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American Tower Corporation.(AMT - Analyst Report) started functioning as a Real Estate Investment trust (REIT) from January 1, 2012, after completing the merger with its wholly owned subsidiary American Tower REIT, Inc., on December 31, 2011.
The share holders of the parent company will automatically gain control over American Tower REIT, Inc.’s stock. The stock of the newly merged company will continue to trade on the New York Stock Exchange under the same ticker symbol.
The main purpose of the company to covert itself into a REIT will be beneficial for the company in terms of tax savings. Following the conversion, American Tower will be required to pay less tax as the company will distribute 90% of its earnings through dividends.
It all started on May 19, 2011, when the Board of Directors of American Tower approved the commencement of the steps necessary to reorganize the company to qualify as a REIT for tax purposes. On November 29, 2011, AmericanTower received the stockholders approval relating to the merger between AMT Tower business and American Tower REIT, Inc.
In order to qualify as a REIT, American Tower made a special distribution to stockholders of its undistributed earnings and profits for an aggregate amount no more than $200 million. This resulted in a payment of special dividend of 35 cents per share to its shareholders on December 23, 2011.
American Tower announced mixed third quarter 2011 financial results, where total revenue surpassed the Zacks Consensus Estimate but EPS missed the same mainly due to unfavorable foreign exchange fluctuation and higher operating expenses.
The company expects total revenue from the Rental & Management segment in the range of $2,360 million - $2,390 million in fiscal 2012, lower than the Zacks Consensus Estimate of $2,783 million.
We believe that the wireless tower industry will continue to outperform primarily on the back of huge demand for mobile data and video services. So, in order to cash in on this lucrative opportunity the company has acquired 2,500 towers from Telefónica's Mexican subsidiary, Pegaso PCS, for $500 million. Moreover, the recent Multi lease Agreement (MLA) signed with Sprint Nextel Corp. (S - Analyst Report) will further boost the company’s top-line growth going forward.
Despite these positive sentiments, AmericanTower with its highly leveraged balance sheet continues to face huge margin pressure. Moreover, the recent development of satellite-delivered radio and video services could reduce the need for tower-based broadcast transmission going forward.
Currently,the companyhas a Zacks#3 Rank, implying a short-term Hold rating.
Boston, Massachusetts-based American Tower Corporation is a leading independent operator of wireless communications towers in the U.S., Brazil, Mexico, India, and Chile. American Tower leases antenna space on its towers to wireless service providers as well as to radio and television broadcast companies.