T-Mobile Stock Buyback Is Here. There’s More Where That Came From.

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T-Mobile

US announced a $14 billion share repurchase program on Thursday evening, in the start of a process that could retire some two-thirds of the stock’s free float by the end of 2025.

That reduction in shares outstanding will dramatically increase earnings per share, and is one of the greatest benefits enabled by the wireless company’s 2020 acquisition of Sprint.

T-Mobile stock (ticker: TMUS) was down 0.1% in after-hours trading on Thursday despite the announcement. Wall Street may have been hoping for even more. 

In an 8-K filing with the Securities and Exchange Commission on Thursday evening, T-Mobile said its board of directors had approved a stock repurchase program for up to $14 billion through the end of September 2023. It said that up to $3 billion might be spent between now and the end of this year.

At an investor day in early 2021, T-Mobile management said that the company could direct some $60 billion toward share repurchases between 2023 and 2025. The company has a market value of about $182 billion—which recently exceeded rivals 

Verizon Communications

(VZ) and

AT&T

(T). More than half of shares are held by

Deutsche Telekom

(DTEGY) and SoftBank (9434.Japan).

Fewer shares outstanding will mean higher earnings per share, and a higher stock price. On average, Wall Street analysts expect T-Mobile’s earnings to grow fourfold in the coming years, from $2.41 in 2021 to $11.54 in 2025. For comparison, rivals Verizon’s and AT&T’s earnings per share are expected to be essentially flat from 2021 through 2025, according to FactSet.

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Since its acquisition of Sprint closed in 2020, T-Mobile has jumped to a lead in the 5G wireless era and grown its subscriber base and revenue. As the costly integration phase of the combination nears a close, free cash flow is set to rise—and the company will direct that toward repurchasing its stock.

That buyback program is starting earlier, but perhaps smaller, than many had expected.

“In any case, the exact timing of the $60 billion in share repurchases T-Mobile has planned through 2025 has never been material to our thesis, but the news now is certainly welcome,” wrote New Street analyst Jonathan Chaplin on Thursday.

T-Mobile stock is up 25% this year, compared with a 17% loss after dividends for Verizon and 5% for AT&T. The

S&P 500
has lost 16% after dividends in 2022.

Write to Nicholas Jasinski at [email protected]