BofA Merrill Lynch Research report: At&t Fundamentals Strong Rating Neutral

BofA Merrill Lynch, in Thursday, learned from the AT&T executives meeting that the company will promote a traffic-based charging model for individual users of wired communications; sales growth will turn positive this year; the acquisition of T is proceeding in a step-by-step manner; The company has enough assets to develop its data center business. BofA Merrill Lynch believes the At&t fundamentals are strong, but is expected to have a downward revision, as well as a "neutral" rating of 30 of billions of dollars in the current valuation, which is at the high end of its historical range. June 10 at&t closed at 30.34 dollars. At&t in the past year, the following is the Bank of America Merrill Lynch research Summary: Last Thursday (June 9) We had the honor to attend the meeting held by At&t, CEO Stephenson (Randall Stephenson), CFO Stephens (CFO), General advisor Watts ( Wayne Watts, Business FX CEO Stanky (John Stankey), and many other senior executives attended.　　A number of key issues were discussed, based on the flow pricing model, operational department performance expectations, T acquisition progress and corporate data center development strategy. The revenue model based on traffic is established the revenue model based on traffic may be extended to individual users of wired communications, because the mode of the industry for many years, the pattern of implicit call subsidy for data is broken down with the decrease of telephone traffic and the growth of data.　　Management believes that the pricing model based on traffic is not likely to be extended to business users in the near future because of the different types of purchasing power in this market.　　Operations are expected to grow, but the risks remain at&t expect operating department revenue growth to turn positive this year, with the assumption that the economic environment has not been improved, and management believes that a number of key economic indicators, including small business openings, are still not ideal. T buy-out management is confident that the acquisition of Deutsche Telekom's wireless carrier t within a year. At&t that the takeover would be subject to antitrust scrutiny by the Federal Communications Commission (FCC).　　If the deal is finally released, we expect the FCC to impose a number of behavioral conditions, such as price constraints. Asset portfolio for cloud-related development according to management, AT&T has the assets needed to drive data center revenue to achieve expected growth.　　We believe that value-added services, including the use of at&t networks, are likely to remain a company's business focus rather than a low-end hosting service. The investment viewpoint at&t the fundamental strength, has the stable business model based on the user. However, we give a "neutral" rating because of the potential for downward revisions and valuations at the high end of the historical range. Mergers and acquisitions and wireless sector profit margins have boosted earnings growth premiums, but they are losing momentum at a critical juncture.　We expect wireless business margins to remain under pressure.　Base and risk of target stock price valuation based on cash flow discount method (DCF) and market related valuation analysis, we set the At&t 12-month target price at $30, which corresponds to 15 times times the dynamic P/E and 4.5 times times the expected interest tax amortization depreciation before the profit. The At&t historical P/E range corresponds to the average P/e ratio of 0.7 to 0.95 times times, and the historical average is 0.8 times times the average P/E. Our target share price believes that the historical P/E level can be maintained.　　Our Cash flow discount valuation analysis assumes that the rate of equity cost discount is 10.9%, debt cost discount rate 5.9%,beta coefficient is 1.3. The target share price faces the risk: 1 2011 Average expected earnings per share downward revision; 2 The consumption scale of wireless scheme is reduced more than expected; 3) the competition of mobile subsidy is intensified. (Tsumer)