Last Updated: April 1, 2008: 4:05 PM EDT
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Verizon needs $8B for airwave licenses

Ambitious plan for a new wireless network has a big pricetag, and it's coming due.

By Scott Moritz, writer

NEW YORK (Fortune) -- Verizon says it intends to sell $8 billion of of stock and debt notes to help finance the company's recent $9.36 billion acquisition of federal airwave licenses, according to a filing Tuesday. The New York phone giant hopes to build a fourth generation nationwide network using the swath of 700 megahertz radio frequencies.

Verizon (VZ, Fortune 500) needs to make a $1.4 billion down payment by Thursday on top of the $500 million installment made at the beginning of the Federal Communications Commission auction. The remaining $7.5 billion is due on April 17, hence the trip to the capital markets.

This isn't great timing for a massive new debt offering, given the recent stickiness in the credit markets. And Verizon already has $31.1 billion in total debt on its books and only $1.15 billion in cash and cash equivalents as of the beginning of 2008. The company manage to sell some of its rural operations - phone lines in Maine, Vermont and New Hampshire to FairPoint Communications (FRP) this week - but only realized $2.3 billion, short of the $2.7 billion the company had hoped for.

The company says that due to an anti-collusion quiet period, it cannot comment on the financing move until Thursday. A representative says he expects the company will hold a conference call with investors and analysts as early as Friday to discuss the wireless financing plan.

Investors and creditors have largely cheered Verizon's plans to plow money into fiber optic network expansion and now a costly broadband wireless network. This latest bold spending news did not scare Wall Street, as Verizon shares rose 3% Tuesday.

The new wireless network will operate on what used to be analog UHF TV channels. The robust frequencies allow the signals to deeply penetrate buildings making the new spectrum conducive to fast Net connections. Verizon and rival AT&T (T, Fortune 500) plan to use the airwaves to provide next-generation wireless service on a new wireless standard called long term evolution or LTE. The only rival wireless standard available in the near-term is riding with Sprint (S, Fortune 500) (S) and its WiMax efforts with Clearwire (CLWR). To top of page