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There are a couple of key differences between towers stocks like American Tower (NYSE:AMT), Crown Castle (NYSE:CCI), SBA Communications (NASDAQ:SBAC) and sliced bread.

In the case of AMT, I have outlined a variety of fundamental challenges that the company faces in the coming quarters in my earlier articles, available here. What I think the critical difference between AMT and sliced bread is that the bakers of bread tend to eat their product. In the case of AMT, the same people who serve up the wonderful sounding story are selling their own stock at an increasing pace.

My first article dealt with the increasing rate of insider selling immediately following the SEC subpoena and formal investigation of the company. This issue is still very much alive at the company. In fact the longer it takes the more likely it is that the SEC has found something to continue investigating.

This rate of sales has not changed, and the pace continues to accelerate while the investigation goes on. The key insiders shoveled out $5.8 million so far this month, and it's not over yet.

Source: EDGAR.

These insiders have no plans to slow down either, with an additional $25 million of planned sales in the coming year.

PLANNED INSIDER TRANSACTIONS ACTIVITY: AMERICAN TOWER CORP

LATEST
FILING

NAME

TITLE

12 MO. TOTAL
QUANTITY

12 MO. TOTAL

03/12/12

SHARBUTT DAVID E

Unknown

25,965

1.62 Mil

12/29/11

DISANTO EDMUND

Officer

47,418

2.81 Mil

12/06/11

DOLAN RAYMOND P

Unknown

45,000

2.67 Mil

12/01/11

HESS WILLIAM H

Officer

342,823

19.25 Mil

11/01/11

BARTLETT THOMAS

Unknown

42,663

2.45 Mil

09/01/11

TAICLET JAMES D

Chairman

240,000

13.23 Mil

08/30/11

MEYER ROBERT J

Unknown

6,250

326,352

Source: SEC Filings.

What I find troubling is that all this comes as the story at AMT continues to change with the news flow. I have written about the enormous challenges the company faces in India, which used to be their highly touted growth engine. In fact the story in India has become worse even over the past week.

Last week the government of India laid out its budget for the coming year. Buried deeply within it - "Finance Bill 2012" - is an amendment of a law with retrospective effect from April 1962 to tax deals involving overseas firms with interest in India. That would include AMT. Vodafone (NASDAQ:VOD) is the most high-profile company which would be affected by this change, and it recently took its case to the Supreme Court. The Supreme Court judged in favor of Vodafone. The judgment was seen as bolstering the confidence of foreign investors in India. However, deep within that same judgment the court left latitude for the government to change the law upon which its decision was based:

"It is for the government of the day to have them (tax policies)incorporated in the Treaties and in the laws so as to avoid conflicting views."

- Supreme Court of India, CA 733 of 2012 Vodafone Vs. Union of India.

This is exactly what the government has now done, and it presents a major problem - potentially - for AMT.

Funny Math

CEO James Taiclet recently gave a presentation to a real-estate oriented crowd where he said:

"We have 28% land ownership in the U.S. The balance of the sites that are leased, the average term is over 20 years right now remaining. And for each year over the next few years of less than 1% of the sites that are going to come up for renewal."

- James Taiclet, at Citigroup 2012 Global Property CEO Conference 3/8/2012.

While that may be true, it somewhat misses the point. The key to making money in the tower business is to have critical locations which multiple tenants will demand for a long time in the future. Leasehold aggregators, who are the real competitive threat for AMT in the future, are only concerned with the top 5% of the towers out there. The reason is that in 20 years the other 95% aren't going to be worth much due to advances in network architecture. See my earlier notes for details.

So while it may be true that only 1% of sites are due to be renewed this year. It is likely that those are some of the best ones in the portfolio. In this context AMT could lose the top 5% of sites pretty quickly. Additionally, leasehold aggregators do not wait around for the leases to expire before moving on them. In many cases landowners have sold interests in the land to the aggregators many years before the tower rep shows up to negotiate an extension.

Additionally, the 78% of the ground leases have a "final expiration" of 2021 and beyond that includes the two five year options. Each of these ground leases is unique, and many of the options have other bells and whistles attached, in particular price. So while those leases may have "final expirations" way off in the future, it does not mean that the rent won't go up a lot beginning in 2012 at the expiry of the initial 10 year term.

The bulk of AMT's leased sites are newer/peripheral sites including DAS/rooftop sites. The real problem is when the aggregator buys out the 200 foot tower which is at the corner of Main amd Main. Those tended to be some of the first ones, which were constructed in the early 1990's. These in particular are the "top 5%" ones that the aggregators are focused on. Fifteen years from 1990 is 2015 ... just around the corner in leasehold terms. This is where they are feeling the pain. To me it is clear that there is a "quality drain" over time, the best towers go away and AMT holds the rest.

A large percentage of the "2021 and beyond" towers are in Uganda, India, Ghana etc, and have extremely low tenancy rates.

This adds up to a some funny math. The insiders don't seem to want to wait around to see what happens.

Disclosure: I am short AMT.

Additional disclosure: I have negative delta options positions in AMT.

Source: Towers And Sliced Bread: Another Look At American Tower