The Times - UK (2022-05-27)

36 Friday May 27 2022 | the times

Business

Drahi, 58, reiterated at the time he

raised his stake in December that he

held BT’s board and management in

“high regard” and remained “fully

supportive of their strategy”. He has al-

so engaged Flint Global, the advisory

consultancy co-founded by Ed Rich-

ards, the former boss of Ofcom, and Sir

Simon Fraser, a former permanent sec-

retary at the business department, to

engage with the government, while Al-

tice met with Kwarteng last July.

Nonetheless, speculation over the

intentions of the secretive billionaire

has continued to swirl. The Swiss-based

tycoon was able to amass his BT posi-

tion through derivatives, according to

sources, potentially giving him a mech-

anism to exert further control.

Drahi declined to comment yester-

day but is understood to have been in

regular contact with Jansen, and has

sent messages to BT management after

results announcements to “keep going”.

Openreach is investing £15 billion to

offer 25 million premises a full-fibre in-

ternet connection by 2026 — the cen-

trepiece of Jansen’s strategy since he

took charge in 2019. The division says it

has been “building like fury” and has

passed 7.2 million premises to date.

Drahi is understood to see Britain as

one of Europe’s most pro-investment

network environments, after BT se-

cured a pivotal agreement in March

with Ofcom, and that the company is

undervalued. He is said to view BT as a

long-term investment.

Bernstein analysts said they believed

Drahi’s “ultimate motive is not to take

BT private but to push for a full or par-

tial divestment of Openreach” and “the

outcome of this review may limit his

ability to influence BT’s board”.

1

EY is exploring a restructuring

that could see it spin off the

audit division from its advisory

business. The Big Four accountant

confirmed last night it was in the

“early stages” of separating the

audit business from its higher-

margin consultancy arm. Page 35

2

Pressure was mounting on BT

after unions threatened the

first national strike at the

FTSE 100 giant in 35 years and the

government launched a review of

stakebuilding in the group by a

Swiss-based tycoon. Page 35

3

FirstGroup, the train operator,

has received a takeover

approach valuing the

company at £1.22 billion. Its board

was considering the offer from the

US private equity firm I Squared

after a “series of unsolicited,

conditional proposals” which had

been rebuffed. Page 35

4

The City regulator has

proposed an overhaul of the

stock market to encourage

more companies to list in London

— raising concerns of “watered-

down” standards. The Financial

Conduct Authority said it was

considering measures to simplify

the listing regime.

5

Asda’s latest income tracker

said average household

disposable income fell by

£40.38 per week in April, the

largest fall since its tracker was

created in 2008. The rise in costs

has seen spending cash fall to £205

a week, its lowest in four years.

6

The US economy shrank by

more than expected this year

as the rising price of imports

pushed up the trade deficit. The

world’s biggest economy

contracted by 1.5 per cent in the

first quarter compared with the

same period in 2021. Page 38

7

One of Britain’s biggest DIY

investment platforms has

warned the growing cost-of-

living crisis will erode the cash

that consumers put aside to invest

into markets as it reported a fall in

profits. AJ Bell said that the

impact of inflation was likely to

cause “a potential short-term

headwind for inflows”. Page 40

8

Auto Trader believes it will

shrug off the cost-of-living

crisis because recession or

inflation tend not to affect the

volume of used cars bought and

sold. It reported a 65 per cent rise

in income in the year to end of

March, to £432 million, 17 per cent

ahead of where it was in the last

year before the pandemic. Page 41

9

A survey of big UK

companies found 64 per cent

had been affected by fraud

and other crimes in the past two

years, above the global average

and 10 per cent up on the figure

from two years ago. The average

cost ranged from £800,000 to

nearly £4 million. Page 42

10

Hundreds of industrial

scientist jobs around the

UK appear to have been

saved after Johnson Matthey sold

the high-performance electric car

battery business it had threatened

to close. The disposal to EV

Metals, a Saudi-Australian

company, was announced as

Johnson Matthey reported a

plunge into the red. Page 43

Need to know

Whitehall threatens to cut off

2017 2018 2019 2020

Only connect

July 31, 2020

Shares in BT drop

below 100p

March 1, 2021

Jan du Plessis, BT's

chairman, reveals plans to

step down after less than

four years in the role

At about 5pm on Wednesday, after the

London market had closed, the chief

executive and chairman of BT picked

up the phone to government officials

concerned about the future ownership

of the UK’s largest telecoms group.

Philip Jansen, 55, and Adam Crozier,

58, were told by the business and digital

departments that the government was

“calling in” the stake being built by

Altice, the international telecoms

group, for review under the new

National Security and Investment Act.

The intervention by Kwasi Kwar-

teng, the business secretary, would not

have come as a surprise to BT, which

has been on alert since Altice, owned by

Patrick Drahi, a renowned dealmaker

and cost-cutter, suddenly emerged as

BT’s largest shareholder last June.

Ever since the new law, billed as the

biggest shake-up of the UK’s national

security regime for 20 years, came into

force on January 4 — three weeks after

Altice raised its voting rights over BT

from 12.1 per cent to 18 per cent,

prompting the government to warn it

would “not hesitate to act” to protect

Britain’s critical national infrastructure

— the City has expected BT to become

its most high-profile case.

The former state monopoly was priv-

atised in 1984. In addition to the EE

mobile network and BT Sport it owns

Openreach, the broadband infrastruc-

ture business, whose UK full-fibre net-

work plans are a crucial part of the gov-

ernment’s levelling-up agenda.

BT’s services also include handling

calls to the emergency services and

cybersecurity for the government.

Whitehall is understood to have raised

the situation with Altice during offi-

cials’ regular meetings with the group.

The timing of the call-in this week,

though, surprised some stakeholders.

Analysts at Bernstein said: “This review

comes sooner than we expected.”

The intervention sent shares in BT,

whose stock has been supported by the

potential of Altice’s stakebuilding,

down 4¼p, or 2.3 per cent, to 185½p. An-

alysts at Berenberg noted that it “cre-

ates an overhang over whether Drahi

will be allowed to retain his ownership”.

Deutsche Bank said that it was “likely

to halt any further stakebuilding and

could lead to potential divestments”.

The government is thought to have

acted now as the latest six-month lock-

up period barring Altice from launch-

ing a bid expires on June 14.

Stock market shake-up to boost London listings

The City regulator has proposed an

overhaul of the stock market to encour-

age more companies to list in London

— in a plan that has raised concerns of

“watered-down” standards.

The Financial Conduct Authority

yesterday revealed it was considering

measures to simplify the listing regime

in what would be the biggest shake-up

of the market rule book for decades.

In recent years, London has fallen

behind other financial centres such as

New York as a destination for

flotations, particularly of high-growth

technology and bioscience businesses.

Under the present regime, compa-

nies can list either in the premium seg-

ment of the market, which has tougher

governance rules, or the standard seg-

ment, which is less strict.

Only premium-listed companies can

join the influential FTSE indices that

are tracked by the vast passive funds,

which means companies that would be

eligible only for a standard listing

sometimes shun London altogether.

The regulator is proposing a system

centred around a single segment that

would require all companies to adopt a

minimum set of mandatory obligations

on governance to protect investors.

There would also be a set of supple-

mentary obligations that companies

could choose to adopt which would give

shareholders a greater say in the busi-

nesses in which they have invested.

The watchdog believes that such a

revamp would make the listing rule

book less complex and would make it

easier for a wider variety of companies

to join the London market.

Clare Cole, the authority’s director of

market oversight, said: “The rules for

companies [that] want to list here have

not changed since the 1980s. Now is a

good time to have an open conversa-

tion to make sure our rules are fit for the

future, so we have a more accessible,

competitive and growing market that is

attractive to a range of companies.”

Roger Barker, of the Institute of

Directors, said that any reforms would

be closely watched for signs that stan-

dards were being diluted. “Ultimately

the devil’s going to be in the detail,” he

said. “It could lead to a watering down.”

While the UK’s share of global flota-

tions stood at 10 per cent in 2006, it had

shrunk to 5 per cent by 2018.

The regulator last year took steps to

make London more competitive. In De-

cember it loosened the rules to allow

companies with dual-class share struc-

tures into the premium segment and

lowered its free-float requirements to

10 per cent from 25 per cent.

These changes followed a govern-

ment-commissioned review by Lord

Hill of Oareford to make London more

appealing to international companies.

Ben Martin Banking Editor

Q&A

What intervention has the

government made regarding BT?

The Department for Business,

Energy and Industrial Strategy

announced yesterday it had “called

in” the acquisition by Altice, the

telecoms group controlled by

Patrick Drahi, of 6 per cent of BT’s

shares for a “full national security

assessment” by Kwasi Kwarteng, the

secretary of state, under the

National Security and Investment

Act. Kwarteng has 30 working days

for an assessment, but the process

can be extended by a further 45.

New national security

powers could bring

Patrick Drahi’s

stakebuilding efforts to a

halt, writes Alex Ralph