The Daily Telegraph - Business
Penny-pincher with £2bn to spend comes calling at BT
French billionaire known for cost cuts has praised the UK firm’s expansion plans and ruled out a bid for now,
‘It looks like they can see the potential upside from the enhanced fibre roll-out that has yet to be fully reflected in the current share price’
For workers at Cablevision, their company’s takeover by French telecoms giant Altice left a bitter taste. “Cablevision was a family,” one former employee complains on the anonymous reviews website Glassdoor. “We had BBQs. We had holiday parties. We lost it all.”
Cutbacks since its $17.7bn (£12bn) takeover by billionaire Patrick Drahi’s firm have dented staff morale, according to the anonymous feedback.
Staff say they were denied office amenities in the aftermath of the takeover such as cleaning wipes, condiments and cutlery, according to the New York Post.
Drahi, 57 and worth $12.2bn, is the reclusive billionaire founder of Altice, a telecoms and media conglomerate that has just taken a £2.2bn stake in Britain’s former state monopoly BT.
A self-described penny pincher, Drahi’s normal business strategy involves cuts and restructuring, finding value in businesses and eking out profits.
His frugality is well known. At a 2015 conference he told attendees: “I don’t like to pay salaries. I pay as little as I can.”
Drahi came to France from Morocco at 15, where he studied at the prestigious Ecole Polytechnique in Paris in engineering. He began his career at Philips and later founded a business laying TV cables to sleepy French towns, which he sold to the American “cable Cowboy” John Malone, making €40m (£34m).
In 2001, Drahi founded Altice, a holding company that began snapping up cable companies across Europe. Its interests spread from the Dominican Republic to Israel, often through debt-fuelled acquisitions, and it now has 40m customers and is France’s second biggest telco. Altice France had €22bn of debt alone as of March 2021.
Drahi’s other interests include Sotheby’s, the auction house he snapped up for $3.7bn in 2019, taking it into private ownership after 31 years. The father of four is an avid art collector himself and is said to have an eye for impressionist and modernist works. He is said to own an impressive collection of paintings by 20th century impressionist Marc Chagall.
Last year, he took Altice’s European business private after sparring with investors over its falling share price, which had tumbled under its debt burden. The deal valued it at €6.87bn. Its market cap three years ago was €13.7bn.
Now, BT has been added to his list of interests. His stake of 12.1pc makes Drahi the single biggest shareholder in the telecoms company, just inching out Deutsche Telekom. It is a rare deal where Drahi has not bought his target outright.
His decision to buy into BT comes as the telecoms firm’s share price faces a long recovery from all time lows last year. BT is currently in the process of spending £15bn to upgrade swathes of its network to full fibre.
It may provide a short-term boost to BT chief executive Philip Jansen, who was only contacted by Altice about its stake on Wednesday. A day after the call, BT shares were trading up 7pc.
But analysts are split as to what Drahi, who has French, Israeli, Portuguese and Moroccan citizenship, sees in BT.
On Thursday, Drahi said: “BT has a significant opportunity to upgrade and extend its full-fibre broadband network to bring substantial benefits to millions of households across the UK. We fully support the management’s strategy to deliver on this opportunity.”
Altice eased concerns over a takeover bid by promising not to make an offer, meaning it now has a six month sit out period.
Drahi added: “We understand that the expansion of the broadband network is one of the UK Government’s most important policy objectives and a core part of its levelling up agenda.”
Some market watchers say Drahi could be looking for a sale event for a return on his investment.
“A key issue now is how Altice intends to unlock value,” said Jerry Delis, an analyst at Jefferies in a note to clients. “Encouraging an Openreach spin seems most likely.”
A full takeover of either BT or Openreach, however, would almost certainly be a step too far due to its strategic importance to the UK, he adds.
An Altice spokesman said the prospect of a spin-off was “speculation”, and Mr Drahi’s reputation as a cost-cutter was based on “generalisations”. However, other analysts note Altice may see advantages in BT’s huge investment programme, replacing copper wire with fibre optics across the UK.
Matt Howett, founder of Assembly Research, says: “To me it looks like they can see the potential upside from the enhanced fibre roll-out that has yet to be fully reflected in the current share price.
“I’d say the lack of a seat on the board is a fairly good indicator for now that Drahi isn’t looking to embark on a change of direction.”
James Barford, of Enders Analysis, adds: “It’s possible they looked at the UK and at other altnet investments, and came to the conclusion that BT was the one that was going to win.”
While BT is spending more than £1bn per year on its fibre build, Enders points out that it estimates it could ultimately enjoy £2bn per year from its 25m premises target of its fibre build, post-2026.
BT also has other plans that could interest Altice, such as a joint venture for 5m of its fibre connections, which has attracted interest from Vodafone. It is also considering selling a stake in BT Sport.
BT has also enjoyed a boost from regulators after Ofcom’s review of the telecoms market, which said it could make a “fair return” on its investments, while the “super deduction” announced at the Budget will allow it to trim its tax bill.
For now, the spending taps are on at BT, which is hiring thousands of engineers through its Openreach subsidy.
With the exit of chairman Jan du Plessis, BT’s Jansen may have found an unlikely supporter for his spending spree in the thrifty Drahi. What will interest investors and staff is how long that alliance holds.