ALEX BRUMMER : The spirited opposition to LV’s takeover shows the political dissonance of private equity. BT won’t be an easy nut cracker for foreign marauders.

  • BT shares fell more than 50% in the past five years
  • BT prepared for bid with Goldman Sachs and Robey Warshaw as defence team 
  • The attack on national security is to sell telecoms companies giants overseas. 

Recent days have seen a mini revival in BT shares. After the appointment of Adam Crozier to the chair and the ending of the lockout for Patrick Drahi the telecoms tycoon, who took a 12.1% stake in June’s stock, takeover interest has been revived. 

Watchers of the European telecoms scene have been keeping a close eye on Italy where ‘barbarians’ KKR have launched a £9.2billion offer for Telecom Italia. 

BT shareholders, including this writer, have experienced a difficult time with shares falling more than 50% in the past five years. BT, despite all its difficulties, is not Telecom Italia. This company is often regarded as a failure and desperately needs to be managed more effectively. 

Watching brief: BT investors have had a torrid time, with the shares plummeting more than 50 per cent in five years

Watching brief: BT investors have had a torrid time, with the shares plummeting more than 50 per cent in five years

BT, however, has a strong duo at its top with Crozier and Philip Jansen as chief executive. 

The assumption is that Drahi and BT’s other big holder, Tim Hoettges of Deutsche Telekom, have ideas for maximising the value of their holdings by working together or encouraging a private equity offer. BT has already engaged Robey Warshaw, a boutique bank Robey Warshaw and Goldman Sachs to be its defense team. Osborne, as Chancellor, was open to the possibility of valuable British assets being purchased by foreign raiders. 

This UK telecoms company is very difficult to value. The UK telecoms provider is hard to value. It not only earns annuity income from its landline company, but also owns a significant stake in mobile, masts, and EE. Openreach is the UK’s most powerful broadband network. Openreach is its offshoot and it provides telecoms services to some of the best companies around the globe. 

This bundle can be difficult to untie. At its core is Openreach, which supplies 23m customers directly or through wholesale contracts and has been valued at £40billion. 

The immediate problem is how to deal with the rights it has in sports, such as Champions League. Jansen put the pay-TV sports operation – an expensive luxury – on the market in April. 

Pay-TV is changing and programming such as Sky’s will be moving from satellite to online. This will make the rights market more flexible and open. BT as a leading supplier of broadband means that it is better able to deliver fibre to customers and regain pricing power, rather than be a player in the production process. 

DAZN is backing Sir Leonard Blavatnik, a New York-based telecoms giant. DAZN has advanced negotiations to purchase expensive BT rights. Global services have become a marginal enterprise – not helped by the fraud scandal in Italy which contributed to Jansen’s predecessor Gavin Patterson losing his job. Drahi’s Altice firm and Deutsche Telekom have both discovered that Jansen and Crozier do not have any private equity connections, and they are aware of the difficulties in securing such deals. 

Bain Capital’s takeover of LV has been met with strong opposition. This is a clear demonstration that politics and private equity are not compatible.

Asda and Wm Morrison were taken over by private equity investors. This has led to tighter borrowing markets. Omicron doom has exacerbated the problems with junk bonds. BT’s deficit in its pension funds is also a big problem. 

Politics is the ultimate obstacle. It would be a serious threat to national and economic security for Britain to sell its telecoms infrastructure to short-term, unreliable overseas buyers. Because of concerns about cyber theft, Huawei, the Chinese supplier to Britain’s telecoms infrastructure has been expelled. It would be difficult to buy a network of telecoms used by security agencies without thorough scrutiny. 

For foreign invaders, BT is not an easy nut.