BT’s status as a potential takeover target is back in focus after UK rules preventing its new largest shareholder from making its next move expired on Saturday. Here we look at the key points.
What is happening?
Altice, the telecoms group controlled by the billionaire Patrick Drahi, made an unexpected £2.2bn share swoop in June to take a 12.1% stake in BT. After the move Drahi, who has said he is supportive of management and their strategy and is not seeking to take control of BT, has been subject to a six-month no-bid clause. However, all bets are off from 11 December.
The key players
Patrick drahi The 58-year-old French-Israeli telecoms billionaire has amassed a $12bn (£9bn) fortune making shrewd bets, often involving aggressive cost-cutting programmes at businesses he controls. Drahi has made his money in the telecoms market, but he is best known in the wider media for his $3.7bn swoop on struggling auction house Sotheby’s in 2019.
Philip Jansen The 54-year-old chief executive of BT, who has made an estimated $100m fortune from the flotation and subsequent buyout of his former employer WorldPay, has led the telecoms company for the past three years.
Adam Crozier Drafted in as chairman designate on 1 March after a boardroom bust up between Jansen and chairman Jan du Plessis, the 57-year-old Scot officially took the helm on 1 December – just in time to join the frontline resistance to Drahi. Crozier’s CV spans chief executive stints at ITV, Royal Mail, the Football Association and the advertising group Saatchi & Saatchi, as well as chairman at online retailer Asos and the Premier Inn owner Whitbread.
Tim Höttges The chief executive of Deutsche Telekom, BT’s second-largest shareholder with a 12.06% stake, has held its shareholding in a passive capacity as a legacy of the telecom’s company’s takeover of EE in 2015.
KKR The US private equity firm has proposed a “friendly” buyout of Telecom Italia which, like BT, is a former state monopoly of significant strategic importance. A sign of private equity interest in European telecom stocks, and something of a template for how any deal for BT would need to be approached.
Why is BT a target?
The timing of Drahi’s stake-building was no accident. It followed BT’s £15bn commitment to roll out full-fibre broadband to 25m homes by 2026, having gained valuable regulatory and financial incentives guaranteeing a return on the huge investment over the long term. Telecoms have long argued that they are undervalued by the market; BT’s share price remains stubbornly about 65% down on 2015 levels, while the pandemic has shown the essential role internet and mobile companies play in society and strategic importance to the nation.
What are the options?
Drahi could look to increase his stake in BT by snapping up more shares with one option to quickly double his holding by buying out Deutsche Telekom. Höttges said recently the company is “entertaining all options” regarding BT. Drahi could also demand a seat on the board, as Deutsche Telekom has, to increase his direct influence over future strategy.
A full-blown takeover could also be on the cards, although it would come with significant ramifications, both in terms of competition and politics.
Britain has become more wary of threats to the economy and national security posed by the sale of certain UK companies to foreign rivals and private equity firms. From January, the government will gain tougher powers to block the takeover of key national assets, which BT would certainly be designated, under the National Security and Investment Act 2021.