AT&T has announced it is indeed raising $14.7BN for “general corporate purposes…[including] financing acquisitions of additional spectrum.” The facility is set up to be drawn in one go before May 29 2021; we assume this is specifically for the C-Band.
AT&T ended 2020 with $9.7BN of cash on the balance sheet. With the new facility they will have total capacity of $24.4BN. This is slightly above the $24.1BN we had most recently assumed AT&T would spend directly on the auction (they would incur another $4.4BN in clearing costs). We aren’t changing our base case estimate at this stage.
AT&T has $1.2BN coming in from the sale of CrunchyRoll, as well as an estimated $1.7BN in FCF after dividends in 1Q21. If they commit these resources to the auction they could spend up to $27.3BN. We would assume if they had spent that much they would have just raised a larger facility though.
Based on our estimates, which assume a recovery in EBITDA in 2022 after being down in 2020 and again in 2021, leverage will land at just above 2.5x and far above the 2.25x they had earlier targeted for 2022. We expect management to reset leverage targets at their analyst day, after the auction.
Jonathan Chaplin is Communications Services: U.S. Team Head at New Street Research.