Wells Fargo Securities reports that it has received several queries about how the proposed tax plan will impact the wireless industry. To begin with, carriers such as AT&T and Verizon would see effective tax rates decrease from 35 percent to 20 percent, as well as favorable tax deduction changes.
“Many in our telecom space will benefit from the proposal to allow companies to take a full tax deduction for capital expenditures given the capital-intensive nature of our industry,” wrote Jennifer Fritzsche, senior analyst. “AT&T has indicated if tax reform is implemented it will spend an additional $1B in capex. We would not be surprised if other companies pulled forward some investment to take advantage of this significant tax deduction.”
Since American Tower and Crown Castle International and SBA Communications have become Real Estate Investment Trusts (REITs), Fritzsche commented that there is are positives in the bills for REIT investors as well.
“We think there are several positives for REITs,” Fritzsche wrote. “For one, the Senate and House bills have proposed to lower the dividend tax rate on REIT income to ~25-30 percent (from the ordinary income tax rate of nearly 40 percent). Furthermore, tax reform could pull forward the investment cycles of many data center/tower customers.”