Why would a successful and dominant telecom group, with a strong footprint in fast-growing Asian and African markets, want to venture into a mature, low-growth market like the UK?
That’s the question analysts were asking after Bharti Enterprises, the company that controls Bharti Airtel, India’s second-largest telecommunications company, announced a binding agreement to acquire a 24.5% stake in British Telecom, the UK’s largest telecom services operator, for £3.2 billion, or $4 billion. Bharti also owns Indus Towers, the world’s largest telecom tower company.
To begin with, there is some history between the two companies. British Telecom (BT) was one of the first shareholders in Bharti Airtel, until it sold its 21% stake in the late 1990s. Prior to last month’s announcement, Bharti, founded by billionaire Sunil Mittal, had already purchased a 9.9% stake in BT, reportedly at a 15% premium to BT’s August 12 closing price.
Also, the BT stake dovetails with Bharti’s larger ambitions. It owns a 23.83% stake in Paris-based satellite operator Eutelsat and has said that it is scouting for global opportunities in digital infrastructure and software, where it believes there may be considerable unrealized value.
To acquire the additional 14.51% stake in BT, Bharti is seeking permission under the UK’s National Security and Investment Act and will complete the purchase once it receives government permission.
On the sell side is Altice UK, which purchased a 24.5% stake in BT between 2021 and 2023 for a total investment of $5.5 billion. The Altice Group, which has telecom interests across the globe, has a heavy debt load of $60 billion, and the British government has raised concerns over the stability of its investment. Some analysts say the sale of Altice’s stake to Bharti will remove a major overhang to BT’s stock price. Bharti’s announcement comes following Mexican billionaire Carlos Slim’s announce-ment in June that he had purchased a 3.2% stake in BT.