Vstup 4. operátora na trh telekomunikací, úvahy v Kanadě (dokument v AJ)

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DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ONTRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. US Disclosure: CreditSuisse does and seeks to do business with companies covered in its research reports. As a result, investors should be awarethat the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this reportas only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION

Client-Driven Solutions, Insights, and Access

07 August 2013

Americas/Canada

Equity Research

Wireless Telecommunication Services

Canadian TelecomSECTOR FORECAST

Three's a Crowd; Four's a Feud; Global

Lessons from Four Carrier Wireless Markets

As Verizon considers whether to invest in Canada, we have analyzed global

wireless markets to gain a broader perspective on the impact a stronger 4th

carrier could have on the market. Our research indicates that a committed

challenger could cause significant financial disruption to incumbents.

A healthy wireless sector requires scale: If VZ decides to enter themarket, Canada would become one of the few countries with four National

competitors. Of the 34 OECD countries only ~30% have four or morecarriers and those markets tend to have higher population densities. Owing

to the high fixed costs of wireless networks, far more developed markets are

consolidating rather than expanding.

Do not underestimate how wireless markets can be disrupted: Wirelessfinancials can be significantly compromised by regulatory shifts and

successful new entrants. For example, in 2012 Iliad launched a fourth

network in France and has gained ~10% share of subscribers through

disruptive pricing. While Canadian carriers have lost $5 billion in market cap

since the VZ threat emerged in June, the combined French telecom market

cap has dropped by almost35 billion since Iliad gained spectrum in 2009.

Sustainability of fourth carrier: We note very few fourth carriers that havelaunched over the past decade have more than a 10-15% share of

subscribers, nor are they yet significantly profitable, owing in part to network

and scale disadvantages. Ironically, the market disruption caused by new

entrants often leads to consolidation, although that may not be a regulatory

option in Canada. The message is that a new entrant, particularly a

committed one, can become a destabilizing agent for a long time.

Not all new entrants are successful, but VZ would have the tools: Newcompetitors have high hurdles and are not always successful, even with

existing infrastructure and low-cost operations. The risk with VZ committing

to Canada is that it would have the financial power and patience to invest in

a stronger network, but even leveraging its U.S. asset, would likely still need

reasonable subscriber share to gain scale.

View: There are no changes to our wireless estimates at this time pendingVZ's ultimate decision. We currently believe the market is pricing in a

moderate VZ entry scenario, but an actual commitment by VZ would likely

lead to further pressure and cause a long-term over-hang on the sector.

Research Analysts

Colin Moore, CFA

416 352 [email protected]

Robert Peters

416 352 [email protected]


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Canadian Telecom 2

Lessons from Four Carrier MarketsAhead of a potential Verizon wireless investment in Canada, we have reviewed global

wireless markets to gain a broader perspective on the potential impact of a strong fourth

carrier. The broad conclusion is to not underestimate how impactful disruptions, either

regulatory or new entrants, can be to a wireless market, and how long the overhang can

persist.

Scale is important in wireless: First, network scale is very important to wireless

margins and profitability and there is a strong correlation between service revenue

share and EBITDA margins. By our estimate there are only about a third of OECD

markets that have four carriers and directionally these are higher density countries.

Ironically, many four carrier markets are reverting back to three: Our review

highlights how many of the markets that have experienced new entrants over the past

decade are merging back to three, under strategic review or trying to consolidate.

Globally, most recent new wireless entrant, even those with some success, still have

less than 15% subscriber share, EBITDA margins that are typically in the low teens,

and limited profitability as they gain scale. While the Canadian Government may allow

a fourth to enter, it is uncertain whether they would ever allow a fourth to exit, at least

unless financials became sufficiently weak. This presents a long-term structural risk.

Building Networks are for the Brave and Financially Patient: Gaining scale has

typically been a challenge, even for carriers that launched 3G services over a decade

ago. As such, despite the potential head-start provided by acquiring a company such

as Wind, Verizon would likely need a longer-term investment horizon. The bad news

for Canadian investors is that Verizon has the financial capacity to take a longer-term

approach, which could cause long-term overhang on the sector if the carrier remained

committed.

Wireless Markets Can Also Experience More Abrupt Disruptions: Owing to the

high-fixed cost nature of the business, new entrants or regulatory shifts can also have

more immediate impacts on sector financials, as demonstrated by the recent launch of

Iliad in France, and regulatory changes in Belgium. Both markets have experiencedaccelerating revenue declines, and stock pressure. Should Verizon launch in Canada,

it has the tools and financial power to potentially be more disruptive, relative quickly.

A premium offering by VZ will require investment and in turn market share:

Canada could be relatively unique in that Verizon may look to offer a premium wireless

service, consistent with its U.S. model, rather than a low-cost offering other recent

global challengers have tended to launch. In order to pursue a premium high-data

business model, we believe Verizon would need to invest beyond just purchasing new

entrants and spectrum to ramp-up its LTE capabilities. As reference, such a network

investment has not been an easy one for other smaller carriers to make, and is one of

the reasons, for example, why the #3 Australian carrier Vodafone and #4 Hutchison

merged in 2009. In short, if Verizon undertakes a premium strategy, we believe the

investment would ultimately require meaningful market share to make sufficientreturns.

Without Fixed line services, the break-even market share for VZ may be higher;

We expect VZ to leverage U.S. infrastructure to offset: Similarly, most recent new

wireless entrants in developed markets (i.e. France, Netherlands, Chile) have been

existing telecom providers that have expanded into mobile. For providers with existing

networks, the break-even analysis of a wireless venture could be viewed from a

slightly broader economic perspective. In Canada, Verizon could leverage its U.S.

network, similar to how Hutchison effectively operates one network for

Sweden/Denmark, but its entire investment return would have to come from wireless.


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Canadian Telecom 3

Again, this implies that Verizon would need a relatively higher wireless share to make

it work.

Verizon may also need to push a low cost back-office model: Another theme with

recent global wireless challengers is that they have typically taken a very low cost

approach. For example Yoigo, which launched in Spain in late 2006, outsources

almost its entire business, while Iliad mostly sells through the internet. Although

Verizon may push a premium model in Canada, it may also need to be somewhat

creative with costs and 'in-source' as much as possible to its U.S. operations. Owing to

its already strong brand, it may try to increasingly leverage the web for distribution.

Overall a fourth carrier is not always successful but if VZ commits we believe

they would have the tools and financial capacity to make an impact: A fourth

carrier does not necessarily mean that incumbent wireless financials will be materially

compromised, it just sets the preconditions. Indeed, new entrants in Canada, and

smaller carriers in similar markets such as Australia and U.S., have had challenges

competing successfully in a wireless environment where network scale is becoming

increasingly important. That said, we believe that if VZ commits to Canada, through its

neighboring network infrastructure, financial capacity, and North American scale

advantages it would have a higher chance of being a real competitive 'Maverick'.

Global Responses: In our research, we have found that there are a number ofcommon themes on how incumbents have responded to competition. The first is

pricing. Even if Verizon does not decide to enter the market with highly discounted

prices, we still expect it to be creative with its pricing options (i.e. North American

roaming). In other markets where challengers have gained subscriber momentum, it

has inevitably led to pricing responses, which could put Canadian ARPU at risk if

Verizon were to gain traction. Other response strategies have included cost cutting,

focus on four-play bundles, incumbent partnerships and greater emphasis on global

operations. The lack of global diversity is perhaps where Canadian telco's are most

vulnerable given they do not have international operations.

Investment view: If Verizon ultimately does commit to Canada, we would be very

cautious on the sector as we believe Verizon would have the capacity to meaningfully

disrupt the market. By our analysis we believe the market is already pricing in amoderate competitive scenario for incumbents, consisting of limited subscriber growth

through 2020 and mid-single digit ARPU declines. There is likely further downside risk

to stock prices if Verizon ultimately decides to enter Canada as sentiment weakens

and as the market builds in some probability of more accelerated financial declines.

Unfortunately, the over-hang could persist for some-time, both leading up to a

renewed launch and as the incumbents become financially impacted. Conversely, we

believe cable providers would benefit as both a defensive and potential take-out play.


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Canadian Telecom 4

A Global Perspective - HealthyWireless Markets Require ScaleWireless is a high fixed cost business and scale is important. The relationship is evident in

Exhibit 1 that compares the service revenue share for North American, European and

Australian carriers vs. their respective EBITDA margins. A strong fourth carrier in Canada

would obviously risk market shares and margins.

Exhibit 1: Service Revenue Share vs. EBITDA Margins

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0% 10% 20% 30% 40% 50% 60% 70%

E

BITDAMargin

Service Revenues Market Share

RogersTelus

Bell

Source: Company data, Credit Suisse estimates

Given the importance of scale, it is not surprising to see that many global wireless markets

are converging globally to three facility based carriers. By our estimates, of the 34 broader

OECD markets, only about a third have four or more major facility based carriers and

those markets are often skewed to higher density markets.

Exhibit 2: OECD Wireless Markets: Number of Carriers by Population per Km Sq.

11

7

4

4

4

4

27%

36%

50%

0%

10%

20%

30%

40%

50%

60%

0

2

4

6

8

10

12

14

16

18

20

0 to 100 100 to 200 Above 200

3 Carriers 4 or More Penetration of 4 or More carriers



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Consolidation is often the end-game for four carrier markets

If a strong new competitor emerges in Canada, the country would be moving against the

direction of most OECD markets, which have increasingly had consolidation activity as

opposed to expansion. For example, within the sub-segment of 4 carrier markets, there

are only four OECD markets that are adding facility based carriers but up to nine that have

carriers consolidated or contemplating a sale.

Exhibit 3: Market Direction of Major Carriers in Four Carrier Countries

4 43 3 3 3 3 3 3

4 4 43 3 3

1 1 12

21 1

1 1 1 1 1 1

0

1

2

3

4

5

6

7

Exist ing Carriers New Carr iers Ex ist ing Carriers Exiting Potent ia l Ex iting Carriers


Hutchison Telecom, one of the leading developers of new wireless networks globally over

the past decade, has alone merged its Australian asset with Vodafone in 2009, agreed to

acquire competitors in Ireland (pending) and Austria (approved), and has recently been

vocal about its interest to consolidate in Italy and other European markets.

The issue for Canada is that consolidation may not be a playbook option for industry

players old or new down the road, if the stated goal of four carriers is not loosened. As aresult, the entry of Verizon, or another strong competitor, could cause permanent market

dislocation. In fact, that very risk may weigh on any new entrants decision to enter the

Canadian market.

Business case of a fourth entrant for existing players or the patient brave

Interestingly, within the four OECD markets that are currently dealing with new entrants,

such as Netherlands, Chile, Israel and France, almost all of the challengers are existing

cable carriers or wireline ISP's. In our view, this highlights how challenging it is to start a

network in a mature industry from the ground-up. Even with infrastructure and subscriber

advantages it is not easy. For example, cable provider Tele2 in Netherlands has had

launch delays of its 4G network, currently planned for 2014, while cable provider VTR in

Chile has recently indicated after only a year of network investments, that it will likely

switch back to an MVNO arrangement. In Canada, Shaw communications also struggledwith the wireless business model.

When reviewing new entrants over the past decade that have been committed and gained

some traction, we note most of them are still well below 15% revenue and subscriber

market share, which speaks to how long it can take to gain scale and profitability. We note

that Iliad in France, which has been successful with particularly disruptive pricing, is an

exception having only operating for over a year and gained almost 10% subscriber share.


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Exhibit 4: New Entrants Current Market Shares

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Hutchison Italy -Launched 2003

HutchisonAustria -

Launched 2003

HutchisonDenmark -

Launched 2003

HutchisonSweden -

Launched 2003

Hutchison UK -Launched 2003

HutchisonAustralia -

Launched 2003*

HutchisonIreland -

Launched 2005

Yoigo Spain -Launched 2006

Iliad France -Launched 2012

Chile NewEntrants (3Carriers) -

Launched 2012

Tele2Netherlands -

Launching 2014

Subscriber Share Revenue Share Average

Most New carriers do not appear to significantly exceed 15%market share even 10 years after launch

Source: Company data, Credit Suisse estimates * Pre 2009 merger with Vodafone

Four is not the New Three

Whether the Canadian Government should be going out of its way to bring a strong fourth

player into Canada is debatable, but that level of competition does not appear to be a

natural state for most wireless markets, where scale is becoming increasingly important. In

our view, the entry of a strong carrier such as Verizon into Canada, would contribute to

Canada shifting from one of the more investable wireless markets globally, to one with

some of the higher downside risks.


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Canadian Telecom 7

Wireless Disruption PrecedentsIn this section we take a closer look at wireless markets that have had disruptions, ranging

from regulatory or new entrant catalysts. The examples, among other insights, highlight

how sensitive markets can be towards negative events. While not all new entrants are

successful at challenging incumbents, those that are committed for the long-term can

create a long-term overhang on the sector, or worse, immediate and meaningful

competitive pressure.

France Entry of Iliad in 2012

France is among one of the most recent OECD markets to experience a new facility based

operator, and the impact on the wireless market has been significant, contributing to

double digit revenue and EBITDA declines and meaningful equity erosion.

Iliad adds wireless to existing wireline 3-play

Iliad, a successful wireline provider in France, launched a facility-based wireless service in

early 2012 after gaining spectrum in 2009. The carrier offered wireless plans that undercut

incumbents with plans that included data and unlimited voice & long distance, in bundles

as low as 19.99. The prices were well below the existing market rates of30-40, which

had already been lowered in advance of the competition. Despite having a SIM-onlyoffering and with distribution almost exclusively online, Iliad has gained about 6 million

subscribers (10% of French subscribers) in just over a year.

Market Cap Meltdown

As highlighted by our European Analysts, in their June 14 2013 noteFrench telecoms -

Are we there yet? the market disruption of Iliad has contributed to significant equity

declines. "Since Iliad won its mobile license in December 2009 there has been a

significant shift in the equity value of the stocks, with Iliads market cap doubling to 9bn,

while the market cap of the incumbents has almost halved from 85bn to 46bn. Overall,

the equity value of the French telcos has fallen from 89bn to 55bn since Iliad won its

license, a nearly35bn fall."

Exhibit 5: French Telecom Market Capitalization 2009 to 2013

$-

$10,000 m

$20,000 m

$30,000 m

$40,000 m

$50,000 m

$60,000 m

$70,000 m

$80,000 m

$90,000 m

$100,000 m

12/18/2009 6/18/2010 12/18/2010 6/18/2011 12/18/2011 6/18/2012 12/18/2012 6/18/2013

ORANGE Bouygues S.A. Vivendi Iliad S.A.

Source: Bloomberg, Company data, Credit Suisse estimates
https://plus.credit-suisse.com/u/nvryIlhttps://plus.credit-suisse.com/u/nvryIlhttps://plus.credit-suisse.com/u/nvryIlhttps://plus.credit-suisse.com/u/nvryIlhttps://plus.credit-suisse.com/u/nvryIlhttps://plus.credit-suisse.com/u/nvryIl


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Canadian Telecom 8

Financial Challenges

Financially, in order to protect subscriber share incumbents gradually responded by

lowering prices, as highlighted in the exhibits below. (We note the absolute ARPU declines

were also impacted by economic challenges, MTR declines and roaming regulations).

Exhibit 6: French Telecom ARPU Exhibit 7: French Telecom ARPU Growth (Y/Y)

$15

$20

$25

$30

$35

$40

$45

Q1.11 Q2.11 Q3.11 Q4.11 Q1.12 Q2.12 Q3.12 Q4.12 Q1.13

Orange France SFR Bouygues Telecom Iliad

-30%

-25%

-20%

-15%

-10%

-5%

0%

Q1.11 Q2.11 Q3.11 Q4.11 Q1.12 Q2.12 Q3.12 Q4.12 Q1.13

Orange France SFR Bouygues Telecom

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Despite the competitive responses and stimulation of the market, Iliad has essentially

picked up all of the industry subscriber growth since its launch in early 2012, as

highlighted in the exhibit below. For incumbent France Telecom, annual churn rose from

25% in 2010 to 28% in 2013, only partly offset by higher (and more costly) gross additions.

Exhibit 8: Net addition chart below/plus subscriber market share chart

(1.00) m

(0.50) m

-

0.50 m

1.00 m

1.50 m

2.00 m

2.50 m

3.00 m

Q3.11 Q4.11 Q1.12 Q2.12 Q3.12 Q4.12 Q1.13

Orange France SFR Bouygues Telecom Iliad French MVNOs

Iliad has claimed majority ofsubscriber growth since launch


Not surprisingly, due to the revenue and costs pressure, EBITDA margins have declined

by an average of 300 bps for the French incumbents and EBITDA by an average of 17%

y/y in 2012.

Lessons from France

Each global market is unique, and there are several regulatory, competitive and economic

factors that are contributing to the financial declines in France. The scenario however, is


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Canadian Telecom 9

illustrative of how wireless markets can be meaningfully impacted by strong new entrants

(even if Verizon ultimately chooses a different strategy than Iliad).

Given the impact to-date of low cost operator Iliad in France, the natural question is why

Wind and Mobilicity have not had better success to-date in Canada. In our view, Iliad had

three advantages:

It had existing customers and infrastructure from its existing wireline service;

Iliad signed a 3G roaming agreement with France Telecom that allowed to offer its

competitive price offerings on a national basis (not just within urban zone);

iPhones were compatible on its network.

As we discuss later, should Verizon decide to commit to the Canadian market, we believe

Verizon would have its own competitive advantages to be successful.

Belgium Contracts eliminated in 2012

Belgium has not had a new facility based carrier, but it has had a mix of regulatory and

competitive changes that also illustrates how quickly wireless markets can come under

pressure. Belgium has been impacted by a couple of recent events including:

New regulatory rules introduced in mid-2012 that effectively forbid contracts beyond 6months, and;

The launch of simplified and competitive wireless plans by Telenet, a cable provider

operating under an MVNO agreement, which included additional discounts to existing

cable providers.

The two developments have increased market churn and market prices for the

incumbents, contributing to an acceleration of mobile revenue declines in 2013, as

highlighted in the exhibit below.

Exhibit 9: Belgium Wireless Service Revenue Growth Y/Y

-15%

-10%

-5%

0%

5%

10%

Q1.12 Q2.12 Q3.12 Q4.12 Q1.13 Q2.13

Proximus Mobistar KPN Base


Mobistar, the only pure play wireless operator in Belgium without fixed operations, has

indicated that it sees itself at a disadvantage in the new regulatory environment as it does

not have fixed-line services to offset wireless pressure or to help subsidize mobile.


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Lesson from Belgium

The first is again to reiterate how relatively stable markets can quickly turn weaker from

higher churn and ARPU pressure. The second is to highlight how the strategic value of

four-play bundles may become increasingly important in Canada should Verizon enter.

Spain Yoigo entry in 2006

Yoigo is a low cost Spanish wireless operator majority owned by Swedish basedTeliaSonera, It launched as the fourth facility based network in Spain in late 2006 after

several initial delays. The network offered simple low cost wireless plans, leveraging the

web for distribution and relying heavily on outsourcing in fact the company typically

operated with less than 100 employees. Spain was viewed as an attractive opportunity

owing to its relatively high ARPU at the time (vs. other European countries).

The initial losses of Yoigo were higher than anticipated, in part due to higher churn as the

network ramped up. Over-time Yoigo began to gain subscriber traction, helped in part by a

very challenging economy that motivated consumers to switch to Yoigo's low cost offering

and other MVNO offerings. Gradually, as highlighted in Exhibit 10, the incumbents have

reacted with their own pricing declines and lower cost offerings.

Exhibit 10: Spain ARPU Trends

0

5

10

15

20

25

30

35

40

Q2.07 Q4.07 Q2.08 Q4.08 Q2.09 Q4.09 Q2.10 Q4.10 Q2.11 Q4.11 Q2.12 Q4.12

Telefonica Vodafone Orange Spain Yoigo (est)


After six years of operation, Yoigo has now reached 7% of subscribers, and by our

estimates has captured approximately 60% of industry net additions over that time. Said

another way, since Yoigo's launch the incumbents have only grown at 40% of the

country's subscriber CAGR of 2.1% y/y and has actually trended worse in recent years,

with subscriber losses in 2012.


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Canadian Telecom 11

Exhibit 11: Share of Spain's Net Additions Since Q4.06

Telefonica, 1,101

Vodafone, 376

Orange Spain, 1,343

Yoigo, 3,730

Source: Company data, Credit Suisse estimates; Adjusted for accounting deactivaitons

Yoigo reportedly reached break-even after ~5 years, although margins are still tight, with

EBITDA margins of 8% in 2012. Despite the relative success, TeliaSonera, the majorityowner has for some time considered a strategic sale of the asset, previously indicating that

while it was pleased with the execution it believed it could make higher returns in emerging

markets with lower investments, although a sale has been pulled off the market for now.

Lessons from Spain

Again, the Spanish market is very different than Canada and the country is dealing with

unemployment levels that would make any business venture challenging. Nonetheless, the

scenario highlights:

How long it can take for a new entrant to reach profitable scale even with a very low

cost base.

Even with some relative success and scale, the returns from launching a network arenot necessarily that strong, as evident by the low EBITDA margins and TeliaSonera's

strategic reviews on the asset.

Finally, it highlights that for Verizon to make an entry into Canada work, it may need to

lean on it U.S. infrastructure, such as call-center and operations more than expected,

similar to how Yoigo outsourced a large component of its business. Verizon may also

decide to leverage the website distribution channel as much as possible.

Hutchinson 3

Hutchinson has been a significant investor in wireless networks across developed

markets over the past decade

Outside of Iliad and Yoigo the main new wireless challengers in OECD countries have

been led by conglomerate Hutchinson Whampoa's global telecom operations, which have

launched (with partner investors in some cases) a fifth carrier in the UK and a fourth

carrier in Austria, Sweden/Denmark, and Italy in 2003. The company's subsidiaries also

launched a fourth network in Australia in 2003 and in Ireland in 2005.

Europe Long-term commitment and still seeking scale

In Europe, Hutchinson tended to a take a long-term, network based strategy with a focus

on launching 3G networks that were slightly ahead of the industry curve in some markets.

Consistent with the more premium network and challenger position, the company typically

targeted heavier users with attractive voice bundles (that according to the company in the


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Canadian Telecom 12

UK reduced prices by up to 30% for mid-to high users), while also offering creative new

data plans.

Reflecting the high cost of investments, it took Hutchison roughly seven years (until 2010)

for the European group to be profitable. More specifically, even with a relatively strong

network in the UK (a joint venture was established with T-Mobile in 2007) its subscriber

share in 2012 was still at 12%, and owing to its smaller scale, EBITDA margins were 11%.

Not surprisingly, in Europe Hutchinson has been pushing to gain greater scale through

M&A, recently acquiring networks in Austria, Ireland (approval pending) and has been intalks in Italy.

Australia Incumbent Network Scale Hard to Overcome

In 2009, Hutchinson also decided to merge its Australia wireless network with Vodafone,

combining the #4 and #3 carriers, respectively, into a 50/50 joint venture. Separately the

carriers struggled to compete against the stronger networks established by Telstra and

Optus, which had 41% and 35% market shares, respectively.

Despite having revenue and subscriber momentum at the time of the merger, Hutchinson

still had only 9% subscriber share with 2008 EBITDA margins of 12%, and a reported net

loss of over $160 million.

As such, network scale was an important driver of the consolidation. In 2008, Hutchinson'snetwork only covered 57% of the population with its 3G network, and relied on a roaming

agreement (initially only in 2G) for the remainder of the country. It was reported during the

regulatory review of the merger that Hutchison would still require substantial investments

in its network capacity in order to continue to compete aggressively against its larger peers,

which it would be unlikely to do alone. In short, the increasing demands of data and

network strength of the leaders was too difficult to overcome as a fourth challenger.

Lessons for Canada

As Hutchinson has demonstrated in Europe, the investment horizon is long and often

ultimately requires consolidation to require the necessary scale to fully compete.

In Australia, it appears Telstra and Optus were able to manage the challengers by

leveraging its stronger network, as incumbents have done to-date in Canada. The riskin Canada is if Verizon is patient enough and/or is willing to sufficiently invest to build

out a stronger network required to support rising data demands.

If Verizon does invest in a premium network, we do not expect it to be an easy

financial decision (as illustrated in Australia) and it would likely need market share to

offset that investment.

Summary Verizon Strategy

While each wireless market has different industry dynamics, the global examples highlight:

Wireless networks require significant financial investments and take time to reach

scale if Verizon does see an opportunity in Canada, we believe the required

investments will require a reasonable market share.

A committed player can create an overhang a market for some time. Successful

competition can also create the tail-risk for acute financial pressure.

We'd expect VZ to try and keep costs as much as possible to a minimum, by focusing

more heavily in urban markets, leveraging its neighboring infrastructure (similar to

Hutchinson' common network in Sweden & Denmark) and to in-source a lot of costs to

its U.S. base.


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Canada ConundrumIn this section we look at the structural challenges of Verizon entering Canada, the likely

responses from incumbents and valuation sensitivities.

Verizon would be Maverick to Balanced Market

Canada is somewhat unique in that all three national carriers have relatively high marketrevenue shares, with Rogers the highest at ~39% and Bell the lowest at 30% as of Q1.13.

While those shares have been shifting, highlighting the competitive dynamics in market, it

does structurally support rational competition.

A fourth carrier, does not guarantee strong competition if the new entrant cannot gain

sufficient spectrum or build a strong enough network, among other requirements. Indeed,

the challenges of the smaller new entrants in Canada are well documented, as are the

increasing network scale advantages of VZ/AT&T in the U.S. and Telstar/Optus in

Australia, which have similar geographical markets to Canada.

Exhibit 12: U.S. Revenue Market Share Exhibit 13: Australia Revenue Market Share

0%

5%

10%

15%

20%

25%

30%

35%

40%

Verizon AT&T Sprint Nextel(Softbank

Investment)

T-Mobile(AT&T

acquisitiondenied)

MetroPCS(Acquired by

T-Mobile)

LeapWireless

(Agreeementto be

Acquired byAT&T)

Scale has been anadvantage for Verizonand AT&T, causingconsolidation andinvestments in smallercarriers

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Telstra Optus Vodafone/Hutchison

Vodafone/

Hutchison stillstruggle postmerger to overcome brandperceptions/smaller network

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Our concern if Verizon commits to Canada is that we expect them to be both a fourth

carrierandto have the financial capacity to be a successful 'maverick' in the market.

Potential Response to Challengers

In response to a strong competitor such as Verizon, we expect Canadian carriers to

compete aggressively. Based on our analysis of other global markets, incumbents have

taken a variety approaches in dealing with challengers:

Pricing lever often used: In most markets, if the new entrant was successful at

gaining subscriber share, incumbents eventually use pricing levers to defend. Even ifVerizon does not come to the market with aggressive price discounts, any subscriber

momentum it gained would likely eventually lead incumbents to defend with price

declines. Additionally, with a more unbalanced market, long-term discipline becomes

harder to achieve.

Restructuring: Not surprisingly with increased margin pressure, cost efficiencies

increasingly became an important tool to manage new entrant pressure, and we'd

expect cost initiatives in Canada to accelerate under such a scenario.


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Partnerships: Domestic joint ventures also become increasingly important, as other

markets have reverted to joint procurement arrangements and increased network

sharing. Canada already seems advanced in this regards with the Bell/Telus network

sharing and Rogers partnership with Videotron and Manitoba Telecom. In theory,

Rogers could look to network share with the new entrant, but we believe the risk from

the network facilitation would far outweigh the revenue upside.

Roaming becomes a Prisoner's Dilemma: France Telecom signed a 3G roamingagreement with Iliad that provided it with an estimated 1 billion euros in revenues over

six years, although that has helped Iliad gain share quickly. Similarly, Telenet has

signed an MVNO agreement in Belgium with Mobistar that has allowed it to gain

strong share. While roaming is mandatory in Canada, the extent to which Rogers or

another carrier works with Verizon on a broader roaming agreement will be important.

Bundles are Increasingly Leveraged: Globally the ability to offer subscriber bundles

across fixed services was important for both defensive and offensive reasons.

Defensively, carriers offered more attractive bundle packages to protect subscribers

and offensively to target the new entrant's fixed services if they were already in the

market. Canadian incumbents won't have similar a pressure point on Verizon, but we

expect them to push hard on bundles, which could give them a competitive advantage,

but also hurt its overall profitability. Ultimately, we believe the ability to offer quad playbecomes increasingly important, which could be a catalyst for further wireless/cable

consolidation.

Leveraging Global Assets: Finally, many global carriers when faced with domestic

pressures, leaned on other international markets for growth. Unfortunately, Canadian

incumbents do not have any other market exposure.

Sensitivities

Risk of Limited Subscriber Growth

Today the incumbents have roughly 21 million postpaid subscribers, which represent

roughly 80% of all Canadian wireless subscribers and the bulk of the incumbent wireless

revenues. The growth rate of this segment has been gradually decelerating, but it has still

been increasing at a pace of 5-6% y/y. By comparison, we estimate Wind/Mobilicity has

roughly 3% of overall Canadian wireless subscribers and that these are mostly prepaid or

lower value postpaid.

Based on its U.S. business model, we expect Verizon to be more interested in Canada's

postpaid segment. By using some basic assumptions on market growth and penetration

gains, it suggests that incumbent subscriber growth over the mid-term would be limited.

For example, as highlighted in Exhibit 14, assuming a gradual decline in market growth as

the industry matures and VZ reaching 15% share by 2020, the incumbents would

collectively gain as many subscribers between 2015-2020 (1 million) that they currently do

annually.

Exhibit 14: Postpaid market Growth

2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2015-2020Available Postpaid Subs 19,679 20,814 21,855 22,729 23,638 24,584 25,567 26,334 27,124 27,938 5,209

Y/Y Growth 6% 6% 5% 4% 4% 4% 4% 3% 3% 3%

VZ Postpaid Subscribers - - - - 591 1,229 1,918 2,633 3,390 4,191 4,191

VZ Postpaid Penetration 2.5% 5% 8% 10% 13% 15%

Incumbent Net Subscribers 1,108 1,135 1,041 874 318 307 295 51 33 14 1,018


Assuming the bulk of the losses were from higher churn losses and not lower gross

additions, it would imply a roughly 20bps increase in monthly churn, not inconsistent with


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Canadian Telecom 15

what we have seen in France. For perspective, all else the same, we estimate such a

scenario for a carrier such as Rogers (receiving a third of incumbent net additions), would

imply 7% decline in wireless valuations and 5% overall.

ARPU risk more concerning

We don't expect Verizon to be as disruptive with pricing as Iliad has been to the French

market, but we do expect it to be creative with its pricing to gain share, likely leveraging its

North American roaming advantage and/or equipment subsidies. However, as we havepreviously commented, if competition is gaining subscriber traction, it eventually leads to

industry price cuts. The re-pricing of the base is harmful to financials. For a carrier such

as Rogers, we estimate every 1% y/y step-down in ARPU can lead to a 2% y/y change in

EBITDA and 3% impact to valuation.

As one reference, given Verizon may push a North American roaming plan, we estimate

postpaid ARPU's in Canada are in the mid-$60's range and that roaming represents 5-7%

of service revenues. Therefore, a 50% cut in roaming revenues, would alone result in a

3% decline in ARPU all else the same.

Market Appears to be Pricing in a Moderate Competitive Scenario from VZ

Overall, a simple scenario that assumes limited subscriber growth through 2020 and a

one-time ARPU decline of 5% y/y, would impact our valuations for Rogers and Telus byroughly 20% and 10% for BCE. It would bring our valuations to stock prices at or slightly

below current market prices, suggesting the market is already pricing in such a moderate

competitive scenario. The implied scenarios would effectively take our Rogers wireless

EV/EBITDA multiples to 6.0x from 7.0x currently, and for Telus and Bell to 7.0x from 8.0x.

As we have demonstrated, however, new entrants can have a more meaningful impact on

financials. As a result, multiples could be further compressed to reflect the generally

weaker sentiment on the sector and risk that financials declines do accelerate. As we

highlight below, telecom carriers Telus and Bell have previously traded as low as 5.0x,

while some European telecom providers, in more challenging competitive, economic and

regulatory environments, have traded as low as 4.0x.

Exhibit 15: Historical Canadian Telecom valuation

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

1/11/2008 1/11/2009 1/11/2010 1/11/2011 1/11/2012 1/11/2013

BCE-CA T-CA SJR.b-CA RCI.b-CA


Long-term Overhang

Finally, if Verizon decides to enter Canada, it could create a long-term over-hang by

impacting stocks both before it launches a renewed service and should it eventually gain


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Canadian Telecom 16

traction in the market. As highlighted in Exhibit 16, stocks such as Rogers and Telus

underperformed from the time the existing new entrants announced their intentions in late

2007 until they ultimately acquired spectrum in 2009.

Exhibit 16: Relative Performance of Canadian Wireless Carriers after New Entrants Announcement

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

11/14/2007 1/14/2008 3/14/2008 5/14/2008 7/14/2008 9/14/2008

Rogers Communications Inc. Cl B Telus Corp. S&P/TSX Composite

Initial relative downside at time of new wireless auction annoucement was

-5% to -9% for Telus and Rogers respectively. Troughed at 20% beforeauction closed

Wireless auction close sawstocks improve before marketcrash helped drive relativegains higher


Subsequently, Rogers stock also became more volatile around increased ARPU pressure,

driven by both the Bell/Telus HSPA expansion and the impact of new entrants. As such,

while the Canadian stocks have already reacted by up to 10% on the threat of Verizon, the

sector could still underperform for over the mid-term if the carrier ultimately commits.

Investment View

Fundamentally, we have been constructive on Canadian wireless, owing to a rationalcompetitive market, structural growth in data usage, and pricing plans that leverage that

increasing data usage. A new major competitor to Canada such as Verizon would

obviously be a major risk and would cause us to be more cautious on the sector. More

specifically by stock:

Rogers has the highest risk owing to its wireless market share, particularly with high-

end smartphones and business accounts, and with wireless representing

approximately two-thirds of its valuation.

Telus has similar wireless exposure in its valuation. As a result, expectations may

have to be reset further with a Verizon entry, but we like the fact it is the only

incumbent in Western Canada with the ability to offer four-play bundles. Telus also

has a strong balance sheet at under 2.0x net debt/EBITDA, providing it capital returnflexibility (including buying back shares at lower stock prices) and recent growth in its

wireline business.

BCE has less wireless exposure at roughly 38% of its NAV, which would shelter the

stock to some degree. On the other hand, BCE has been relying on wireless growth to

drive its overall growth as it continues to have high exposure to legacy wireline.

Cable stocks (Shaw Neutral, Quebecor O/P, Cogeco Not Rated) could outperform, as

they become a more defensive sector and potentially have more take-out speculation,

as four-play bundles become more important.


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Canadian Telecom 17

Companies Mentioned (Price as of 06-Aug-2013)

AT&T (T.N, $35.48)BCE Inc. (BCE.TO, C$42.55, NEUTRAL, TP C$45.0)Belgacom(BCOM.BR, 18.175)Bouygues(BOUY.PA, 22.43)Cogeco Cable (CCA.TO, C$49.36)Hutchison Whampoa (0013.HK, HK$91.65)Iliad(ILD.PA, 181.5)KPN(KPN.AS, 1.981)Leap Wireless (LEAP.OQ, $16.5)Mobistar(MSTAR.BR, 10.52)

Orange(ORAN.PA, 7.279)Quebecor, Inc. (QBRb.TO, C$47.0, OUTPERFORM, TP C$52.0)Rogers Communications (NVS) (RCIb.TO, C$41.44, NEUTRAL, TP C$50.0)Shaw Communications (NVS) (SJRb.TO, C$25.47, NEUTRAL, TP C$24.0)Singapore Telecom (SGT.AX, A$3.37)Sprint Nextel Corp (S.N^G13, $7.18)T-Mobile US Inc (TMUS.N, $24.06)TELUS Corporation (T.TO, C$31.32, OUTPERFORM, TP C$40.0)Tele2 AB (TEL2b.ST, Skr83.9)Telefonica(TEF.MC, 10.78)Telenet(TNET.BR, 37.285)TeliaSonera (TLSN.ST, Skr47.01)Telstra Corporation (TLS.AX, A$5.07)Verizon Comm (VZ.N, $50.09)Vivendi(VIV.PA, 15.96)Vodafone Group (VOD.L, 198.15p)

Disclosure Appendix

Important Global Disclosures

I, Colin Moore, CFA, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies andsecurities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed inthis report.

3-Year Price and Rating History for BCE Inc. (BCE.TO)

BCE.TO Closing Price Target Price

Date (C$) (C$) Rating

04-Nov-10 33.80 32.00 N

10-Dec-10 36.09 34.00

11-Feb-11 35.90 35.00

10-May-11 36.97 36.00

13-May-11 37.87 37.00

03-Nov-11 39.49 38.00

03-May-12 40.31 39.00

08-Aug-12 44.30 42.00

04-Feb-13 44.34 43.00

08-Feb-13 44.29 44.00

10-May-13 47.83 45.00

* Asterisk signifies initiation or assumption of coverage.

N E U T R A L


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Canadian Telecom 18

3-Year Price and Rating History for Quebecor, Inc. (QBRb.TO)

QBRb.TO Closing Price Target Price


09-Nov-10 37.29 39.00 N

10-Mar-11 35.39 40.00

11-Aug-11 31.47 38.00

15-Mar-12 35.93 40.00

09-Apr-12 38.66 48.00 O

14-Mar-13 43.66 52.00


N E U T R A L

O U T P E R F O R M

3-Year Price and Rating History for Rogers Communications (NVS) (RCIb.TO)

RCIb.TO Closing Price Target Price


27-Oct-10 37.05 42.00 O

09-Jan-12 38.86 42.00 N25-Apr-12 36.81 40.00

02-Oct-12 39.86 44.00 O

24-Oct-12 42.43 46.00

04-Feb-13 46.55 50.00

19-Feb-13 48.49 52.00

23-Apr-13 50.28 52.00 N

16-Jul-13 42.06 50.00

* Asterisk signifies initiation or assumption of coverage. O U T P E R F O R MN E U T R A L

3-Year Price and Rating History for Shaw Communications (NVS) (SJRb.TO)

SJRb.TO Closing Price Target Price

Date (C$) (C$) Rating21-Oct-10 23.45 24.00 N

29-Nov-10 20.78 25.00 O

30-Jun-11 21.99 26.00

12-Jan-12 20.20 25.00

16-Apr-12 19.67 23.00

02-Oct-12 20.31 21.00 N

10-Jan-13 23.07 22.00

08-Apr-13 24.41 23.00

01-Jul-13 25.24 24.00

* Asterisk signifies initiation or assumption of coverage. N E U T R A LO U T P E R F O R M


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3-Year Price and Rating History for TELUS Corporation (T.TO)

T.TO Closing Price Target Price


06-Aug-10 20.60 19.75 N

08-Nov-10 22.85 22.00

15-Dec-10 23.60 23.00

14-Feb-11 23.75 23.50

06-May-11 25.96 25.00

07-Aug-11 25.82 27.00

10-Feb-12 28.15 28.00

03-Aug-12 31.58 30.00

02-Oct-12 31.34 34.00 O

04-Feb-13 33.44 35.00

19-Feb-13 34.66 37.00

10-May-13 37.51 40.00


N E U T R A L

O U T P E R F O R M

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse'stotal revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts stock rating are defined as follows:

Outperform (O) : The stocks total return is expected to outperform the relevant benchmark*over the next 12 months.Neutral (N) : The stocks total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stocks total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stocks total return relative to the analyst's coverage universe whichconsists of all companies covered by the analyst within the relevant secto r, with Outperforms representing the most attractiv e, Neutrals the less attractive, andUnderperforms the least attractive investment opportunities. As of 2nd October 2012, U. S. and Canadian as well as European ratings are based on a stocks totalreturn relative to the analyst's coverage unive rse which consists of all companies covered by the analyst within the releva nt sector, with Outperforms representing themost attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non -Japan Asia stocks, ratingsare based on a stocks total return relative to the average total return of the relevant country or regio nal benchmark; Australia, New Zealand are, and prior to 2ndOctober 2012 U.S. and Canadian ratings were based on (1) a stocks absolute total return potential to its current share price and (2) the relative attractiveness of astocks total return potential within an analysts coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute totalreturn calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings werebased on a stocks total return relative to the a verage total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain othercircumstances.

Volatility Indicator [V] :A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24months or the analyst expects significant volatility going forward.

Analysts sector weightings are distinct from analysts stock ratings and are based on the analysts expectations for the fundamentals and/orvaluation of the sector* relative to the groups historic fundamentals and/or valuation:

Overweight : The analysts expectation for the sectors fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analysts expectation for the sectors fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analysts expectation for the sectors fundamentals and/or valuation is cautious over the next 12 months.

*An analysts coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 42% (53% banking clients)Neutral/Hold* 40% (49% banking clients)Underperform/Sell* 15% (38% banking clients)Restricted 3%*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closelycorrespond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer todefinitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.


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Credit Suisses policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or themarket that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please referto Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research andanalytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannotbe used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for BCE Inc. (BCE.TO)

Method: Our Neutral rating and Target Price of $45.00 for BCE is obtained primarily by using a discounted cash flow (DCF) analysis with aweighted average cost of capital (WACC) of 8.8% and a terminal growth rate of 0.0%. Our DCF is supported by peer multiple and NAVcomparisons.

Risk: The risk to our $45.00 price target for BCE is as follows; i) Cable telephony competition increases in its markets; ii) New Wirelesscompetition is more aggressive than expected; iii) Bell's technology and quality of service deteriorates relative to its peers; iv)Technologies and products mature quicker than anticipated; iv) The economy weakens more than expected.

Price Target: (12 months) for Rogers Communications (NVS) (RCIb.TO)

Method: Our $50 target price for Rogers Communications Inc. is based on sum-of-the-parts valuation for the business's operating divisions. Over90% of our target enterprise value is accounted for by the wireless (65%) and cable (25%) divisions of the company. We use a discounted

cash flow model (DCF) to establish EV/EBITDA (enterprize value/earnings before interest, taxes, depreciation and amortization) multiples(enterprise value divided by earnings before interest, taxes, depreciation and amortization)for valuation. In our DCF we use a 9% WACC(weighted average cost of capital) for both wireless and Cable and a 2% terminal year growth rate for wireless, given its strong growthprofile and 1% terminal growth rate for cable given its relatively more mature profile.

Risk: The risks that could lead to a shortfall in attaining our $50 target price for Rogers Communications Inc. can be categorized by the majoroperating divisions. Risks to the wireless segment include 1) a deterioration in the existing industry pricing structure, 2) the inability tomaintain a competitive product offering (including advanced data services), 3) the emergence of effective substitutes for cellular basedwireless technology, and 4) changes in government attitudes toward regulation of the industry. Risks to the cable segment include 1) thesuccess of newly launched VoIP telephony, 2) migration of customers to an all-digital format, 3) changes in government attitudes towardregulation of the industry, and 4) the ability to maintain an effective product offering as compared to competing providers for television,telephony, and internet service.

Price Target: (12 months) for TELUS Corporation (T.TO)

Method: Our target price of C$40.00 is based on discounted cash flow (DCF) analysis of TELUS' segments (Telus Mobility and TelusCommunications). Our DCF assumptions are a weighted average cost of capital (WACC) of 9.0% and a terminal growth rate of 1.0%.

Risk: We see several risks to TELUS attaining our C$40.00 target price: (1) Competition a higher than expected churn rate from loss of wirelesssubscribers (current and potential) to other wireless competitors, thereby impeding T.TOs ability to realize a growing trend in averagerevenue per user (ARPU); (2) Economic risk - a high exposure to wireless demand can leave the company vulnerable to unfavourableeffects on wireless demand during weaker than expected economic times; (3) Potential regulatory risk in the telecommunications sector;(4) Potential for future labour disputes leading to increased capital expenditure; (5) Higher than expected cost cutting in the wirelessdivision.

Price Target: (12 months) for Quebecor, Inc. (QBRb.TO)

Method: Our target price of C$52.00 is based on a mix of a NAV and DCF. Our NAV is derived by applying a holding company discount to the sumof the valuations derived for the major segments of QBRb.TO. We use a 7.0x EV/EBITDA multiple for cable, a 4.0 EV/EBITDA (enterprisevalue/earnings before interest, taxes, depreciation and amortization) multiple for newspapers. QMI also owns TVA Group (36%), which is

valued at market. Finally, a holding company discount of 10% is applied. Our Discounted Free Cash Flow (DCF) analysis is derived usingan 8% weighted average cost of capital and a 1% terminal growth rate.

Risk: The following are risks to our QBRb.TO target price of C$52.00: a) Subscriber trends a declining subscriber trend or an increasing trendin churn rate would put downward pressure on QMIs cable, internet and, telecommunications margin growth; b) Economy weakeconomic trends would adversely affect demand for entertainment related consumption of books, magazines and music, thereby weakensales potential for QMI operations in this area; c) Greater online secular shift in online video; d) Greater than expected wireline voicesecular decline; e) Significant additional investments in media or wireless infrastructure; f) Secular risk from print to digital migration.


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Price Target: (12 months) for Shaw Communications (NVS) (SJRb.TO)

Method: Our target price of $24.00 is based on discounted cash flow (DCF) analysis of SJRbv.TOs segments (Satellite and, Cable). Our DCFassumptions over an 11 year period for Satellite are: a) StarChoice - a weighted average cost of capital (WACC) of 10.0% and a terminalgrowth rate of 0.0%; b) Cancom a WACC of 9.0% and a terminal growth rate of 1.0%. The DCF assumptions for Cable are WACC of9.0% and a terminal growth rate of 1.0% over an 11-year period.

Risk: Risks to SJRb.TO's achievement of our $24.00 target price are 1) Competition loss of subscribers (current and potential) resulting in adownward trend can lead to an increase in churn rates, thereby reducing SJRb.TOs ability to realize a steady stream of average revenue

per user (ARPU) growth; 2) Higher than expected demand for cable telephony service has the potential to increase capital expenditures ata rate faster than the rate of profit margin growth; 3) Potential regulatory risk in the cable sector 4) Increased competition from IPTV

Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in thetarget price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (T.TO) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided non-investment banking services to the subject company (T.TO) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (RCIb.TO, T.TO, QBRb.TO)within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (T.TO) withinthe past 12 months

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (BCE.TO, RCIb.TO, T.TO,QBRb.TO, SJRb.TO) within the past 12 months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may notcontain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visithttp://www.csfb.com/legal_terms/canada_research_policy.shtml.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are importantdisclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as researchanalysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to theNASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by aresearch analyst account.

Credit Suisse Securities (Canada), Inc................................................................................................................ Colin Moore, CFA ; Robert Peters

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Additional information is, subject to duties of confidentiality, available on request. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solelyby CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation orwarranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject tochange without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments issubject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which areinfluenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors whoare capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to,spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structuredproduct should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in

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Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibilityfor the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of anysuch website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed inEurope (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority ("PRA") and regulated bythe Financial Conduct Authority ("FCA") and the PRA. This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by theBundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). 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INB230970637; INF230970637;INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, SeoulBranch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of theabove. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia isauthorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. 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Recipients who arenot market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessaryexplanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the PRA and regulated by the FCA and the PRAor in respect of which the protections of the PRA and FCA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are availableupon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering intosuch transactions. 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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal canbe eroded due to changes in redemption amounts. Care is required when investing in such instruments.

When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CSas a seller, you will be requested to pay the purchase price only.
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