Seeking Alpha

Telcos swing wildly as Street mulls REIT odds, M&A potential

  • "I’m skeptical it can be replicated," says Elevation LLC's Stephen Sweeney about Windstream's (WIN +12.9%) REIT spinoff plans. "It’s very unclear if other large cap companies can have their companies viewed by the IRS as real estate."
  • UBS also has its doubts: It thinks AT&T (T +3.3%) and Verizon (VZ +1.8%) would have to open up their networks to rivals if they were spun off into REITs, something it doesn't think the carriers will be keen on doing.
  • Oppenheimer's Tim Horan is more positive, albeit while cautioning Windstream's spinoff isn't a done deal. "If successful with this restructuring, and there are obviously high regulatory barriers, this will be a game changer for the valuation of non-REIT infrastructure stocks in our industry.”
  • AT&T, Verizon, Windstream, Frontier (FTR +11.7%), and CenturyLink (CTL +4.2%) have pared their morning gains a bit amid volatile trading on very heavy volumes. AT&T has seen 66M shares trade vs. a daily average of 19.3M; Frontier has seen 89M trade vs. an average of 6.9M.
  • Enthusiasm about Windstream's spinoff stems not only from the tax benefits provided to REITs - American Tower's tax expense has been halved since it converted into a REIT in 2012 - but also from the potential for spinoffs to spark new M&A activity.
  • Windstream CFO Tony Thomas: "The REIT is going to be uniquely positioned to be in a great spot to help unlock value at other companies ... We have a good understanding of how the REIT opportunity could work in the telecom landscape."
  • Earlier: Telcos soar following Windstream's REIT announcement
Comments (6)
  • docx2
    , contributor
    Comments (45) | Send Message
    I wonder if anyone has discussed the structure of the spin-off: some exchange ratio of WIN shares for the new REIT shares, the expected yield for the REIT versus the parent company, etc.
    29 Jul 2014, 12:24 PM Reply Like
  • 25348853
    , contributor
    Comments (29) | Send Message
    I read on an article that it would be a annual div total for both of .70 cents, .60 cents being for the reits and .10 for Win.


    It was a barrons blog article. Title "windstream soars 21% on reit spin off" this might give u more info.
    29 Jul 2014, 12:58 PM Reply Like
  • 8210021
    , contributor
    Comments (10) | Send Message
    REIT div vs Qualified div? Hmmm
    29 Jul 2014, 02:00 PM Reply Like
  • berloe
    , contributor
    Comments (1854) | Send Message
    T does own a lot of telephone poles and rents space to electric cos.
    29 Jul 2014, 03:02 PM Reply Like
  • jhesr
    , contributor
    Comments (459) | Send Message
    I fill my Roth IRA up with nothing but REITs because the companies pay no taxes and neither do I. Its a free lunch as far as I can tell.


    If AT&T did this I'd sell off the spinoff in my taxable account and buy it in my Roth IRA.
    29 Jul 2014, 05:54 PM Reply Like
  • docx2
    , contributor
    Comments (45) | Send Message
    Thanks 2534...
    30 Jul 2014, 10:45 AM Reply Like
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