12th Aug 2024 11:13
(Alliance News) - Bharti Global's acquisition of a large chunk of BT Group PLC reflects a "big power shift" between the two companies in recent years, an analyst on Monday said.
On Monday Bharti Global, the Delhi, India-based telecommunications company, said it will buy a 24.5% stake in BT from Altice UK. The subsidiary of Altice Europe NV is lead by Israeli billionaire Patrick Drahi.
The shares will be purchased through Bharti Televentures UK Ltd, a company established and wholly owned by Bharti Global.
Bharti said it has entered into a binding agreement with Altice UK to acquire a 9.99% stake of BT's issued capital imminently, with the balance of 14.51% of BT's share capital to be purchased following receipt of regulatory clearances.
Back in 2022 the UK government had considered the national security implications of Altice's 18% stake in BT, but ultimately decided to take no action.
Bharti said it has no intention of making an offer to acquire all of BT.
Sunil Bharti Mittal, chair of Bharti Enterprises Ltd, said: "This investment demonstrates the confidence we have in BT and in the UK.
"BT has a strong portfolio of market leading brands, high-quality assets and an experienced management team with a compelling strategy mandated by the BT board to deliver value over the long term, which we fully support."
In response, BT Chief Executive Officer Allison Kirkby said: "We welcome investors who recognise the long-term value of our business, and this scale of investment from Bharti Global is a great vote of confidence in the future of BT Group and our strategy."
AJ Bell's Investment Director Russ Mould said the deal is reflective of a big power shift between the two companies.
"Around the turn of the millennium, it was BT which had a substantial holding in Bharti, as well as two seats on its board," he pointed out.
Mould thinks the news will likely be greeted with "some relief" by shareholders as it holds the promise of a bit more stability, adding: "Drahi has been selling assets to pay down debt so his stake in BT represented a significant overhang on the shares."
Mould thinks management will be glad to hear Bharti are "supportive" of the company’s current strategy, although they will want to see "evidence of progress that can revive a share price which has gone nowhere in the last five years."
However, he noted that investors are not able to extrapolate anything about valuation either, given the price Bharti is paying has not been disclosed.
Susanah Streeter, head of money and markets at Hargreaves Lansdown, said the investment was a "vote of confidence" in BT and the UK.
"This is a confidence boosting move, with Bharti Global clearly confident that there is long-term untapped value in the group. It clearly sees great potential in Openreach, which is responsible for maintaining and building out the new fibre networks.
"It's also likely to have been encouraged by indications that the cost of building 5G infrastructure may have peaked, and once new customers are moved over to the new networks, there is the potential for lower running costs," she suggested.
BT shares rose 6.5% to 139.00 pence each on Monday morning in London. This makes it the best performer in the FTSE 100, which was up 0.5%.
By Jeremy Cutler, Alliance News reporter
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