A vote of confidence in the company? That’s always a board’s default spin on events when a billionaire buys a large stake, purrs politely about management but is slightly mysterious about his long-term intentions. The pitch is rarely convincing because billionaires are not generally the type to sit back and simply collect a stream of dividends. They tend to want something.
It’s too soon to be confident about the motives behind Patrick Drahi of Altice’s purchase of a 12.1% stake in BT, worth £2bn. But, on this occasion, the non-threatening interpretation may be correct. Or, at least, it looks the most likely line for a while.
For starters, the French-Israeli Drahi must know that a foreign-backed bid for BT (which can’t now happen anyway for six months) would provoke a political storm. The company, committed to spending £15bn on fullfibre broadband rollout in the UK in the next five years, is almost the definition of too-important-to-mess-with. It is probably not a coincidence that every time BT seems engulfed by financial crisis (2009-10 and again last year) the regulatory weather suddenly improves.
The latest outbreak of peace with Ofcom allowed BT to get its longed-for “fair bet” on long-term fast-fibre returns. Rishi Sunak, the chancellor, then made life sweeter by creating “super deductions” on infrastructure spending for two years, a tax policy that could almost have been designed with BT in mind.
That points to a second reason to favour the “vote of confidence” theory. If he wished, Drahi could have thrown a large sum at an fibre insurgent – CityFibre, say. But backing BT to remain streets ahead looks a sounder bet than ever if the regulatory set-up remains stable. If the plan to reach 25m premises by the end of 2026 is achieved, the company should emerge with control of about two-thirds of the UK’s fibre infrastructure. And the kit, remember, is meant to last decades.
Drahi, presumably, still wants something. But it may be only a seat on the board (hard to refuse since Deutsche Telekom, with a similar-sized stake, already has one) to give him a voice in any future spinoff of Openreach, the broadband subsidiary. Any tycoon-style craving for immediate excitement may be satisfied just by leveraging the £2bn investment via debt, on which front Altice revealed nothing.
We’ll await events but, on day one, BT’s relaxed view of its new shareholder is reasonable.