Verizon Communications Inc. said its board authorized a buyback of as many as 100 million shares, allowing the second-largest U.S. phone carrier to return cash to investors as smartphone demand boosts its earnings.
A buyback of the full amount would equal about 3.6 percent of outstanding shares and cost $3.62 billion at yesterday’s closing price. The authorization is set to end Feb. 28, 2014, or when Verizon reaches 100 million shares, according to a statement from the New York-based company today.
Last week, Verizon forecast revenue growth for this year that topped analysts’ estimates, as it sells more smartphones and wireless data plans. The company started selling Apple Inc.’s iPhone today, ending a monopoly AT&T Inc. had on the device in the U.S. since 2007. Still, Verizon’s acquisition and debt-service spending may mean that it buys back few, if any, shares this year, said analysts including Shing Yin.
"We don’t believe that a buyback can be modeled or hoped for any time soon," said Yin, of Citadel Securities LLC, in a note to investors today. "In recent years, an authorization does not necessarily translate in repurchase activity at Verizon."
Verizon must find ways to offset declining revenue from its landline business and may report negative cash flow from that unit this year, said New York-based Yin. The company also has committed to paying down debt at Verizon Wireless -- which it co-owns with Vodafone Group Plc -- and agreed to buy Terremark Worldwide Inc. for $1.4 billion, said Michael Nelson, an analyst with Mizuho Securities Co. in New York.
Verizon spokesman Bob Varettoni declined to comment on the timing of repurchases.
Sales and profit may jump as much as 8 percent this year if Verizon sells 11 million iPhones, Chief Financial Officer Fran Shammo said last week. AT&T said it activated more than 15 million iPhones last year.
Verizon also said it is canceling a previous stock-repurchase program set to end this month. The company had approval to buy about 60 million shares remaining under that authorization.
Verizon rose 22 cents to $36.38 in New York Stock Exchange composite trading at 4 p.m. The company’s shares have gained 33 percent in the past 12 months.
AT&T, the largest U.S. phone company, said in December its board authorized it to buy back as many as 300 million shares with no expiration. That plan would cost the Dallas-based carrier $8.3 billion at yesterday’s closing price.
U.S. companies are increasing spending on their own shares, according to data from Birinyi Associates Inc. Businesses announced $373.4 billion in stock-buyback authorizations in 2010, the fourth-highest annual level, according to the data.
Buyback announcements have fallen from a record $862.9 billion in 2007, when the Standard & Poor’s 500 Index rallied to a record high, the Birinyi data show. Last year’s figure is exceeded only by 2005, 2006 and 2007.