November 7, 2011 7:49 pm

Sprint Nextel raises $4bn in debt offering

Sprint Nextel, the third-largest US mobile network operator, has raised $4bn in a debt offering – the first step in the company’s plan to close an estimated $5bn to $7bn funding requirement, as it seeks to modernise its network and perhaps fund Clearwire, its WiMax network partner.

The successful debt offering, comprising $3bn of seven-year 9 per cent notes and $1bn of ten-year, 11.5 per cent notes, should also help ease concerns about Sprint Nextel”s continuing access to the capital markets.

Joe Euteneuer, Sprint Nextel’s chief financial officer, indicated last month when the company announced its third-quarter results that Sprint would use the bulk of the proceeds of the debt sale to replace $2bn of 7.3 per cent notes due in 2012 and $1.5bn of 6.9 per cent notes due in 2013.

Sprint, which also faces the cost of subsidising Apple iPhones that it began offering recently, is expected to seek vendor funding of between $1bn and $3bn to cover a portion of its Network Vision network upgrade costs and close its remaining funding gap.

The Network Vision project will enable Sprint to support multiple network technologies including LTE, the favoured 4G broadband mobile data standard. Sprint plans to deploy its own LTE network beginning in mid-2012.

“We thought Sprint needed to raise $6bn to fully fund $4bn in maturities as well as an aggressive iPhone push and Network Vision,” said Jonathan Chaplin, a Credit Suisse analyst, in a research note. “Sprint will probably close the remaining gap with vendor financing. We expect the company to close this financing early in 1Q12 [first quarter 2012]. This largely eliminates the funding overhang, which we think has weighed heavily on the stock since the (company’s early October) analyst day.”

Mr Chapin and other analysts believe that Sprint Nextel may use some of the latest funds raised to help fund the completion of Clearwire’s 4G WiMax network, which Sprint resells to its own subscribers. Clearwire, in which Sprint owns a 54 per cent stake, has said it needs around $600m to complete the nationwide rollout of its mobile WiMax network, and between $150m and $300m to maintain its existing network.

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