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Telus’ Buyback: Sizeable Recent Activity

Telus (TSX:T) issued a press release last week that may have flown slightly under the radar, but has some interesting implications never the less.

The company has stated its intention to buyback $1 billion worth of its own stock in 2013, up to a maximum of 31.9 million shares.  It plans to follow this up with planned buybacks of $500 million in each of 2014, 2015, and 2016.

Last week’s press release indicated progress is being made on shelling out that $1 billion.

At the end of the second quarter, only $238 million had been spent (according to Capital IQ).  After the quarter ended however, in June, Telus announced that a private agreement that would allow it to purchase up to 4 million shares (worth approx. value of $132 million) was in place.  As of last week’s release, 3.5 million of these shares had been acquired.

This sizeable deal has been followed up by another private agreement to buy an additional 6.5 million shares (approx. value of $214.5 million) by November 30, 2013.

Implications

There are at least 2 messages to be taken from this activity, one clear, the other slightly less so.

Telus is clearly putting its money where its mouth is.  One of the knocks against share buybacks is that unlike a dividend that is paid like clockwork, buybacks give management flexibility on timing, and more significantly, don’t have to be carried out.  When these transactions are complete, Telus will be well on its way to completing this year’s $1 billion buy back.

On the other side of the coin, in the slightly murky department, is just who is on the other side of the trade?  If these blocks are coming out of a single source, it’s a sign that one of the company’s biggest shareholders has lost faith – a loss that is likely to have more to do with the industry than Telus itself.  Nothing personal.  This would of course stem from the recent activity surrounding Verizon’s possible entry into the Canadian market.

Foolish Takeaway

There are a number of reasons why a stock is sold.  There is only one reason to buy.  Telus clearly thinks its stock is a great bargain and is seemingly happy to be backing up the truck so to speak at current levels.  Given the timing of these deals however, at least one institutional investor is concerned about Telus, and the industry, and wants out of at least a portion of their position.  Fast.  The degree of uncertainty that has emerged on the competitive front is perhaps just too much for some shareholders to take.

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Fool contributor Iain Butler does not own shares in any of the companies mentioned at this time.  The Motley Fool does not own shares in any of the companies mentioned at this time.

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