The UK business secretary has flagged telecoms business Altice UK Sarl’s shareholding in BT Group PLC (LSE:BT.A) as a matter of national security.
The move comes after concerns were raised last year that the government could take steps to block a possible foreign takeover of the company.
Altice is owned by French-Israeli billionaire and telecoms magnate Patrick Drahi, who is the owner of Israeli cable television company HOT and has built stakes in multiple American and British telecoms companies.
His firm Altice raised its stake in the national telecoms business to 18% in December, raising alarm bells that the government could block a possible takeover.
Altice previously became the largest shareholder in BT last June after paying £2.2 bn for 12.1% of its shares.
It acquired further shares in BT in December, increasing its total ownership to 1,785,476,188 shares, equivalent to an 18% stake in BT.
BT said in a notice to shareholders on Thursday that the Secretary of State for Business, Energy and Industrial Strategy has now considered Altice UK’s move to increase its shareholding and that Kwasi Kwarteng is “exercising his call-in power under section 1 of the National Security and Investment Act 2021”.
The clause in the Security Act states that it can be exercised where there is a threat to national security: “Arrangements are in progress or contemplation which, if carried into effect, will result in a trigger event taking place in relation to a qualifying entity or qualifying asset, and the event may give rise to a risk to national security.”
BT Group said it will fully cooperate with this review.
Its share price fell 4% to 182p in early trades on Thursday morning.
Altice insisted to BT’s board after increasing its stake in the company last December that it did not intend to “make an offer for BT” and would be bound by the UK’s Takeover Code.
Drahi said at the time: "Over recent months we have engaged constructively with the Board and Management of BT and look forward to continuing that dialogue. We continue to hold them in high regard and remain fully supportive of their strategy, principally to play the pivotal role in delivering the expansion of access to a full fibre broadband network; an investment programme which is so important to both BT and to the UK.”
The UK government once held a golden share in BT but removed the covenant, which would restrict a takeover of a national publicly listed asset, to facilitate a mooted merger with MCI.
It currently only holds golden shares in BAE Systems PLC (LSE:BA.), Rolls-Royce Holdings PLC (LSE:RR.) and a smaller portion in Babcock International’s dockyard assets.
Last August, a group of influential MPs urged the government to repurchase golden shares in defence groups critical to UK national security to prevent takeovers by overseas rivals after US company Parker-Hannifin Corp’s agreed takeover of FTSE 250-listed contractor Meggitt PLC (LSE:MGGT).
BT Group is nevertheless a valuable asset, reporting £20.85 bn of revenue for the year ending 31 March 2022 and pre-tax profit of £1.96 bn.