BT Group, the British telecommunications company, has announced a major change in its shareholder structure. Indian billionaire Sunil Bharti Mittal, through his conglomerate Bharti Enterprises, has bought the 24.5% stake in BT previously owned by French billionaire Patrick Drahi.
Mr. Drahi, who is the owner of France’s second biggest telecoms company Altice, first acquired a 12.1% stake in BT in June 2021 and gradually increased his ownership over time. However, recent speculation in the City suggested that he was looking to sell his shareholding in order to pay off some of the estimated $60 billion (£47 billion) debt that Altice has accumulated.
Bharti Enterprises is believed to have paid around £3.2 billion for the stake, effectively swapping one billionaire shareholder for another. This development is likely to be welcomed by BT’s newish chief executive, Allison Kirkby. While she may not publicly express her satisfaction, it is reasonable to assume that she will be pleased to see the back of Mr. Drahi.
The speculation surrounding Mr. Drahi’s potential exit from BT had a negative impact on the company’s share price, which has been a source of frustration for Philip Jansen, Ms. Kirkby’s predecessor. Following the announcement of Bharti’s investment, BT’s shares rose by as much as 7.5%, indicating that the removal of what was seen as a stock overhang has boosted investor confidence.
Ms. Kirkby expressed her appreciation for Bharti’s investment, stating: “We welcome investors who recognize the long-term value of our business, and this scale of investment from Bharti Global is a great vote of confidence in the future of BT Group and our strategy.”
She also highlighted the long-standing relationship between BT and Bharti, noting that the latter has a strong track record of success in the telecoms sector. She further added, “They have a strong track record of success in the sector, and I look forward to ongoing and positive engagement with them in the months and years to come.”
This sentiment is also likely shared by the UK government. Mr. Drahi’s arrival on BT’s share register had caused unease in Whitehall, and the Johnson government had indicated that it would intervene if he were to make a full takeover bid. However, Bharti has ruled out any such intentions, stating that it fully supports BT’s executive team and strategy.
Bharti highlighted its significant record of long-term investments in the UK and its longstanding familiarity with BT’s business. The company also noted that BT had been a significant minority shareholder in Bharti Airtel from 1997 to 2001, with a 21% stake. Mr. Bharti Mittal, who revealed that he has already met with BT’s management, stated that he sees a bright future for BT and fully supports its strategy.
He also emphasized that Bharti is a long-term telecom investor, not looking for short-term gains in the stock market. He added, “We are not in this for making a buck or looking at stock markets up or down. We are long term telecom investors.”
Under Mr. Jansen’s leadership, BT has made significant progress in stabilizing its business. The company has heavily invested in its infrastructure arm, Openreach, to roll out full fibre to the premises. It has also resolved its previously troubled relationship with Ofcom, its regulator, and found a creative solution for its struggling BT Sport business by forming a joint venture with US media giant Warner Brothers Discovery.
Since taking over as CEO in February, Ms. Kirkby has continued to focus on cost-cutting, announced plans to raise the dividend, and delivered better-than-expected results for the three months ending June 2021.
Despite these positive developments, BT’s share price has fallen by around a third since Mr. Drahi’s initial stake declaration. However, those familiar with Mr. Bharti Mittal’s track record know that he is a long-term investor, not just looking for short-term gains. He sees the stake in BT as an opportunity to build synergies between the UK and India in areas such as artificial intelligence, engineering, and research and development on 5G networks.
This aligns with the UK government’s vision, as demonstrated during a recent trip to Delhi by the new foreign secretary David Lammy. The UK and India had announced a Technology Security Initiative to collaborate more deeply in various sectors, including telecoms.
Bharti’s investment in BT also reflects the broader trend of Indian companies investing in UK enterprises. Companies like Tata Group, Mahindra & Mahindra, and TVS Motors have all made significant investments in UK businesses and have proven to be good long-term owners.
BT’s other major stakeholders, including Deutsche Telekom and Mexican billionaire Carlos Slim, will likely view Bharti’s investment as a positive development and hope that the company will continue to be a stable and successful long-term investment.
