T-Mobile: ‘We won’t be in a cash tax-paying situation until 2024’ under reform

T-Mobile CFO Braxton Carter (T-Mobile)

T-Mobile likely won’t be in a position to pay cash taxes for roughly the next seven years under tax bills currently working their way through Congress, CFO Braxton Carter said this morning.

“With the tax reform—and it is looking like it’s going to be a reality and we’re really excited about it—we’ve modeled the various versions of the House and Senate bill,” Carter said this morning during an investor conference. “And the bottom line is we think that we won’t be in a cash tax-paying situation given the immediate expense of capex, given the reduction of the rates—I mean even considering what could be adverse, for a short period of time, limitations on the deductibility of interest—we are not going to be in a cash tax-paying position based upon the current modeling until 2024, very end of 2023.

“And you look at the prior guidance that we had out there that basically shows that during the next five-year period we’re going to be picking up $3 billion to $4 billion of additional cash flow in the business,” he continued. “And then once we do (get back) to a cash-paying position the low rate has significant ongoing benefits to the ultimate cash generation of our company.”

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The nation’s third-largest carrier also said this morning its board of directors had authorized a stock buyback program for as much as $1.5 billion in T-Mobile shares through the end of the next fiscal year. Carter said that amount is likely to be exhausted we before then, and said parent company Deutsche Telekom may buy an additional $500 million in shares.

The $1.5 billion buyback may be “lighter than what some on the Street had been expecting,” Jennifer Fritzsche of Wells Fargo Securities observed in a research note.

“Carter noted the repurchases would commence tomorrow in the open market, and is looking for a sustainable program going forward,” Fritzsche wrote. “Importantly, T-Mobile is funding the buyback with free cash flow generation, which is still expected to grow at 45% to 48% CAGR (compound annual growth rate) over the next several years.”