India’s Bharti Global snaps up Drahi’s 24.5% stake in BT

• Billionaire telecom investor Patrick Drahi had built a 24.5% stake in BT via Altice UK
• But his Altice empire is overloaded with debt and Drahi has been selling assets
• Now he has agreed to offload his 24.5% stake in the UK telco to Bharti Enterprises
• The Indian conglomerate, run by another billionaire, Sunil Bharti Mittal, will become BT’s single biggest shareholder

With his Altice empire still weighed down with debt, billionaire telecom and media investor Patrick Drahi has agreed to sell his 24.5% stake in the UK’s BT Group to giant Indian conglomerate Bharti Enterprises, which is run by another billionaire with a penchant for telecom – Sunil Bharti Mittal. 

Bharti Global, the international investment arm of Bharti Enterprises, has struck a deal to acquire the Altice stake in two stages: An initial 9.99% tranche to be bought “imminently”; followed by the remaining 14.51% once the acquisition has been cleared by the UK’s regulatory bodies. The Indian company has made it clear that it has “no intention of making an offer to acquire” BT. 

Based on UK telco’s share price of 130.5 pence before the London Stock Exchange (LSE) opened for trading on Monday morning, a 24.5% stake in BT is valued at about £3bn. Bloomberg estimates that Drahi's stake in BT is now worth £990.9m less than when he acquired it.  

News of the deal gave BT’s stock a lift, as it quickly gained 6.3% to reach almost 139 pence in early trading on the LSE. 

Bharti Global is also “applying voluntarily for UK National Security and Investment Act clearance”, which is a smart move as that’s a process that would almost certainly have been initiated anyway. In early 2022, the UK government’s National Security and Investment Act 2021 came into force, giving authorities the power to “scrutinise and, if necessary, intervene in qualifying acquisitions on national security grounds.” In essence, the act gives the government, on the grounds of national security, the clout to scrutinise and even intervene in minority stakeholdings and asset deals, as well as mergers and acquisitions. Any deal can be assessed, but a stakeholding of 25% or more of a UK company triggers a mandatory government review. Drahi’s stakebuilding in BT, which began in 2021, was assessed and approved under that legislation and there’s nothing to suggest that Bharti Global won’t be given the green light to buy all of Altice’s 24.5% stake.   

Should, as expected, Bharti Global take ownership of that 24.5% stake, it will become the biggest single shareholder in BT. (Remember, too, that another telecom sector billionaire, Carlos Slim, who founded and still controls Latin American telecom giant América Móvil, recently snapped up a 3.16% stake in BT.) 

In its announcement about the planned transaction, Bharti noted that it “supports BT's executive team and strategy as the company accelerates its ambitious transformation program to deliver long-term, sustainable growth. Bharti endorses BT's goal to transform the UK's telecoms landscape by building fibre, rolling out 5G technology and developing market-leading services to live, work, game and learn.” 

Sunil Bharti Mittal stated: "This investment demonstrates the confidence we have in BT and in the UK. BT has a strong portfolio of market leading brands, high-quality assets and an experienced management team with a compelling strategy mandated by the BT board to deliver value over the long term, which we fully support. Bharti and BT have enjoyed a longstanding relationship - BT previously owned a 21% stake along with two board seats in Bharti Airtel Limited from 1997 to 2001.”

He continued: “BT is playing a vital role to expand access to full-fibre broadband infrastructure for millions of people across the UK. Its focus on strengthening its networks, driving consumer growth, and optimising every aspect of its business makes it well-placed to consolidate its position as a leading global telecoms company. Bharti's own record of owning and operating telecom and broadband networks around the world is underpinned by placing customers, digital innovation, and operational efficiency at the heart of its business."

Mittal’s empire includes India’s second largest mobile operator, Bharti Airtel, and Airtel Africa, which provides telecom and mobile money services in 14 markets across the continent (primarily in East, Central and West Africa).

BT issued a short statement referencing the deal. CEO Allison Kirkby stated: “We welcome investors who recognise 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. BT has enjoyed a long association with Bharti Enterprises, and I’m pleased that they share our ambition and vision for the future of our business. 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."

Kirkby took over as BT’s CEO in February this year and recently announced a new back-to-basics, UK-focused plan that includes further cuts to BT’s operating costs. BT recently reported a slight year on year dip in fiscal first quarter revenues to £5.1bn.

Drahi, meanwhile, still needs to find more ways to raise additional capital to help manage the debt pile built up across multiple parts of the Altice Group’s debt: Altice France (which includes French telco SFR) has debts of about €24bn; Altice International (which includes national telco Altice Portugal) has debts of about €9bn; and Altice USA has debts of $24.6bn. Drahi has been trying to sell Altice Portugal and was close to a deal with Saudi telecom giant STC, but the parties could not agree terms.   

- Ray Le Maistre, Editorial Director, TelecomTV