Will he or won’t he? This is the question BT shareholders are asking.
On December 10, French-Israeli billionaire Patrick Drahi, founder and boss of Altice, the multinational telecoms business, will be free of the six-month commitment not to bid, a pact made when he snapped up 12.1 per cent of BT in June.
BT’s 783,000 forbearing small shareholders should note that Drahi is known for his decisiveness. He proposed to his wife within an hour of meeting her at a university party.
High rise: BT shares soared this week after the telecoms firm announced it had made £1bn of savings 18 months earlier than scheduled
BT has hired advisers to prepare for an approach. But the art-loving Drahi, who acquired the auction house Sotheby’s in 2019, will be deliberating his strategy with care. He is known for his facility with figures. At an early age he would spot errors made by his maths teacher parents.
Drahi, who has four children, has called the stake an investment for his family.
Some among BT’s small shareholder multitude took the same view when they bought shares at privatisation in 1984.
In recent years, however, their faith has not been rewarded by the telecoms giant, a group that today encompasses mobile network EE and Openreach, supplier of phone lines and internet to almost all our homes.
BT may be focused on the broadband future. But a series of missteps have hit shares.
This includes large sums paid for Premier League football rights, involvement in an Italian accounting scandal in 2016 and ill-considered disposals such as the sale of BT Cellnet which became O2, a subsidiary of Spain’s Telefonica.
When the pandemic struck, BT shares fell to 99p, barely above their 1985 level.
They surged to an 18-month high of 206p when Drahi came on the scene. They have fallen back to 160p, although, after this week’s first-half results, BT confirmed it has made £1billion of savings 18 months earlier than scheduled. The group is now pledging to achieve £2billion by 2024.
Chief executive Philip Jansen says: ‘We feel – I feel – BT is undervalued for the kind of business that we are and the assets we have.’
He has declared that BT will ‘compete like fury’, in a drive aided by the Budget’s ‘super-deduction’ tax break for infrastructure companies.
This week it struck a deal with Oneweb, the low-orbit satellites company, that will enable BT to beam internet services across the UK.
The average analyst target price on the shares is 188p, with some forecasting 261p. Broker Jefferies rates the shares a ‘buy’.
Despite this optimism, some fund managers consider BT to be too complicated a proposition, given the tight regulation governing its operations.
Russ Mould of AJ Bell is a sceptic, citing BT’s massive capital requirements and pension deficit, saying: ‘About the only reason to hold the shares now is the dividends.’
BT chief executive Philip Jansen (pictured) has declared that BT will ‘compete like fury’, in a drive aided by the Budget’s ‘super-deduction’ tax break for infrastructure companies
BT’s final 2020 dividend was cancelled. The company will be paying an interim dividend of 2.31p a share and aims to make a full-year payout of 7.7p.
But if you are minded to keep the faith, it’s important to recognise the size of the task that confronts the new chairman Adam Crozier and Jansen.
They must handle not only Drahi, but also Deutsche Telekom, BT’s second largest shareholder with 12 per cent, whose boss Tim Hoettges says it is ‘entertaining all options’.
The options for Jansen and Crozier – who must have cash to finance expansion – include the sale of a slice of Openreach, estimated to be worth £20billion-plus. That is more than BT’s £14.8billion market capitalisation.
US private equity group KKR is among those reputed to be interested in Openreach – which is said to be Drahi’s real objective.
But, given Openreach’s key role within national security, would the Government allow control to pass outside these shores?
Last September, this column stressed that investors inclined to stay loyal to BT would have to be patient.
Thanks to Drahi, Crozier and Jansen’s renewed determination, the company may be a more exciting prospect. But don’t hold your breath for immediate results.