Sprint spectrum position may seem more valuable after AT&T’s Straight Path deal
Although chatter about a Sprint/T-Mobile US merger seems to be an industry reflex, a new report from Bloomberg claims that Sprint parent company Softbank is looking beyond T-Mobile US for a possible deal, because it feels that the Sprint spectrum portfolio is undervalued.
According to the anonymous sources cited by Bloomberg, that view was bolstered by AT&T’s recent $1.6 billion purchase of Straight Path and its 868 spectrum licenses in the 28 GHz and 39 GHz spectrum bands, to pad AT&T’s 5G spectrum position. Sprint is now trying to figure out how to “better reflect the value” of its spectrum holdings, Bloomberg reported, whether by pushing for higher compensation for spectrum in a T-Mobile US deal or “even entertaining the notion of spinning off some spectrum into a separate, publicly traded company.”
Limitations on telecom merger talks by companies that participated in the recent 600 MHz spectrum auction will be lifted Thursday, which has prompted increased speculation on deals that might get done — with particular interest around Sprint, T-Mobile US and Dish Network.
Sprint has used its spectrum assets as backing for debt, raising billions in a series of offerings set to continue through mid-2017 which valued its spectrum holdings at $16.4 billion. Last October, Sprint expected to raise $3.5 billion in debt backed by 14% of its total spectrum holdings on a megahertz-per-potential customer covered basis and had indicated that it could raise as much as $7 billion backed by its spectrum holdings.
The spectrum-backed move followed up on a pair of previous asset-related funding moves by the carrier.
In 2015, Sprint created its Mobile Leasing Solutions subsidiary, tasked with handling the financial aspects of the carrier’s device leasing program in which it provides devices to consumers for a monthly fee over a fixed term before exchanging that device for a new model. In the spring of 2016, Sprint set up its Network LeaseCo, which raised funds backed by the carrier’s infrastructure. The entity, which was set up in connection with parent company SoftBank, used $3 billion worth of equipment to raise $2.2 billion in funds.
Sprint sees its vast swathes of spectrum in the 2.5 GHz band — in some markets, more than 150 megahertz — as central to 5G plans. Speaking at an investor conference late last year, Sprint CFO Tarek Robbiati echoed previous comments from Sprint management that the carrier’s 2.5 GHz holdings are set to be the low-band spectrum for the 5G world.
“In our mind 2.5 GHz is going to be to 5G what 800 [MHz] is to the 4G world,” Robbiati said.
Sprint has also tapped into higher spectrum bands in its 5G network trials, including the 73 GHz band in conjunction with vendor Nokia and the 15 GHz band with Ericsson.
