Sprint’s Plan to Mortgage Its Airwaves

Sprint’s Plan to Mortgage Its Airwaves


Well-repute mobile operator is not only in its golden time of flourishment but is also carrying approx. US$ 34 billion in debt – double to that of its market value. Recently assigned Chairman, Masayoshi Son, in year 2013, is looking ahead to get rid of these debts. The scenario looks exactly like a car manufacturer borrowing against tires to fulfill pay-outs.

The newly launched strategy might look onto creating another subsidiary of Son’s Japanese corporation that will lend Sprint money. The new unit plans to accept the carrier’s wireless equipment and some of its rights to slices of the wireless spectrum as collateral, as per Chief Financial Officer, Tarek Robbiati.

On a similar note, Sprint refuse to give up control of those precious airwaves—worth more than US$ 115 billion as it’s aiming for US$ 3 billion to US$ 5 billion this year from these loans.

Spectrum is one of the most valuable assets they have. It gives them something to be measured on, since Sprint can’t be measured on cash flow.” – Gimme Credit analyst, Dave Novosel

Mobile carrier is supposed to generate US$ 2.3 billion in debt payments this year – a warmup for US$ 10 billion coming due by the end of 2020.

“This is setting up to be a game of chicken between Masa and the high-yield market.” – CreditSights’s analyst, Chris Ucko

INSIGHT: Sprint owns the largest piece of high-frequency, 2.5-gigahertz spectrum in the U.S. It’s been promising for years that with enough infrastructure behind them, the airwaves could create America’s fastest wireless network. By lowering data fees and liberally using half-off promotions, it added net subscribers last year for the first time since year 2008. To keep them, though, Sprint will have to fix its network.

Analysts count on to Sprint to report a net loss of US$ 1.5 billion for its fiscal year ending in March. Standard & Poor’s cut the company’s credit rating one level, to B, last month by citing intense competition meanwhile Moody’s Investors Service downgraded it to a high-risk B3 last year.

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I cover technology, utilities and biotechnology for Markets Morning, and I help out occasionally with other industry sectors. I've written about investment and personal finance topics for more than 20 years from a lowly copywriter to editor-in-chief, so I've done a little bit of everything. For what it's worth, I have a BA from Duke University and an MBA from Rollins College. I'm married with one daughter, and that's worth more than everything else put together.