India's Bharti Enterprises buys 24.5% stake in UK's BT Group from Altice

Indian billionaire Sunil Bharti Mittal’s Bharti Enterprises has announced an agreement to purchase a 24.5% stake in BT Group from Patrick Drahi’s Altice, marking a significant investment in the UK telecoms giant.

The deal is seen as a vote of confidence in BT Group and the broader UK market, as Mittal, a prominent figure in India’s telecommunications industry, aims to bring his experience and long-term vision to the table.

Bharti's strategic investment in BT Group

Bharti Enterprises, through its international investment arm, will acquire 10% of BT’s shares immediately, with plans to purchase the remaining 14.5% after securing the necessary regulatory approvals.

Despite the substantial stake, Bharti clarified that it does not intend to make an offer for the entire BT Group, signaling a strategic, rather than an opportunistic, approach to the investment.

Mittal, who built his fortune in India's highly competitive telecom market, expressed his long-standing interest in BT and highlighted the company’s significant infrastructure and national status in the UK.

He emphasized that the investment is long-term and not driven by short-term market gains.

Support for BT's leadership and strategic direction

Bharti’s investment is a strong endorsement of BT’s current leadership under CEO Allison Kirkby. Since taking over in February, Kirkby has overseen a nearly 30% increase in BT’s share price, driven by cost-cutting measures, a higher dividend, and improved cash flow.

This recovery in BT’s fortunes has been welcomed by investors, including Bharti, who sees potential for further growth under Kirkby’s stewardship.

Altice’s entire stake in BT was valued at approximately £3.2 billion based on Friday’s closing price. Despite the recent rally in BT shares, including a 6% jump on Monday following the announcement, Altice's investment has been making losses.

The company initially acquired a 12% stake in BT in 2021, later increasing it to 24.5%, but the value of this stake has decreased by about £1 billion since its acquisition, according to calculations by the Financial Times.

Altice’s challenges and asset sales

Altice, led by Patrick Drahi, faces mounting pressure to reduce a debt pile exceeding $60 billion, accumulated during an era of low-interest rates. The sale of its stake in BT is part of a broader strategy to offload assets and manage this debt burden.

In recent months, Altice has sold a news channel and a radio station to shipping magnate Rodolphe Saadé and secured a $1 billion capital injection for Sotheby’s from Abu Dhabi’s sovereign wealth fund ADQ.

Karen Egan, head of telecoms at Enders Analysis, described Mittal as a “completely different kettle of fish to Patrick Drahi,” emphasizing that Mittal’s approach is long-term, constructive, and collaborative.

Mittal’s history with BT dates back to the late 1990s when BT owned a 21% stake in Bharti Airtel and held two board seats, indicating a long-standing relationship and understanding of BT’s operations.

Strategic implications and market response

The investment by Bharti comes at a time when BT Group is navigating a challenging telecom market. The entry of a high-profile, long-term investor like Mittal is likely to provide BT with strategic support and stability.

The move also highlights the growing interest in BT from global investors, following the disclosure in June that Mexican billionaire Carlos Slim had acquired a 3% stake in the company.

Allison Kirkby, BT’s CEO, welcomed the investment, stating,

Bharti Airtel’s shares, listed in Mumbai, fell slightly by 0.4% on Monday following the announcement. However, the stock has surged by 43% this year, outperforming India’s benchmark BSE Sensex index, which has gained 10% over the same period.

This strong performance underscores investor confidence in Bharti Airtel’s growth prospects, despite the challenges in the global telecom sector.

Mittal's long-term bet on BT Group

Sunil Bharti Mittal’s acquisition of a significant stake in BT Group from Altice represents a strategic long-term investment in the UK telecom giant.

This move underscores Mittal’s confidence in BT’s potential and his commitment to contributing to its future growth.

As Bharti integrates its stake in BT, the telecom industry will be closely watching the impact of this partnership on the market dynamics and BT’s continued recovery.