Billionaire Drahi Makes $3.1 Billion Bet on BT’s Fiber Plan
Billionaire Patrick Drahi has bought a 12% stake in BT Group Plc, in a high-profile backing of the company’s plan to expand its high-speed broadband internet network. Altice UK, a newly created company, has agreed to buy 1.2 billion shares of BT, it said in a statement on Thursday. The stake, which a spokesman said was acquired over the past few days, had a value of about 2.2 billion pounds ($3.1 billion) as of Wednesday’s close.
Drahi said he’ll use Altice’s expertise in rolling out fiber networks to help BT expand across the U.K. The British company has been looking for a partner to help it build out an extra 5 million fiber optic connections by 2026, opening up its infrastructure to an external investor for the first time. Altice said that it has no plans to launch a full takeover bid for BT.
BT Drops as it Explores Joint Venture to Boost Fiber Rollout
BT shares rose 2.1% in London trading at 8:58 a.m. on Thursday to 187 pence after earlier gaining as much as 4%. The stock price has increased about 41% so far this year. BT said in a separate statement that it welcomes “all investors who recognize the long-term value of our business and the important role it plays in the U.K. We are making good progress in delivering our strategy and plan.”
With this deal, Drahi will become the company’s largest investor, holding a stake comparable to Deutsche Telekom AG’s. Representatives for BT and Altice declined to comment further on details of the partnership. BT’s Chief Executive Officer Philip Jansen is looking for ways to share the load of a potentially costly network upgrade after years of shrinking earnings. Jansen has said a nationwide fiber rollout may cost 15 billion pounds.
Still, the company has the support of the U.K. government, which is pushing to expand access to fast internet connections, and Prime Minister Boris Johnson has discussed a subsidy for rural broadband.
“The purchase of a 12.1% stake in BT by billionaire Patrick Drahi’s Altice is a testimony to the U.K. carrier’s potential to increase midterm profit and cash flow, we believe, thanks to management’s 5G and full-fiber-infrastructure investments, and a 2 billion-pound cost-cutting plan. BT is making good progress, but upside to consensus for fiscal 2021-22 and 2022-23 may be limited, in our view, with a takeover bid looking unlikely.”
Matthew Bloxham, BI telecoms analyst
Drahi, who has racked up the equivalent of about 35 billion euros ($42.6 billion) in debt from a series of acquisitions according to data compiled by Bloomberg, didn’t disclose how he’d planned to pay for the new stake. He’s been exploring options to tackle some of the European entity’s costly bonds after taking the French telecom and media company private in January.
Following the announcement, Altice’s euro-denominated notes with maturities between 2025 and 2029 were down around 0.6 cents on the euro to prices ranging from 95 to 100 cents depending on the bond, according to CBBT data. BT’s 500 million euro hybrid notes due in 2080 were down 0.8 cents on the euro to 98.9 cents, the biggest drop in a year.
The acquisition was made through a new entity, Altice UK, which was established to hold the shares in BT and is separate from the European and U.S. businesses, the company said in the statement. It’s owned by Drahi’s Next Alt Sarl, which also controls Altice USA, Altice France, Altice International and Sotheby’s.