India’s Bharti Enterprises said it would acquire a 24.5% stake in BT, paying around 3.2 billion pounds ($4 billion) to buy out the British company’s top investor, Patrick Drahi, as his Altice group struggles with high debts.
Bharti, which owns the Bharti Airtel brand operating in 17 countries across South Asia and Africa, said on Monday it had no intention of buying all of BT, the former state monopoly which is Britain’s biggest broadband and mobile company.
It said it supported BT’s executive team and strategy as it pushed forward with an “ambitious” transformation programme to deliver long-term sustainable growth, by building the country’s fibre network.
The deal, which sent shares in BT up 6% to 139 pence in early trading, will pose an early test for Britain’s new Labour government.
Bharti said it had already bought a 9.99% stake but would wait for the government to provide national security clearance before it buys the remaining 14.51%.
The news brings an end to Drahi’s involvement with the 178-year-old company. His holding had been seen as a drag on BT as his debts, estimated at $60 billion and built up in an era of low interest rates, mean he is now selling assets.
“BT to my mind has a much brighter future ahead and they need to be following their strategy, if I may say, even more boldly,” Bharti chair Sunil Bharti Mittal told reporters.
“We are not in this for making a buck or looking at stock markets up or down. We are long-term telecom investors.”
Mittal said he had been watching BT for a period of time and was recently approached by the seller, meeting BT management in recent months.
While BT’s shares have risen by 24% in the last six months as the fruits of its long-term fibre build start to materialise, over the longer term the share price has been in decline, falling 72% since 2015.
Deutsche Telekom is a long-term holder of a 12% stake in BT, while in June this year Mexican magnate Carlos Slim bought a 3.2% stake in the company, a boost for Allison Kirkby who took over as BT’s CEO in February.
She called the Bharti stake a “great vote of confidence” in BT’s strategy.
Deutsche Bank analysts said the new shareholder removed an “overhang” from the stock, and added that there could be further prospects for co-operation between BT and Bharti.
NO BOARD SEAT
In 2021 Drahi caused alarm when he bought into BT and its critical communications infrastructure, prompting the government to say it would intervene if necessary to protect the group.
Although Britain has long been comfortable with Indian investment – India’s Tata Group owns Jaguar Land Rover and the country’s largest steel producer – the attitude of the new Labour government elected in July towards foreign ownership of stakes in key sectors is untested.
Bharti said the deal was a vote of confidence in Britain and its stable business and policy environment, a possible nod to the new government after five years of turmoil under the Conservative party.
The group also noted its long-standing relationship with BT, which owned a 21% stake in Bharti Airtel from 1997 to 2001.
Asked how much Bharti had paid for the stake, Mittal pointed reporters to the market, noting that the shares had ranged between 130 pence and 142 pence, with a dividend paid out.
He said the group had not asked for a board seat, although he added that he had some “ideas” for management.