latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/telco-capital-raises-grind-to-a-near-halt-in-july-66109101 content esgSubNav
In This List

Telco capital raises grind to a near halt in July


Credit Risk Trends for Telecom & Tech: A Mid-Year 2021 Outlook


Summer box office rebounds in 2021


S&P Capital IQ Pro | Powering Your Edge


MediaTalk Episode 22: Privacy Concerns Grow As Lawmakers Stall On Federal Bill

Telco capital raises grind to a near halt in July

Publicly traded telecommunications companies in the U.S., Canada and Bermuda raised a meager $100,000 through capital offerings in July, all of which came through common equity offerings, marking the sector's lowest monthly total for 2021.

Despite persistent low interest rates and robust capital markets in some earlier months in the year, debt analysts were not surprised at the flatlining in July.

"It is typical for us to see a bigger slowdown starting in July," Moody's debt analyst Neil Begley said in an interview, noting that this year may have been exaggerated since summer 2020 was dominated by a pandemic-era frenzy to maintain liquidity. "On the telco side in the U.S., there just aren't a lot of investment grade companies, and they were in the market earlier in the year."

Indeed, among telcos, capital raises occurred en masse around the Federal Communications Commission's C-band spectrum auction, when the FCC auctioned 280 MHz of spectrum in the 3.7 GHz-3.98 GHz band, a portion of the C-band considered crucial for 5G deployment.

The result was a concentration of capital offerings in March after the February auction results, when Verizon Communications Inc.'s Cellco Partnership spent $45.45 billion, winning 3,511 licenses, while AT&T Inc. was the second-biggest spender, paying $23.41 billion for 1,621 licenses. March saw $44.31 billion in senior debt offerings. Aside from the March spike, the sector's total capital raises in other months this year did not exceed $9.05 billion.

"AT&T and Verizon issued a boatload of debt in March ... to pay for spectrum more than anything else," S&P Global Ratings senior director Naveen Sarma said in an interview.

Verizon has raised the largest amount of capital for the telecom sector in the year to date, raising $31.23 billion from 23 separate offerings to help fund its spectrum purchases.

Sarma noted there has been some activity among smaller telcos taking on high-yield debt in a low-interest-rate environment, but the large publicly traded tickers were consumed with adding spectrum.

T-Mobile US Inc. came in second for capital raising, with $9.8 billion from nine offerings, including $3.8 billion raised through an offering of its senior notes spread across three tranches. In May, T-Mobile launched a private offering to sell another $3 billion of senior notes.

T-Mobile spent considerably less in the C-band auction than Verizon or AT&T, as it already had a strong mid-band spectrum position following its purchase of Sprint. All told, T-Mobile spent $9.34 billion for 142 licenses during the C-band auction. But the company has been working to build out its 5G network and deploy the mid-band spectrum it acquired from Sprint.

Capital markets activity could heat up again soon, analysts said, driven by a surge in M&A activity across the technology, media and telecommunications industry. AT&T's DIRECTV unit has already begun raising a significant amount of debt capital to fund its joint venture with private equity firm TPG Capital LP. To date, the sector's largest common stock offering, American Tower Corp.'s $2.42 billion raise from 9.9 million common shares, was driven in part to finance its €7.7 billion acquisition of Telxius Telecom SA from Telefónica SA.

SNL Image