American Tower Corp. (AMT) continues to perform exceptionally well supported by the rise in demand for wireless broadband data services coupled with the company’s global expansion strategy. Substantial demand for tower space to facilitate high-speed wireless data and on-demand video services, together with super-fast 3G/4G technologies, becomes a major boon for wireless tower operators. We believe massive demand for wireless data and video throughout the world will boost American Tower’s long-term growth.
In a major development, on May 19, 2011, the board of directors of American Tower has approved the commencement of the steps necessary to reorganize the company to qualify as a real estate investment trust (REIT) for tax purposes. However, the conversion will not take place before January 1, 2012. In order to qualify as a REIT, American Tower will issue a special distribution to stockholders of its undistributed earnings and profits for an aggregate amount no more than $200 million. The company will utilize its liquid cashes for this purpose. This special distribution of undistributed earnings and profits will happen in the fourth quarter of 2011.
Nevertheless, consolidation of the U.S. wireless industry and ongoing global economic fluctuations may restrict above-market potential of the stock any time soon.The proposed acquisition of T-Mobile USA by AT&T (T) may become a negative for American Tower in the long run . T-Mobile currently accounts for around 8% of American Tower’s consolidated revenue. At present, these two companies simultaneously shares 3,100 sites of American Tower. Several industry researchers have estimated that successful merger of AT&T and T-Mobile may reduce American Tower’s mid-term growth rate in the U.S. by 10%-15%.
We, therefore, reiterate our long-term 'Neutral recommendation on American Tower.
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