T-Mobile begins to pad its war-chest for spectrum purchases, to issue $3 billion in notes

T-Mobile begins to pad its war-chest for spectrum purchases, to issue $3 billion in notes
Team Magenta has been preparing for the 600MHz spectrum auction, to be held next year, for quite a while, most notably, by lobbying the FCC to change the rules that might limit bidding from carriers with existing blocks of low-band spectrum, that is, below 1,000MHz.

During the last big auction in 2008, the 700MHz block, Verizon and AT&T were the big winners, securing the majorities of Block C and Block B respectively, which had the largest set of licenses, and in Verizon’s case, the most bandwidth.

It is plain to see that Verizon and AT&T have not wasted any time in making use of that spectrum, and in fact, AT&T is still building out it portion of the network. Sprint and T-Mobile were not significant bidders in those auctions, whereas, of the $20 billion raised, $16.3 billion came from AT&T and Verizon.

The two big players with the deepest pockets are sure to carry similar weight in next year’s auction, but T-Mobile is getting ready by issuing $3 billion in two different blocks of senior notes (debt) to investors this week. The first set, $1.3 billion will be redeemable in 2023 at 6%, and the next set will be $1.7 billion at 6.375%, due in 2025.

600MHz has been called “beachfront property” in the wireless sphere, better building penetration, and wider coverage characteristics, thus fewer towers required to power the network. T-Mobile may have some rules on its side, but it is still going to need to bring its wallet to buy the spectrum where it wants.

$1 billion of funds raised will be set aside to pay off existing notes that are due in 2018. The rest of the proceeds will be for “general corporate purposes, which may include capital investments and acquisition of additional spectrum.”

T-Mobile already has about $3 billion of cash on hand, and its position is looking good thanks to a healthy stock price which again, is due to solid growth and the prospect of becoming the third largest carrier in the United States. Couple that cash flow with whatever is in place next summer, other credit facilities, maybe another round of debt issues, and Team Magenta is going to be a bidder to watch in next year’s auction.

source: T-Mobile

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