Philip Jansen may face another challenge before handing over his role as BT chief executive to Allison Kirkby later this year.
Aggressive cost cutting and stronger pricing have reversed BT’s revenue decline in the latest quarter.
But doubts remain about future ownership. A standstill agreement that prevents French-Israeli telecommunications investor Patrick Drahi from using his 24.5 percent stake to launch a bid ends on November 24.
Drahi is currently suffering considerable losses, so it is unlikely that he will leave without exploring ways to unlock value.
You may not be the only impatient investor. Deutsche Telecom has a 12 per cent stake in the group, a carryover from BT’s £12.5bn acquisition of mobile group EE in 2016.
Turnaround: Aggressive cost cutting and price increases have reversed BT’s decline in revenue. Boss Philip Jansen (pictured) will step down at the end of the year
Investors across Europe are looking to extract value from telecommunications. This week, in the first stage of the restructuring, new Vodafone boss Margherita Della Valle agreed to sell its Spanish subsidiary to UK takeover vehicle Zegona Communications for £4.4bn.
Last month, Saudi Arabia’s STC revealed it had acquired a 9.9 percent stake in Spain’s Telefónica, which owns the UK’s O2 network.
The government in Rome has come out in favor of private equity magnates KKR taking a 20 percent stake in Telecom Italia.
Fierce competition in the cellular markets and weak margins in fixed line and broadband have contributed to putting national telecommunications companies in play.
If Drahi alone, or through an agreement with Deutsche Telecom, were to decide that the time was right for a full or partial bid for BT, it would put the Government or its successor in a difficult position.
Current relatively high interest rates would make the economics of a leveraged buyout of BT complicated. But a relatively weak share price makes it an attractive asset.
The Government would have to invoke the scrutiny provided for in the National Security and Investment Law in the case of a bid for such a strategic company. You might be worried that efforts to bring full-fibre broadband to every doorstep in Britain will be disrupted.
Some solid assurances would be needed on future broadband investments.
The most serious obstacle could be BT’s pension fund. In the past, the Pension Protection Fund viewed BT’s retirement fund problems as the biggest potential risk it could face.
BT’s pension fund is estimated to have a solvency deficit of £11.6bn.
Trustees and regulators would fear that the new owners’ covenant, especially in a leveraged deal, was not strong enough and would demand corrective action.
Jansen has shown that BT can become more profitable.
BT’s market value of just £12bn means a full bid is not something that can be imagined.
Purchase change
The fight for Britain’s listed supermarkets continues.
Sainsbury’s shares cheered after it projected higher profits for the year. Lower prices on key items and a high-quality offering have allowed it to regain market share from German discounters Aldi and Lidl.
Sainsbury’s and market leader Tesco may also take advantage of tensions at private equity-controlled rivals Morrisons and Asda. Rising interest rates across the Western world have raised borrowing costs for acquisitions.
Both Asda and Morrisons changed hands when they were bought at peak valuations when rates were low. That limits the ability to price match with simple retailers, and market share has shrunk.
Its ownership may be less comfortable for chief executive Simon Roberts and Sainsbury’s. During the pandemic, Qatar’s stability as a cornerstone investor at 25 percent may have been comforting.
As Israel and the United States move to crush Hamas and cut off its financial support, the Gulf state is in the spotlight for its support of Gaza.
inspector calls
Every child and teacher in England and Wales knows to be on their best behavior when Ofsted comes calling.
Imagine then what the nine members of the Bank of England’s rate-setting monetary policy committee (MPC) must have felt at this week’s two-day meeting.
In one corner sat Nobel Prize-winning economist and former US Federal Reserve Chairman Ben Bernanke, invited by the Court, the Bank’s board of directors, to rate the MPC’s duties and the old lady’s forecasting skills. . Scary stuff!
