T-Mobile Wraps Asset Sale, Files for Debt Sale, Offers Mixed Guidance

Joining a parade of U.S. firms that are revisiting previously issued guidance for the second quarter, T-Mobile US Inc. (NASDAQ: TMUS | TMUS Price Prediction) filed a report with the U.S. Securities and Exchange Commission (SEC) on Thursday related to the company’s second-quarter results.

T-Mobile expects to take a noncash, pretax impairment charge of approximately $418 million in connection with the company’s merger with Sprint. Another noncash, pretax charge of $800 million to $900 million is expected related to merger-related costs. That estimate is $300 million higher than a March estimate of $500 million to $600 million.

Now for some good news. Estimated costs related to the COVID-19 outbreak have been lowered by $100 million to a new range of $350 million to $450 million. The even better news is that T-Mobile now expects net postpaid (contract) customer additions of 800,000 to 900,000 in the second quarter. The previous estimate had called for postpaid net additions to fall in a range of zero to 150,000.

The company also announced that the U.S. Department of Justice has cleared the way for the sale of T-Mobile’s prepaid wireless business to Dish Network Corp. (NASDAQ: DISH). T-Mobile operated its prepaid business under three names: Boost Mobile, Virgin Mobile and Sprint. The sale is reportedly worth about $1.4 billion to T-Mobile. The sale is expected to close on July 1.

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Finally, T-Mobile filed with the SEC to offer an unspecified amount of senior secured notes in a private placement to qualified institutional buyers through offshore transactions. The notes will not be registered and therefore may not be offered or sold in the United States.

T-Mobile said it plans to use the net proceeds for ongoing liability management, including the redemption of some existing unsecured notes that are subject to redemption without payment of a ‘‘make-whole’’ redemption premium. Given total long-term debt of nearly $35 billion, using the proceeds to pay off other debt is a good thing.

The company’s stock traded up about 3.6% in the noon hour Thursday, at $106.36 in a 52-week range of $63.50 to $106.72. The high was posted Wednesday. The consensus 12-month price target on the stock is $113.95. T-Mobile pays no dividend.

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