Australia's incumbent telecommunications provider Telstra has announced a AU$1.5 billion share buyback program, through an off-market buyback of approximately AU$1.25 billion in shares and an on-market buyback of AU$250 million in shares.
"[The Telstra] board has decided to undertake the buyback tender because we have surplus capital as a result of continued strong free cash-flow generation and from the proceeds of Telstra's recent sale of its investment in Autohome," Telstra chairman John Mullen said in an announcement [PDF] on Wednesday to the Australian Securities Exchange (ASX).
"In accordance with our capital management framework and the announcement of our AU$1.5 billion capital management program on 2 May 2016, the board has determined to return this surplus capital to our shareholders through the buyback tender of AU$1.25 billion, together with an on-market buy-back of AU$250 million to be conducted after the completion of the buyback tender."
Shares will be bought back for AU$1.78. While this is below market price, those selling their shares through the buyback tender will receive better "tax treatment of the proceeds", Mullen said.
Eligible shareholders can participate in the tender if shares are registered in their name by August 19, the buyback tender record date. The distribution of tender documents is expected to be completed by September 2, with the tender period opening on September 5. Buyback tender proceeds will be paid to successful shareholders from October 11.
Telstra had in May announced this capital management program of AU$1.5 billion for the second half of calendar 2016, with the telecommunications provider planning to use the AU$2.1 billion sale of its shares in Chinese online company Autohome to fund the program.
"I am pleased that we are able to confirm such a significant capital management program as the result of active management of our investment portfolio. Given our recent announcement of the sale of Autohome shares, we believed it was important to provide the market with further information about how we intend to use those funds," Telstra CEO Andrew Penn said at the time.
"Creating this type of shareholder value is in accordance with our capital management framework. Importantly, we also maintain sufficient capacity to invest in our growth plans for the future."
At the end of 2014, Telstra similarly completed a AU$1 billion share buyback, with the offer oversubscribed by almost 70 percent.
At the time, Telstra bought back more than 217.4 million shares or 1.75 percent of those on issue. The buyback price was AU$4.60 per share, a 14 percent discount on the market price.
Telstra earlier this month released its 2015-16 financial year results, reporting a net profit after tax of AU$5.8 billion, a 36.6 percent jump from last year's AU$4.2 billion, on revenue of AU$26.7 billion and earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$10.5 billion.