T-Mobile is stocking up on cash just ahead of the FCC spectrum auction with a $2 billion bond deal.
According to a recent 8-K filing, T-Mobile has entered into an agreement with parent company Deutsche Telekom (DT) in which it will sell DT $2 billion in senior notes and use the cash generated from the deal to pick up low-band spectrum assets.
Under the terms of the agreement, T-Mobile can also use the money to refinance its debt or for “general corporate purposes” if it is not first used for spectrum.
The notes issued to DT will come with an annual interest rate of 5.3 percent, will pay interest on a semiannual basis and will mature on March 15, 2021, according to the filing.
The move follows T-Mobile’s $2 billion debt sale in November, the proceeds of which were also earmarked for “general corporate purposes, which may include acquisition of additional spectrum.”
T-Mobile CFO Braxton Carter has said previously the Un-carrier will have up to $10 billion to spend in the auction, but tempered that statement by saying the company will likely be able to achieve its coverage goals with just $1 billion to $1.5 billion in additional spectrum.
The latter figures would be on par with the $1.8 billion T-Mobile spent in last year’s AWS-3 auction. In that auction, T-Mobile’s bidding was well behind that of AT&T and Verizon, which put up $18.2 billion and $10.4 billion, respectively.
Bloomberg analysts, however, have predicted T-Mobile will be among the big spenders this go around. According to their forecasts, AT&T will be at the top of the spending pool with an estimated $10.6 billion in bids, followed by T-Mobile with $8 billion, Verizon with $6.2 billion and Dish Network with $4.7 billion.
The upcoming FCC auction is slated to begin at the end of this month.