The French billionaire Patrick Drahi has increased his Altice group’s stake in BT to 18%.
BT, the UK’s largest telecoms group, has been on red alert since Patrick Drahi surprised the market in June, buying a 12.1% stake in BT Group for £2 billion. He set up a new unit, Altice UK, then promised not to launch a takeover bid for at least six months, which has just expired.
Drahi said today that he had “engaged constructively with the board and management of BT” and that he did not intend to make a bid.
Calling in the law
The UK government was spurred to issue a statement that said, “The government is committed to levelling up the country through digital infrastructure, and will not hesitate to act if required to protect our critical national telecoms infrastructure”.
The government cited its powers under the National Security & Investment Act, which comes into force in January. Kester Mann, Director, Consumer and Connectivity, CCS Insight, noted, "Mr Drahi’s moves will be closely watched by the UK Government.
"The sale of a British institution such as BT would be politically sensitive, particularly with the Government under mounting pressure over its handling of the Covid-19 pandemic.”
For its part, BT issued a statement saying that it would continue to operate the business “in the interest of all shareholders”.
Like most European telecoms groups, BT is struggling with underperforming shares, a lack of revenue growth, large debts and needing to make huge investments on fibre and 5G infrastructure.
BT’s CEO Philip Jansen, new Chair Adam Crozier and Nadine Dorries, the Minister responsible for the Department of Digital, Culture, Media and Sport to discuss the company’s strategy.
Others are interested
As well as Drahi, private equity and infrastructure funds are also believed to be interested in investing in BT, as they in former incumbents right across Europe.
Drahi’s approach to BT is different from his acquisition strategy in other countries, including Portugal, France and the US, where he acquired undervalued assets outright leveraging debt, then massively reduced their operating costs.
Altice has its headquarters in Amsterdam and Drahi took the company he founded back in private ownership last December, ironically complaining about its unreasonably low valuation.
He has not requested a seat on BT’s board, but said in his statement, Drahi said of BT’s management, “We continue to hold them in high regard and remain fully supportive of their strategy, principally to play the pivotal role in delivering the expansion of access to a full fibre broadband network”.
Shares in BT have risen by 20% this year since Drahi made his first investment in the group. Mann of CCS Insight added, “The move by Patrick Drahi will accelerate expectations that the French billionaire will eventually seek to take full control of BT.
"A logical next step could be to look to acquire Deutsche Telekom’s 12% stake in the operator and the German company has already indicated that it may be open to an offer.”
“For BT, the ownership uncertainty is an unwelcome distraction as it seeks to turn around its financial performance after a challenging few years. It also comes as it seeks to find a partner or buyer for BT Sport and accelerates its full-fibre roll-out commitments.”