T-Mobile US is out with a US$2bn bond offering to bolster its warchest ahead of the incentive auction of 600 MHz spectrum early next year.
T-Mobile US (NASDAQ:TMUS) has priced US$2bn of 6.5% senior notes at par as it looks to raise funds that could be used for the upcoming incentive auction of 600 MHz spectrum.
America’s third-largest wireless operator has also doubled the size of its term loan credit agreement to US$2bn, according to an SEC filing.
Proceeds from the offering, expected to close on 5 November, will be used for general corporate purposes, which may include acquiring additional spectrum, the company said.
In mid-October the FCC has announced prices and detailed procedures for next year’s incentive spectrum auction, with the highest opening price to pay-TV broadcasters set at US$900m.
The ‘reverse’ part of the auction will see broadcasters sell spectrum to the FCC and the starting prices represent the highest amounts they can expect to receive. It is up to individual broadcasters to decide how much, if any, of their spectrum they will sell.
Deutsche Bank, Citigroup, JP Morgan, Barclays and Goldman Sachs are joint book-running managers on the note offering and Credit Suissé, Morgan Stanley and RBC Capital Markets are co-managers.
In a note to investors Moody’s assigned the bond a non-investment grade Ba3 rating, while saying the outlook for T-Mobile was stable.
The ratings agency expects T-Mobile’s positive free cash flow generation to grow rapidly from the start of next year, and said a strong liquidity profile and valuable spectrum assets supported its credit.
However, Moody’s said this was offset by the operator’s distant third position in the US’s highly competitive market and capital requirement to upgrade its network, allied to its “moderately leveraged” balance sheet.
The bond issuance comes a week after T-Mobile reported disappointing Q3 results that saw its share price drop 7% as its average postpaid ARPU fell.
New Street Research analysts felt the sell-off was overblown, saying the results were just “a little soft relative to recently raised expectations”.
The firm has a buy rating on the stock as its subscribers, revenues and EBITDA are going in the right direction while rival operators are standing still. New Street has a US$50 per share target price on the stock, which is currently trading at around the US$39 per share mark.