Altice bets on British optical fiber with £2 billion of BT shares

The telecommunications investor Altice controlled by billionaire Patrick Drahi bought a 12.1% stake in British Telecom for £2 billion, making it the largest shareholder of the British company.

This acquisition marks the reopening of transactions for the Luxembourg-based company, which has shrunk to Reduce debtThe investment in BT was made through a new British holding company separate from Altice’s main business, which was Drahi’s boldest move since acquiring two US cable companies five years ago.

Altice stated that it does not intend to bid for the British Telecom company, which means that according to the Takeover Code, without the approval of the management of British Telecom, it cannot take the initiative to make a takeover offer within six months, nor will it obtain a seat on the board of directors. .

The increase in BT’s holdings is of course a change for Drahi. His previous acquisition strategy was to control undervalued telecom assets by borrowing, then stripping off costs and selling assets. His support of the existing management team and long-term view of the company’s role in fiber optic construction, the UK lags behind other markets, this is a new approach.

Deutsche Telekom is still a 12% shareholder of British Telecom, which means that the British company regards Europe’s largest existing telecommunications group and the industry’s most active deal maker as its two major shareholders.

Altice has been buying shares on the open market through banks, including a £810 million transaction, but did not inform the management of British Telecom until Wednesday that it has become the largest shareholder of the telecommunications company.

This has raised questions about Drahy’s long-term value strategy, but people with direct knowledge of the situation said that the takeover offer is unlikely to succeed. “Considering the strategic importance of the network, a full-scale acquisition (against BT or Openreach) may encounter political opposition,” said Jefferies analyst Jerry Delis.

Since hitting an 11-year low last summer, BT’s stock price has risen by 90%, of which it has risen by 5% in the past week. After the announcement of Altice’s stake on Thursday, it rose 1% to £1.87.

The recent stock price rise has been driven by a series of positive events from British Telecom, including actions by the regulator Ofcom Reduce the regulatory burden Companies investing in fiber optic upgrades and the government’s decision to implement tax relief on capital investment have strengthened the company.

Drahi who owns the auction house Sotheby’sSaid that he believes that British Telecom is best suited to take advantage of the huge investment in upgrading the UK’s broadband network to all-fiber optics. This position is not reflected in its stock price.

“BT has an important opportunity to upgrade and expand its all-fiber broadband network, bringing huge benefits to millions of households in the UK,” Drahy said. “We fully support the management’s strategy to seize this opportunity.”

BT CEO Philip Jansen argued that the company needs long-term investors as it embarks on expensive network upgrades.Since joining the private equity-backed payment business Worldpay in 2019, the telecommunications company has negotiated with infrastructure and sovereign wealth funds on its £15 billion network upgrade plan, and has considered Introduce funding partners Lay more optical fibers in rural areas.

Jansen said: “An investment of this scale from a respected industry leader is a huge confidence in BT’s bold plan to become the next-generation digital connectivity market leader in the UK. I have spoken to Patrick and welcome him, I look forward to continued participation and discussion.”

Altice’s investment also comes from British Telecom’s search for a chairman to replace Jan du Plessis, who is Due to step down The summer after the board quarrel.

Altis Delisting its shares Last year in Amsterdam, after arguing that they were undervalued. This is part of an effort to strengthen its vast empire, including France, Portugal, Israel, the United States and the Dominican Republic, after a series of cost cuts and asset disposals in recent years. It also split its US operations into an independent company. BT’s move followed The failed $7.8 billion attempt The Canadian cable company Cogeco was acquired last year.

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About the Author: Agnes Zang