T-Mobile to raise $1.8B in stock sale, could use funds to buy spectrum
T-Mobile US (NYSE:TMUS) said it plans to sell new shares in a move that could raise as much as $1.8 billion. The company could use the cash to acquire spectrum in upcoming auctions.
T-Mobile said it will be offering 66.2 million shares, or roughly 9 percent of its existing shares outstanding, which would raise $1.8 billion, based on the stock's closing price of $26.97 on Monday. T-Mobile also said it will grant the underwriters--Morgan Stanley, Goldman Sachs, JPMorgan Chase & Co., Credit Suisse and Deutsche Bank--the option to buy as many as 6.62 million additional shares.
In a statement, the carrier said it "expects to use the net proceeds from this offering for general corporate purposes, including capital investments, enhancing its financial flexibility and opportunistically acquiring additional spectrum in private party transactions and/or government auction."
There are several auctions that will likely take place in the next 12-16 months, including the 1900 MHz PCS H Block auction, scheduled for Jan. 22. Additionally, T-Mobile, like Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and Sprint (NYSE:S), is angling for the 600 MHz broadcast TV spectrum incentive auctions, which are scheduled to being sometime next year. Finally, T-Mobile could be particularly keen to participate in the auction of AWS-3 spectrum, scheduled for February 2015 at the latest, since those airwaves would pair well with its existing AWS spectrum.
"We can think of three options currently or imminently in play: 1) the H-Block; 2) LightSquared, and; 3) the 700MHz A-Block. TMUS mgmt. has stated in the past that the H-Block isn't a great fit and that they have a strong preference for low-band spectrum," New Street Research analyst Jonathan Chaplin wrote in a research note. "As such, of the three bands that immediately come to mind, the A-Block seems most likely. The only other low-band spectrum we could think of that is unused is the D&E-Block; however, we doubt DISH or AT&T would part with these and we believe TMUS would prefer paired spectrum."
T-Mobile added 2.1 million net new subscribers during the past two quarters, including 1.33 million branded postpaid customers. However, T-Mobile reported a net loss of $36 million in the third quarter and a loss of $16 million in the second quarter.
Further, T-Mobile's branded postpaid average revenue per user decreased quarter-over-quarter by $1.40 to $52.20 in the third quarter, lower than analysts had expected. T-Mobile CFO Braxton Carter said the company expects to see ARPU stabilize in the second half of 2014. He said eventually the company expects to see 85 to 90 percent of its subscribers move to its Value/Simple Choice plans, which are cheaper than traditional plans bundled with a discounted handset.
- see this release
- see this WSJ article (sub. req.)
- see this Reuters article
- see this Bloomberg article
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