Behind the scenes

BT: a game of fantasy M&A? 

There’s talk of a bid for BT from Reliance Industries. Is it a serious offer?

Just in time for “panto season” comes word of a bid for BT from Reliance Industries – the behemoth owned by Asia’s richest man, Mukesh Ambani, said Alistair Osborne in The Times. Surely not a serious offer? “Oh, yes it is,” says The Economic Times of India. “Oh, no it isn’t,” retorts Reliance, which calls the rumour “completely speculative and baseless”. Nonetheless, the Government is reportedly monitoring the situation at the former state telco. BT’s shares jumped nearly 10% on the story – and were still up after it was dashed, perhaps reflecting the fact that “there’s been bid talk” ever since the French-Israeli billionaire Patrick Drahi’s outfit, Altice, quietly “snaffled” a 12.1% stake in June. The big prize is seen as BT’s Openreach broadband operation.

Investors are eager for “a quick win”, said Helen Thomas in the FT. Quite understandable given shares have “halved in the past five years”, and “the company is sinking more than £1bn a year into rolling out its full fibre network” for “an as yet uncertain return”. The “euphoric reaction” was also influenced by the huge €33bn bid for Telecom Italia recently tabled by the US buyout giant KKR. Yet even assuming that Openreach could be easily separated out, there’s the “albatross” of BT’s huge pension scheme – not to mention a challenging “political climate”, with even tougher rules to protect national security due in January.

I blame the locals, said Ben Marlow in The Daily Telegraph. If City fund managers “aren’t willing to invest in this country’s future infrastructure, perhaps we can’t complain if an overseas buyer steps in”. Had Britain’s institutional shareholders valued BT correctly, instead of baulking at the upfront roll-out costs, it would never have fallen to becoming “a plaything for international billionaires”.

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