Market Overview

Telecom Sector Shoots Higher On Unprecedented Windstream Announcement

Related WIN
How Has Windstream Holdings, Inc. Performed Since Announcing REIT Conversion Plan?
Earnings Scheduled For August 7, 2014

Windstream (NASDAQ: WIN) is spinning off its assets into a publicly traded REIT to take advantage of massive tax savings.

Telecommunication stocks are moving higher as investors speculate other companies will follow a similar route. Oppenheimer called Windstream’s transition to a REIT a “game changer” for the entire industry.

How The Transaction Works

Windstream will spin off some assets for approximately $3.5 billion, which will be used to pay back $3.2 billion of debt. The REIT will then pay Windstream $650 million per year to rent the assets.

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The REIT plans to grow revenue via lease escalation, capital investment and acquisitions, allowing payment of a dividend to shareholders.

The structure change is expected to have no impact on customers and little impact on the way Windstream operates.

Stocks In Play

Windstream is up 33 percent, sending most other telecommunication stocks higher. Investors looking to play telecommunication stocks on this news should note that ADRs are less likely to move, as governance is different.

The following is a list of telecommunication stocks moving higher. The rest of the industry may be in play as investor’s analyze the REIT possibility for various business plans.

  • CenturyLink (NYSE: CTL) up 20.1 percent
  • AT&T (NYSE: T) up 5.2 percent
  • Verizon (NYSE: VZ) up 4 percent
  • T-Mobile US (NYSE: TMUS) up 1.1 percent
  • Comcast (NASDAQ: CMCSA) up 0.8 percent
  • Telephone & Data Systems (NYSE: TDS) up 0.4 percent

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