• Billionaire owner of Altice has built an 18% stake in BT in the past 14 months
• His purchase of an additional 5.9% in January triggered a UK government security probe in May
• Now UK’s business secretary says no further action will be taken – at least not by the UK government…
• BT now awaits to see what Drahi might do next

The UK government has concluded its security review of the stake held in national operator BT Group by Altice UK, an acquisition ‘vehicle’ owned by billionaire Patrick Drahi, and decided that everything is tickety-boo and shipshape (as some Brits might say). 

Drahi, who now owns and manages the Altice empire through his Next Private BV holding company after he took the operator private in early 2021, started building his stake in BT in mid-2021, when his 12.1% stake set alarm bells ringing at BT headquarters and within the UK government. That’s because Drahi is known as a ruthless cost-cutter of businesses he owns, and there were concerns the Franco-Israeli businessman might consider a takeover bid for the UK national operator – see Drahi’s Altice grabs 12.1% chunk of BT.

The news sent BT’s share price to 189 pence on the London Stock Exchange.      

Then, in December of last year, Altice UK increased its stake in BT to 18%, but noted at the time: “Altice UK has restated its position to the board of BT that it does not intend to make an offer for BT” – see Drahi’s Altice ups its stake in BT to 18%, but still has no plans for a takeover offer.

Following that clarification, BT’s share price dipped a little to trade at 166 pence.

Then, on 4 January of this year, the UK government’s National Security and Investment Act 2021 came into force: It gives the authorities the power to “scrutinise and, if necessary, intervene in qualifying acquisitions on national security grounds.” This wasn’t a knee-jerk reaction to anything recent: The white paper that provided the foundations for the act was published in 2018. 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.  

Months passed before, on 26 May, the UK government announced a full investigation into the additional 5.9% stake Altice UK acquired in December 2021: That news put a little dent in the operator’s share price to 186 pence. 

Now, three months later, the UK’s Department for Business, Energy and Industrial Strategy has announced that “following careful consideration, the government will take no further action on the acquisition of 5.9% shares by Altice in BT.”

So Drahi gets to keep his 18% stake and has, effectively, been told that an Altice stake is not regarded as a security concern, at least at its current level. The security review, initiated by Business Secretary Kwasi Kwarteng, appears to have been a shot across Drahi’s bows, effectively giving notice that the UK government is keeping an eye on his activities and won’t hesitate to step in and take action if it feels a threshold has been crossed. 

The news that the review is over gave BT’s stock a 1.7% lift to 159 pence: That’s still very close to its lowest point this year, though nowhere near the desperate sub 100 pence price the shares were trading for in July 2020. 

Currently, the Drahi/Altice stake in BT is worth £2.84bn (US$3.3bn).  

What happens next? Well, Drahi could increase his stake further – after all, he has said he has faith in the current strategy of the BT board and management team, particularly as the operator’s quasi-independent fixed access unit, Openreach, builds out its fibre access network across the UK, creating the infrastructure needed for a digital future and encouraging others, such as Virgin Media O2, CityFibre and scores of smaller independent players, to do likewise (albeit most often on a smaller scale in a particular area). 

But what if Drahi buys a lot more BT shares? Well, the 25% stake that triggers a mandatory security review has been set at that level for a reason and it seems somewhat unlikely that the UK government, no matter who is Prime Minister or which political party is in power, would allow the UK’s national operator to be acquired and run by an overseas owner now that the National Security and Investment Act is in place. If Drahi’s stake was to get to that level, it seems certain another review would be initiated.

But, of course, anything could happen: Money talks (increasingly loudly) and lawyers are capable of finding and exploiting gaping holes in legislation (if they exist), so the unexpected cannot be ruled out.

The ball is now in Drahi’s court.

- Ray Le Maistre, Editorial Director, TelecomTV