In a brief two line statement to the Australian Securities Exchange, Telstra has announced a ‘benchmark’ €1 billion ($1.275 billion) ten year bond issue. The bonds will attract a tiny 2.50% interest rate and mature on 15 September 2023.
Telstra says the bond issue is part of its ‘debt financing program’. The Sydney Morning Herald reports Telstra spokesman Scott Whiffin as saying that it would be used for “general corporate purposes”, which may include funding the purchase of more spectrum.
“We may predominantly finance spectrum through debt in the first instance,” Whiffin said. He was referring to the Government’s auction of extra spectrum freed up by the end of analogue TV transmissions, which stop in December this year. He was confirming what CFO Andy Penn said in announcing Telstra’s recent half year financial results, when he indicated that Telstra would use debt to fund spectrum purchases.
The Government hopes to make more than $3 billion from the so-called ‘Digital Dividend’ auction. Telstra’s bond issue will account for nearly half that, and further consolidate its market dominance.
The auction has become a contentious issue – Vodafone has said that it may not take part, and Optus has criticised the pricing and the process. Communications Minister Stephen Conroy has taken personal charge of the process, taking it out of ACMA’s hands.
In the context of Telstra’s overall financial position it is not an enormous amount of money. It is equal to about two weeks’ revenue, or one third of the company’s annual profits.