Just as it promised, T-Mobile (TMUS 0.57%) has announced that its board of directors has authorized a new $1.5 billion share repurchase program. CFO Braxton Carter said at a conference in mid-November that the company was pursuing a "significant" program, and that board approval could be secured within about two weeks. Approximately two weeks later, the program is now official, and is good through the end of 2018.

The amount of the authorization is actually modest relative to some analyst expectations, which had ranged from $5 billion to as high as $17 billion. That high estimate would have represented a meaningful portion of T-Mobile's current market cap of $51.5 billion.

T-Mobile CEO John Legere speaking and making a hand gesture

CEO John Legere. Image source: T-Mobile.

That's what he said

"Since launching Un-carrier, T-Mobile has delivered unmatched growth and continues to take share in a rapidly changing and competitive wireless industry. This repurchase program underscores our Board of Directors' and management team's confidence in our business and our commitment to creating value for shareholders," CEO John Legere said in a statement. "Our strong balance sheet and cash flow generation give us the ability to return capital while continuing to make significant investments in our network and operations. 2018 is going to be another exciting year in wireless and we can't wait to get started."

Carter was at a different conference this morning (the UBS Global Media and Communications Conference) to discuss the program. Once the Sprint deal definitively fell through after months of speculation, T-Mobile had to consider what to do with its strong and growing cash flow. Carter also implied that this is just going to be the beginning:

This is our initial foray into this. We're going to learn a lot. This is the first time we've done a buyback. And given the cash flow generation of the business -- and by the way, tax reform is going to substantially enhance that cash flow over the next five years. We can talk a little bit about that. But it shows the absolute confidence that we have and the ramp in free cash flow story of the business.

...

So this will be a continual program until we deplete the current program and then look at what we're going to do after that. But we're very, very excited about it and we think this is a tremendous buying opportunity. The -- we're doing this out of cash flow, by the way. We're not levering up to do this at this point. It's out of cash that will be on the balance sheet, actually as of year-end.

The program will start with open market purchases, and Carter expects to hit the $1.5 billion authorization "well before" the end of 2018. T-Mobile recently shot down the idea of a dividend after soliciting feedback from investors, which is why it's focusing on a buyback for capital returns.

But wait, there's more!

It's also worth pointing out that T-Mobile parent Deutsche Telekom will not be participating in the buyback program -- i.e., T-Mobile will not be repurchasing any shares from Deutsche Telekom. On the contrary, Deutsche Telekom actually plans on increasing its majority stake in the Un-carrier. Deutsche Telekom has not finalized its plan, but Carter suggested the parent company could end up buying roughly $500 million worth of stock.

T-Mobile is also cognizant of its credit ratings, one of which was recently upgraded to BB+ at S&P, just one notch below investment grade. T-Mobile is hoping to achieve investment grade as it undergoes what Carter calls "organic deleveraging." T-Mobile has convertible bonds that were issued in 2014 that mature next week and conversion is mandatory, so that debt will turn into equity and reduce leverage on the balance sheet. Moody's just announced that the repurchase program in its current form has no ratings impact (Moody's has T-Mobile's corporate rating one notch lower than S&P at Ba2).

The program is a solid move to return capital to shareholders, and there will probably be more where that came from.