July 29 Shares of U.S. telecom companies rose
after network operator Windstream Holdings Inc said it
got regulatory approval to convert some of its assets into a
REIT - a tax-efficient structure that could be followed by
The company's shares jumped as much as 26 percent in early
trading. Peer CenturyLink Inc's shares were up 8
percent, while AT&T Inc's shares rose 3 percent and
Verizon Communication Inc's shares were up 2 percent.
Windstream said it got a favorable private letter ruling
from Internal Revenue Service (IRS), allowing it to spin off its
fiber and copper network and other fixed real estate assets into
a real estate investment trust (REIT).
"Given the IRS approval, we expect other companies may
explore the possibility of spinning off their Wireline assets
into a similar structure," Jefferies LLC analysts wrote in
REITs are not required to pay corporate tax but must
distribute at least 90 percent of taxable income among
shareholders via dividends, making it attractive for investors.
To qualify as a REIT, however, a business must have at least
75 percent of its holdings in real estate assets.
Windstream's REIT will list separately and pay an annual
dividend equivalent to 60 cents per share, after a tax-free
spinoff, the company said in a statement.
The company's shares were up 18 percent at $12.46 on the
Nasdaq on Tuesday morning, after touching a two-year high of
Nearly 57.5 million shares had changed hands by 10.48 a.m.
ET, 10 times the stock's 10-day average volume.
(Reporting by Supantha Mukherjee in Bangalore)