Drahi is mulling his next steps with BT

French billionaire Patrick Drahi is mulling his next steps with BT Group Plc as UK rules that prevent him from launching a takeover offer expire on Tuesday.

The moment a year since the founder of Altice Europe NV unexpectedly became BT’s biggest shareholder brings back into play a company now part-owned by two of Europe’s biggest broadband groups, opening the door to long-awaited restructuring in the continent’s telecoms sector. Aside from the former British monopoly, German giant Deutsche Telekom AG has skin in the game, with US assets also potentially involved.

“You’ll hear all the CEOs around Europe talking about the theme, about further consolidation,” Chief Executive Officer Philip Jansen said at a dinner with reporters in London last month. BT’s two biggest shareholders “recognize that the industry structure could be improved.”

Since securing a 12% stake last June and then expanding the holding to 18% in December, the 58-year-old has kept close tabs on BT’s development. Jansen said he regularly hears from Drahi after quarterly results and said the billionaire pushes for faster execution on rolling out fiber infrastructure.

While Drahi publicly supports the British carrier’s strategy, the Moroccan-born investor has a track record of debt-fueled dealmaking, raising questions over his ultimate plans. Deutsche Telekom, which owns 12% of BT, may be a willing partner if a deal moves forward — though the timing could still be months away.

BT’s board is preparing for the possibility it will receive a takeover offer at some point, said people familiar with the company’s thinking, who asked not to be identified because the discussions are private.

Drahi would need help financing a deal. BT is currently valued at 17.6 billion pounds ($21.8 billion), while the investor’s wealth has dwindled by $1.4 billion so far this year to $7.9 billion, according to the Bloomberg Billionaires Index.

Securing the resources may be difficult. Credit markets are getting tighter, and already three Altice entities and Drahi’s auction house Sotheby’s hold combined net debt totaling some $58.5 billion.

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Even if his liquidity is solid and he has until 2025 before a significant amount of debt matures, “rising interest rates will impact him,” said Pierre-Francois Merveille, a credit analyst with Oddo BHF.

Meanwhile, a possible sale of Altice Portugal, which could have raised resources, has gone nowhere, and it’s not a good time for listing some of his assets like Sotheby’s and digital-advertising business Teads, Merveille said.

German ‘Kingmaker’
Deutsche Telekom Chief Executive Officer Tim Hoettges has hinted that the German company is prepared to be a “kingmaker” in deals involving BT. That cooperation could involve trading its stake in BT for Drahi’s American cable group Altice USA Inc., according to New Street Research analyst James Ratzer.

Such a deal could help both sides. Altice US shares have plunged more than 70% in the last 12 months as it loses customers and dials up spending on fiber. A swap could be a welcome exit for Deutsche Telekom after the value of its BT stake has declined by billions since acquiring it for half of mobile carrier EE in 2016. The German company declined to comment.

Hoettges has been increasing Deutsche Telekom’s stake in T-Mobile USA Inc. The unit now accounts for more than half of the Bonn-based carrier’s profits and could benefit from a broader American presence. Drahi’s BT holding would rise to 30% in such a deal — potentially without sucking up capital — though that would trigger a formal takeover offer under UK rules.

A breakup is also an option. The separation of Openreach, BT’s nationwide fixed-infrastructure unit, would overhaul the British telecom market and has long been speculated. But Drahi hasn’t expressed interest in the idea with BT, a person familiar with the matter said.

Even when the ban on making an offer lifts, there are reasons for Drahi to bide his time. The UK government is still investigating his stake-building on security grounds and that may encourage caution as long as the outcome is pending, according to a person familiar with his thinking.

The inquiry is due to conclude in the first week of July, though officials could choose to extend the probe for 45 working days. Bloomberg