Sprint Corp and T-Mobile US are reported to be considering raising US$10bn and forming a joint venture to bid for 600 MHz spectrum, set to be auctioned next year, as they continue to discuss a possible merger. The JV would be used if parents Softbank…
Sprint Corp and T-Mobile US are reported to be considering raising US$10bn and forming a joint venture to bid for 600 MHz spectrum, set to be auctioned next year, as they continue to discuss a possible merger.
The JV would be used if parents Softbank and Deutsche Telekom agree to combine the operators this summer and the transaction’s regulatory review – expected to be lengthy – is still happening when the 2015 frequency sale comes around.
The US$10bn would be raised as part of Softbank’s wider US$45bn financing package it is looking to secure to unite the US’s number three and four players, people familiar with the matter told The Wall Street Journal.
Japanese banks Mizuho, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui have been hired to raise the debt, alongside JP Morgan, Goldman Sachs, Deutsche Bank, BofA Merrill Lynch and Citigroup, according to previous reports.
The operators are said to have agreed a deal in principal in June. Sprint is set to pay around US$40 per share for T-Mobile US, which would give the operator a market capitalisation of US$32bn, although it is not clear how large a stake it would look to acquire in the merged telco.
A JV would enable the operators to participate in the incentive auction without running the risk of anti-collusion regulations, although it is just one option they are considering. The FCC is considering setting unique rules for joint bidders and a JV would have to register to participate in the auction well in advance, the report said.
The incentive auction is two-sided, designed to use market forces to recover 600 MHz spectrum from broadcasters and put it into the hands of mobile operators. The low-band frequencies are considered ‘beachfront property’ by telcos as they are ideal for deploying LTE.
The FCC has said it will reserve up to 30 MHz of spectrum in the 600 MHz auction for “providers that currently hold less than 1/3 of suitable and available low-band spectrum in a license area”.
This favours Sprint and T-Mobile, however the FCC said it was based on the current market structure meaning the rule would change if the operators decided to merge.
