1.22880.91 1xEV-DO2.457Pk1.22882.01 W-CDMA (UMTS)0.384Pk5*0.076810.0768 x 33 = 2.53 LTE16.2Av101.621 LTE172.8Pk208.61 IEEE 802.16e75Pk203.751 The promise of 4G isnt average spectral LINK efficiency…its in frequency-domain aggregation and scheduling (and therefore total throughput), and to a lesser extent, peak spectral link efficiency.

30. 30 LTE-Speed Dependent on how much spectrum Average Throughput 0 1 2 3 4 5 6 7 8 5 x 510 x 10 Mbps

31. FUTURE Actually, right down the road* LTE Advanced – 100% Data Centric with voice as just a data packet Technical Specifications: In LTE-Advanced focus is on higher capacity: Increased peak data rate, DL 3 Gbps, UL 1.5 Gbps (actual goal 1Gps Down, 500m up) Higher spectral efficiency, from a maximum of 16bps/Hz in R8 to 30 bps/Hz in R10 Increased number of simultaneously active subscribers Improved performance at cell edges, e.g. for DL 2x2 MIMO at least 2.40 bps/Hz/cell. The main new functionalities introduced in LTE-Advanced are Carrier Aggregation (CA), enhanced use of multi-antenna techniques and support for Relay Nodes (RN). *The technology received its first commercial implementation in October 2012 by Russian network YotaYota Yota Networks launched the technology LTE Advanced, which will provide data rates up to 300 Mbit / s on the user's device. LTE Advanced technology currently implemented by 11 base stations. LTE Advanced, п. The first consumer devices that support LTE Advanced, will have virtual network operator Yota Networks in the first half of 2013. 31

32. Growth Drives Changes in Network Capacities Latency/Year of Rollout WCDMA = 150 ms (2003/4) HSPA = 100 ms (2005/6 HSDPA, 2007/8 HSUPA) HSPA+ = 50 ms (2008/9) LTE = ~10 ms (2009/10 LTE Advanced = less than 5ms According to Cisco, Mobile video will grow at a CAGR of 90 percent between 2011 and 2016 Mobile video traffic exceeded 50 percent for the first time in 2011 Last years mobile data traffic was eight times the size of the entire global Internet in 2000 In 2011, a fourth-generation (4G) connection generated 28 times more traffic on average than a non-4G Global mobile data traffic will increase 18-fold between 2011 and 2016 Two-thirds of the worlds mobile data traffic will be video by 2016 Cisco estimates that traffic in 2012 will grow 2.1-fold 32

33. 33 2012 2013 2014 2015 2016 Mobile Data Volumes Estimated to Grow 10X Over Five Year Period AT&T Mobile Data Volumes Estimated to Grow 10X Over Five Year Period Petrabytes/Month 2012 2013 2014 2015 2016

34. 34 Total Florida* AT&T Total Traffic By Technology Total FLJan-07Jan-08Jan-10Jan-12 TDMA MB's Equiv0.59%0.03%0.00% GSM MB's Equiv96.83%79.87%26.03%3.65% UMTS MB'sEquiv2.58%20.09%73.97%96.18% LTE MB's Equiv0.00% 0.17% Total100.00% Industry Data Jan-07Jan-08Jan-10Jan-12Jan-14Jan-16Dec-17 Traffic Voice vs Data Voice %97.53%91.16%61.98%29.31%16.26%13.45%12.87% Data %2.47%8.84%38.02%70.69%83.74%86.55%87.13% Total100.00% *Voice also includes non circuit switched voice starting in 2013 - the LTE voice is a data packet - Voice Over Long Term evolution the data shown does not include VOLTe as data so actually the true data % from 2014 forward is even greater

35. 35 © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. Network Coverage & Subscriber Unit Projections For 3G, 4G And Smartphone Proliferations, 2011-2021 20132015201720192021 2G Subs % Total Subscriptions(%)20%7%2%0% 3G Subs % Total Subs(%)66%60%44%25%15% 4G Primary Subs % Total Subscriptions(%)14%33%54%75%85% Smartphone Owners(mil.)190.9231.6259.2280.0294.9 Smartphone Owners % Total Retail Subs(%)66%77%85%90%94%

36. 36 AT&T Recent Announcement 4G LTE Extending Our Buildout Expand build plan to 300M POPs U.S. coverage by Year End 2014 Densification of wireless grid Enhances AT&Ts ability to offer voice and data services Supports launching Voice over LTE Multiple technology deployments*: 10,000+ new macro sites 1,000+ distributed antenna systems 40,000+ small cells *Over plan period

37. 37

38. PARADIGM CHANGING TECHNOLOGY: THE ELIMINIATION OF THE CELL TOWER The lightRadio Cube … A small antenna and radio that has shrunk the regular workings of a conventional cell phone base station and antenna and could, as soon as mid-2012, replace those unsightly cell phone towers. Photo courtesy of Bell Labs / Alcatel- Lucent 38

39. PARADIGM CHANGING TECHNOLOGY: THE ELIMINIATION OF THE CELL TOWER The lightRadio Cube o Three 2-inch, stacked circuit boards for the antenna, radio, and network connection, replacing the conventional antenna system that connects every cell phone call. o Could radically transform the model for wireless networks and could actually change the way the wireless industry operates," per Dan Hays, Telecommunications Consultant with PRTM of Washington, D.C. o Developed by Bell Labs. o Could replace wireless towers blanketing urban areas and the countryside. o Can be positioned nearly anywhere: Sides of buildings. Light poles. Arranged in grids for more strength. Implication: Lowers the barriers for competitors to inexpensively gain entry into markets by [1] eliminating the need to obtain permission to place towers or [2] placing additional antennas on existing towers. These scenarios could be exploited as competitive threats which, in turn, translates into greater risk. 39

40. WIRELESS SUBSCRIBERS BY TECHNOLOGY Source: Technology Futures, Inc. 40

41. Summary Wireless Changing Technology Analog – No longer in Service TDMA – No longer in Service GSM – In service but going, going…. Not capable of high volume data UMTS – Now widely used for data and voice o HSPA – Software upgrades to improve data o HSPA+ - Additional software upgrades to further increase speed o It too is starting to be phased out LTE (Long Term Evolution)4-G – Currently being deployed to enhance and replace 3G because of data demand. Based on IP technology. Relies on typical servers and routers for much of its infrastructure. LTE Advanced – coming right on down the road 41 Analog TDMA GSM/CDM A UMTS HSPA/EVDO HSPA+ LTE LTE Advanced

42. VALUATION 42

43. Valuation / Depreciation Issues 1.The introduction of a next generation of technology / equipment does not mean that the old equipment or technology is immediately removed from service. 2.Generations of equipment and technology are layered, meaning that customers are migrated from older generations and technologies to newer ones over a period or time. 3.During that process of migration, layers of overlapping equipment and old technologies are captured in the historical costs that are carried on the General Ledger and in the Fixed Asset Register. 4.The historical costs do not reflect the cost efficiencies and capacity improvements of newer technologies (i.e., functional obsolescence). 5.Wireless equipment depreciation factors that are applied to historical costs need to take into account the embedded inefficiencies and the layers of overlapping equipment / older technologies in order to derive an appropriate value. 6.Wireless equipment depreciation factors should also take into account: Price declines of wireless electronics impacted by technology Cost efficiencies and capacity improvements of newer technologies 43

44. 44 Principle of Substitution States that a buyer will not pay more for a particular property if it costs less to buy a similar property of equal utility and desirability. People prefer the less expensive price if all other things are considered equal. The maximum value of a property tends to be set by the cost of acquiring an equally desirable substitute property. A prudent investor would pay no more for a property than the cost of acquiring an equally acceptable alternative property on a timely basis REPLACEMENT COST– ASA is the current cost of a similar new item having the nearest equivalent utility as the item being appraised – constructing a property with the same function/utility as the subject using current prices for labor and materials

45. Replacement Cost Principle of Substitution Even if Replacement Cost used – it only eliminates excess capital costs – Subject property still has obsolescence Excess operating costs (reduces margins) Lacks ability to do streaming video (reduces potential revenue/income) 45

46. 46

47. Next Generation Technologies Result in Improved Network Performance & Lower Unit Costs 47

48. 48

49. RCN Impacts: Pricing Decline 49 Technology Price Trends Electronic Price Trends

50. 50 Summary of Replacement Cost Translators as of December 31, 2011 by Asset Group and Vintage in Service Year Translators 1998=100 Description 19951996199719981999200020012002200320042005200620072008200920102011 (b)(m)(n)(o)(p) (q)(r) (s)(t)(u)(v) (z)(aa)(ab)(ac) Depreciable Plant Switching Equipment 0.1490.1500.1520.1820.1840.2380.3450.3460.3590.3960.4790.5040.5620.6340.6950.7520.774 Radio Frequency & Control Equip 0.0750.0870.0890.1450.1480.2370.3360.3600.3630.3770.4040.4690.5890.6360.7040.7550.759 Used with permission of AUS/VZW

51. 51 REPLACEMENT COST ONLY ELIMINATES THE EXCESS CAPITAL COSTS THE SUBJECT PROPERTY 2.5G/3G/3.5 G LACKS THE UTILITY OF NEW PLANT CUSTOMERS ARE DEMANDING MORE AND MORE DATA APPLICATIONS, ESPECIALLY VIDEO Current technologies lack the ability to give customers what they want Loss of potential revenue/income Current technologies, have significant additional costs to operate Operating expenses to operate dual networks (voice & data) Spectral inefficiencies of current technology require more plant/carriers (spectrum) to be deployed than LTE Lower margins/income Transport Costs (Backhaul – significantly less expensive for fiber/ethernet connection than multiple T1 (copper) connection Need To Quantify for Proper Valuation

52. Depreciation The American Society of Appraisers states, in part, that: The most economical new substitute property may have many advantages over an old property, such as longer life expectancy, lower annual disbursements for operation and maintenance, increased receipts from sale of product or service. The depreciation deduction of the hypothetical new substitute property should be a measure in money terms of all of these disadvantages of the existing old property. [The American Society of Appraisers, Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets, 2005, pg. 66] 52

53. 53 Technology Throughput 0 1 2 3 4 5 6 7 8 TodayLTE Mbps Latency 0 10 20 30 40 50 60 70 80 TodayLTE msec Cost Efficiency 0 Cost per MB TodayLTE

54. 54 LTE Economics EV-DO Network Cost 1 GB = 100% 1.25 Mhz 15 Mbps Network Cost 1 GB ~ 10 – 16% 10 Mhz 1.1 Mbps Packet Core Base Station Common platforms used for GSM and WCDMA Common elements across product lines (amplifiers, filters) Mobility Manager evolved from existing GSM Nodes Gateways use widely deployed router platforms UMTS 5 Mhz

55. 55 ASA Functional Obsolescence is the loss in value within the property as a result of the development of new technology – this includes such things as changes in design, materials, or process resulting in overcapacity, inadequacy, excess construction, lack of utility, or excess variable operating costs. Starting Point For Value IF YOU ARE STARTING FROM ORIGINAL COST OR REPRODUCTION COST, ACCORDING TO THE ASA, the difference between reproduction and replacement cost represents the amount of excess capital cost which is a form of FUNCTIONAL OBSOLESCENCE

56. Not Only Speed Spectral Efficiencies – Can have more users in the same amount of spectrum Data/Voice on same session – Big plus for carriers especially if spectrum constrained Real-time delivery – Super low latency, 30-millisecond latency is better than the 50-millisecond real time threshold, new revenue streams/real time applications Cost – Both infrastructure costs, transport costs and other variable costs are significantly lower (increased margins)

57. 57 Quantification of Obsolescence Identification of excess operating costs in subject property Subject property, lacks potential revenues In my opinion, what works best is an economic approach Companies are is business to make money – in a highly competitive industry such as wireless, projections of revenue/income of different technologies over a period of time works best Remember, lack of utility Analog – no data Digital – limited data 2.5G – data but only 3X dial up 3G/3.5G – BB data but not real time, voice still circuit switched 4G – ability for new revenue streams/real time apps/VOLTe

58. 58 HYPOTHETICAL REVENUE OPPORTUNITY 2013201420152016201720182019202020212022 VOICE23.7721.4719.2217.0714.9712.9711.079.327.726.22 FEATURES3.00 DATA22.5624.3726.3728.5230.8233.2735.8738.3740.6242.62 TOTAL49.3348.8448.59 48.7949.2449.9450.6951.3451.84 USING 10 YR PERIOD 2013-22 POTENTIAL REVENUE YEAR 1YEAR 2YEAR 3YEAR 4YEAR 5YEAR 6YEAR 7YEAR 8YEAR 9YEAR 10 VOICE23.7721.4719.2217.0714.9712.9711.079.327.726.22 FEATURES3.00 Non BB Data4.353.703.142.672.271.931.641.391.191.01 3G BB Data13.1511.8310.659.598.637.766.996.295.665.09 4G BB Data1.255.469.2912.6615.4917.9520.0121.8923.5925.15 Total45.5245.4645.3044.9944.3643.6142.7141.8941.1640.47 Revenue Opportunity1G Totals 23.7721.4719.2217.0714.9712.9711.079.327.726.22143.8033.02% 2G 26.7724.4722.2220.0717.9715.9714.0712.3210.729.22173.8039.91% 2.5G 31.1228.1725.3622.7420.2417.9015.7113.7111.9110.23197.0945.26% 3G 44.2740.0036.0132.3328.8725.6622.7020.0017.5715.32282.7364.93% 4G 45.5245.4645.3044.9944.3643.6142.7141.8941.1640.47435.47100.00% DCF using 10% discount rate0.90910.82640.75130.6830.62090.56450.51320.46650.42410.3855 Present Value 1G21.6117.7414.4411.669.297.325.684.353.272.4097.7736.16% Present Value 2G24.3420.2216.6913.7111.169.027.225.754.553.55116.2042.98% Present Value 2.5G28.2923.2819.0515.5312.5710.108.066.405.053.94132.2848.92% Present Value 3G40.2533.0627.0522.0817.9314.4911.659.337.455.91189.1869.97% Present Value 4G41.3837.5734.0330.7327.5424.6221.9219.5417.4615.60270.39100.00%

59. 59 INCOME OPPORTUNITY KNOWLEDGEABLE WILLING BUYER/WILLING SELLER REVENUE IS NOT EVERYTHING - REMEMBER OPERATING COSTS IT IS NOT ONLY REVENUE - IT IS INCOME, MARGINS EACH GENERATION OF EQUIPMENT IS MUCH MORE SPECTRAL EFFICIENT EACH GENERATION OF EQUIPMENT COSTS LESS BUT DOES MORE ERACH GENERATION OF EQUIPMENT COSTS LESS TO OPERATE SO: MARGINS 1G5%=voice only 2G10%=voice + features 2.5G15%=voice+features+data @ 3x dial up 3G20%=voice+features+brodbad data (dsl speed) 4G40%=voice*+features+super fast broadband data (cable modem speed) coming down the road Advanced LTE = 4.5Gvoice*+features+super fast broadband data (fiber optic speed) *Voice in 4G and 4G Advanced = VOLTe (Voice Over Long Term Evolution) - voice is just another data packet, no dedicated equipment such as circuit switches

60. 60 HYPOTHETICAL INCOME OPPORTUNITY 2013201420152016201720182019202020212022 VOICE23.7721.4719.2217.0714.9712.9711.079.327.726.22 FEATURES3.00 DATA22.5624.3726.3728.5230.8233.2735.8738.3740.6242.62 TOTAL49.3348.8448.59 48.7949.2449.9450.6951.3451.84 USING 10 YR PERIOD 2013-22 Revenue Per User YEAR 1YEAR 2YEAR 3YEAR 4YEAR 5YEAR 6YEAR 7YEAR 8YEAR 9YEAR 10 VOICE23.7721.4719.2217.0714.9712.9711.079.327.726.22 FEATURES3.00 Non BB Data4.353.703.142.672.271.931.641.391.191.01 3G BB Data13.1511.8310.659.598.637.766.996.295.665.09 4G BB Data1.255.469.2912.6615.4917.9520.0121.8923.5925.15 Total45.5245.4645.3044.9944.3643.6142.7141.8941.1640.47 NOI PER USER1G Totals 1.191.070.960.850.750.650.550.470.390.317.194.13% 2G 2.682.452.222.011.801.601.411.231.070.9217.389.98% 2.5G 4.674.233.803.413.042.692.362.061.791.5329.5616.97% 3G 8.858.007.206.475.775.134.544.003.513.0656.5532.46% 4G 18.2118.1818.1218.0017.7417.4417.0816.7616.4616.19174.19100.00% DCF using 10% discount rate0.90910.82640.75130.6830.62090.56450.51320.46650.42410.3855 Present Value 1G1.080.890.720.580.460.370.280.220.160.124.894.52% Present Value 2G2.432.021.671.371.120.900.720.570.450.3611.6210.74% Present Value 2.5G4.243.492.862.331.891.521.210.960.760.5919.8418.35% Present Value 3G8.056.615.414.423.592.902.331.871.491.1837.8434.98% Present Value 4G16.5515.0313.6112.2911.029.858.777.826.986.24108.16100.00%

61. VALUATION Start with RCN – Fee simple, actual costs new for same capacity/function – Mass Appraisal – trend original cost (will be higher than fee simple if sight added to over time) Depreciation -Physical -Obsolescence -Functional -External (test for) 61

62. Summary LTE is not only a complete replacement for 2.5G/3G/3.5G, it is also a growth technology; can handle all traffic today and new services that cant be run on even 3G – EnodeB (base station) launched actually has almost DOUBLE the capacity of our average deployed cell sites – Core network has significantly less cabinets and in fact are not tied to just the cell sites homed to them. They have significantly more capacity and are now in a community of interest where other sites can also be run thru them All at a fraction of the cost of todays 2.5G and 3G/3.5G networks As history shows, technology keeps moving along, plans/standards are being drawn up for the next iteration: LTE ADVANCED

63. 63 KEY TAKEAWAY Remember State of the Art Today Obsolete Tomorrow As evidenced by Moore's law, technology is continually changing at a rapid pace – Thus, todays innovation although state of the art, will become functionally obsolete property in the near future The good news is that in a highly competitive marketplace such as wireless, companies will try to differentiate themselves and will continually reinvest and bring the latest & greatest to the marketplace