Telstra taps eurobonds for spectrum spending war chest
The $1.28 billion bond issuance will have a maturity of 10 years and attract a 2.5 per cent interest above the euro benchmark.
Telstra spokesman Scott Whiffin said the raising was part of company's annual borrowing program.
"The proceeds will be used for general corporate purposes, which include a range of different business needs and may include funding spectrum. We may predominantly finance spectrum through debt in the first instance," said Mr Whiffin. "We consider the current eurobond market to be in good shape and offered competitive all up pricing after swap to $A in the longer 10-year region."
Commonwealth Bank telecommunications analyst Alice Bennett estimates the cost of the spectrum auction for Telstra could be about $1.8 billion. The federal government expects to raise as much as $3 billion from auction, which is due to be held in April.
It is not clear whether the government can raise the expected amount of money after the country's third largest telco, Vodafone, pulled out of the auction for 720Mhz spectrum and Optus said that it would also consider alternatives to spectrum.
Telstra chief financial officer Andy Penn mentioned the likelihood of the bond issuance at the company's first-half results announcement in January.
"As we have previously indicated, as part of our overall capital management framework we will predominantly finance spectrum through debt in the first instance," Mr Penn said, "hence we will have an active debt program in the second half of the year."
US-based telco AT&T has also tapped the European bond market, selling €1 billion of 20-year bonds on Tuesday.
Frequently Asked Questions about this Article…
Telstra issued more than $1 billion of euro-denominated bonds — specifically a $1.28 billion bond — as part of its annual borrowing program. The bond has a 10-year maturity and carries an interest rate of 2.5% above the euro benchmark.
Telstra says the proceeds will be used for general corporate purposes, which may include funding spectrum for the upcoming auction. Company spokesman Scott Whiffin noted the firm may predominantly finance spectrum through debt in the first instance.
Commonwealth Bank telecommunications analyst Alice Bennett estimated Telstra's cost for the spectrum auction could be about $1.8 billion. The federal government expects the auction could raise as much as $3 billion overall.
The spectrum auction is due to be held in April. The government’s ability to raise the expected amount (about $3 billion) is uncertain after Vodafone pulled out of the 720MHz auction and Optus said it would consider alternatives to spectrum.
Telstra CFO Andy Penn said the company intends to predominantly finance spectrum through debt initially and will have an active debt program in the second half of the year. He mentioned the likelihood of the bond issuance at the company's first-half results announcement.
Telstra spokesman Scott Whiffin said the current eurobond market was in good shape and offered competitive all-up pricing after swap to Australian dollars in the longer 10-year region, which supported their decision to tap the market.
The article mentions Vodafone (which pulled out of the 720MHz auction) and Optus (which said it would consider alternatives to spectrum) in relation to the auction. It also notes US-based telco AT&T tapped the European bond market, selling €1 billion of 20-year bonds.
For everyday investors, the key points are that Telstra is proactively raising long-term funding via euro-denominated bonds to support corporate needs — including likely spectrum costs — and that the company plans an active debt program. Auction outcomes and competitors’ decisions (Vodafone, Optus) could affect industry spending and government auction proceeds, which are factors investors may want to watch.
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