Sprint Moves Forward on Expected Spectrum Deal to Shore Up Books
Sprint said it plans to raise about $3.5 billion by selling off and then leasing back spectrum licenses. About 14 percent of Sprint’s total spectrum holdings, on a MHz/POPs basis, are included in the deal, offered through three lease vehicles,…
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Sprint said in a Wednesday news release. The spectrum leases are used “by approximately 77 percent of all of Sprint’s 2.5GHz enabled sites and approximately 33 percent of Sprint’s 1.9GHz enabled sites,” Sprint said. The licenses were independently valued at $16.4 billion, the company said. Sprint said it had negative cash flow of $3.17 billion in its last fiscal year, which ended March 31. Chief Financial Officer Tarek Robbiati said in May the carrier was working on a deal to shore up its books by selling and then leasing back spectrum (see 1605250060). In April, Sprint said it formed Network LeaseCo for the sale and leaseback of some of its network assets, mostly equipment located at cell towers (see 1604060070). The notes are expected to be rated investment grade by both Moody’s and Fitch, Sprint said. “The consummation of the Notes offering is subject to market and other conditions and is anticipated to close in early November 2016,” the carrier said. “There can be no assurance the Notes offering will be successfully completed on the terms described herein or at all.” The announcement was expected by investors, but there are still many unknowns, said Jonathan Chaplin, analyst at New Street Research, in a research note. “The most interesting data point will be what the value ascribed to this spectrum implies for Sprint’s overall spectrum value -- specifically, what value is being ascribed to Sprint’s 2.5 GHz licenses," Chaplin said. "Without knowing specifically which 1.9 GHz and 2.5 GHz licenses have been placed into the vehicles it is impossible to say, and the range of possible values based on the data that has been disclosed so far is enormous.” “The intent of the deal is to lower Sprint’s borrowing costs by replacing more than $4 billion of higher cost unsecured debt that is maturing over the next four quarters with this new secured debt,” said BTIG analyst Walter Piecyk in a blog post. BTIG estimates Sprint is valuing mostly 2.5 GHz spectrum at $1.85 MHz/POP, “which is more than 6x the $0.30/MHz/POP it effectively paid for this spectrum when it acquired Clearwire in 2013,” Piecyk said.