T-Mobile US May Propose Substantial Share Buyback
On Thursday, the chief executive officer of T-Mobile US said that they plan to propose a ‘significant’ share buyback, which could be initiated in December. This is a clear sign that the third largest carrier in the United States is confident in its future outlook, even after the merger negotiation talks with Sprint Corp were not successful. Since news of the collapse of the merger talks hit the market, T-Mobile has seen its share price decline by almost 10 percent. The potential merger could have awarded benefits worth $40 billion. The buyback plan of the company is a signal that the management is sure of their outlook and wish to convey the same to all their investors.
The chief executive spoke at a Morgan Stanley TMT conference being held in Barcelona. He said that the buyback proposal would be brought in front of the company’s board in this very month. He also revealed that shares would not be tendered by Deutsche Telekom and it might buy some stock itself. At this time, Deutsche Telekom owns approximately 64 percent of the shares in T-Mobile. One of the number of reasons that the talks between Sprint and T-Mobile fell apart was the issue of control.
If Deutsche Telekom participates in the buyback, it would be able to focus on its holding in T-Mobile and would gain the upper hand if they talks of merger are held in the future. According to Carter, he was looking forward to explore the potential of being able to return cash to the shareholders in a very rational way. He also made a reference to the debt levels of T-Mobile, which are manageable and also the free and strong cash flow. He also said that credit rating agencies had already been briefed about the potential buyback plan. Last week, Moody had upgraded their rating of the carrier to Baa2 as a reflection of the company’s improved financial leverage and their strong performance.
The CEO said that he was expecting S&P to do the same. He also said that the shares they would buy back would be held in a treasury and would be used as acquisition currency for M&A in the future. He highlighted the interest of the company in targets in regional players or the Internet of Things, as it is known. There is no denying that T-Mobile has expressed their confidence in the company’s ability of working alone and without merging with any other.
The third biggest carrier has made an investment in 600 MHz spectrum that’s worth $8 billion. The company will be able to use this to launch fifth-generation coverage countrywide by the end of the decade. Speaking at the conference, Neville Ray, the Chief Technology Officer at T-Mobile, said that their company was fully committed to launching 5G services in the United States by the end of 2020. The merger with Sprint could undeniably have worked well for T-Mobile, but there was a lot of conflict that caused it to fall apart, prompting the company to move onto another plan.