Verizon wants to raise $1.2 billion by issuing a bond backed by the contracts of approximately 2.5 million users in the US who have recently brought new smartphones.

The US operator has previously securitised its handset receivables with banks in private transactions. This is the first time it has done it more broadly for investors, said the Wall Street Journal.

The monthly payments made by consumers would be used to pay interest and principal to buyers of the securities.

The funds raised will allow Verizon to finance the upfront cost of the handsets. The company has yet to price the new securities, so their interest rate is not known.

It will only securitise the 24-month device payments, not the monthly service charge.

The bond is expected to launch in the third quarter.

“This deal is now a benchmark. Whether it is 2016 or soon after I think there will be other issuers doing similar transactions,” Andreas Wilgen, managing director at Fitch, told Financial Times.

Bank of America MUFG and Barclays are lead managers on the deal and an investor roadshow will take place this week and next.

Verizon did not comment on the deal but Fran Shammo, chief financial officer, said earlier this month that the company was looking to issue bonds and had conducted roadshows with investors.

“From a company like Verizon and the quality of these receivables, there’s demand out there for this,” he said.