Kwasi Kwarteng expected to block Patrick Drahi from takeover of BT

Business Minister Kwasi Kwarteng is expected to block billionaire Patrick Drahi from a takeover of telecoms giant BT and could cap any further stake-building by the tycoon under new national security laws, according to City sources. 

The Government could also stop the French-Israeli mogul from taking a seat on the board, the sources added. He is currently barred by takeover rules from launching a bid but the shackles come off this week. 

The Department for Business, Energy and Industrial Strategy (BEIS) said last month that Drahi’s 18 per cent stake would be reviewed under new legal powers that came into force earlier this year. 

The Government has until early next month to decide whether to take action over his holding in BT under the terms of the new National Security and Investment Act, which gives Ministers more powers to protect critical infrastructure. The review period could be extended by BEIS if more time is needed. 

Drahi’s European telecoms business Altice increased its stake in BT from 12.1 per cent to 18 per cent in mid-December, making him the single biggest shareholder. 

At that stage, he said he did not plan to buy the business outright. But his interest has sparked speculation he may launch a takeover. 

BT provides internet and telecom services through fibre infrastructure company Openreach and mobile network EE, as well as security software. It also provides service contracts across government departments and it is understood to be used by Britain’s security forces. 

Senior telecoms experts working for investment banks and advisory firms said the Government would probably block Drahi, who is estimated to be worth £9billion, from increasing his stake and from exercising any influence on BT’s board and strategy. 

The Government might impose conditions on him keeping keeping his existing stake. Alternatively, it may decide there are no national security issues but continue to monitor the situation and conduct further reviews if he attempts to build his stake. European governments have become increasingly nervous about the ownership of telecoms assets.

Two years ago, Chinese giant Huawei was told it would be banned from the UK’s 5G networks by the end of 2027. And the sale of TMobile Netherlands to private equity groups Warburg Pincus and Apax faced scrutiny from the Dutch government, delaying the deal by several months, according to a person close to the plan. 

Sources said Drahi’s debt-fuelled empire would struggle to afford a significant increase in his BT shareholding at present. 

It has also been reported that he borrowed against a mortgage taken on the London headquarters of his Sotheby’s auction business to help fund his stake-building. 

Altice shelved plans to sell its Portuguese arm in January after private equity bids failed to meet price expectations. Drahi is also reportedly sitting on losses from a collapse in the valuation of Altice USA since December 2020. He has also failed to offload his advertising technology firm Teads, after withdrawing plans for an initial public offering last August. 

BT declined to comment. Altice said it was ‘fully supportive’ of BT’s strategy.