Verizon to tap debt market to pay $36 billion tab on 5G airwaves

The largest U.S. wireless carrier splurged on airwaves in an attempt to catch up to rival T-Mobile in developing new 5G wireless services.

Verizon Communications Inc. made an $8.2 billion payment to the U.S. Treasury Wednesday and expects to go to the debt market to help finance the remaining $36 billion due this month for airwaves that the phone giant needs to accelerate growth.

“We expect to access the public debt market as soon as possible, assuming favorable conditions,” CFO Matt Ellis said on an webcast Wednesday with investors.

Verizon raised $12 billion in a bond sale in November and has set up a $25 billion bank facility to help cover the largest splurge on airwaves ever.

Verizon, the largest U.S. wireless carrier, is chasing rival T-Mobile US Inc., which holds as much as a year’s lead in the some of the key midband frequencies crucial to the new 5G wireless services that all of the carriers are developing. Verizon committed $45 billion last month in the record federal airwaves auction.

The carrier expects to its revenue growth to double to 4% by 2024, riding on a wave of new 5G services. But that will come with higher costs. Verizon plans an additional $10 billion in capital expenditures over three years as it expands its 5G network. The costs are expected to reduce profit by 10 cents a share next year and 20 cents a share in 2023.

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The airwaves are prized for their ability to travel far and carry lots of data. They are expected to drive years of new revenue growth when deployed for next-generation mobile devices, autonomous vehicles, health care equipment and manufacturing facilities.

The company said Wednesday it will cover 100 million people with its new 5G C-band and millimeter-wave networks by year-end and reach coast-to-coast coverage by 2024.

After years of passing up large M&A deals like those engineered by AT&T Inc., Verizon has made a huge bet on its network under the assumption that consumers and businesses will adopt 5G services.

“We are in a scaling mode right now,” Chief Executive Hans Vestberg said as he concluded the investor presentation.

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