T-Mobile Sells Sprint Assets to Cogent for $1
T-Mobile agreed to sell Cogent Communications its long-haul fiber network and other wireline assets for $1, unloading a Sprint asset that had been a money loser for T-Mobile. T-Mobile noted the development in a filing Wednesday at the SEC. As…
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part of the transaction, Cogent will offer T-Mobile IP transit services for 54 months after closing, T-Mobile said. T-Mobile will pay Cogent $700 million, with $350 million due in equal payments over the year and $350 million due over the remaining 42 months. “T-Mobile expects to recognize a total pre-tax charge of approximately $1 billion in the third quarter of 2022 as T-Mobile anticipates adjusting the carrying value of the Wireline Business and establishing a liability for the contractual payments of the Transaction, including the $700 million of fees payable for IP transit services,” T-Mobile said. “For Cogent, acquisition of T-Mobile’s Wireline Business is expected to be an ideal strategic fit with its existing business,” the ISP said: “The Wireline Business offers the legacy Sprint U.S. long-haul network that provides an owned network asset to complement and eventually replace Cogent’s current leased network and provides the ability to expand its product set, including the sales of optical wave transport services to new and existing customers.” The asset offers a “customer base who are a fit for Cogent’s products and services, and a group of experienced employees with the knowledge and capabilities to execute the company’s strategy,” Cogent said. The $1 billion non-cash charge in Q3 follows a nearly $500 million write-down last quarter for the assets, said New Street’s Jonathan Chaplin. “The transaction itself should come as little surprise; T-Mobile said on the first quarter call in April that they wouldn’t need the Sprint wireline assets after shutting down the Sprint LTE network, and that there could be an opportunity to monetize the assets,” Chaplin said. “T-Mobile has tended to be a shrewd dealmaker, and so we would expect that the company decided it was cheaper to give away the wireline assets, and pay for their continued use of them, than it would be for T-Mobile to operate these long-haul assets themselves," he said: “We don’t have great visibility into Sprint’s wireline network’s current financial profile, and so we don’t know exactly what T-Mobile is selling. We know the assets were losing money when T-Mobile bought them, with $1.2BN in wireline revenues offset by at least $1.2BN in cash" operating expenses and "at least a couple hundred million" in annual capital expenditures.