Sprint to Double Spectrum Leaseback Transaction Amount

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sprintLast October, Sprint announced its plan to sell $3.5 billion worth of spectrum and then lease that same spectrum to pay off “higher interest bearing loans.” This week, the company announced it will increase that transaction from $3.5 billion to $7.0 billion, reports Yahoo Finance.  

The initial spectrum leaseback deal was made to free up cash for the company and “ease some of the liquidity pressure on its balance sheet.” With this recent increase, the carrier is now planning to sell some 14 percent of its spectrum assets.

It’s suspected that the carrier will be selling its 1.9 Gigahertz (GHz) and 2.5 GHz-banded spectrum, which is valued at an estimated $16.4 billion. The carrier is taking the much lower valuation—$7 billion—due to its short-term need for capital to pay off loans.

Zacks predicts the deal will generate the necessary cash flow needed to expand its business and that the deal will add value to the company.

“Although Sprint may incur higher operating expenses in the process, the tradeoff between lower lease payments and higher interest savings is sure to add value to Sprint,” the research firm predicts.

December 12, 2016

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