Sprint spends $10 billion every year on devices. Hence the value of its shifting of device funding to a newly-formed Mobile Leasing Solutions.
Sprint will sell to, and then lease back, devices from Mobile Leasing Solutions. That will result in $1.1 billion in cash proceeds at closing.
The cash proceeds are part of approximately $1.2 billion in total consideration that are expected to be exchanged for approximately $1.3 billion of leased device assets, Sprint says.
The transaction, which is expected to close in the first week of December, will immediately improve the company’s liquidity position and the funding comes at an attractive cost of capital, which is well below Sprint’s alternatives in the high-yield debt market, the company says.
“Providing mobile devices to customers is the biggest use of cash in the carrier model and with this new structure we have more closely aligned Sprint’s cash flows with those associated with leasing devices to our customers,” said Sprint CFO Tarek Robbiati.
Mobile Leasing Solutions, LLC was formed by a group of equity investors including SoftBank and has secured debt financing from several lenders including international banks and leasing companies.
Brightstar Corp. through its Financial Services Business provided support in structuring the transaction, including assisting in the formation of Mobile Leasing Solutions, LLC which is utilizing Brightstar's Lease Management and Tracking System.
Brightstar has also been contracted to provide reverse logistics and device remarketing services, which will include a forward purchase agreement that is being finalized with Foxconn, thus minimizing the downside risk of future changes in device residual values.