T-Mobile CEO Mike Sievert announced today that the carrier will buy back about $15.25 billion of its own shares over the next five quarters, beginning in the fourth quarter this year. It’s currently completing a $14 billion buyback program this quarter.
And, for the first time in its history, T-Mobile will pay a dividend.
Its board has authorized $3.75 billion in annual dividends over five quarters, beginning in the fourth quarter 2023. “We expect the dividends to grow after this year at about 10% per year,” said Sievert, speaking today at the Goldman Sachs Communacopia + Technology Conference.
He said the initial dividend is a “modest start,” but for a business that is expected to grow to cash flows of as much as $18 billion, “I think it’s really important to begin to move down that [dividend] path without constraining us in any way in terms of our ability to allocate capital.”
T-Mobile’s competitors AT&T and Verizon pay about $8 billion and $11 billion, respectively, in annual common stock dividends.
Sievert said the company is also going to move a little faster than expected to reduce its debt.
The recent layoffs
Sievert was, naturally, asked about the recent layoffs of about 5,000 employees. It seems rather insensitive to cause so many people to lose their jobs and then reward shareholders with a stock buyback and dividend.
Of the layoffs, Sievert said, “It’s not something that we do at T-Mobile every year. This is a culture that’s important to me and to us.” He said after 3.5 years of integrating a merger and doing a “historic network build” the company found itself with a lot of duplication.
He said the decision to lay off people was made to “reclaim our efficiency, our entrepreneurship, our speed, our decisiveness, the cultural characteristics that got us to this present success in the first place.”
This is not the same message that former T-Mobile CEO John Legere gave when lobbying for approval to purchase Sprint. He repeatedly promised that the combined company would have more jobs for people, not less.
Devices
Today, Sievert also talked about T-Mobile’s move to offer more frequent opportunities for customers to get subsidized new devices.
He said T-Mobile noted a couple of years ago that customers were “voting with their dollars” for device subsidies. “You know it’s always been a slider in this business between: they want great rate plans, they want device subsidies, they want some of both," he said. "Right now, over the last couple of years, it’s been device subsidies. That’s been where the competition has gone.”
But he did acknowledge that providing device subsidies is more expensive.
Some analysts who track smartphone sales have been saying that people are keeping their phones longer.
But Sievert said, “Right now, what customers want is a great deal on devices. When it’s time for a new one, they don’t want to be told ‘no, you’re not done paying yet.’”