Sprint is “on track” to raise much-needed capital through its spectrum lease-back scheme by the end of the year, according to CFO Tarek Robbiati.
The operator hopes to cash in on its airwaves under a structure similar to two others it has embraced over the last year: In November it sold $1.3 billion in leased device assets to Mobile Leasing Solutions (MLS), which was established by SoftBank and other investors. Sprint received $1.2 billion in total financing in return. And in April Sprint raised roughly $2.2 billion by selling some of its cell-tower equipment to a new entity.
The carrier hopes to raise another $1 billion or more by borrowing against its spectrum assets, likely focusing on its 2.5 GHz airwaves.
“We always said (earlier this year) that between Network LeaseCo and Spectrum LeaseCo we would do somewhere around $3 billion to $5 billion of asset-backed financing,” Robbiati said during an investor conference, according to a Seeking Alpha transcript. “We did a Network LeaseCo and… in doing a Spectrum LeaseCo we would be putting a small quantity of spectrum in a structure and raise money against it.
“As the performance of the company improved – and we had a great first quarter, and our performance continues to improve – our cost of capital starts to drop,” he continued. “And spectrum is really critical to the value of Sprint. We want to make sure that we have the right structure with Spectrum LeaseCo and we’re on track to raise money with Spectrum LeaseCo before the end of the calendar year, hopefully.”
Indeed, Sprint’s spectrum assets are estimated to be worth more than $115 billion. While it’s unclear how much spectrum Sprint might lease through the arrangement – or how much money it might raise – the move is part of the broader lease-back strategy to help it pay off billions in loans that will come due through next year.
The question of when Sprint might return to profitability continues to loom large, however. The operator posted 173,000 net postpaid phone additions during the second quarter, beating analysts’ expectations, but it also reported a $302 million net loss. So while its lease-back strategy will surely help Sprint meet its financial obligations in the short term, its long-term prospects are still uncertain.
- read this Seeking Alpha transcript
Analysts: Sprint could continue risky financial strategy with spectrum, real estate lease-backs
Sprint hopes to secure as much as $5B from mortgaging spectrum and network gear
Sprint CFO: We will lease some spectrum assets via 'spectrum leaseco' within next several months