Bharti Enterprises Acquires 24.5% Stake in BT for £3.2 Billion

Summary:

• Bharti buys 9.99% stake in BT.
• No plans to fully acquire BT.
• Altice sells to reduce debt.
• BT shares rise 6%.
• Drahi spent £4.2B on BT stake.

 

Bharti Enterprises Acquires 24.5% Stake in BT for £3.2 Billion

Bharti Enterprises announced plans to acquire a 24.5% stake in British telecommunications giant BT Group, valued at £3.2 billion ($4 billion). This strategic move involves buying out Patrick Drahi, BT’s largest shareholder, as his Altice group accelerates asset sales to mitigate its $60 billion debt.

 

Sunil Bharti Mittal, the billionaire founder of Bharti, positions his conglomerate as a pivotal strategic shareholder in BT. Under the leadership of new CEO Allison Kirkby, BT aims to rejuvenate its share value by targeting increased profits following years of stringent cost reductions.

Operating under the Bharti Airtel brand across 17 countries in South Asia and Africa, Bharti clarified on Monday that it has no intentions of pursuing a full acquisition of BT. The company expressed strong support for BT’s executive team and its ambitious transformation agenda, particularly its efforts to expand the UK’s fiber network.

Patrick Drahi, a Franco-Israeli billionaire renowned for debt-driven acquisitions in the telecom and cable sectors, initially invested approximately £4.2 billion for his 24.5% stake in BT between 2021 and 2023, based on Reuters’ estimates.

Market Reaction and Strategic Implications

Following the announcement, BT’s shares surged 6% to 139 pence in early trading. This development also serves as an early indicator of the new Labour government’s stance on foreign investments in critical sectors.

Bharti confirmed the acquisition of a 9.99% stake and awaits national security clearance from the government before finalizing the remaining 14.51%. “BT, in my view, has a promising future ahead and should pursue its strategy even more assertively,” Mittal remarked to reporters.

He emphasized that the investment, estimated at £3.2 billion based on current share prices, is a long-term commitment rather than a short-term market play. Mittal also revealed that Bharti had been monitoring BT for some time and engaged with its management in recent months.

While BT’s shares have climbed 24% over the past six months, reflecting progress in its fiber infrastructure rollout, they have declined 72% since 2015. Other notable shareholders include Deutsche Telekom with a 12% stake and Mexican magnate Carlos Slim, who acquired a 3.2% stake in June. Kirkby, BT’s CEO since February, hailed Bharti’s investment as a “great vote of confidence” in the company’s strategy.

Analysts at Deutsche Bank noted that the new shareholder alleviates concerns stemming from Drahi’s potential asset sales and highlighted opportunities for further collaboration between BT and Bharti.

Governance and Future Outlook

In 2021, Drahi’s investment in BT’s critical infrastructure raised alarms, prompting government assurances of intervention if necessary. Bharti underscored its confidence in the UK’s stable business and policy environment, alluding to the nation’s political stability under the new government.

Reflecting on historical ties, Bharti pointed out BT’s previous 21% stake in Bharti Airtel from 1997 to 2001. Regarding governance, Mittal stated that Bharti has not sought a board seat but mentioned having some “ideas” for management.

($1 = £0.7832)