Sunil Bharti Mittal's telecom empire is all set to invest nearly $4 billion in BT Group Plc for a 24.5% stake, becoming the biggest shareholder in the UK's leading broadband and mobile provider.
Bharti Global, the international investment arm of Bharti Enterprises, has acquired 9.99% of BT Group with immediate effect from Patrick Drahi's Altice and will buy the remaining shares once regulatory clearances are received. The valuable consideration of the deal was not stated, but industry experts estimate it to be about $4 billion, given that BT is valued at roughly $15 billion.
"Sunil Bharti Mittal, Chairman of Bharti Enterprises, said: 'The overall leadership of BT Group and a comprehensive portfolio of next-generation services in broadband, fibre, mobile, and enterprise solutions represent an exciting long-term investment opportunity. Mittal added, 'I am quite positive on the sustainability of BT Group's growth and cash flow into the future.'".
Mr. Mittal said that it was hard to buy that big size of stake from the open market and "Altice was up to selling." He said that it was the right opportunity to buy a stake, or else the uncertainty and difficulty to purchase such a gargantuan stake would otherwise present a risk.
BT was a major shareholder in Bharti Airtel between 1997 and 2001, so this would be a long-time rekindling of relations between the companies. Bharti, the second-largest telecom operator in India, has about 400 million subscribers. It is not considering making an offer for all of BT or taking a board position.
This comes as Altice, controlled by French billionaire Patrick Drahi, prepares to sell this stake in BT amid high debt levels. Altice had first taken out a 12% stake in BT last year, then increased that to 24.5%. Since then, BT shares have fallen by about a third.
According to Bharti Global, it will seek to create fresh synergies between India and the UK in the field of AI, 5G R&D, and core engineering, besides promoting better cooperation on industry best practices and emerging technologies.
Mittal said, "The fact that we have a long history together is also of a lot of value."
He also pointed out that the existing investment problem was also in tune with Narendra Modi, the Prime Minister of India's claim and that this is evident in the recently reaffirmed Technology Security Initiative between the UK and India under the visit of the UK Foreign Secretary, David Lammy, to India.
"This is an exciting opportunity," said Shravin Bharti Mittal, managing director of Bharti Global. BT is effectively quite a stable cash flow franchise, and lying in its future from Openreach, it has immense growth opportunities. He also feels that the timing for this strategic move significantly enhances the cash flow profile of BT.
"BT Group welcomes the investment and is highly supportive of it," said Chief Executive Allison Kirkby. "We share a common vision for digital communication in the years ahead." Barclays Bank PLC and Linklaters LLP acted as financial advisor and legal counsel, respectively, to Bharti Global for the transaction.
Timotheus Hottges, CEO of Deutsche Telekom (which has 12% stakes in BT), also welcomed the investment and looked forward to working with BT on its Board of Directors. Union Minister Piyush Goyal stated this investment is a full circle given British Telecom had stakes in Bharti Airtel, in an earlier period.
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