AT&T UVERSE

STARZ Original Programming

Executive Summary• Purchasing Starz increases strategic and Shareholder Value

• There will be EPS accretion so it adds value to AT&T shareholders• Follows industry trends (Cable companies becoming originators of content)

• Reasonable Offer: $42.7 price per share, which represents a 50% premium based on Starz current share price of $28.18. Gives Starz shareholders a hefty premium compared to Lionsgate’s offer (keeps John Malone happy) and allows them some participation on the upside. We can also achieve our targeted EPS increase of 2%

• Some risks for the deal:• Shareholder approval (John Malone owns 14.5% voting interest)• Regulatory approval: some deals between cable operators and media companies have fallen

apart due to FTC regulations (Verizon’s 2015 bid for AOL)• Ability to retain key talent (if key talent leaves as a result of acquisition, synergies might not

be realized• Alternatives: Acquiring Scripps Network Interactive

Studios & Networks

E.g. Starz & Lionsgate

Original Content & Channels

TV ProviderE.g. AT&T, Verizon

3rd Party Content Only

End UsersYou and Me

Cable TV

OTT Streaming

Studios & Networks

E.g. Starz, Lionsgate

Original Content & Channels

Online Streaming

ServiceE.g. Netflix, Hulu

3rd Party Content & Original Content

End UsersYou and Me

STARZ

Original Content for AT&T to Distribute

Industry Trend

2015.5 2016 2016.5 2017 2017.5 2018 2018.5 2019 2019.5 2020 2020.5-

50

100

150

200

250

EBITDA Improvement (milllion)

2015.5 2016 2016.5 2017 2017.5 2018 2018.5 2019 2019.5 2020 2020.5-%

0.5%

1.0%

1.5%

2.0%

2.5%

% change in EPS

Rationale for Acquisition

0

5

10

15

20

25

30

35

40

45

50

DCF Comps Precedent 52 Week Hi-Lo

Offer Price$42.27

Current Share Price $28.18

AT&T’s Offer Est. Lionsgate’s Offer

Offer Price $42.27 $35.79

Implied Premium to Fair Share Price

21% 2.3%

Implied Premium to Current Share Price

50% 27%

Breakeven Price for Lionsgate’s proposal

• Starz Current Share Price: $28.18

• Synergy per share: $7.6

• Estimated Offer Price: $35.79

Key Metrics

Discounted Cash Flow• WACC: 9.5% - 10.5%• Exit Multiple: 9x – 10x

Comparables• EBITDA x LTM: 11x – 12x• EBITDA x 2016E: 10.5x -11.5x

Precedents Transaction• EBITDA x LTM: 10.5x -11.5x

Valuation Summary

-%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2016 2017 2018 2019 2020

% EPS Accretion

Aggressive

Base

Best

-

50

100

150

200

250

300

2016 2017 2018 2019 2020

EBITDA Improvement

Aggressive

Base

Best

Type Aggressive Base BestFinancingPremium Paid 50.0% 27.0% 27.0%

Transaction and Financing Fees 2.0% 3.0% 3.0%

Stock Consideration 10.0% 37.1% 0.0%

Cash Balance Used [do not change] 500 500 500

Synergy Assumptions1) Shared Overhead 10% 10% 20%2) Vertical Integration of Content 5% 5% 5%3) Marketing Costs 15% 15% 15%4) Content Negotiating Leverage 10% 10% 15%5) Cross Promotion of Starz 10% 10% 20%6) Scale Content Quality 5% 5% 5%

PF ACCRETION/DILUTION 2% 1.70% 2.60%

Key Scenarios

• Within the other channel network, the strongest margin is between Scripps and AMC Networks. However we think AT&T has a better chance to integrate by concentrating on the US Latin American Market.

0.0x2.0x4.0x6.0x8.0x

10.0x12.0x14.0x

Network Average EV/REVENUE

2014A

2017E

(40.0%)

(30.0%)

(20.0%)

(10.0%)

-%

10.0%

20.0%

DiscoveryCommunications

Scripps NetworksInteractive

AMC Networks MSG Networks Starz

Network Average

Revenue CAGR 2Yr

EBITDA 2 yr frcst

Alternatives

Conclusion

• Starz Acquisition is good for AT&T• EPS accretion• Strategically beneficial• Follows industry trends

AppendixActive Scenario: Base Key Outputs: 2016 2017 2018 2019 2020

% Change in EPS 0.6% 1.3% 1.7% 1.7% 1.7%EBITDA Improvement 58 108 160 197 201

Key Transaction Parameters($ millions)Financing Assumptions Synergy Run-Rate Assumptions Key Results 2016 2017 2018 2019 2020

% Stock Consideration 37.1% 1) Shared Overhead 10.0% Accretion / (dilution) 0.6% 1.3% 1.7% 1.7% 1.7%Premium Paid 27.0% 2) Vertical Integration of Content 5.0% Debt / EBITDA 2.6 x 2.4 x 2.3 x 2.1 x 2.0 xTransaction Costs 3.0% 3) Marketing Costs 15.0% PF EBITDA w/o Synergies 52,287 53,523 54,259 55,420 56,678 Cash Balance Used [do not change] 500 4) Content Negotiating Leverage 10.0% EBITDA from Synergies 58 108 160 197 201

5) Cross Promotion of Starz 10.0% Incremental Interest 146 149 149 147 144 6) Scale Content Quality 5.0%

Uses Enterprise Value ATT Starz @ OfferEquity Market Value 2,996 60.0% Current Share Price (16 Mar 2016) $38.78 $28.18Equity Premium Paid 809 16.2% Offer Price N/A $35.79Repayment of Debt 1,038 20.8% Equity Value 230,470 3,804 Transaction Fees 150 3.0% (+) Debt 126,474 1,038

(-) Cash (5,121) (11) Funding Requirements 4,992 100.0% Enterprise Value 351,823 4,831

Sources Pro Forma Share IssuanceStock Issued 1,848 37.1% AT&T Stock Consideration 1,848 New Debt 2,633 52.9% SQ Diluted Shares Outstanding 5,943 Cash from AT&T 500 10.0% New Shares Issued 48 External Sources 4,981 100.0%Cash from Starz 11 PF Diluted Shares Outstanding 5,991 Funding Sources 4,992 PF Ownership (AT&T / Starz) 99.2% / 0.8%

Active Scenario: Base Key Outputs: 2016 2017 2018 2019 2020% Change in EPS 0.6% 1.3% 1.7% 1.7% 1.7%EBITDA Improvement 58 108 160 197 201

Key Transaction Parameters($ millions)Financing Assumptions Synergy Run-Rate Assumptions Key Results 2016 2017 2018 2019 2020

% Stock Consideration 37.1% 1) Shared Overhead 10.0% Accretion / (dilution) 0.6% 1.3% 1.7% 1.7% 1.7%Premium Paid 27.0% 2) Vertical Integration of Content 5.0% Debt / EBITDA 2.6 x 2.4 x 2.3 x 2.1 x 2.0 xTransaction Costs 3.0% 3) Marketing Costs 15.0% PF EBITDA w/o Synergies 52,287 53,523 54,259 55,420 56,678 Cash Balance Used [do not change] 500 4) Content Negotiating Leverage 10.0% EBITDA from Synergies 58 108 160 197 201

5) Cross Promotion of Starz 10.0% Incremental Interest 146 149 149 147 144 6) Scale Content Quality 5.0%

Uses Enterprise Value ATT Starz @ OfferEquity Market Value 2,996 60.0% Current Share Price (16 Mar 2016) $38.78 $28.18Equity Premium Paid 809 16.2% Offer Price N/A $35.79Repayment of Debt 1,038 20.8% Equity Value 230,470 3,804 Transaction Fees 150 3.0% (+) Debt 126,474 1,038

(-) Cash (5,121) (11) Funding Requirements 4,992 100.0% Enterprise Value 351,823 4,831

Sources Pro Forma Share IssuanceStock Issued 1,848 37.1% AT&T Stock Consideration 1,848 New Debt 2,633 52.9% SQ Diluted Shares Outstanding 5,943 Cash from AT&T 500 10.0% New Shares Issued 48 External Sources 4,981 100.0%Cash from Starz 11 PF Diluted Shares Outstanding 5,991 Funding Sources 4,992 PF Ownership (AT&T / Starz) 99.2% / 0.8%

Active Scenario: Aggressive Key Outputs: 2016 2017 2018 2019 2020% Change in EPS 0.9% 1.6% 2.0% 2.1% 2.0%EBITDA Improvement 58 108 160 197 201

Key Transaction Parameters($ millions)Financing Assumptions Synergy Run-Rate Assumptions Key Results 2016 2017 2018 2019 2020

% Stock Consideration 10.0% 1) Shared Overhead 10.0% Accretion / (dilution) 0.9% 1.6% 2.0% 2.1% 2.0%Premium Paid 50.0% 2) Vertical Integration of Content 5.0% Debt / EBITDA 2.6 x 2.4 x 2.3 x 2.1 x 2.0 xTransaction Costs 2.0% 3) Marketing Costs 15.0% PF EBITDA w/o Synergies 52,287 53,523 54,259 55,420 56,678 Cash Balance Used [do not change] 500 4) Content Negotiating Leverage 10.0% EBITDA from Synergies 58 108 160 197 201

5) Cross Promotion of Starz 10.0% Incremental Interest 254 259 258 256 250 6) Scale Content Quality 5.0%

Uses Enterprise Value ATT Starz @ OfferEquity Market Value 2,996 53.1% Current Share Price (16 Mar 2016) $38.78 $28.18Equity Premium Paid 1,498 26.5% Offer Price N/A $42.27Repayment of Debt 1,038 18.4% Equity Value 230,470 4,493 Transaction Fees 113 2.0% (+) Debt 126,474 1,038

(-) Cash (5,121) (11) Funding Requirements 5,644 100.0% Enterprise Value 351,823 5,520

Sources Pro Forma Share IssuanceStock Issued 563 10.0% AT&T Stock Consideration 563 New Debt 4,570 81.1% SQ Diluted Shares Outstanding 5,943 Cash from AT&T 500 8.9% New Shares Issued 15 External Sources 5,633 100.0%Cash from Starz 11 PF Diluted Shares Outstanding 5,958 Funding Sources 5,644 PF Ownership (AT&T / Starz) 99.8% / 0.2%

Active Scenario: Max Synergy Key Outputs: 2016 2017 2018 2019 2020% Change in EPS 0.7% 1.5% 2.0% 2.1% 2.0%EBITDA Improvement 77 146 218 272 279

Key Transaction Parameters($ millions)Financing Assumptions Synergy Run-Rate Assumptions Key Results 2016 2017 2018 2019 2020

% Stock Consideration 37.1% 1) Shared Overhead 20.0% Accretion / (dilution) 0.7% 1.5% 2.0% 2.1% 2.0%Premium Paid 27.0% 2) Vertical Integration of Content 5.0% Debt / EBITDA 2.6 x 2.4 x 2.3 x 2.1 x 2.0 xTransaction Costs 3.0% 3) Marketing Costs 15.0% PF EBITDA w/o Synergies 52,287 53,523 54,259 55,420 56,678 Cash Balance Used [do not change] 500 4) Content Negotiating Leverage 20.0% EBITDA from Synergies 77 146 218 272 279

5) Cross Promotion of Starz 15.0% Incremental Interest 146 149 149 147 144 6) Scale Content Quality 5.0%

Uses Enterprise Value ATT Starz @ OfferEquity Market Value 2,996 60.0% Current Share Price (16 Mar 2016) $38.78 $28.18Equity Premium Paid 809 16.2% Offer Price N/A $35.79Repayment of Debt 1,038 20.8% Equity Value 230,470 3,804 Transaction Fees 150 3.0% (+) Debt 126,474 1,038

(-) Cash (5,121) (11) Funding Requirements 4,992 100.0% Enterprise Value 351,823 4,831

Sources Pro Forma Share IssuanceStock Issued 1,848 37.1% AT&T Stock Consideration 1,848 New Debt 2,633 52.9% SQ Diluted Shares Outstanding 5,943 Cash from AT&T 500 10.0% New Shares Issued 48 External Sources 4,981 100.0%Cash from Starz 11 PF Diluted Shares Outstanding 5,991 Funding Sources 4,992 PF Ownership (AT&T / Starz) 99.2% / 0.8%

Active Scenario: Worst Case Key Outputs: 2016 2017 2018 2019 2020% Change in EPS 0.3% 0.9% 1.3% 1.4% 1.3%EBITDA Improvement 47 88 131 163 167

Key Transaction Parameters($ millions)Financing Assumptions Synergy Run-Rate Assumptions Key Results 2016 2017 2018 2019 2020

% Stock Consideration 37.1% 1) Shared Overhead 10.0% Accretion / (dilution) 0.3% 0.9% 1.3% 1.4% 1.3%Premium Paid 50.0% 2) Vertical Integration of Content 3.0% Debt / EBITDA 2.6 x 2.4 x 2.3 x 2.1 x 2.0 xTransaction Costs 3.0% 3) Marketing Costs 10.0% PF EBITDA w/o Synergies 52,287 53,523 54,259 55,420 56,678 Cash Balance Used [do not change] 500 4) Content Negotiating Leverage 10.0% EBITDA from Synergies 47 88 131 163 167

5) Cross Promotion of Starz 10.0% Incremental Interest 171 175 174 172 169 6) Scale Content Quality 3.0%

Uses Enterprise Value ATT Starz @ OfferEquity Market Value 2,996 52.5% Current Share Price (16 Mar 2016) $38.78 $28.18Equity Premium Paid 1,498 26.3% Offer Price N/A $42.27Repayment of Debt 1,038 18.2% Equity Value 230,470 4,493 Transaction Fees 171 3.0% (+) Debt 126,474 1,038

(-) Cash (5,121) (11) Funding Requirements 5,702 100.0% Enterprise Value 351,823 5,520

Sources Pro Forma Share IssuanceStock Issued 2,112 37.1% AT&T Stock Consideration 2,112 New Debt 3,080 54.1% SQ Diluted Shares Outstanding 5,943 Cash from AT&T 500 8.8% New Shares Issued 54 External Sources 5,691 100.0%Cash from Starz 11 PF Diluted Shares Outstanding 5,997 Funding Sources 5,702 PF Ownership (AT&T / Starz) 99.1% / 0.9%

Active Scenario: Best Case Key Outputs: 2016 2017 2018 2019 2020% Change in EPS 1.3% 2.0% 2.6% 2.7% 2.6%EBITDA Improvement 77 146 218 272 279

Key Transaction Parameters($ millions)Financing Assumptions Synergy Run-Rate Assumptions Key Results 2016 2017 2018 2019 2020

% Stock Consideration 0.0% 1) Shared Overhead 20.0% Accretion / (dilution) 1.3% 2.0% 2.6% 2.7% 2.6%Premium Paid 27.0% 2) Vertical Integration of Content 5.0% Debt / EBITDA 2.6 x 2.4 x 2.3 x 2.1 x 2.0 xTransaction Costs 3.0% 3) Marketing Costs 15.0% PF EBITDA w/o Synergies 52,287 53,523 54,259 55,420 56,678 Cash Balance Used [do not change] 500 4) Content Negotiating Leverage 20.0% EBITDA from Synergies 77 146 218 272 279

5) Cross Promotion of Starz 15.0% Incremental Interest 249 254 253 251 245 6) Scale Content Quality 5.0%

Uses Enterprise Value ATT Starz @ OfferEquity Market Value 2,996 60.0% Current Share Price (16 Mar 2016) $38.78 $28.18Equity Premium Paid 809 16.2% Offer Price N/A $35.79Repayment of Debt 1,038 20.8% Equity Value 230,470 3,804 Transaction Fees 150 3.0% (+) Debt 126,474 1,038

(-) Cash (5,121) (11) Funding Requirements 4,992 100.0% Enterprise Value 351,823 4,831

Sources Pro Forma Share IssuanceStock Issued - 0.0% AT&T Stock Consideration - New Debt 4,481 90.0% SQ Diluted Shares Outstanding 5,943 Cash from AT&T 500 10.0% New Shares Issued - External Sources 4,981 100.0%Cash from Starz 11 PF Diluted Shares Outstanding 5,943 Funding Sources 4,992 PF Ownership (AT&T / Starz) 100.0% / 0.0%

Active Case Stored Scenario Outputs

3 1 2 3 4 5 6Key Results (FY2018) Aggressive Initial Base

Aggressiv

Max Synergy Worst Case Best Case

Revenue Synergies 97 71 97 97 130 71 130

Cost Synergies 121 103 121 121 162 103 162

STARZ EBITDA 735 705 735 735 792 705 792STARZ EBITDA Margin 40.1% 39.1% 40.1% 40.1% 42.5% 39.1% 42.5%

PF Diluted EPS $2.63 $2.62 $2.62 $2.63 $2.63 $2.61 $2.65

PF Accretion / (Dilution) 2.0% 1.5% 1.7% 2.0% 2.0% 1.3% 2.6%

Transaction Assumptions

Premium Paid 50.0% 20.0% 27.0% 50.0% 27.0% 50.0% 27.0%

Stock Consideration 10.0% 40.0% 37.1% 10.0% 37.1% 37.1% 0.0%

Synergy Assumptions (Margin ∆)

1) Shared Overhead 10.0% 10.0% 10.0% 10.0% 20.0% 10.0% 20.0%

2) Vertical Integration of Content 5.0% 3.0% 5.0% 5.0% 5.0% 3.0% 5.0%

3) Marketing Costs 15.0% 10.0% 15.0% 15.0% 15.0% 10.0% 15.0%

4) Content Negotiating Leverage 10.0% 10.0% 10.0% 10.0% 15.0% 10.0% 15.0%

5) Cross Promotion of Starz 10.0% 10.0% 10.0% 10.0% 15.0% 10.0% 15.0%

6) Scale Content Quality 5.0% 3.0% 5.0% 5.0% 5.0% 3.0% 5.0%

Starz Valuation Model - Discounted Cash Flow ValuationValuation($ in millions of U.S. dollars except per share amounts) Projected Fiscal Years Ending March 31Free Cash Flows 2016 2017 2018 2019 2020EBIT * (1-tax rate) 292 348 363 358 366Depreciation And Amortization 19 18 16 16 15Other - - - - -Capex 12 12 12 13 13Net change in w orking capital 29 1 (25) (16) (16)Free cash flow s to the firm (FCFF) 341 378 367 369 378

Years to Discount 0.97 1.97 2.97 3.97 4.97Cost of Capital 10.1% 10.1% 10.1% 10.1% 10.1%Discount Factor 0.91 0.83 0.75 0.68 0.62

PV Free cash flows to the firm (FCFF) 310 313 276 252 235

FCFF Fair Value Perpetuity Method FCFF Fair Value Multiple MethodGrow n TV FCFF 386 EBITDA Multiple 9.4xTerminal Value 4,781 Last forecast EBITDA 578Present Value of Terminal Value 2,969 Terminal Value 5,433Terminal Value as % of Total Value 68.2% Present Value of Terminal Value 3,374Present Value of Forecast FCF 1,387 Terminal Value as % of Total Value 70.9%Forecast Period as % of Total Value 31.8% Present Value of Forecast FCF 1,387Enterprise Value 4,356 Forecast Period as % of Total Value 29.1%

- Debt (1,053) Enterprise Value 4,761+ Cash (use hardcode as of valuation date) 11 - Debt (1,053)

Net Debt (1,043) + Cash (use hardcode as of valuation date) 11Equity Value (Market Cap) 3,313 Net Debt (1,043)Shares outstanding 106 Equity Value (Market Cap) 3,718Fair value share price 31.17 Shares outstanding 106

Fair value share price 34.98

AT&T & Starz Merger Model - Precedent Transactions

Target Buyer Transaction

Company Type Company Type EV (1) Date Year Rationale Impl. EV Revenue EBITDA Revenue EBITDA(all figures presented in USD millions, except per share figures or where otherwise noted)

TV & MediaJornal Communications TV and Radio Broadcasting The E. W. Scripps Company 1,742 July 30, 2014 2014 685 406 85 1.7x 8.1xLIN Media TV Broadcasting and Digital Services Media General 4,425 March 31, 2014 2014 2,345 702 175 3.3x 13.4xBelo Corp. TV Broadcasting TEGNA 9,666 June 13, 2013 2013 2,185 719 262 3.0x 8.4xNBCUniversal Media Integrated Media Comcast 199,108 February 12, 2013 2013 39,997 23,812 4,290 1.7x 9.3xLucasfilm Content Production and Special Effects Walt Disney 180,706 October 30, 2012 2012 4,050 860 230 4.7x 17.6xNews Corporation Media and Information Service 21st Century Fox 71,164 June 27, 2012 2012 6,902 8,768 700 0.8x 9.9xAstral Media TV and Radio Broadcasting Bell Media N/A March 16, 2012 2012 3,402 1,033 334 3.3x 10.2xMarvel Entertainment Diversified Media Walt Disney 180,706 August 31, 2009 2009 3,842 720 319 5.3x 12.0x

TV & Media Average 3.0x 11.1x

Starz 2.3x 9.0x

(1) Current EV(2) EV/LTM multiple should be calculated based on Transaction EV

LTM EV/LTM (2)

Company Name Market Enterprise Net Debt / EV/Revenue (3) EV/EBITDA (3) P/E (3) EBITDA CAGR (3)Revenue CAGR (3) EBITDA WACC

Cap. (1) Value (2) EV 2014A LTM NTM 2017E 2014A LTM NTM 2017E 2014A LTM NTM 2017E 3-Yr Hist.2-Yr Fcst.3-Yr Hist. 2-Yr Fcst. Margin(all figures presented in USD millions, except per share figures or where noted)

StreamingNetflix 43,288 43,348 0.1% 7.9x 6.4x 4.9x 3.9x 94.9x 117.8x 79.6x 38.4x 159.4x 355.7x 222.2x 78.0x 56.8% 23.4% 27.7% 5.4% 12.9%

NetworksDiscovery Communications 15,332 22,918 32.0% 3.7x 3.6x 3.5x 3.3x 9.5x 9.9x 9.5x 9.1x 17.6x 17.3x 15.1x 13.4x 5.5% 12.5% 4.4% 36.2% 8.2%Scripps Networks Interactive 8,365 12,564 30.1% 4.7x 4.2x 3.8x 3.6x 11.1x 10.1x 9.2x 8.8x 16.8x 13.8x 12.9x 12.1x 5.9% 9.4% 8.0% 41.1% 6.8%AMC Networks 4,751 7,378 32.3% 3.4x 2.9x 2.7x 2.5x 12.0x 9.3x 8.1x 7.7x 18.1x 11.9x 11.1x 10.3x 20.9% 24.0% 6.8% 30.7% 7.4%MSG Networks 1,314 2,614 (8.4%) 1.7x 2.3x 4.0x 3.9x 9.0x 7.9x 9.2x 8.5x 11.8x 8.4x 8.9x 9.0x 31.9% 8.1% (35.6%) 28.5% 4.9%

Networks Average 7,441 11,369 21.5% 3.4x 3.2x 3.5x 3.3x 10.4x 9.3x 9.0x 8.5x 16.1x 12.8x 12.0x 11.2x 16.0% 13.5% (4.1%) 34.1% 6.8%

Mass MediaWalt Disney 161,852 180,706 7.2% 3.7x 3.3x 3.2x 3.1x 13.2x 11.1x 10.4x 9.9x 23.0x 18.0x 17.0x 15.9x 12.2% 7.5% 6.3% 29.9% 9.1%Time Warner 57,476 78,812 27.1% 3.5x 3.3x 3.1x 3.0x 9.8x 9.9x 9.0x 8.6x 28.1x 30.6x 26.8x 24.4x 1.0% 3.5% 6.0% 33.5% 6.0%21st Century Fox 54,144 71,196 14.9% 2.2x 2.7x 2.6x 2.4x 10.6x 11.0x 10.8x 9.5x 14.2x 17.5x 16.8x 13.1x 6.8% 5.0% 0.9% 24.5% 7.9%CBS Corporation 25,141 33,266 24.4% 2.4x 2.4x 2.3x 2.3x 10.5x 12.5x 9.7x 9.5x 10.2x 16.4x 13.7x 12.4x (8.1%) (0.5%) 3.0% 19.2% 7.8%Lionsgate 3,393 4,988 21.1% 1.9x 2.3x 2.1x 1.9x 19.8x 76.7x 16.7x 15.5x 20.4x 38.5x 34.8x 15.5x 82.3% 14.8% 4.6% 1.5% 8.9%

Mass Media Average 60,401 73,794 18.9% 2.7x 2.8x 2.7x 2.5x 12.8x 24.3x 11.3x 10.6x 19.2x 24.2x 21.8x 16.2x 18.8% 6.0% 4.2% 21.7% 7.9%