One of the biggest broadband companies in Europe today stunned the industry by splashing out £2 billion on a 12.1% stake in BT in what was seen as a huge vote of confidence in the company’s turnaround plans.
Altice UK, part of French billionaire Patrick Drahi’s telecoms giant Altice, built up its huge stake in the last two days.
Founder Patrick Drahi phoned BT’s chief executive and chairman last night to explain his plans.
He declared himself supportive of BT’s strategy to roll out superfast broadband to 25 million UK homes and had no intention of launching a takeover.
The pledge not to launch an offer now prevents it making a bid for a minimum of six months under UK takeover rules.
It came with a caveat, that it could bid for BT if it was agreed by the board or if another company made a takeover offer.
Analysts said Altice was likely to want a board seat to influence its future direction.
The share purchase makes it BT’s biggest shareholder, a shade ahead of Deutsche Telekom. DT has one board member.
In a statement, the French group said: “Altice UK has made this significant investment in BT as it believes that it has a compelling opportunity to deliver one of the UK government’s most important policies, namely the substantial expansion of access to a full fibre, gigabit-capable broadband network throughout the UK.”
BT has recently won a pricing framework from regulators that will enable it to roll out fibre to 25 million homes by the end of 2026.
Its shares have dramatically underperformed in recent years but Jansen’s turnaround plans, which include a sale of its sport broadcasting arm and massive investment in broadband, have recently started to reverse the slide.
Drahi has French, Israeli and Portuguese citizenship but lives in Switzerland.
He built up his empire over the last 20 years and has a reputation for driving extremely aggressive growth. He bought into, then took over France’s SFR telecoms group and has operations in the US, Portugal and Israel, with a combined 40 million customers.
Drahi said in a statement that he “holds the board and management team of BT in high regard and is supportive of their strategy.”
Friends said he was impressed by Jansen’s ambition to drive BT’s transformation hard - an ambition that reportedly put him at odds with chairman Jan du Plessis, who subsequently announced his retirement.
Drahi set up Altice UK specifically to make the investment in BT. The share purchases were handled by Morgan Stanley and BNP Paribas. Morgan Stanley’s Jean Abergel is seen as a close adviser to the tycoon who has a reputation for astute financing and leverage in his deals.
Big overseas investors have been in a dash to build broadband networks here as the UK plays catch up to gain faster Internet speeds after what has been seen as years of underinvestment.
Alternative networks to BT - known as Altnets - have been backed by billionaire Mikhail Fridman, Goldman Sachs and other long term investors with deep pockets looking for decades of guaranteed returns from subscribers.
Drahi’s decision to invest £2 billion in BT will be seen not only as a huge endorsement of the former monopoly’s strategy, but means he will not be deploying the cash with a rival such as Goldman-backed CityFibre, which has been reportedly seeking a new investor.
Drahi has met informally in the past with BT chief executive Philip Jansen and Openreach boss Clive Selley but only to talk broadly about industry matters.
Jansen has been seeking to find investors to take a longer term view of the company as it embarks on its vast investment programme that will only start paying back investors in future decades.
Drahi’s arrival may have caught the company by surprise, but could also be seen in that light, analysts said.
Drahi called Jansen and outgoing chairman Jan du Plessis at 4pm last night to explain his plans before flying off to Tel Aviv.
Sources in the Drahi camp did not dispute that he would be seeking a board seat but firmly denied that he would be seeking to influence BT directors on their hiring of a new chairman to replace du Plessis.
“We want a ‘seat at the table’ to bring our expertise to bear at BT, but hiring the chairman is entirely a matter for the board,” said one.
Quite how it brings that expertise to bear remains to be discussed.