Sprint’s CFO announced the operator plans to go to market with its second spectrum leaseback offer in early 2018 to raise funds.
Tarek Robbiati said Sprint will offer the next tranche of spectrum in the first half of calendar 2018 and holds the option to push another chunk of spectrum to the block during the year if necessary. Sprint is also looking to leverage its handset assets with a second asset-backed security move using devices as collateral during its fiscal year 2018 (the 12 months to end-March 2019).
The CFO said an initial $3.5 billion spectrum leaseback offer in 2016, which included around 10 per cent of Sprint’s 2.5GHz and 1.9GHz airwaves, was ten times oversubscribed. He called the deal “incredibly successful” and noted the transaction helped Sprint “reduce our cost of capital” to well below 3.5 per cent in addition to raising funds.
“We feel that we have diversified the balance sheet sufficiently to be able to tap different markets to fund our business,” he commented.
Leveraging assets for cash
Sprint began leveraging its assets as collateral in 2015, when it completed a sale and leaseback of its handsets to raise $1.2 billion. The company followed up with a network asset leaseback deal which raised $2.2 billion in April 2016 before moving on to a spectrum leaseback sale in October 2016.
The push to raise more funds comes as Sprint plans to increase its capital spending in 2018 to between $5 billion and $6 billion for network improvements. Robbiati said Sprint will likely dip into negative free cash flow territory in 2018 as a result, but indicated the operator will “absolutely” be able to fund its business plan using its financing capabilities.
“What we have to look at is managing the business for the long term with all the spectrum assets that Sprint has at its disposal on air…because we know that this is the way you sustain cash flow in the long run.”