Verizon Communications is reportedly preparing to issue the first bonds in the US to use customers’ regular payments for mobile phones as collateral. The US’ largest wireless operator has met with investors and ratings agencies such as Standard & Poor’s in recent weeks to discuss the asset-back offering, Bloomberg cited a person familiar with the matter saying.
Verizon Communications (NYSE:VZ) is reportedly preparing to issue the first bonds in the US to use customers’ regular payments for mobile phones as collateral.
The US’ largest wireless operator has met with investors and ratings agencies such as Standard & Poor’s in recent weeks to discuss the asset-back offering, Bloomberg cited a person familiar with the matter saying.
Verizon could begin selling the securities, which it wants to be rated as high as AAA, in June or July, the report stated. If they generate strong demand from investors, the company could begin offering such bonds on a regular basis, potentially four times a year.
Verizon and Standard & Poor’s have declined to comment.
As in certain other countries, wireless carriers in the US allow customers to spread the full cost of their mobile phones over 24 months, providing them with a steady cash stream that can be securitised.
Verizon’s smaller rival Sprint is also testing out innovative forms of financing. The number four mobile player has raised funds through newly formed leasecos which use handsets and network assets as collateral and, according to New Street Research analysts, it is expected to announce a new spectrum leasing finance vehicle shortly.
Verizon today reported Q1 2016 revenue, adjusted EBITDA and earnings per share of US$32.2bn, US$12bn and US$1.06 respectively.
Wells Fargo analyst Jennifer Fritzsche said in an investor note that while 2016 “remains a transition year for the company, we believe Verizon has several catalysts for growth in 2017 – visibility toward positive service revenue growth, improved operating efficiency in wireline and the expansion of its digital media and internet of things platforms. While we recognise the company is indeed making a big strategic shift in its forward-looking direction – the company’s robust cash flow generation should help it to make this transition.”
Verizon, reportedly the frontrunner for Yahoo’s core internet business, has been making big bets on content recently, agreeing to pay US$4.4bn for AOL last May and launching its advertising-funded mobile video app go90 last October. This March, it formed a digital video joint venture with media company Hearst, Verizon Hearst Media Partners. This month, the JV partners agreed to make two acquisitions: a 24.5% stake each in multi-platform media company AwesomenessTV and a full takeover of online publisher Complex.