BT's share price made modest gains in early trading on Tuesday after the UK government indicated that billionaire Patrick Drahi will not be forced to cut his 18% stake in the UK incumbent despite initial security concerns.

In a statement, UK business secretary Kwasi Kwarteng confirmed he will not be taking any further action over the increase of Altice UK's stake in the UK incumbent from 12.1% to 18%.

Kwarteng launched a "full national security assessment" of Drahi in May, and extended the review period in June. The business secretary had been exercising his "call-in power" under section 1 of the relatively new National Security and Investment Act (2021), which allows the government to review foreign interests in UK companies deemed vital for national security.

Figure 1: Billionaire Patrick Drahi will not be forced to cut his 18% stake in BT.
(Source: Ecole polytechnique on Flickr CC 2.0)

As set out by the National Security and Investment Act, the UK government can block acquisitions of 25% or more if there is a perceived risk to national security.

Although Drahi appears to be off the hook for now, the government warned that "any future transaction could be subject to a separate assessment under the Act."

Takeover ahead?

Altice UK was set up by France-based telecoms group Altice, controlled by Drahi, as a BT investment vehicle.

Drahi blindsided BT management last June, scooping up its 12.1% stake in a £2.2 billion (US$2.6 billion) spending spree spread across a few days. The move made the French-owned company BT's biggest single shareholder, just ahead of Germany's Deutsche Telekom (12%).

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Then in December, Altice UK increased its stake to 18% with another investment believed to be around £1 billion ($1.2 billion).

Drahi has always indicated he has no intention of mounting a takeover bid for BT. Indeed, Altice UK expressed its "high regard" for BT management and supports the group's plan to build a fiber network throughout the UK.

However, speculation that Altice will buy more shares is unlikely to disappear. Indeed, Drahi has a track record of aggressive takeovers, pursuing debt-fueled deals to buy assets in France, the United States, Portugal and Israel. His company already controls SFR in France, for example.

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— Anne Morris, contributing editor, special to Light Reading