Last week, fourth-largest domestic carrier T-Mobile (NASDAQ:TMUS) raised about $1.8 billion from a secondary stock offering. But just yesterday, the company announced it's also selling $2 billion of debt in an attempt to raise capital for additional wireless spectrum.
It's all about the spectrum
T-Mobile wants to boost its network data capacity and coverage by increasing its wireless spectrum. T-Mobile said in recent SEC filings that it's currently in talks with a private company to add additional spectrum and that it won't participate the upcoming FCC wireless spectrum auction this coming January.
T-Mobile announced on Monday that it's selling up to $2 billion of senior notes due in 2022 and 2024 in a registered public offering. As with the secondary offering of shares last week, T-Mobile expects to use the money for "capital investments, enhancing its financial flexibility and opportunistically acquiring additional spectrum in private party transactions and/or government auctions," although the majority of the money is likely to be used for spectrum.
Last week the company sold 72 million shares of stock in a secondary offering, at $25 per share. T-Mobile said in an SEC filing that if a wireless spectrum private-party deal goes through, a portion of that money will be used for the spectrum acquisition.
BTIG analyst Walter Piecyk wrote last week that T-Mobile is likely to be interested in a lower-band spectrum below 1 GHz, and that the only available spectrum available would come from Verizon Communications (NYSE:VZ). Piecyk said it would cost T-Mobile $3 billion to acquire the spectrum from Verizon and another $1 billion to expand its network further into the top 100 markets. This puts the total T-Mobile would need for current expansion at $4 billion, which is about how much it will have after selling $1.8 billion in new shares last week and if it can sell the $2 billion in debt.
Although Verizon's low-band spectrum is what T-Mobile may currently be in the market for, there's no guarantee that it's the private deal T-Mobile has been talking about.
T-Mobile has had two solid quarters of net postpaid branded subscriber growth, and it's looking to keep those customers and its current expansion momentum. Though the company has built its customer base with up-front pricing and low-cost plans, its network will need faster speeds and more coverage in order to compete with Verizon, AT&T, and Sprint. In addition to money from the recent secondary offering, the capital raised from selling some of its debt may be just the thing T-Mobile needs to add additional wireless spectrum and continue its massive turnaround.