In business, life comes full circle more often than not. In 1997, British Telecom picked up a 21% stake in Bharti Airtel, before exiting that investment in 2001. After more than 20 years, Bharti Global, the international investment arm of Bharti Enterprises, is set to acquire a 24.5% stake from Altice UK—the leading investor in the British firm—in what is now known as BT Group for an estimated $4 billion.
In May, Altice, a telecom group founded by Patrick Drahi, raised its stake in BT Group from 18% to 24.5%. Interestingly, this development came before the company announced a restructuring plan that would result in a reduction of 55,000 jobs by the end of the current decade.
In India, Bharti Airtel, the listed entity of Sunil Bharti Mittal-led Bharti Enterprises, offers mobile and broadband services. It also has a strong presence in Africa. However, there has been some curiosity surrounding the deal with BT Group, especially considering Bharti’s current struggle with stagnant revenues and profitability. Also, the mobile services market in the UK, which is BT’s primary market, is saturated, which leaves little room for growth. Other shareholders in BT Group include Deutsche Telekom and T-Mobile Holdings; they hold 12% each.
Analysts tracking the sector believe that Bharti is clearly taking a long-term view of the investment in BT Group. According to Satish Meena, Principal Analyst at Datum Intell, Bharti gains access to technology and infrastructure through its entry into the UK market. “Plus, there is an opportunity to rework the cost structure in Britain. In terms of the investment, they will take a measured approach in a market where the consumer part is slow but potential exists in enterprise,” he says.
The other interesting thing is 5G and how the insights from the UK can be put to good use in India. “Value will come from premium customers here, and that’s where technology can make a difference,” explains Meena. Clearly, the investment goes beyond just cutting a cheque.
@krishnagopalan
