T-Mobile US is looking to bolster its wallet ahead of planned wireless spectrum auctions, announcing plans to offer up to $3 billion in senior notes.
The offering is to include $1.3 billion worth of 6% senior notes due in 2023, and $1.7 billion worth of 6.375% senior notes due in 2025. Deutsche Bank Securities, Citigroup Global Markets, Credit Suisse Securities and J.P. Morgan Securities are the joint book-running managers for the notes offering, with Barclays Capital, Goldman Sachs and RBS Securities set as the co-managers for the notes offering.
T-Mobile US said it plans to use $1 billion from the proceeds to redeem outstanding 7.875% senior notes that are due in 2018, with the remainder set aside for “general corporate purposes, which may include capital investments and acquisition of additional spectrum.”
T-Mobile US late last year raised $3.7 billion in a pair of note offerings that the company said would be used for “general corporate purposes, including capital investments, enhancing its financial flexibility and opportunistically acquiring additional spectrum in private party transactions and/or government auctions.” Shortly after that offering, T-Mobile US announced a deal to acquire 700 MHz spectrum licenses from Verizon Wireless.
T-Mobile US is expected to be an aggressive player in the upcoming Auction 97, which includes spectrum in the 1.7/2.1 GHz bands. That spectrum is adjacent to the carrier’s current holdings that are the basis for its LTE network deployment. T-Mobile US had been vocal in pressing the Federal Communications Commission on license sizes for the auction, which is set to begin Nov. 13.
T-Mobile US is likely to see strong competition in Auction 97, as Verizon Wireless is also expected to be a robust player in the proceedings. Wells Fargo Securities senior analyst Jennifer Fritzsche noted earlier this year that during a meeting with Verizon executives, CTO Tony Melone appeared “particularly excited about the AWS-3 upcoming auctions. Melone indicated AWS-3 is preferred over the broadcast incentive auction as [Verizon] needs more spectrum for ‘capacity more than coverage.’”
Verizon Wireless’ current LTE network is built on the 700 MHz spectrum holdings the carrier won during a government auction in 2008. Over the past several months, Verizon Wireless has added capacity support for its LTE service using the 1.7/2.1 GHz spectrum it acquired through a 2006 auction and from a handful of third-party deals.
In setting up rules for Auction 97, also known as AWS-3, the FCC did not put any limitation on bidding activity, which followed an announcement that it expects to limit participation in next year’s planned 600 MHz incentive auction. The FCC recently set a reserve price of $10 billion for the 1,614 total licenses up for bid in Auction 97.
Partial funds generated from the auction are set to be funneled to the FirstNet nationwide public-safety network. The government earmarked $7 billion toward the build out of FirstNet. The FCC had already generated more than $1.5 billion in auction funds earlier this year through the H-Block proceedings, which witnessed Dish Network gain access to all of the 10 megahertz spectrum licenses up for bid. With Auction 97 set to at least generate $10 billion in revenues, FirstNet should be set for its funding well ahead of the uncertainty that still surrounds the 600 MHz incentive auction proceedings.
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