Sprint hopes to secure as much as $5B from mortgaging spectrum and network gear

Sprint (NYSE: S) Chairman Masayoshi Son plans to create a subsidiary of SoftBank that will accept some of the carrier's network gear and spectrum as collateral for billions in loans this year, as outlined in a new report from Bloomberg.

In a move Bloomberg likened to "borrowing against the tires to make car payments," Sprint won't cede control of the spectrum, which is estimated to be worth more than $115 billion. But the operator hopes to secure between $3 billion and $5 billion in loans from the move.

The strategy mirrors the model SoftBank and other investors employed to establish a handset leasing company late last year to take the financing of leased devices off of Sprint's balance sheet and provide the carrier with more liquidity. Sprint sold $1.3 billion in leased device assets to the unit, dubbed Mobile Leasing Solutions (or MLS), and received $1.2 billion back in total financing.

The beleaguered carrier owes $10 billion that will come due by the end of 2020 and has to make $2.3 billion in debt payments this year. And its financial struggles are exacerbated by a flagging junk bond market that will likely only make it more difficult for Sprint to refinance its debt in the coming months.

Sprint owns the biggest chunk of 2.5 GHz spectrum in the U.S., and it said recently it hopes to use the airwaves to provide wireless backhaul for small cells instead of fiber. The company continues to build its LTE network as plays catch-up to its tier-one rivals.

Sprint reported fourth-quarter earnings in January that exceeded Wall Street expectations thanks largely to aggressive marketing campaigns such as the half-off promotion it launched last fall. The operator continues to work to cut as much as $2.5 billion from its budget – it eliminated 2,500 jobs in January during a third round of layoffs and is looking to trim its network expenses – and analysts expect it to post a net loss of $1.5 billion for its fiscal year ending in March, according to Bloomberg. Moody's downgraded Sprint to a high-risk B3 in September, saying the carrier hadn't done enough to stabilize its financial situation.

For more:
- see this Bloomberg report

Related articles:
Sprint 'undeniably improving' with half a million new customers and improved financial guidance
Sprint to get $1.1B in cash thanks to handset leasing vehicle
Sagging market for junk bonds is just more bad news for Sprint
Sprint's credit ratings get downgraded by Moody's amid unease about its long-term turnaround prospects

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