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What’s T-Mobile’s Take on Share Buybacks and Dividends?

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T-Mobile’s share buybacks in 4Q17

In early December 2017, T-Mobile’s (TMUS) board of directors approved its first share repurchase program for up to $1.5 billion worth of shares through December 31, 2018. Under this program, in 4Q17, the company repurchased approximately 7 million shares for roughly $444 million, which means the shares were repurchased at an average price of $63.34 per share.

Since the inception of T-Mobile’s share buyback plan through February 5, 2018, the company has repurchased $783 million worth of shares at a price of $63.68 per share.

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T-Mobile’s share repurchase plan

T-Mobile’s majority shareholder, Deutsche Telekom AG, is planning to repurchase additional shares through December 31, 2018. Deutsche Bank predicts that T-Mobile will increase its dividend soon. The company currently doesn’t have a dividend payment structure.

T-Mobile has been undergoing a transition phase and is making efforts to strengthen its position amid slowing growth in the US wireless industry and rising competition from both new cable MVNOs (mobile virtual network operators) and the top two wireless providers, AT&T (T) and Verizon (VZ). Through stock buybacks, T-Mobile, the third-largest wireless service provider, can return value to its shareholders and improve its earnings per share.

How do peers return value to shareholders?

Verizon and AT&T have been regularly paying dividends for the past several years. In 4Q17, Verizon declared a quarterly dividend of $0.59 per share, a 2.1% rise year-over-year from 4Q16. Verizon has a dividend yield of 4.7% as of February 16, 2018. In comparison, AT&T has a dividend yield of 5.4% as of February 16.

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