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3 Telecom Stocks to Consider for 2012

Wireless telecommunications carriers provide telephone, Internet, data and other services to customers through the transmission of signals over networks of radio towers. The signals are transmitted through an antenna directly to customers, who use devices, such as cell phones and mobile computers, to receive, interpret and send information. As a result of the explosive growth in the use of wireless communication devices, telecommunication tower companies have seen a dramatic increase in demand for their services. In the U.S., there are four major tower companies Global Tower Partners, American Tower, Crown Castle International (CCI) and SBA Communications. This article will examine three of the wireless telecommunication tower companies.

American Tower REIT (AMT) has a market cap of $24.8 billion with a price to earnings ratio of 63.74. The stock has traded in a 52 week range between $45.85 and $64.55. The stock is currently trading around $63. The company reported fourth quarter revenues of $653 million compared to revenues of $547 million in the fourth quarter of 2010. Fourth quarter net income was $205 million compared to net Income of $83 million in the fourth quarter of 2010.

One of American Tower’s competitors is Globecomm Systems (GCOM). Globecomm is currently trading around $14 with a market cap of $329.98 million and a price to earnings ratio of 13.67. Neither Globecomm nor American Tower pays a dividend.

American Tower operates as a real estate investment trust. The company’s primary business comes from leasing antenna space on multi-tenant communications sites to wireless service providers, as well as radio and television companies. The company increased fourth quarter year-over-year revenues by 19% and net income by 147%. American Tower operates internationally and does business in the U.S., Latin America and Asia. In 2011, the company invested in over 12,000 new communication sites of which 90% were international sites. International growth has been driven as companies upgrade their 2 and 3G networks. In the U.S., AT&T (T) and Verizon (VZ) are investing in their 4G LTE networks.

These network upgrades bode well for American Towers, which predicts that it will grow its 2012 U.S. earnings by 13.8% and foreign earnings by 13%. In what is good news for shareholders, Tom Barlett, the company’s executive vice president, CFO and treasurer stated, “Finally, in 2012, our primary method of returning capital to stockholders will shift to our quarterly dividend, which for the full year we expect will be between $0.80 and $0.90 per share or approximately $340 million.” American Tower did not pay a dividend prior to 2012. The stock price has increased by 23% over the last 52 weeks. Prospective investors should do further research.

Crown Castle International (CCI) has a market cap of $14.7 billion with a price to earnings ratio of 101. The stock has traded in a 52-week range between $36.38 and $55.99. The stock is currently trading around $53. The company reported fourth quarter revenues of $519 million compared to revenues of $496 million in the fourth quarter of 2010. Fourth quarter net income was $49 million compared to net income of $41 million in the fourth quarter of 2010.

One of Crown Castle’s competitors is Iridium Communications (IRDM). Iridium is currently trading around $9 with a market cap of $666 million and a price to earnings ratio of 16.8. Neither Iridium nor Crown Castle pays a dividend.

Crown Castle provides communication towers and distributed antenna systems (DAS) networks. The company operates in the United States, Puerto Rico and Australia. The company increased fourth quarter year-over-year revenues by 4% and net income by 19%. The company has increased revenues for seven straight years, and in 2011, the company increased its year-over-year net income by $482 million. In the company's fourth quarter earnings call, CFO Jay Brown announced that, “In December 2011, we announced an agreement to acquire NextG Network for $1 billion, which we expect to close in the second quarter of 2012. NextG is the leading provider of distributed antenna systems or DAS.”

Crown Castle receives 94% of its revenues from within the U.S., and stands to benefit from the 4G LTE build-outs of its principal U.S. clients, Sprint Nextel (S), AT&T (T), Verizon (VZ) and Clearwater (CLWR). Crown Castle's stock price increased by 34% over the last 52 weeks and 169% over the last three years. Crown Castle’s future looks bright. Prospective investors should do further research.

SBA Communications (SBAC) has a market cap of $5.5 billion with a negative price to earnings ratio. The stock has traded in a 52 week range between $32.36 and $50.39. The stock is currently trading near its 52 week high at around $50. The company reported fourth quarter revenues of $183.8 million compared to revenues of $165 million in the fourth quarter of 2010. Fourth quarter net loss was $29 million compared to a net loss of $39 million in the fourth quarter of 2010.

One of SBA’s competitors is J2 Global (JCOM). J2 Global is currently trading around $30 with a market cap of $1.45 billion and a price to earnings ratio of 12.4. J2 Global pays a dividend which yields 2.8% versus SBA which does not pay a dividend.

SBA owns and operates communication towers for wireless communication providers. The company increased fourth quarter year-over-year revenues by 11% and net income by 34%. SBA has increased revenues in each of the last nine years but has reported losses in net income in each of those years. The company’s balance sheet shows debt of $3.5 billion with cash of $53 million. Over 90% of the company's revenues are earned in the U.S., and it expects to increase 2012 earnings by helping U.S. customers like T-Mobile (DTEGY.PK), Clearwater, AT&T and Verizon expand their 4G LTE networks. The stock price has increased by 22% over the last 52 weeks and 9% over the last month. If SBA could ever report positive earnings, the stock could see a hefty price increase. Prospective investors should do further research.

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