BT Group sees share spike as Bharti buys out Altice holding

Bharti Global has announced that it has reached an agreement to acquire around 24.5% of the issued share capital of BT Group held by the UK subsidiary of the financially troubled Altice Group.

Industry analysts are calling the move a vindication by the investment community of the go-forward strategy of BT Group’s CEO Alison Kirkby’s cost-control strategy.

In December 2021, Altice UK increased its interest in BT Group’s voting share capital to 18% from the 12.1% share that it acquired in June 2021 for a sum reported to be in the region of £2.2bn. Part of this deal included a no-bid clause under UK takeover rules that ran until 10 December that year.

The move inspired talk in the telecoms industry of a takeover and prompted a government investigation. On 26 May 2022, it received notification from then secretary of state for Business, Energy and Industrial Strategy, Kwasi Kwarteng, that was exercising his call-in power under section 1 of the National Security and Investment Act 2021 to greenlight the move.

Since taking over the reins at BT at the start of 2024, Kirkby has won investor community backing for the company’s financial performance. In its recently announced results for the first quarter of the year, the telco noted that it remained on track to deliver its financial outlook for this year, with its cash flow inflection would be around £2bn in 2027 and £3bn by the end of the decade, driven by the full-fibre gigabit broadband build out by its Openreach division.

Yet Kirkby gained most kudos – and drove the share price upwards – by announcing in May 2024 that the company had passed peak capital expenditure on the full-fibre broadband roll-out and achieved its £3bn cost and service transformation programme a year ahead of schedule, which she called an “inflection point” on the telco’s long-term strategy.

“As we move into the next phase of BT Group’s transformation, we are sharpening our focus to be better for our customers and the country, by accelerating the modernisation of our operations, and by exploring options to optimise our global business,” she said at the time.

Just a few months ago, Mexican business magnate Carlos Slim decided to acquire a 3.2% stake in BT and now has seen the Bharti Enterprises company take over Altice’s UK’s 24.5% holding in a deal valued at £3.2bn.

“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,” said Kirkby, recognising the move.

“BT has enjoyed a long association with Bharti Enterprises, and I’m pleased that they share our ambition and vision for the future of our business. They have a strong track record of success in the sector, and I look forward to ongoing and positive engagement with them in the months and years to come.”

The deal represented growing investor confidence in BT, added Joe Gardiner, research analyst at CCS Insight. “Alison Kirkby’s strategy of cost-cutting measures has resonated with investors, who have gone from shorting shares to having major international backers within a few months,” he said.

“BT’s announcement that it passed peak capital expenditure back in May will further encourage shareholders to invest, as BT is set to benefit from its impressive Openreach programme.

“Bharti Enterprises feels that BT’s increased focus and efficiency, and the possibility of the Vodafone-Three merger being approved, which would reduce industry competition, make it a good time to invest.”

Garner did also caution that the UK government may want to investigate the agreement on national security grounds, given the scale of how much UK telecoms infrastructure is controlled by BT.