Windstream shares spike more than 12% following REIT plan announcement

Nasdaq shares for Windstream Communications' holding company ended trading Tuesday, July 29 up 12.35 percent after the company revealed that it was spinning off its copper and fiber assets into a real estate investment trust (REIT) and leasing them back.

In fact, at one point during afternoon trading, Windstream shares soared over 20 percent, as the company revealed a new strategy that will render its key broadband infrastructure exempt from federal taxes.

The Little Rock, Ark.-based provider of TV, broadband and voice services says it will pay $650 million a year to lease back its infrastructure, while cutting its debt $3.2 billion and freeing up cash for broadband upgrades. The company had 421,100 digital TV subscribers and 1.2 million broadband users as of March. Windstar says the network infrastructure being rolled into the REIT accounts for only around 25 percent of its assets.

"As a result of the transaction, Windstream will offer faster broadband speeds and more robust performance to consumers," Windstream said in a statement. The company said it would expand availability of 10 Mbps Internet service to more than 80 percent of its customers by 2018 and make 24 Mbps service available to 30 percent of customers by that same year, aboiut twice its current availability.

So, will we begin to see every cable and telecom spin off their network into REITs?

At least in terms of the larger operators, media investment analyst Craig Moffett thinks they already manage their tax situations well enough.

"The applicability of all this to peers is a matter of some debate," he wrote in a Tuesday memo to investors. "With or without REIT status, for example, AT&T, Verizon, Comcast, Charter, and Cablevision have all proven adept at managing their tax liabilities."

For more:
- read this Wall Street Journal story

Related links:
Windstream to spin off network assets into REIT
Windstream officially forms new holding company
Windstream to reach 75,000 rural households with broadband stimulus grants