Telstra taps eurobonds for spectrum spending war chest
Telstra has issued more than $1 billion of euro-denominated bonds on the international market, raising money to pay for the cost of spectrum in the coming auction.
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.