Bike-riding telecoms billionaire becomes BT’s biggest single shareholder
Unveiling BT’s full year results, last month, the company’s chief executive, Philip Jansen, made clear he felt the shares were a long term investment.
For the second consecutive year, he announced an increase in spending in fibre rollout, disappointing some shareholders who would rather have seen BT focusing on returns in the shorter run rather than promising jam tomorrow.
Today, though, came proof that some investors in the broadband and telecoms stalwart are prepared to take a longer view.
BT made clear that Mr Drahi had already spoken with chief executive Philip Jansen Pic: BT
Altice, the second-largest telecoms company in France after Orange (the renamed France Telecom), announced it had snapped up a 12.1% stake in BT worth roughly £2.2bn.
It means Altice – which is owned by France’s ninth-richest man, Patrick Drahi – becomes the biggest single shareholder in BT, overtaking Deutsche Telekom, which has a 12.06% stake as a result of BT’s 2014 acquisition of the mobile operator EE, which was previously part-owned by the German giant.
Shares of BT shot up by 3% at one point to take them to their highest level since January last year.
That was despite an unequivocal statement from Altice that it has no intention of bidding for BT.
It said: “Altice holds the board and management team of BT in high regard and is supportive of their strategy.
“Altice UK has informed the BT board that it does not intend to make a takeover offer for BT.
BT shares climbed to their highest level since January last year
“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.
“Altice believes that the UK provides a sound environment for substantial long-term investment.
“This is supported by the current regulatory framework, which offers BT the appropriate incentives to make the necessary investments.”
In other words, then, the stake-building appears to be a strong endorsement of and vote of confidence in the long-term approach set out by Mr Jansen who, last month, said cash flow would “go through the roof” once the majority of full fibre rollout had been completed in 2026.
BT responded: “BT Group notes the announcement from Altice of their investment in BT and their statement of support for our management and strategy.
“We welcome all investors who recognise the long-term value of our business and the important role it plays in the UK.
“We are making good progress in delivering our strategy and plan.”
The emphasis from Altice that it is a long term shareholder, rather than seeking to make a takeover bid, also reflects a degree of pragmatism.
BT is increasing spending on its fibre roll-out Pic: BT
The UK government has recently bolstered its ability to intervene in takeovers of companies and particularly infrastructure that may be integral to national security.
As the owner of the UK’s largest fixed line and broadband network, Openreach, BT would appear to fall squarely into that category.
It makes it highly likely that the government would intervene were any bidder for BT to emerge.
That is not to say that Altice will not seek to influence what BT does.
Jerry Dellis, equity analyst at the investment bank Jefferies, told clients: “A key issue now is how Altice intends to unlock value.
“Encouraging an Openreach spin [off] seems most likely.
“A full takeover of BT or Openreach would be likely to run into political opposition given the strategic importance of networks.”
And Mr Drahi, the billionaire founder and owner of Altice, is used to getting his own way.
Altice said it does not intend to make a takeover offer for BT
This was emphasised to the outside world when, in June 2019, he swooped to buy Sotheby’s, the world’s most famous auction house, which had looked poised to fall into the hands of the Chinese insurance billionaire Chen Dongsheng.
He has since announced plans to install his 26-year old son, Nathan, as head of Sotheby’s Asia at the end of the year.
Similarly, Mr Drahi pounced in 2014 to buy SFR, France’s second-largest mobile operator, from under the nose of the billionaire industrialist Martin Bouygues.
That business now forms the bulk of Altice Europe, which also owns Portugal Telecom, the country’s largest telecoms operator.
It also owns the second largest telecoms operators in Israel and the Dominican Republic.
Apart from SFR, its other assets in France include BFM TV, the country’s most-watched 24-hour rolling news channel and the radio broadcaster RMC.
Mr Drahi is also adept at pricing telecoms assets.
He bought out minority shareholders in Altice Europe in January this year, at a cost of €3.2bn (£2.7bn), after concluding it was undervalued by the market.
Mr Drahi pounced in 2014 to buy SFR, France’s second-largest mobile operator
He also knows about demergers, having in 2018 spun off Altice’s majority shareholding in Altice USA, the cable and broadband operator, in response to concerns over the parent company’s debt.
What is quite striking about 57-year old Mr Drahi is that, unlike the heads of many of France’s richest business dynasties, he is an entirely self-made man.
Born in Casablanca, Morocco, his parents were maths teachers and he did not move to France until he was 15 years old.
Having studied at one of the country’s top engineering schools, Ecole Polytechnique, he joined the Dutch electronics giant Philips on graduation to work in fibre optics.
It was in this work that he first visited the United States and saw how the cable industry was growing.
On returning to France, he launched his first cable company, Sud Cable Services, using a student loan, the equivalent of the time of around £5,000, as seed capital.
He went on to sell the business to the US cable magnate John Malone four years later, becoming a multi-millionaire in the process, and going on to use the proceeds to set up Altice in 2002 with the intention of using it to consolidate cable and telecoms businesses across Europe.
Mr Malone, himself one of the industry’s most revered figures, has described him as a “genius”.
US cable magnate John Malone has described Mr Drahi as a genius
Mr Drahi has been rumoured to have had his eye on BT for some time now.
The Mail on Sunday reported in August last year that he was eyeing Openreach in particular and had “secured financial backing from heavyweight bankers at JP Morgan with a view to paying £20bn for the unit”.
He is likely to keep his motivation in buying the stake in BT, who made clear today that Mr Drahi had already spoken with Mr Jansen, to himself.
Mr Drahi, who with his wife, Lina, has four children, prefers to take a low-key approach.
With homes in Paris, Geneva, Tel Aviv and the US – he has French, Israeli and Portuguese citizenship – he gives few interviews and has been known in the past to turn up to meetings on foot or on a bicycle rather than, as most executives do, in a chauffeur-driven car.
One thing is clear, though.
Life at BT will be more interesting with him on the shareholder register.
The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.
A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).
Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.
It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.
A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.
This was borne out by other figures released by the ONS on Friday.
Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.
Overall, there was a “large rise in goods imports and a fall in goods exports”.
A ‘disappointing’ but mixed picture
It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.
“I am determined to kickstart economic growth and deliver on that promise”, she added.
But the picture was not all bad.
Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.
It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.
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The expansion in March means the economy still grew when the three months are looked at together.
While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.
Such a cut would bring down the rate to 4% and make borrowing cheaper.
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Is Britain going bankrupt?
Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.
“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.
Why did the economy shrink?
The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.
The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.
It made up for a “very weak” month for retailers, the ONS said.
Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.
However, the picture emerging a year since the election of the Labour government is not hugely comforting.
This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.
Output shrank in May by 0.1%. That followed a 0.3% drop in April.
Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.
Hangover from artificial growth
However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.
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In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.
Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.
Signs of recovery
Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.
“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.
Meanwhile, the services sector eked out growth of 0.1%.
A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.
Struggles ahead
It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.
The economy remains fragile, and there are risks and traps lurking around the corner.
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Is Britain going bankrupt?
Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.
Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.
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