Government Drop Security Probe of Altice UK’s Stake in BT UPDATE

The Government’s move in May 2022 to conduct a “full national security assessment” of last year’s decision by Patrick Drahi’s (French billionaire) Altice UK, which increased its stake in UK broadband and telecoms giant BT from 12.1% to 18% (here), will result in “no further action” being taken by the Secretary of State.

In case anybody has forgotten. Last year saw BT move to strengthen its defences against a potential takeover attempt, or a demand for the operator to spin off its consumer (BT, Plusnet and EE) or network access division (Openreach), which was partly fuelled by Patrick Drahi’s growing stake in the operator.

Deutsche Telekom (DT), which has long been linked with speculation of a takeover attempt and holds a modest stake in BT, also added further fuel to the speculation by alluding to the possibility of a deal with others for BT (here). DT’s boss, Tim Hoettges, said: “In the next 12 months something is going to happen there around [our 12% stake in BT] … We are entertaining all options. We have a lot of optionalities now on the table in the BT business. We will do something which is a good deal.”

In the past, potential suitors have often ended up being discouraged by various concerns, such as over the operator’s complex regulatory position, uncertainties around the outcome of Brexit, challenges due to their massive debt and pension liabilities, as well as various other issues. But with Brexit and the pandemic largely out of the way, and Ofcom having given the green light for Openreach’s £15bn FTTP build, there are now fewer obstacles.

However, the new National Security and Investment Act 2021 effectively meant that any group making a play for BT would need the UK Government on their side, which could be a challenge because they’re currently minded to protect key players in the British technology sector.

The Government was clearly concerned enough about BT’s position that, in May 2022, they ended up calling Altice’s growing stake in for a security review (here). But a statement released by BT this morning indicates that “no further action is to be taken” following that review.

Statement from BT on Security Review

On 26 May 2022, BT Group plc (“BT Group”) announced that it had received notification from the Secretary of State for Business, Energy and Industrial Strategy that he had considered the increase by Altice Europe N.V. of its shareholding in BT Group from 12.1% to 18% and was exercising his call-in power under section 1 of the National Security and Investment Act 2021 (the “Act”).

BT Group has now been notified by the Secretary of State that no further action is to be taken under the Act in relation to the increase by Altice Europe N.V. of its shareholding in BT Group from 12.1% to 18%.

A government spokesperson said:

“Following careful consideration, the Government will take no further action on the acquisition of 5.9% shares by Altice in BT. We will always act to protect our critical national telecoms infrastructure if we judge action is necessary. Under the National Security and Investment Act, acquisitions are assessed on a case by case basis, so any future transaction could be subject to a separate assessment under the Act”.

Back in May the Government’s move appeared to be overcautious, since they seemed to be reviewing a stock trade on the public market that, by itself, didn’t yet raise any obvious red flags (it would need to be a much bigger stake for that to happen). Having said that, we don’t yet have the Government’s side of today’s decision, and indeed the outcome does not prevent them from taking action in the future, should the situation change.

UPDATE 9:41am

We’ve added a comment from the government (BEIS) above .