Bharti Group Eyes Long-Term Growth with Investment in BT Group

Telecom tycoon Sunil Mittal expressed optimism about BT Group's growth and cash flow potential, highlighting it as a promising long-term investment for Bharti Group. Bharti Global, the international investment arm of Bharti Enterprises, announced plans to acquire a 24.5% stake in BT Group, valued at approximately USD 4 billion. This acquisition will make Bharti the largest shareholder in the UK's leading broadband and mobile company.

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Mittal emphasised that the investment is in a sector Bharti understands well, given its long-standing relationship with BT and the UK. He stated, "We got this opportunity to buy a very important block of shares. It is very difficult and hard to buy such stock in the market. It takes a long period of time and there are uncertainties of pricing... here was a block with a willing seller Altice UK who moved in to make this offer and we quickly decided to take the same."

Investment Strategy and Market Insights

Mittal noted that the current focus is on understanding the UK market deeply, but Bharti would consider lucrative opportunities in Europe as they arise. He said, "I think this is a very attractive buy... the UK and European telecom companies are trading at low multiples...so given the cash flow expectations of BT, we believe this is going to be a good investment and it is a long-term investment."

Shravin Bharti Mittal, Managing Director of Bharti Global, highlighted the unique opportunity to acquire such a significant stake. He remarked, "BT is exciting for a couple of reasons. It has a perfect combination of a stable cash flow profile from its consumer business, BT business and growth coming through openreach...our expectation is that there is enough clarity that the management is delivering, there is clarity of vision and clarity on execution, and it is the right time to enter as an investor in BT."

Operational Scale and Future Prospects

Sunil Mittal pointed out that while growth in developed markets like Europe and the UK tends to be lower, BT's large-scale operations present significant opportunities. He mentioned, "...the growth in Europe and UK is bound to be much, much lower....as in countries and economies which are fully developed. So growth is very small, one-two per cent a year....But revenue, as I mentioned, are pretty large, 25 billion dollars of current revenues, and 10 billion dollars in EBITDA...can we create more efficiency, can the free cash flows increase over a period of time..."

Mittal also highlighted BT's extensive fibre broadband network covering 30 million homes in the UK. He said, "BT...is perhaps the only company to cover 30 million homes on fibre broadband 60 per cent of which is already done and the rest is set to be completed in the next two years."

Stake Acquisition Details

Bharti will initially acquire about 9.99% stake in BT Group immediately, with an additional 14.51% pending regulatory approvals. Mittal clarified that there are no immediate plans to increase their holding beyond 24.5%, nor does Bharti seek a board seat at this time.

When asked about not taking a board position despite the significant stake purchase, Mittal explained that their current approach allows them to add value without being part of BT's internal processes until the entire stake acquisition is complete. He said: "At this stage, we are not asking for a board seat because it is not an investment that we are making with BT...in case of BT...they came into Airtel, bought the stake from Airtel and so there was...negotiated settlement. Over here we have bought...from a seller, who also by the way has no board seat."

Impact on Bharti's Indian Operations

Mittal clarified that Airtel and BT are independent investments with no immediate plans for technology or operational collaboration between them. He stated: "As you know, Airtel has not made this move...this is an investment by Bharti Enterprises, best practice sharing can always take place given the common shareholders on both sides but Airtel at the moment is not engaged in this particular process...for seeking any technology or any help from BT...They are two independent investments but I am sure, given the commonality of shareholding, there will be discussions, ideas from both sides."

The strategic acquisition underscores Bharti's confidence in BT's future prospects while maintaining independent operations for Airtel in India.