Spark New Zealand plans to buy back as many as 40 million shares on market for up to $100million this year after a series of asset sales left its balance sheet under-leveraged.
Forsyth Barr broker Suzanne Kinnaird said the buyback confirmed her view that an increased dividend payout ratio was unlikely from Spark for several years.
Any change in dividend policy was unlikely while there was uncertainty around the regulated price for broadband and there was aggressive competition for fibre and mobile customers.
''The buyback aims to return Spark's gearing to a more appropriate level after the sale of Telecom Rentals and its share of Telecom Cook Islands.''
Spark had completed a programme of disposing of non-core assets starting with the sale of its Australian business AAPT in 2014 for $500 million.
The latest sales netted a combined $129million.
The telecommunications service retailer sought to maintain an ''A band'' credit rating with Standard & Poor's, and previously said it intended to keep net debt at a ratio of 1.5 times earnings before interest, tax, depreciation and amortisation.
The maximum value and number of shares Spark plans to buy implied an average price of $2.50, a discount to the $2.765 the stock traded at before the announcement.
''Our concerns are the relatively weak operating earnings growth delivered by its operations and that high-margin fixed-line revenues will continue to decline.
''Our rating for Spark is underperform,'' Ms Kinnaird said.
