1. M A Y 2 0 0 7 T E L E C O M S E C T O R : O V E R V I E W Presentation to FIN 824 (SPRING QUARTER) Marc Reitter Siddhesh Sankulkar T E L E C O M S E C T O R

2. Agenda Page Sector Weights – SIM v S&P 500 Sector Overview Telecom Sector Overview: 1 2 3 T E L E C O M S E C T O R Size & Composition 4 Sector Performance 5 Economic Analysis 6-10 Financial Analysis 11-14 Valuation Analysis 15-20 Domestic M&A Activity 21 Recommendation 22

3. S&P Telecom Sector Sector overview – defined 2 T E L E C O M S E C T O R The Telecom sector is grouped into two primary segments: Telecommunications Equipment  Wireless, Satellite & Network Telecommunications Services  Cable & Satellite, Data Services, Wireless Communications Telecom Industry Growth  The worldwide telecom industry is in a strong growth mode, and overall industry revenue is expected to climb to $1.3 Trillion in 2007.  Strong growth in wireless is leading the way as wireless service revenues are expected to grow at a compounded rate of nearly 10 percent over the next few years. Source: Insight Research Corp. 2007 industry review

4. SIM overview: Sector weights – SIM vs. S&P 500 3 T E L E C O M S E C T O R Current holdings: S&P 500 overview: SIM overweight Telecom by 3.43% YTD Return -.62% 2.10% 2.85% 10.54% -.79% 6.61%.52% 8.59% -3.96% 1.05%

5. Size & composition Sector overview – company analysis 4 T E L E C O M S E C T O R Telecom defined within the S&P 500: Current SIM holdings: Source: Yahoo Finance & Bloomberg

6. Performance of S&P Telecom Services (SP50): Sector overview – performance & strength 5 T E L E C O M S E C T O R Strength of S&P Telecom Services (SP50):

7. Sector Overview Economic Analysis In 2006, the U.S telecommunications market grew at its fastest rate since 2000. TIA states that the U.S Market grew 9.3% in 2006 to total $923 billion in revenue. Projected revenue for the U.S Market in 2007 is at $1025 billion at 11.05% Major drivers of high growth rates are expansion of wireless communication and broadband access. Wireline is losing ground to wireless and VoIP Telecom Sector Outlook is positive in the recent past and for the foreseeable future T E L E C O M S E C T O R 6

8. Sector Overview Economic Analysis Growth is expected in VoIP, as the broadband-based phone technology is forecast to make up 34% of all U.S residential landlines by 2010, up from just 10% in 2006. Overall, the international market grew 12.1 percent in 2006. Middle East/Africa was the fastest growing region, expanding at 21.6% By 2010, the global market is expected to reach $4.3 trillion in revenue, up from $3 trillion in 2006. United States market is looking good but the real growth is overseas T E L E C O M S E C T O R 7

9. Sector Overview Economic Analysis While growth in voice traffic continues to stimulate the wireless market, data and multimedia applications will drive wireless revenues in the future. The number of broadband subscribers increased from fewer than 5 million in 2000 to nearly 57 million in 2006. Dial-up subscribers fell to 35 million from a peak of 47 million in 2006. With nearly 80% of all households already online and the majority of online households already having a broadband subscription, overall subscriber growth and broadband subscriber growth will necessarily slow. ‘Non-voice’ revenues on the rise T E L E C O M S E C T O R 8

10. Sector Overview Economic Analysis Sector growth is correlated with: GDP (+) Population Growth (+) Unemployment Rate (-) Most pronounced Wireline growth is more strongly correlated with above than wireless Key Economic Drivers T E L E C O M S E C T O R 9

11. Sector Overview Economic Analysis Key Economic Drivers – Unemployment Rate (-) T E L E C O M S E C T O R 10

12. Sector Overview Financial Analysis SP-50 Income Statement Analysis T E L E C O M S E C T O R 11

13. Sector Overview Financial Analysis SP-50 Cash Flow Statement Analysis T E L E C O M S E C T O R 12

14. Sector Overview Financial Analysis SP-50 Income Statement Ratios SP-50 Cash Flow Statement Ratios T E L E C O M S E C T O R 13

15. Sector Overview Financial Analysis SP-50 Prospective Growth and Margin Data T E L E C O M S E C T O R 14

16. Sector Overview Valuation Analysis SP-50 Historical Sector Performance (5 Years) T E L E C O M S E C T O R 15

17. Sector Overview Valuation Analysis Price/Yr-Forward Earnings relative to S&P 500 T E L E C O M S E C T O R 16

18. Sector Overview Valuation Analysis Price/EBITDA relative to S&P 500 T E L E C O M S E C T O R 17

19. Sector Overview Valuation Analysis Price/Sales relative to S&P 500 T E L E C O M S E C T O R 18

20. Sector Overview Valuation Analysis Price/Book Value relative to S&P 500 T E L E C O M S E C T O R 19

21. Sector Overview Valuation Analysis Price/Cash Flow Adjusted to S&P 500 T E L E C O M S E C T O R 20

22. M&A activity A look at what is happening to the Industry in the US before we recommend 21

23. Sector Overview Recommendations Hold current SIM overweight position of 3.43% Divest holdings in Wireline companies which have no wireless component e.g. Windstream Corporation. Invest more in US companies offering integrated telecom services i.e. wireless, wireline, broadband and video services. We see brightest prospects for the national carriers (AT&T, Sprint/Nextel, Verizon) which are able to market on a nationwide basis, offer nationwide calling plans, and carry most traffic on their own networks. They get to exploit both economies of scale and economies of scope. Invest more in Wireless providers in emerging markets. General consensus of industry experts is that these providers will continue to realize double-digit subscriber and revenue growth in 2007, improving margins and profitability. T E L E C O M S E C T O R 22

24. Sector Overview Questions Questions? T E L E C O M S E C T O R 23