- French billionaire Patrick Drahi BT’s largest shareholder

- Drahi’s Altice upped BT stake to 18% in December

- UK government could use new powers to block bids for BT

The UK government said it will use new powers to examine the national security implications of Patrick Drahi, BT’s (BT.A) biggest shareholder, increasing his stake to 18%.

Billionaire Patrick Drahi controls French telco Altice, which increased its stake from 12.1% to 18% in December last year, worth more than £3 billion. That has raised worries at government level that BT, a key asset to the UK’s communications network, could be ripe for a takeover. Drahi has previously denied that Altice’s stakebuilding is aimed at launching a buyout of BT.

Business Secretary Kwasi Kwarteng will now have 30 working days to assess the Altice stake on national security grounds, although that could be extended by 45 days if necessary. Kwarteng will have the power to either clear the move or, ‘if necessary and proportionate’, impose certain conditions on the investment or block it completely.

BT said in a statement that the group ‘will fully cooperate with this review’.

TELCO M&A IGNITES INTEREST

In last week’s Shares (19 May), we reported that the European telecoms sector has burst into life after years of restrictive regulations and poor investment returns. Last year saw the merger of Spanish rivals Euskaltel and Masmovil, and private equity firm KKR’s ultimately failed attempt to acquire Telecom Italia.

Recently, BT and US broadcaster Discovery agreed a venture that will combine to create a new premium sport offering, while Abu Dhabi telecoms group e& has taken a big slice of Vodafone (VOD), buying a 9.8% stake for $4.4 billion.

Investors hope that M&A might spice up returns that have been poor for years from sector heavyweights. The past five years have seen BT’s revenues decline by more than £3 billion to last year’s (to 31 March 2022) £20.9 billion, while pre-tax profits have fallen 16% to £1.96 billion.

BT was one of the day’s biggest FTSE 100 fallers after the government investigation was announced, losing nearly 5% to 181p, with investors clearly seeing the chances of a BT buyout as bleak.

The stock has lost 42% since 2017, when they traded above 300p.

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Issue Date: 26 May 2022