A few items came out this week which bolster the bear case on American Tower (AMT).

First MSCI announced that AMT would not be included in the US REIT index after their comprehensive semi-annual index review. Wall St. analysts had been giddy with the prospect of an avalanche of demand for the shares from Index investors which will now not take place.

More importantly I have found what I consider to be some misleading disclosures regarding both tower ground lease renewal rates.

Below is a slide taken from the recent management roadshow the CFO took with analysts and salespeople from Bank of America (BAC). It reads very well and seems impressive on the surface. However looking into the information makes me question their calculations.

(click to enlarge)

AMT asserts in the slide that they have been successful in renewing 99% of their ground leases.

"Successful land lease renewal history,

American Tower leases cellular tower space to large network operators, primarily Verizon(V) and Sprint (S) and ATT (T) in the United States, as well as Telefonica (TEF) and Millicom (MICC) overseas.

While initially quite successful in the US, this success has attracted enormous competition which escalates as AMT loses control over its assets as leases expire.

There are four separate issues each of which could have billion dollar or greater impact on American Tower.

Issue #1: Loss of Control of Most Valuable US Towers

Issue #2: Property Taxes (ad valorem Taxation on higher basis from leasehold transactions)

Issue #3: India - Substantial Impairment Charges at Best, Total Write-Off Possible

Issue #4: SEC Investigation, Whistleblowers and other pests

Issue #1:

Leasehold Aggregation Activity

As I have discussed in earlier articles, one of the largest threats to AMT is the activity of leasehold aggregators. The goal of the aggregators is to

There are a couple of key differences between towers stocks like American Tower (AMT), Crown Castle (CCI), SBA Communications (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

The last few weeks have been a busy time for American Tower (AMT):

2/2/12 - The Supreme Court of India cancels all 122 licenses granted since 2008.

2/14/12 - Indian Regulator proposes 74% foreign ownership cap for tower companies.

2/16/12 - American Tower is sued in Texas court by its largest landlord.

2/23/12 - American Tower describes 2012 as back-end-loaded

2/27/12 - Industry tradeshow features non-tower based cellular "underlay" products.

American Tower reported Q4 and full-year 2011 results and filed its annual 10-K this week, as well as providing management's outlook for 2012. Separately, the Mobile World Congress took place this week, with companies showcasing the latest products and innovations. Many of these will impact the value of the traditional cell tower quite substantially. Below are my thoughts and questions after these events.

If the International Growth Story is so great, why is AMT's International Rental

On Feb. 15, MSCI published its semi-annual review of the MSCI REIT index and chose not to include American Tower (AMT). This is a shame for AMT because much of their planning for future demand for their stock revolved around inclusion in the key REIT indices, and as of Wednesday, this plan has not panned out. There are many very valid reasons why MSCI could consider AMT not to be a REIT worthy of inclusion in the index. In my opinion the same reasons should be considered by investors as well. A full discussion of these reasons is available here.

This development is in keeping with my recent series of articles about AMT which can be accessed by following the links here. AMT's clients AT&T (T), Sprint (S) probably could not care less whether AMT is in an index or not, but this has

Consolidation among customers is a bad thing in the tower business.

This week's news from the Supreme Court of India that all 122 operating licenses which the Ministry of Communication had issued since 2008 were revoked, has effectively caused immediate consolidation in the Indian cellular market. For a company like American Tower (AMT), which pinned its growth strategy to co-locating multiple tenants on your newly acquired Indian towers, this is extraordinarily bad news. Customers of all the affected smaller operators are going to find their 2G phones not working in 4 months. Customers are signing up with the top 4 providers by the millions. The problem for AMT is that the unaffected operators in India are not material tenants on AMT's towers.

AMT's filings list their largest customer in India as Idea Cellular. Idea Cellular has just lost 13 of their licenses to operate 2G service in India, including the

After listening to the AT&T (T) and Crown Castle (CCI) conference calls today, I have the following observations. These are in addition to my other recent notes on American Tower (AMT).

DAS (Distributed Antenna Systems) - The Panacea for Spectrum issues?

ATT did not mince words this morning to convey their disdain of what Randall Stephenson called of the "Current FCC." With the current non-business friendly decisions and seemingly arbitrary requirements the FCC has recently demonstrated, it seemed quite clear to me that ATT had lost any hope of securing any meaningful spectrum with the current approval process.

Distributed Antenna systems are currently available and are vastly easier to deploy than traditional cell towers. All that is required is power and an internet connection. They are cheap and unobtrusive. Crown Castle provided some pictures of recent installations. American Tower has chosen not to focus on DAS, in my opinion

This is the fifth in an ongoing series about American Tower Corporation (AMT).

These are the hard questions investors should be asking before buying American Tower:

1. Is Adjusted Funds From Operation a relevant metric for valuing AMT?

I think it is a very inaccurate measure to use. The reason is that a very large portion of AMT's expenses are non-cash. Specifically Stock Based Compensation Expense (approximately $50 million), Depreciation and Amortization ($550 million), and foreign currency translations ($150 million and still counting). See my earlier notes here and here for details.

It is far too convenient to add these expenses back to net income and come up with a Funds From Operation (FFO) number or an even more egregious Adjusted Funds From Operation metric (AFFO), a.k.a. Astonishingly Far From Objective.

Measuring a company that owns less than 20% of the land under its towers

This is the fourth article in a series about American Tower Corporation. The previous article in the series can be found here.

This note will include my thoughts on AMT's current valuation. This valuation work is to be used in conjunction with earlier notes which detail the deteriorating fundamental story and opaque financials of AMT.

Thoughts on Valuation

One of my primary concerns with AMT is the rapidly changing nature of the company on many fronts. AMT has changed very fundamental parts of it's business very rapidly, including changing its corporate status (REIT transformation), asset base (rapid foreign expansion), and measurements of success (From Earnings to AFFO). This substantial amount of change makes comparisons difficult, and enables AMT's management to report results which may not reflect the substance of what is really going on with the underlying business.

FFO (Funds From Operation) and AFFO (Adjusted Funds From Operation)

This is the third note in an ongoing series about American Tower Corporation (AMT) (See first note here and second note here). In this segment I focus on AMT’s growth strategy and their intention to convert into a REIT structure. Earlier parts of this series have covered the ongoing SEC investigation of AMT, recent enormous insiders sales, decreasing margins, tower obsolescence, and increasing leverage.

REIT Transformation…Why?

AMT is in the process of converting into a Real Estate Investment Trust (REIT). Management has spent a substantial amount of their time this year involved in this process. The stated goals of the REIT election are in order to lower the amount of AMT’s federal income tax liability and to broaden the investor audience to include REIT investors.

Electing to be taxed as a REIT makes no sense for shareholders at this time for AMT for several reasons:

1.) AMT’s substantial

Over the past 18 months American Tower Corp. (AMT) has radically shifted its business, doubling the size of its overseas business. Overseas markets accounted for 15% of revenues in 2009 and now account for 30% of AMT’s business. This has come at an enormous cost. Entering into new markets is expensive and managing assets in different markets presents many challenges. AMT has spent enormous resource acquiring assets and managing them in emerging and frontier markets. AMT’s management has characterized this shift as part of their growth strategy going forward. There are two main problems with this:

1. At what cost is this growth worth having?
2. These acquisitions have not allowed AMT to leverage their SG&A costs, in fact quite the opposite.

Buying towers hand over fist in disparate operating environments can be value destructive if AMT pays too much for it. How much a tower is worth depends on AMT can

This is an introduction into a series of notes which explore several areas of concern with American Tower Corporation (AMT), including AMT's disclosure, accounting, guidance and governance policies.

Introduction

If the future of AMT is as bright as the current management portrays, why are they selling such substantial amounts of their holdings?

The answer may lie in the fact that the company is subject of an undisclosed Formal SEC Investigation. The investigation apparently involves AMT's tax accounting and as well as the sufficiency of their disclosure surrounding the competitive landscape.

The SEC seems to agree that AMT may be painting the truth in shades of grey, having opened a formal investigation in June. AMT has chosen to not clearly disclose this, and certainly not illuminated the potential serious nature of this investigation. Further, if the SEC finds areas of questionable accounting involving taxation, it would be nearly certain to