Analysts: Deutsche Telekom won't support T-Mobile financially in 600 MHz incentive auction

T-Mobile likely won't have the financial backing of its parent company Deutsche Telekom in 2016's incentive auction of 600 MHz broadcast TV spectrum, according to financial analysts at investment bank Macquarie. Macquarie analysts Kevin Smithen and Will Clayton wrote that "we continue to believe that DT will not fund T-Mo's participation in the incentive auction and that this could become a small overhang on T-Mo shares if the auction somehow happens in 2016." That should not entirely come as a surprise.

On T-Mobile's fourth-quarter earnings conference call, T-Mobile CFO Braxton Carter said the company expects to finance its bidding in the incentive auction through "existing cash plus debt" and that the company has "no plans" to sell additional equity, according to a Seeking Alpha transcript of his remarks. The issue is likely going to take on added significance in the near future. The Macquarie analysts note that on April 28, Deutsche Telekom has the right to sell $2.5 billion of the $5.6 billion in intra-company debt it holds. For T-Mobile, this so-called "reset" will trigger an increase in interest rates from 5.6 percent to an estimated 6.75 percent, according to the analysts.