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Why Has T-Mobile Suspended Its Share Buyback Program?

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May. 18 2018, Updated 10:31 a.m. ET

T-Mobile’s share buybacks

T-Mobile (TMUS) repurchased ~10.5 million shares for roughly $666 million in the first quarter, which means the shares were repurchased at an average price of $63.43 each. The repurchases were part of the company’s share repurchase program authorizing the buyback of up to $1.5 billion worth of shares through December 31.

Also in the first quarter, one of T-Mobile’s largest shareholders, Deutsche Telekom AG, purchased 3.3 million additional shares at an aggregate market value of $200 million.

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T-Mobile’s share repurchase plan

On April 27, T-Mobile completed its initial program and repurchased nearly 24 million shares for $1.5 billion. From the inception of T-Mobile’s share buyback plan through to April 27, the company has repurchased ~$783 million worth of shares at $63.68 per share.

On April 27, the company’s board authorized an increase in the share repurchase program to $9.0 billion, including $1.5 billion in completed repurchases. The additional $7.5 billion of repurchases will be allocated in such a way that up to $500 million worth of shares can be repurchased through December 31. The remaining share repurchases of up to $3.0 billion can be done in the year ending on December 31, 2019, and up to $4.0 billion worth of shares can be repurchased in the year ending on December 31, 2020.

However, the share repurchase authorization of an additional $7.5 billion worth shares is contingent upon the termination of the merger agreement with peer Sprint (S). As a result, the company has suspended its buyback program.

Notably, the company doesn’t have a dividend payment structure right now. However, through stock buybacks, the third-largest wireless service provider after AT&T (T) and Verizon (VZ) can return value to its shareholders and improve its earnings per share.

Peers constantly pay dividends

Verizon and AT&T have been regularly paying dividends for the past several years. In the first quarter, Verizon declared a quarterly dividend of $0.59 per share, up ~1.7% YoY (year-over-year) from $0.58. AT&T’s management also remains committed to continuing to pay higher dividends. In the first quarter, AT&T paid dividends of $3.1 billion, a rise of ~2% YoY.

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