T-Mobile’s share buyback plan
In December 2017, T-Mobile (TMUS) announced its first-ever stock repurchase program for up to $1.5 billion of its common stock through December 31, 2018, using cash on hand and not by adding debt to the company’s balance sheet. Repurchasing shares is one of the ways that T-Mobile is returning value to its shareholders.
During the UBS Global Media and Communications Conference held on December 6, 2017, Braxton Carter, T-Mobile’s chief financial officer, talked about T-Mobile’s stock repurchase program. Carter stated that the company “under no circumstances, would sell shares into the buyback. And conversely, they’re actually finalizing their plans right now to purchase additional shares of T-Mobile US in the marketplace. So our program, combined with their program for an initial program, is really going to be approaching the $2 billion level.”
Buybacks have various potential impacts on a stock such as contributing to improving EPS (earnings per share), which is a closely watched metric in a company’s earnings report, as well as decreasing the effects of stock dilution.
T-Mobile faces a tough growth environment owing to competition from Verizon (VZ), AT&T (T), and Sprint (S). As depicted in the above chart, T-Mobile’s EPS rose ~50.0% YoY (year-over-year) to reach $0.63 in 3Q17 as compared to $0.42 in 3Q16.
Peer comparison of EPS in 3Q17
In 3Q17, AT&T’s adjusted EPS remained stable YoY at $0.74, whereas Verizon’s adjusted EPS fell ~3.0% YoY to $0.98. Meanwhile, Sprint reported an EPS loss of $0.01 in fiscal 2Q17 (quarter ending September 2017), which improved from an EPS loss of $0.04 in fiscal 2Q16.