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

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Comments (6)
  • docx2
    , contributor
    Comments (112) | 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 (23) | Send Message
    REIT div vs Qualified div? Hmmm
    29 Jul 2014, 02:00 PM Reply Like
  • berloe
    , contributor
    Comments (2217) | Send Message
    T does own a lot of telephone poles and rents space to electric cos.
    29 Jul 2014, 03:02 PM Reply Like
  • 123098567432
    , contributor
    Comments (763) | 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 (112) | Send Message
    Thanks 2534...
    30 Jul 2014, 10:45 AM Reply Like
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