BT in talks to sell multi-billion pound stake in Openreach

BT Group Plc is in talks to sell a multi-billion pound stake in its wholly owned network subsidiary Openreach to infrastructure investors to help fund an ambitious expansion in fibre broadband, the Financial Times reported on Thursday.

The FT said potential investors, including Australian investment firm Macquarie Group Ltd (MQG.AX) and a sovereign wealth fund, had held talks in the last three weeks with the former telecoms monopoly.

Macquarie, however, was not interested in a deal, a source close to the investment firm told Reuters.

BT declined to comment on the FT report.

Upgrading Britain’s broadband network is the centerpiece of Chief Executive Philip Jansen’s strategy for BT, but rolling out the fibre connections to 20 million premises by the mid to late 2020s will cost 12 billion pounds ($15 billion).

Shares in BT fell to 11-year lows, giving it a market capitalisation of 10 billion pounds, after the company cancelled its divided a week ago to help weather the economic impact of the coronavirus.

Jansen said the pandemic, which has seen a surge in the use of mobile phones and data, had made the network upgrade “a matter of extreme urgency”.

Cancelling the dividend until 2021/22 and only then reinstating it halve the previous level will save BT 3.3 billion pounds, analysts noted.

The company has multiple call on the cash, including its 5G mobile network, pension deficit and expensive sports rights that underpin its consumer broadband offer.

It will also face more competition across mobile, fixed-line and TV after cable TV company Virgin Media and mobile operator O2 agreed to merge a week ago.

Jansen, however, said last week he was focused on upgrading Britain’s broadband infrastructure, and he confident the regulator Ofcom and the government would create the right conditions for investment.

“Clearly in this environment the political and regulatory will to encourage investment is very, very high,” he said.

On Wednesday he demonstrated his confidence in BT’s prospects by spending 2 million pounds buying the company’s shares, according to a stock market filing on Thursday.

A person associated with the company’s chairman and a non-executive director also purchased stock, the filing said.

—Reuters