Altice UK’s sale of its 24.5% stake in BT Group PLC (LSE:BT.A) to India’s Bharti Global may have removed niggling fears of an overhang event for the British telecommunications giant, according to Deutsche Bank analysts.
A share overhang event occurs when a large number of shares are expected to be sold or become available for sale, which can potentially depress the stock's price.
“Prima facie, swapping one strategic shareholder with another, with both having substantial hurdles to increased ownership, would seem to make little difference though the market has recently speculated that Altice could sell its shares and thus an overhang event is eliminated,” said Deutche’s head of European TMT research Robert Grindle.
Grindle also noted that “there are prospects for co-operation between BT and Bharti” akin to Vodafone’s relationship with major shareholder e&.
On the other hand, the transfer of ownership on the shareholder register may be because Altice “saw no route to value realisation at BT”.
Either way, whoever holds a quarter of BT’s share capital is less consequential to BT’s investment thesis than the impact of alternative network providers that are eating into the network provider’s market share.
Another concern, according to Grindle, is that the Labour government “is untested with regard (to) its willingness to allow foreign companies to take material stakes in sectors with significant strategic and security implications”.