T-Mobile US, Inc. Market Cap (as of 23/11/13): $19.2bn

T-Mobile US, Deutsche Telecom majority-owned mobile operator is raising $2bn in an effort to increase its footprint in the 4G LTE market. T-Mobile is the fourth mobile operator in the US with 45M customers ranking after Verizon Wireless, AT&T Mobility and Sprint Nextel.

On November 14, T-Mobile US announced the sale of  66M common shares in a seasoned offering priced at $25 in an effort to raise $1.6bn. In a similar move on November 18, T-Mobile announced the sale through T-Mobile USA (a wholly-owned subsidiary) the sale of $2bn senior bonds in a registered public offering which was completed on November 21. As stated in the regulatory filing, the company plans to use the proceeds from both the bond issue and the stock issue for “general corporate purposes, including capital investments, enhancing its financial flexibility and opportunistically acquiring additional spectrum in private party transactions and/or government auctions.”

It is expected that T-Mobile uses most of the proceeds topping approx $3.8bn for the purchase of additional spectrum for its 4G network which currently covers 203 million people nationwide. The electromagnetic spectrum (as it is referred to in technical jargon) is sold to telecommunication companies by the Federal Communications Commission (FCC) which conducts auctions of licenses. Companies are able to buy spectrum through these auctions or from private parties.

T-Mobile has expanded its spectrum lately following the acquisition of a tranche from AT&T. In addition, in October the acquisition of 10 MHz of Advanced Wireless Services (AWS) spectrum (covering 32M people) from U.S. Cellular for $308M in cash was completed. However, it is expected that the company will necessitate further spectrum to satisfy a growing demand for data. T-Mobile is aggressively expanding through competitive pricing and through sweet deals for consumers as the one recently announced which gives free data for life to customers purchasing tablets.

On November 5, the company released Q3 results which showed that T-Mobile added more than 1M customers in Q3 and reached an adjusted EBITDA of $1.344 billion, up 6.2% QoQ. The stock has performed well with analysts upgrading to buy and strong buy in the last month even though Credit Suisse and J.P. Morgan cut the target price to $32 from $33 and to $31 from $33 respectively especially due to the increased debt levels following the bond sale. General market sentiment is bullish and the stock has increased more than 10% in the last three months. The bond sale is divided between a $1bn 6.125% senior note due in 2022 and a $1bn 6.5% senior note due in 2024.

J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Goldman, Sachs & Co., RBC Capital Markets, LLC and RBS Securities Inc. are the joint book-running managers for the notes offering.


0 Comments

Leave a Reply

Your e-mail address will not be published. Required fields are marked *