Public Tower Companies Converting to Tax-Efficient REIT Structures: Expert Analyst Benjamin Lowe Discusses Why Companies are Making the Change with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - July 23, 2013 - The Wall Street Transcript has just published its Wireless Communications & Telecom Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Mobile Trends in Emerging Markets - 4G Infrastructure Capital Expenditures - Tower Cell Splitting - Global Wireless Spectrum Allocation - 4G LTE and 3G Infrastructure Upgrades

Companies include: American Tower Corp. (AMT), Crown Castle International Cor (CCI), SBA Communications Corp. (SBAC), AT&T, Inc. (T), Verizon Communications Inc. (VZ), Sprint Nextel Corp. (S), Dish Network Corp. (DISH) and many more.

In the following excerpt from the Wireless Communications & Telecom Report, an expert analyst discusses the outlook for the sector for investors:

TWST: I saw that American Tower is now a REIT. In many ways these companies are real estate companies, but why specifically did American Tower make that change?

Mr. Lowe: I agree, these companies are fundamentally real estate businesses, so location matters. It is vertical real estate. If I were to build a tower in the middle of a cornfield where there are no subscribers within a 10-mile radius, none of the carriers are going to have any desire to be located on that tower. So location is going to matter, and the physical location of the tower is going to drive a lot of the decision-making.

I think the primary reason for AMT's conversion, and why Crown Castle will look to convert when their NOL position is exhausted in the 2015-2016 time frame, is because it is the most tax-efficient structure. As a REIT you avoid paying federal income tax in the U.S. The offset is you are required to pay out at least 90% of your taxable income and return that to shareholders, but that trade-off is a positive one in terms of being able to avoid a lot of the tax liability associated with being a C-Corp in a tax-paying position.

Said in another way, AMT looked to convert when they were getting close to a point where their net operating losses were exhausted, and therefore they would be a more meaningful cash taxpayer. Crown Castle is going to do the same thing. Right now they still have a meaningful amount of NOLs that are shielding their tax liability, but as they burn through those over the next couple of years, and they get to the point in 2015-2016 where they are going to be a more meaningful taxpayer in the U.S., they will work to convert to a REIT structure as well, to again kind of optimize the tax structure of the company.

TWST: You talked a little bit about the international profile of these companies. What is their international exposure?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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