Altice, the telecoms investor controlled by billionaire Patrick Drahi, has bought a 12.1 per cent stake in BT worth £2bn, making it the British company’s biggest shareholder.
The acquisition marked a return to dealmaking for the Luxembourg-based company, which had retrenched over the past two years to reduce its debt. The investment in BT, made through a new UK holding company separate from Altice’s main operations, represents Drahi’s boldest move since he acquired two US cable companies five years ago.
Altice said it did not intend to make a bid for the British telecoms company, meaning that under the takeover code it cannot make an unsolicited buyout offer for six months without the approval of BT’s management, and it will not be offered a seat on the board.
The stake building in BT was a change of course for Drahi, whose previous acquisition strategy has been to take control of undervalued telecoms assets by raising debt and then stripping out costs and selling off assets. His support for the existing management team and long-term view on the company’s role in fibre build, where the UK lags other markets, is a new approach.
Deutsche Telekom remains a 12 per cent shareholder in BT, meaning the UK company counts Europe’s largest incumbent telecoms group and the sector’s most aggressive dealmaker as its two largest shareholders.
Altice has been buying shares in the open market through banks including a £810m trade but only informed BT’s management on Wednesday that it had become the telecom company’s largest shareholder.
The move raised questions over Drahi’s strategy to unlock value in the longer term, but people with direct knowledge of the situation said a takeover bid was unlikely to succeed. “A full takeover (of BT or Openreach) would likely run into political opposition given the strategic importance of networks,” said Jerry Dellis, an analyst at Jefferies.
BT’s share price has risen 90 per cent since it hit 11-year lows last summer, including a 5 per cent jump in the past week. It gained 1 per cent to £1.87 after the Altice stake was revealed on Thursday.
The recent share price rally has been driven by a series of positive events for BT, including a move by regulator Ofcom to ease the regulatory burden on companies investing in fibre upgrades and the government’s decision to introduce tax breaks on capital investment that have strengthened the company’s hand.
Drahi, who owns auction house Sotheby’s, said he believed BT was best placed to take advantage of the huge investment in upgrading Britain’s broadband networks to full fibre, a position that was not reflected in its share price.
“BT has a significant opportunity to upgrade and extend its full fibre broadband network to bring substantial benefits to millions of households across the UK,” said Drahi. “We fully support the management’s strategy to deliver on this opportunity.”
BT chief executive Philip Jansen has argued that the company needs long-term investors as it embarks on a costly network upgrade. Since he joined from Worldpay in 2019, the private equity-backed payments business, the telecom has held talks with infrastructure and sovereign wealth funds over its £15bn network upgrade plan and has considered bringing in a funding partner to lay more fibre in rural areas.
Jansen said: “Investment on this scale from a respected industry leader is a big vote of confidence in BT’s bold plans to be the UK market leader in next generation digital connectivity. I have already spoken with Patrick to welcome him and I look forward to ongoing engagement and discussion.”
Altice’s investment also comes as BT searches for a chair to replace Jan du Plessis, who is due to step down in the summer following a boardroom fracas.
Altice delisted its shares in Amsterdam last year, after arguing they were undervalued. That was part of efforts to strengthen its sprawling empire — which covers France, Portugal, Israel, the US and the Dominican Republic — after a series of cost cutting moves and asset disposals in recent years. It also split its US business into a separate company. The BT move followed a failed $7.8bn attempt to buy Canadian cable company Cogeco last year.