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Kwasi Kwarteng has ordered an investigation into the national security implications of a potential takeover of BT by the French billionaire Patrick Drahi.
The Business Secretary has demanded tighter scrutiny of the 18pc stake held by Mr Drahi's French telecoms group Altice that could provide the stepping stone towards the nation's biggest broadband provider falling into foreign hands.
Mr Kwarteng is taking action now as restrictions designed to prevent a potential takeover approach are poised to run out next month.
In a statement, the business department said the French raider's swoop on BT's shares will be subjected to a full national security assessment that will take 30 days to complete.
It is a sign of the growing alarm among Westminster of the threat posed by takeover of the telecoms operator, which is critical to the nation's digital infrastructure and carries out classified work for the Government.
Such a takeover would also come at a sensitive time as Britain upgrades its network to next-generation technology. BT is spearheading the roll-out of faster full-fibre broadband and is among the operators rolling out 5G mobile signals deemed 100 times faster than 4G.
Officials have been bracing for Mr Drahi's next move after the owner of Sotheby's auction house rocked the markets in June by becoming BT's biggest shareholder with a 12pc stake. He went on to increase his position to 18pc in December.
The latest raid has prevented him from bidding until the middle of June, unless an approach wins the backing of the board, or he is responding to a takeover tilt from a rival suitor.
Mr Drahi, 58, has the power to increase his stake to nearly 30pc without being forced to mount a full-blown bid, prompting concerns he is pursuing a strategy of "creeping control".
Responding to the Government's decision on Thursday, BT said it would "fully cooperate" with Mr Kwarteng's review. Shares in the company fell as much as 6pc to 179p following the announcement.
Altice declined to comment on the Government's decision. In December, Mr Drahi said it held the BT board in high regard and was supportive of their strategy.
The Business Secretary's decision comes irrespective of a charm offensive launched by the telecoms tycoon last year when he met with Mr Kwarteng; Ofcom chief executive Melanie Dawes; and the BT board, to assuage concerns over his intentions.
However, those meetings occurred before Mr Drahi triggered fresh questions over his end game when he increased his position to 18pc at the end of last year.
Mr Drahi's approach has been viewed with increasing caution by the Government owing to his reputation for mounting debt-fuelled deals and unleashing swingeing cuts to drive returns.
The BT board drafted in bankers from Robey Warshaw, the firm which hired former Chancellor George Osborne last year, to help stiffen its bid defences from a potential takeover attempt.
It reportedly ran scenario planning exercises in the event that Altice demanded the telecoms operator offload its mobile arm EE, or the broadband infrastructure builder Openreach.
Speculation over a fresh raid comes amid a backdrop of calls among telecoms executives for greater industry consolidation to ensure operators can make a return on their investment in full-fibre broadband and 5G.
BT's chief executive Philip Jansen is among the public supporters of mobile mergers, while Vodafone's Nick Read is mulling a string of deals across Europe.
However, there are questions as to whether Altice has the cash to pursue BT when it is grappling with debts stretching to around €29bn (£24bn).
Meanwhile, BT is facing a growing threat of its first national walkout for 35 years after the Communications Workers Union prepared a ballot to strike over pay.
The move comes after the union rejected BT's offer of a £1,500 pay rise to frontline staff in April, claiming it was a "bruising real-terms pay cut".
BT had announced that more than 40,000 frontline workers across BT, Openreach, Plusnet and EE would be handed the biggest pay rise for more than 20 years.
Mr Drahi won the backing of shareholders in January to take the telecoms group private in a deal that valued the business at €6.4bn. Altice Europe offers telecoms, media and advertising services, with operations spanning France, Dominican Republic, Israel and Portugal.
Any attempts to tighten his grip on BT will depend upon the company's second biggest shareholder Deutsche Telekom, which holds a 12pc stake.
Chief executive Tim Hoettges has described Germany's biggest telecoms group as a "kingmaker" in any potential deal.
He stoked further speculation in September by saying "something is going to happen" within the next year at BT because the "shareholder side is changing rapidly".
On Mr Kwarteng's decision, James Barford, of Enders Analysis, said there may be an element of signalling from the Government that further moves from Altice will be examined very carefully.
"This move makes clear if it wasn't beforehand that a full takeover - or full control - would be very difficult," he added.
"It is hard to think of a company the laws surrounding takeovers are more directed to than BT. The company does things it cannot talk about for the Government.
"It's hugely important for the resilience of telecoms networks. Not only is it the biggest, but it does a lot of the underlying systems and connections. And it also offers security services through Global. It probably registers in three different ways for the Government.
"The Government has a range of different remedies it can deploy if it is concerned. One of those remedies is a blocking of shares, or unwinding a purchase of shares. It can also put restrictions on information sharing. So, if somebody has a stake but doesn't have full control, then you can use a lesser remedy."
The decision to call-in Mr Drahi's increased stake comes shortly after Mr Kwarteng flexed his muscles under new takeover powers by ordering a security review of the Chinese-backed takeover of Britain's biggest microchip plant.
On Wednesday, he snubbed advice from two security investigations by demanding tighter scrutiny of Newport Wafer Fab's sale to Nexperia in a sign that the deal could be blocked.
The move comes amid mounting pressure from Tory backbenchers, who had voiced concerns that such a move could compromise British interests.
Calling in two significant cases in quick succession has the potential to shift the spotlight onto Mr Kwarteng, who has been previously tipped to run if a future Conservative leadership contest is held.