BT boss Philip Jansen has been looking for an outside investor to speed up and finance the £19billion telecom giant’s rollout of superfast fibre to the door for some time.
It was one of the factors which hastened the sudden resignation of Jan du Plessis as chairman. But no-one expected the cavalry to arrive quite so precipitously.
Indebted Franco-Israeli telecoms billionaire Patrick Drahi has snatched a 12.1 per cent stake in BT for £2.2billion without warning and is offering to sit down with Jansen and the board to discuss the future.
Rollout: BT Openreach is working flat out to improve Britain’s broadband network and has a Government obligation to bring fibre to neglected rural areas
He boldly says he wants to assist BT infrastructure offshoot Openreach to hit an ambitious target of supplying fibre to 25m British homes by 2025.
That is never going to be easy given the cost of £3billion a year, which is about half BT’s underlying earnings.
BT now has two strategic investors in the shape of Drahi, the principal of Altice Europe, and Deutsche Telecom with a 12.06 per cent holding.
Quite how Jansen is able to empower Drahi to help unleash value from fibre is not clear.
However, Drahi has a history of financial engineering, stripping out the infrastructure assets and bringing in private equity money.
He is a huge player in the sector, with ownership of France’s second largest network SFR and telecom assets across Western Europe, Israel and the Caribbean.
On occasion his debt-fuelled private equity approach has forced him to discard executives and assets to pay off loans.
The billionaire investor, who owns trophy asset Sotheby’s, has pledged that his raid is not a prelude to an all-out takeover.
It would be surprising if he didn’t use his heft to demand at least one seat, if not more, on the BT board.
That would give him the platform for ruthless cost-cutting of the kind he engineered at SFR, where staff reportedly found themselves scrambling around for toilet paper and printer refills.
Drahi’s timing is good. The long and ignominious slide in BT’s share price is being halted.
It has benefited from Jansen’s decision to offload its expensive sports TV franchises, a lower-than-expected price paid for 5G bandwidth in the recent spectrum auction and an easing of price controls by the regulator Ofcom.
He also strikes at a time of board vacillation. Du Plessis, a veteran of bids and deals, is still in place and the hunt for the next chairman continues.
Former Kingfisher boss Ian Cheshire is favoured by Jansen but his candidacy is on hold while senior non-executive Iain Conn, formerly of Centrica, conducts a search.
Britain’s ageing superfast broadband network held up better than expected in the pandemic but it is not fit for purpose given the widespread adoption of digital services and home working.
It is way off the pace when compared to South Korea, Japan and even Spain. Openreach is working flat out to catch up and has a Government obligation to bring fibre to neglected rural areas.
It faces formidable obstacles. In urban areas such as London it has real difficulty in gaining access to multi-resident offices and blocks of flats because so many landlords ultimately are domiciled overseas, many in the tax haven of the British Virgin Islands.
It has been pressing Downing Street for legal changes which would allow it to enter such premises as long as residents are agreeable.
The erosion of the UK’s manufacturing base for telecoms equipment means that most of the fibre and technology, such as the boxes used to distribute fibre in blocks of flats, have to be sourced from Corning in the US and other overseas suppliers.
It finds even simple tasks tough, such as replacing its British-made fleet of diesel trucks with electric so as to meet carbon emissions goals because supplier Vauxhall has no EV van production in the UK.
Brexit offers the UK great opportunities away from the bureaucratic interference of Brussels. It is puzzling and sad that when it comes to renewal of vital infrastructure, BT has to reply upon an overseas investor with a mixed reputation to shake things up.
What a pity the UK’s immense fund management industry doesn’t put its shoulder to the wheel and recognise that, free from curbs set by Brussels, it has a real opportunity to shake up underperforming giants such as BT by investing in next generation R&D, equipment and infrastructure.