Shares of BT Group (LON: BT.A) are up over 17% in June after a series of positive news events that helped shape the positive fundamental picture for the British media and telecom giant.
Patrick Drahi, the French billionaire and telecom magnate, is one step closer to fulfilling his dream to build a nationwide fiber broadband network. Altice UK confirmed Drahi bought a 12.1% stake worth about $3.1 billion in BT Group.
Next Alt owns Altice UK, which also controls SFR, the second-largest French telecom operator, and is privately owned by Drahi.
BT is Britain’s biggest broadband and mobile operator, and it plans to upgrade the country’s broadband network, which is now falling behind other markets, for example, Spain. The vision is to expand fiber broadband to 25 million homes and businesses by 2026, but such work requires a partner.
Drahi, who is famous for buying telecom assets that are undervalued, believes BT has a great opportunity to upgrade and expand its full-fiber broadband network. He is aware that one of the UK Government’s most important policy objectives is the expansion of the broadband network.
It is important to note that Deutsche Telekom, which owns 12.06%, is not the biggest shareholder anymore, but Altice. However, any change will require a collaborative relationship with both major shareholders.
Altice skillfully supported BT’s management and strategy, so they had no problem welcoming new investors who recognize the long-term value of the business and the key role it plays in the UK.
The Moroccan-born billionaire who lives between Switzerland, the United States, and Israel is a telecom mogul. In the early 2000s, he bought the cable company Numericable, and shortly after that, SFR from Vivendi. Just recently, he added another company to his holding, Altice Europe, SFR’s parent company.
Besides that, he is the owner of the biggest telecoms firm in Portugal and the second largest operator in both Israel and the Dominican Republic. In France, he controls the most-watched news channel, BFM TV.
Although Patrick Drahi has become synonymous with business savvy, in 2017 he suffered a blow when Altice Europe’s shares plummeted after speculation it would not grow in France, meaning the group could not pay its enormous debts.
Drahi lost no time and responded to investor concerns in his way. The chief executive was ousted and Altice’s U.S. arm spun off.
Analysts at Jefferies recognized his investment as a “signal of confidence” in BT’s strategy. They said the future depends on how Altice plans to unlock value, and suppose that encouraging BT to spin off its independently operated Openreach network is most probable.
JP Morgan predicts Altice will get a seat on the BT board, and not as a passive shareholder. Moreover, they expect Drahi to focus on ramping up BT’s infrastructure monetization and push the company to shift Capex off the balance sheet.
They believe that the fear of the risk posed by new private equity-backed fiber-optic network operators is over-estimated. The bank has an “Overweight” rating on BT with a target price of 225p per share, signalling an upside of about 20% compared to the closing market price on Wednesday.
In the meantime, BT Group share price is now trading at the highest levels recorded since December 2019.