BT Group shares up on Bharti Global investment

Investing.com — Shares of BT Group Plc (LON:) jumped after Bharti Global, the international arm of Indian telecom giant Bharti Enterprises, has agreed to purchase a 24.5% stake in the UK telecom giant. 

At 5:11 am (0911 GMT), BT Group was trading 6.1% higher at £138.45.

The acquisition will be executed in two phases: an immediate purchase of a 10% stake from Patrick Drahi’s Altice UK, followed by the acquisition of the remaining 14.5% once the necessary regulatory approvals are secured. 

The acquisition comes under the purview of the UK government’s National Security and Investment Act 2021, which grants the government the authority to scrutinize and potentially intervene in acquisitions that may raise national security concerns. 

“But considering that the government has approved in the past Altice’s increase of BT stake from 12% to 18% , the regulatory hurdle looks low,” said analysts from Citi Research in a note. 

Citi Research maintains a target price of £2.00 for BT Group, based on a Discounted Cash Flow (DCF) model that incorporates a Weighted Average Cost of Capital (WACC) of 8.0% and a 0% perpetuity growth rate from FY27 onwards. 

While the acquisition by Bharti Global is seen as a positive development, several risk factors remain. These include the size of BT’s pension fund, the potential for network overbuild, the risk of competitors entering the quad-play market, and BT’s exposure to single-country and regulatory risks.