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Reliance reportedly wants to buy BT but publicly denies it

Mukesh Ambani still has eyes on European telco expansion, and BT might just be in his sights if a report is to be believed..

Pinches of salt at the ready, because this is one of those rumours that comes courtesy of unnamed people who are familiar with matters. They told the Economic Times that Asia’s richest man and chairman of India’s Reliance Group is mulling an unsolicited bid for a chunk of BT, possibly even a controlling stake.

It should be noted, however, that as we were writing this we became aware of a statement from Reliance to the Indian stock exchange that reads as follows: ‘We categorically deny any intent to bid for the UK telecoms group, BT, formerly British Telecom, as reported in the article titled “Reliance Mulling Bid for UK’s Telco BT Group” published in The Economic Times dated November 29, 2021.

‘The article is completely speculative and baseless. We expect greater diligence and verification of facts before publishing such articles.’ These sorts of ‘speculative and baseless’ stories are usually planted by insiders as a trial balloon, to gauge market sentiment towards a move without having to formally admit to anything. They’re often publicly refuted but not usually with this degree of vehemence, suggesting this case may be different.

If buying BT Group outright proves to be a non-starter, Ambani is also said to be open to partnering with BT’s networks business Openreach, to help fund its fibre deployment. This despite BT earlier this month shelving plans to solicit outside investors and pay for the rollout itself.

The veracity of this rumour might well be questionable, but there is some logic behind it. The Indian press in September claimed Reliance was in the running to acquire T-Mobile Netherlands, and that Ambani was holding talks with lenders to finance an unsolicited $5.7 billion bid. We may never know whether that was true or not, because T-Mobile ended up being sold for €5.1 billion to a group of funds managed by private equity firms Apax Partners and Warburg Pincus.

Meanwhile, BT’s shares have been in the doldrums for years now, so it’s little wonder that investors are circling. Altice boss Patrick Drahi set tongues wagging in June when he acquired a12.1 percent stake in BT, edging out Deutsche Telekom to become the UK incumbent’s biggest single shareholder. Under UK regulations, Drahi is prohibited from purchasing more BT shares for six months following the initial acquisition. That so-called standstill agreement expires on 10 December, and the industry is watching with baited breath for what he might do next.

Speculation is also rife regarding what Deutsche Telekom may or may not do with the 12 percent of BT it acquired when it sold its half of EE to it. The German incumbent’s CEO Tim Höttges reportedly told investors in September that “something is going to happen” with the BT stake in the next 12 months. That ‘something’ could well mean selling it to an outfit like Reliance.

Reliance eyeing BT certainly isn’t beyond the realms of possibility. The conglomerate is no shrinking violet, and has established a reputation for shaking up telecoms markets by prioritising customer-winning offers over short-term profits. In India, its Infotel Broadband unit spent years and a lot of money building up a portfolio of nationwide TD-LTE spectrum licences. When the time came to launch services under the Jio brand, the operator offered six months of free 4G data, sparking a fierce price war and a fresh wave of market consolidation. Jio has since added fibre broadband, TV and fixed-line phone services to its line-up.

BT, with its EE mobile arm, its rapidly-increasing FTTH footprint, plus its TV service and accompanying sports content, offers an attractive service portfolio that deep-pocketed Reliance could use to its advantage, potentially causing a similar stir in the UK.

It is generally accepted wisdom that BT wants to remain independent, and it has been widely reported that it has brought in external advisors to help it fend off any attempted takeovers. However, this is unlikely to have dissuaded the likes of Drahi and Ambani, so come 10 December, all eyes will be on BT.

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