All of the big ISPs brag to the public about how much they spend on their networks. There is barely a press release when they don’t remind the public how much money they are pouring back into making their networks better. Even at the local level, it’s rare to ask a big ISP to a local government meeting where they don’t open the conversation by reminding local politicians how much money they have spent in a given town or county.

The story is often just the opposite when problems with networks are pointed out, and communities ask the ISPs to beef up networks and improve service. That’s when we hear that money for capital spending is tight, but an ISP will make upgrades a priority in the future.

What’s never heard in conversation about capital spending is how much big ISPs spend to buy back shares of their own stock. This is a practice where big ISPs (and many other large corporations) use profits to purchase and retire stock. The transaction reduces the number of shares of outstanding stock and consequently nudges up the announced earnings per share. The first time I encountered the practice, I was flabbergasted.

Let’s consider the Comcast stock buybacks. Comcast paused stock buybacks in 2019, but in 2021 repurchased 73.2 million shares of stock for $4 billion. The company has over 4.5 billion outstanding shares of stock, so the buyback reduced the shares of outstanding stock by 1.6%. Comcast earnings for 2021 were announced as $3.06 per share for the year. Without the stock buyback, the earnings would have been $3.01.

The theory is this small nudge is good for investors. But it’s hard to envision a worse use for cash. Comcast could have gotten a far better return for investors from using that money to extend networks around their current markets, upgrading older networks to keep customers loyal, or marketing to add new customers. Those kinds of changes would result in long-term value gain for shareholders. Comcast recently announced that it is increasing the stock buyback in 2022 to $10 billion. To put that into perspective, Comcast’s capital spending for the last two years was $11.6 and $12.1 billion.

ISPs vary in the amount put towards stock buybacks according to their current cash situation and Board philosophy. Here are a few other stock buyback plans for large ISPs.

• Charter has actively been buying back its stock. The company repurchased $15.4 billion of its own stock in 2021 and $11.2 billion in 2020.
• T-Mobile has plans to really step up stock buybacks and plans to repurchase $60 billion of its own stock between 2023 and 2025.
• AT&T is not currently buying back stock and only repurchased $104 million of stock in 2021.
• Verizon told investors it would buy back 100 million shares of stock in 2022 – the stock is currently trading at $54 per share.
• The one that is hardest to understand is Lumen. The company generated $700 million in free cash flow in 2021 and spent $1 billion to buy back its stock. That probably demonstrates the pressure that Wall Street is exerting for stock buybacks.

This makes me wonder if corporations that are engaging in stock buybacks should be allowed to get federal grants. For example, should we have allowed a company like Charter to get $1.2 billion in RDOF funding in 2020 at a time when the company was spending $11 billion to buy back its own stock? Did Charter really need a federal subsidy, or does grant funding just allow a company to even further increase stock buybacks? I don’t have an answer for that other than it just doesn’t feel right.