Sprint Corp. announced the pricing structure of its planned $2 billion secondary offering of Sprint PCS shares and equity units, placing 70 million shares of PCS common stock at a public offering price of $24.50 per share and 60 million in equity units at $25 per unit. The equity units are agreements to buy Sprint PCS stock in three years.
Sprint PCS said last year it planned to raise $3 billion this year to help fund its continued expansion, though it has not said how it plans to raise the additional $1 billion this year. Some analysts predict the carrier may sell a portion or all of its tower sites to raise the extra funding.
In addition to providing financing for the carrier’s expansion plans, the funding is expected to support Sprint PCS’ planned next-generation rollout scheduled to begin later this year. Sprint PCS has previously said its upgrade plans to 1x services will cost around $800 million.
While there was some concern the offering would create a stock overhang, devaluing Sprint PCS’ stock, the carrier’s tracking stock price was up slightly for the year even with the overhang present.
“For those investors who have been waiting for this overhang to disappear, we note that PCS is up 32 percent (year to date) vs. our North American wireless index, our global telecoms index and ahead of the major U.S. indices, which are all in negative territory,” said Jeffrey Hines, analyst with Deutsche Banc Alex. Brown, in a research note. “Last week alone, PCS shares increased 9 percent vs. a 1-percent decline in our North American wireless index. Food for thought.”
Standard & Poor’s said the offering would not affect its rating or outlook for Sprint PCS, though the credit rating agency said it is keeping its negative rating on the carrier due to uncertainty surrounding its long-term financing plans.
“Nonetheless, additional proceeds from planned non-strategic asset sales or monetization, and the impact of a potential slowdown in the deployment of some of Sprint’s growth initiatives on free cash flow will be critical elements to an improvement in the company’s credit metrics,” S&P said.
In addition to the 130 million shares Sprint offered, German telecom giant Deutsche Telekom AG offered nearly 50 million shares of PCS common stock it owned. DT is expected to use the nearly $900 million raised from the sale to pay down its enormous debt load. Sprint will not receive any of the proceeds from the DT sale.
