Challenger operator T-Mobile US is set to raise around US$1.8bn from a public offering of shares to fund capex and future spectrum acquisitions. Morgan Stanley, Goldman Sachs, JP Morgan, Credit Suisse and Deutsche Bank are managing the offering which…
Challenger operator T-Mobile US is set to raise around US$1.8bn from a public offering of shares to fund capex and future spectrum acquisitions.
Morgan Stanley, Goldman Sachs, JP Morgan, Credit Suisse and Deutsche Bank are managing the offering which will see over 66 million shares, worth around US$1.8bn based on its latest stock price, put on the market.
A greenshoe option for a further 6.6 million shares is available and would take proceeds for the total offering to roughly US$2bn. The operator’s share price dropped to US$26.97 following the news, after opening at US$27.74.
Over the six months T-Mobile has been listed – following its reverse merger with MetroPCS – investors have been bullish on the operator’s prospects and its shares have risen 66%.
T-Mobile plans to use the proceeds for buying spectrum, both in auctions and through private transactions, and to finance capital expenditure.
Analysts said the capital raising exercise came sooner than expected. New Street’s Jonathan Chaplin expects T-Mobile to purchase low band spectrum and the research firm “suspect[s] the company is close to a deal”.
Nomura analyst Adam Ilkowitz also expects a spectrum deal and suggests that T-Mobile could go for “the remainder of AT&T’s AWS spectrum: 10-30 MHz in 41 of the [US] top-100 markets, easing the proposed acquisition of Leap from a regulatory perspective”.
T-Mobile’s public offering will dilute parent Deutsche Telekom’s stake in the business, taking its 74% holding down to roughly 67%. In a statement Deutsche Telekom said: “This is another step to strengthen the self-funding basis of T-Mobile US after for example the tower sale [to Crown Castle in 2012], the bond issuance in 2013 or the sale of T-Mobile bonds from Deutsche Telekom to investors outside the group [last month].
“We look at the recent operational and financial performance of T-Mobile US with pride. Deutsche Telekom remains committed to the business.”
In a memo, Bernstein Research said Deutsche Telekom’s decision not to take part in the offering was consistent with its strategy for T-Mobile.
“[Deutsche Telekom] has been clear that it wants TMUS to be self-funding, and that they wish to retain their own balance sheet strength for investment in Germany and flexibility regarding their other assets.
“We like the fact that DT are not managed by empire builders, but by more pragmatic management.”
The German incumbent previously tried to offload its US operations to AT&T in 2011 for US$39bn. A deal was agreed but had to be abandoned due to the US antitrust regulator’s concerns.
Earlier this year T-Mobile merged with MetroPCS and took over the prepaid operator’s listed status. This gave Deutsche Telekom more options to exit the business should it wish to.
