T-Mobile Sets Stock Buyback of $1.5 Billion

Mobile carrier T-Mobile US Inc. (NASDAQ: TMUS) announced Wednesday morning that the company’s board of directors have approved a stock repurchase program of up to $1.5 billion in T-Mobile common stock. The buyback program is authorized to run through the end of 2018.

Purchases under the program may be made from time to time, including open market purchases or privately negotiated transactions. Purchases by Deutsche Telekom, T-Mobile’s majority stockholder, will not be counted under the buyback program.

T-Mobile CEO John Legere said:

Since launching Un-carrier, T-Mobile has delivered unmatched growth and continues to take share in a rapidly changing and competitive wireless industry. This repurchase program underscores our Board of Directors’ and management team’s confidence in our business and our commitment to creating value for shareholders. Our strong balance sheet and cash flow generation give us the ability to return capital while continuing to make significant investments in our network and operations. 2018 is going to be another exciting year in wireless and we can’t wait to get started.

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T-Mobile does not pay a dividend and hinted at its first stock buyback program in September at a Goldman Sachs conference. The company’s chief financial officer, Braxton Carter, had already floated the idea of paying a small dividend, but investors did not show much enthusiasm for that idea, Carter said at the time. He also noted, “We think we’re undervalued, and a buyback might be the best use of cash.”

The company’s cash flow guidance indicates a tripling from the 2016 level of $1.4 billion to $4.5 billion in 2019, according to a report from brokerage firm William Blair.

The fact that talks of a merger with Sprint went nowhere sort of makes this look like a consolation prize for stockholders, but they’ll take it anyway.

The buyback announcement sent the stock up about 1.3% in the late morning Wednesday, to trade at around $61.82 in a 52-week range of $54.60 to $68.88. The 12-month consensus price target on the stock is $71.22.

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