T-Mobile to raise new debt in order to purchase AWS-3 spectrum at auction?


In a press release yesterday, T-Mobile announced that it would be seeking to raise new debt, to raise cash for general corporate purposes. Although the earlier release didn’t state how much was going to be raised, a further announcement was made later yesterday evening which did.

 T-Mobile USA, a wholly-owned subsidiary,has agreed to sell $1,300,000,000 aggregate principal amount of 6.000% Senior Notes due 2023 and $1,700,000,000 aggregate principal amount of 6.375% Senior Notes due 2025 in a registered public offering. The notes offering is scheduled to close on September 5, 2014, subject to satisfaction of customary closing conditions. T-Mobile expects to use the net proceeds from this offering for general corporate purposes, which may include capital investments and acquisition of additional spectrum. T-Mobile also intends to use approximately $1,000,000,000 of the proceeds to redeem its outstanding 7.875% Senior Notes due 2018 and pay related transaction fees and expenses.”

It’s expected that T-Mobile will use this money to invest at the upcoming AWS-3 spectrum auction, which begins on November 13. In fact, T-Mobile virtually confirmed as much in a statement.

“We routinely evaluate spectrum acquisition opportunities, including both government auctions and private transactions. We intend to participate in the FCC’s upcoming auction of AWS-3 spectrum, and if we are successful in the auction process, we anticipate that a portion of the net proceeds of this offering would be used to acquire such spectrum.”

Regardless of how much debt is raised, there’s still the possibility that T-Mo will be sold to another company. Although the deal with Sprint fell through at the last minute, Iliad SA – the French telecoms company – is still very interested in acquiring the DT-owned U.S. carrier. It’s been reported that Iliad SA has been courting many companies in order to raise finance for a bid. Three separate reports have stated that it has approached Microsoft and Google, Dish, and a handful of private equity firms. T-Mo itself isn’t denying that a buy-out by Iliad is possible.

“We cannot at this time predict whether Iliad S.A. and/or others will make any new or further proposal for a transaction with us or what the outcome of any such proposal would be. We cannot rule out the possibility that Iliad S.A or another party could submit a new or improved offer that would lead to negotiations and possibly to an agreed transaction.”

It’s clear then that T-Mo is a company in with much to consider. It needs to invest in spectrum to boost its coverage, but it doesn’t come cheap. The public offering will go some way to helping the carrier obtain the airwaves it needs, but it’s still no match for the financial clout of its two biggest rivals, AT&T and Verizon, who will both be bidding against T-Mo at the auction later this year.

Source: T-Mobile, SEC filing
Via: FierceWireless, GeekWire

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  • Maximus

    Paying off old debt with new debt…sounds like someone paying off their credit card with another credit card. You do what you gotta do to compete, I suppose. I hope they get all the spectrum they want. I really think spectrum should be owned and managed by some other entity other than the actual carriers. All carriers should have the same coverage and compete on products, customer service, etc. The current system is like having Honda build out a road system that only their cars can drive on and Ford building out another road network that their cars can drive on. It’s inefficient and doesn’t make sense.

    • Paul Garrison

      It would better for the consumer and prices in theory would be cheaper.

    • S. Ali

      Its more like refinancing older debt at a lower interest rate. Basically lower monthly payments and extended terms.

    • Everyone does refinancing. Even Verizon and AT&T shore up debt and refinance it regularly. If you don’t, it’s impossible to judge your financial creditworthiness.

      As it is, this new debt will allow T-Mobile to retire some debt that’s on less favorable terms, so the overall proportion of debt may actually lower.

      • markw

        Verizon has 28 Billion in cash and AT$T has 38 Billion. That’s as of August 31st. Refinance debt. Stupid.

    • VG

      The US federal government does the exact same thing, selling more and more T-bills and bonds to pay off the older debt. Nothing wrong with that (until nobody wants to purchase your new bonds .. then you have a problem).

      • markw

        Yeah. Its called a Ponzi scheme.

        • Stefan Naumowicz

          Not exactly. Its more of a pyramid scheme.

    • donnybee

      As for the paying old debt with new debt, it’s standard practice. As long as it’s a smart change. They’re lowering their interest, extending the period and possibly getting better ‘fine print’, so to speak. So it works out for us all :)

      The analogy with the cars got me thinking that it would be nice if all the carriers had the same coverage, but that’s exactly why they’re able to compete is because they don’t all have the same. in fact, your analogy really doesn’t play in with the wireless world because, while it would be weird for Ford to make a ‘network’ of roads, that would be equivalent to samsung making it’s own wireless network. Instead, they realistically rely on the independent carriers who build the network to run their products on.

      A better analogy to the wireless market would be to think of toll roads because they’re independent. Some are long, some are short. Some are in high-demand spots, some aren’t. Yet they all are maintained separate from the manufacturers of the products that use them, and they’re all privately owned. They have to buy land and spend money to build their road and maintain it. For that, people come and use it because it’s nice, convenient and well-maintained. They couldn’t all be the same width, length, color, and position, or they just wouldn’t have anything to compete with. Just wanted to share!

    • ChitChatCat

      Assuming the debt is repaid with the higher interest rate new debt, that’s a savings of 1.5% per year on A BILLION DOLLARS. Why wouldn’t you refinance that? I refinanced my $10,000 car loan to save one percent.

    • xmiro

      yeah and they all do it, look at how levered up Verizon is

    • Stefan Naumowicz

      Not exactly. The carriers subscribers can (and do) use their carrier’s competitors networks – that’s what roaming is. By selling spectrum, each carrier gets airwaves that are protected and guaranteed to be free of unauthorized coutilization – aka interference. And, customers get to choose between a carrier with premium spectrum and high prices (verizon, att) and a carrier with lower quality spectrum but low prices (T-Mobile, sprint). What good would 4 carriers be if they all offered the same thing?

  • Alex Zapata

    Well this is all fine and dandy, but I hope they have enough for the 600MHz auction next year.

  • taron19119

    I hope the analyst are right that next year they expect t-mobile bring in the most profit in company history

  • Paul

    I appreciate they Magenta is looking forward, in regards to using the money for spectrum and such, and not holding out to see if someone is going to buy them out. Keep moving forward!!

  • Stefan Naumowicz

    If T-Mobile is interested in more aws spectrum, why did they sell what they had to Verizon when they bought the 700 a block from them?

    • taron19119

      They did not sale and they gave up aws spectrum in markets where they have boatloads of AWS spectrum to help pay for 700mz spectrum

    • k

      They are shoring up existing aws spectrum to boost specific markets to wideband lte. The aws sale they made earlier were in markets where they already had wideband bandwidth

      • Jay Holm

        Existing markets? I’m still waiting for Wideband LTE in Fairfield County Connecticut (Bridgeport)!

    • CPPCrispy

      In terms of the AWS-3 auction, I think that T-Mobile is looking to get more spectrum in areas where they don’t have much (Cincinnati, etc.).

      • Nick

        That’s what I was thinking too

      • Jay J. Blanco

        Columbia, SC :-)

  • fp

    Question marks do not belong in headlines.

  • Laststop311

    bleh this money would be better spent on getting a larger block of 600mhz. How is this 600mhz going to work as far as creating wider bandwidth of lte. Like if t-mobile already has 15+15 from aws lte and they get 20 mhz of nationwide 600mhz spectrum can they just add that to the 15+15 and have 25+25 lte or do the frquencies have to be continous near each other? And how will t-mobile differentiate from boosting their speeds for everyone or using the frequency to allow more people to be connected at the same time. Obviously if its split into people connecting at 10+10 and 15+15 they can have more connections then if people are using the whole 25+25