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Options Risk Statement
Potential Risk at Expiry & Options Limited Duration Risk
Unlike owning or shorting a stock, employing any listed options strategy is by definition
governed by a finite duration. The most severe risks associated with general options
trading are total loss of capital invested and delivery/assignment risk, all of which can
occur in a short period.
Investor suitability
The use of standardized options and other related derivatives instruments are
considered unsuitable for many investors. Investors considering such strategies are
encouraged to become familiar with the "Characteristics and Risks of Standardized
Options" (an OCC authored white paper on options risks). U.S. investors should consult
with a FINRA Registered Options Principal. For detailed information regarding the risks
involved with investing in listed options:
http:/Avww.theocc.com/about/publications/character-risks.jsp
Price objective basis & risk
Deutsche Telekom (DTEGF / DTEGY, B-2-7, EUR17.42/US$19.45)
Our price objective for DT is EUR18.0/sh (US$19.62) and is derived from our Sum-of-
the-Parts analysis.
Each business is valued via DCF (except MtM for TMUS and OTE }) using a 7.0% WACC
and 1.00% terminal growth rate for Domestic and Western Europe assets (and 8.0%
WACC/1% term growth for Eastern Europe assets) and cross-checked using implied
valuation multiple analysis.
Our Domestic business valuation reflects DT's solid positioning in both fixed (FTTC
rollout) and mobile (superior network quality, integrated business model).
Upside risks to our PO are any asset sales (US, non-integrated assets in Austria or NL)
and revenue upside from T-Home's TV push.
Downside risks to our PO are higher than expected mobile impact coming from new
Drillisch tariffs or failure to turnaround good US operational trends into more profitable
revenue streams.
Analyst Certification
We, Benjamin Bowler, Clovis Couasnon and Frederic Boulan, CFA, hereby certify that the
views each of us has expressed in this research report accurately reflect each of our
respective personal views about the subject securities and issuers. We also certify that
no part of our respective compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or view expressed in this research report.
Special Disclosures
BofA Merrill Lynch is currently acting as Financial Advisor to Royal Dutch Shell PLC in
connection with its proposed sale of its UK North Sea assets to Chrysaor LTD, which
was announced on January 31, 2017.
Bankof America
Merrill Lynch Global Equity Volatility Insights |O6 June 2017. 29
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