February 3, 2021
AT&T has entered into a loan agreement worth US$14.7 billion with Bank of America as it seeks to raise money for what looks set to be a hefty bill from the ongoing C-band spectrum auction.
The US operator shared the information in an SEC filing, which stated that it will use the proceeds of the loan for general corporate purposes, “which may include among other things, financing acquisitions of additional spectrum.”
It’s a huge loan, but hardly comes as a surprise.
The operator is one of a number of big telcos expected to shoulder the lion’s share of the financial burden of the FCC’s auction of 3.7 GHz (C-band) frequencies, which raised a staggering $80.92 billion in the first stage. Phase one drew to a close last month and the second phase – the assignment stage, in which telcos bid for their position on the spectrum – is due to get underway on Monday, but is not likely to add a significant amount to the auction total. However, as Sasha Javid, spectrum specialist, and COO of broadcast data network BitPath, has pointed out, the winning bidders will share an obligation to pay out an additional $13 billion to the satellite incumbents in clearing and relocation costs, which pushes the auction total further towards the $100 billion mark.
We won’t know who has won what or for how much until after phase two is completed, but it’s a pretty safe bet that AT&T could be handing over as much as tens of billions of dollars.
There are similar reports about Verizon, while T-Mobile US is expected to have committed a smaller amount. But it’s all relative. Last month T-Mobile tapped the bond markets to the tune of $3 billion, also with a view to financing spectrum acquisitions.
Unnamed sources cited by Bloomberg leaked the AT&T loan information a couple of weeks ago. At the time the newswire noted that the one-year structure of the loan suggests that the telco will refinance it in the bond market at a later date. AT&T now has confirmed that the loan is available for a single draw at any time before 29 May; once drawn, it will be payable in 364 days.
On a price per MHz/pop basis, the C-band auction did not raise unreasonably big sums, but the volume of spectrum being fought over – 280 MHz – means operators that win a large amount of spectrum will have to pay a large amount for the privilege. And that’s putting it mildly. No wonder we’re seeing multi-billion-dollar loan deals.
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