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T-Mobile Going to the Auction Block to Purchase Additional Spectrum

September 4, 2014 - Written By Nick Sutrich

Mobile spectrum is starting to run extremely thin, and as such the competition and regulation of that spectrum has been a hot button issue since the last big spectrum auction in 2008.  In that particular auction AT&T and Verizon came out the winners, collectively buying over $16 billion in spectrum on the 700MHz block, specifically block B for AT&T and block C for Verizon.  Now it looks like the 600MHz spectrum is going up for auction, and this time around it’s going to be a serious game, as the 600MHz spectrum is one of the most coveted ones out there.  With mobile spectrum the lower you go the better, as the signal carries further and penetrates buildings and trees easier, giving a mobile company less reason or need to build towers all over the place.  Currently T-Mobile owns block A on the 700MHz spectrum, 1900MHz and 1700/2100MHz AWS for LTE.

This new spectrum should give them a serious boost in network coverage, speed and capacity, but it comes at a price.  $3 billion in debt is going to be taken on via Senior Notes via four major banking firms: Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, and J.P. Morgan Securities LLC.  These four big banking firms are joining together to grant T-Mobile the funds needed to build its network up and more fairly compete with AT&T and Verizon by continuing to roll out LTE on better, faster spectrum that requires less towers.  The first note is for $1.3 billion and will be due back by 2023 at 6 percent, whereas the second note is $1.7 billion due in 2025 at 6.375 percent.  T-Mobile is also going to use some of the debt to pay down $1 billion in debt currently owed in 2018 at 7.875 percent, giving them a slight advantage since the newer debt is a lower percentage interest rate.  This is all great news for the consumer as T-Mobile continues to build out its network, and with the way its growing it’s entirely possible that the next major network rollout won’t have to be taken on with the risk of such a large debt.