AT&T acquires $14.7 billion loan from BofA to fund spectrum

U.S. telecoms operator AT&T has entered a $14.7 billion loan credit agreement with Bank of America (BofA) in an attempt to massively invest in the ongoing C-band spectrum auction.

According to the company’s U.S. Securities and Exchange Commission (SEC) filing, the funds will be available for AT&T to withdraw at any point before May 29, 2021; the proceeds will be used for general corporate purposes, “which may include among other things, financing acquisitions of additional spectrum.”

The loan will mature 364 days after it has been borrowed and advances will bear interest either at a variable annual rate or a “Eurodollar rate” equal to Libor plus an applicable margin.

AT&T’s move comes after reports that the company was in preliminary talks with other banks to raise the said amount for us in the FCC’s 5G auction, which exceeded the $47 billion benchmark and reached $80.9 billion in its first phase.

The operator is one of several big telcos forecast to take up a large share of the financial burden of the auction. The first phase of the auction closed earlier last month, with the second stage due to be underway as of February 7, 2021 but will not likely add a significant amount to the auction total.

According to AT&T’s Q4 revenue results, the company enjoyed a resilient end of year stream of revenue, as it consolidated a total of $45.7 billion in comparison to last year’s Q4 of $46.8 billion.

In parallel, the U.S. operator recorded its best full year of 800,000 post-paid phone net adds, 1.5 million for full year; and 1.2 million post-paid net adds, 2.2 million for the full year with Q4 churn of 0.76 percent, its second-lowest quarter ever, and full-year churn of 0.79 percent. Domestic wireless services saw six million additions.

Across the aisle, rivals Verizon and T-Mobile U.S. are also expected to commit to the auction, but with smaller amounts. Last month, T-Mobile raised $3 billion in funding in attempts to fuel their 5G endeavor and increase their spectrum for next generation networks.

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 who win a large amount of spectrum will have to pay a large amount for the privilege.