ALTICE BUYS 12% STAKE IN BT

Publishing Date: Jun 10, 2021

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ALTICE BUYS 12% STAKE IN BT

PRESS RELEASE: Patrick Drahi bought a 12% stake in BT Group Plc and pledged to support its high-speed broadband rollout, an unexpected move that marks a return to form by the deal-hungry French-Israeli cable billionaire.

Drahi’s newly created company Altice UK acquired 1.2 billion shares of Britain’s dominant phone company, it said in a statement on Thursday. The stake is worth about 2.2 billion pounds ($3.1 billion) as of Wednesday’s close and makes him the company’s biggest shareholder.

The new stake in BT is a “significant surprise,” said Berenberg analyst Carl Murdock-Smith, calling it “a proper curveball.”

Drahi said he’ll use Altice’s expertise in rolling out fibre networks to help BT expand its own. The British company has been looking for a partner to help it build out an extra 5 million fibre optic connections by 2026, opening up its infrastructure to an external investor for the first time. Altice said it has no plans to launch a full takeover bid for BT.

BT shares rose as much as 4% in London on Thursday. The stock price has increased by about 41% so far this year.

BT said in a separate statement that it welcomes “all investors who recognise the long-term value of our business and the important role it plays in the U.K. We are making good progress in delivering our strategy and plan.”

Drahi didn’t disclose how he planned to pay for the new stake, which a company spokesman said was acquired over the past few days. Drahi has been exploring options to tackle some of his European business’s costly bonds after taking the French telecom and media company private in January.

Drahi will hold a stake comparable to that of Deutsche Telekom AG. Representatives for BT and Altice declined to give further details on the nature of the new relationship, or how Altice will contribute to the fibre rollout.

BT’s Chief Executive Officer Philip Jansen is looking for ways to share the burden of the costly network upgrade after years of shrinking earnings. Jansen has said a nationwide fibre rollout may cost 15 billion pounds.

The purchase of a 12.1% stake in BT by billionaire Patrick Drahi’s Altice is a testimony to the U.K. carrier’s potential to increase midterm profit and cash flow, we believe, thanks to management’s 5G and full-fibre-infrastructure investments, and a 2-billion-pound cost-cutting plan. BT is making good progress, but upside to consensus for fiscal 2021-22 and 2022-23 may be limited, in our view, with a takeover bid looking unlikely.

Matthew Bloxham, BI telecoms analyst

The new entity, Altice UK, was established to hold the shares in BT and is separate from Drahi’s European and U.S. businesses, the company said in the statement. It’s owned by Drahi’s Next Alt Sarl, which also controls Altice USA, Altice France, Altice International and auction house Sotheby’s.

Although Altice said it would not pursue a takeover offer for BT, U.K. rules mean that it could choose to do so after six months.

James Ratzer, analyst at New Street Research, said the move will raise questions including whether Drahi plans further share increases or a full takeover of BT, whether he plans to ask for a board seat, and whether he could act in concert with Deutsche Telekom, or another backer, to launch a takeover.

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