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BT Group, once a solidly-British telephone company, now boasts an impressively international register of influential investors. The latest to join is billionaire Carlos Slim, who has taken a 3.16 per cent stake. Grupo Carso, one of Slim’s investment vehicles, claims it is only a financial investment. Even if Mexico’s wealthiest man has long sought a foothold in Europe’s telecoms market, that makes sense.
Perhaps new management caught Slim’s attention. Under short-busting new boss Allison Kirkby, BT’s shares have had a nice run in the past month. At her debut quarterly results in May she offered clarity on the telco’s free cash flow targets — doubling by the end of the decade — and upped the dividend.
After years of cost savings programmes, BT shares jumped double digits on that day. But despite Kirkby’s bravado about the shorts, there is scant evidence that the doubters have taken flight. And for good reason. Over one year, the BT share price remains 11 per cent behind the FTSE 100 benchmark, including dividends.
So what might Slim be after? Probably the stability of a utility’s cash flow. Kirkby did emphasise that group capital expenditure has peaked. He has plenty of experience in telecoms throughout the Americas and Europe, where he has taken pot shots at various incumbents, including KPN in the Netherlands and Telecom Italia.
What he probably wants he may never find again: another monopoly like Mexico’s domestic telephone incumbent Telmex. He, with others, bought a controlling stake in a government privatisation in 1990 for under $1.8bn ($4.6bn in 2023 dollars). It has since evolved into the $52bn Latin American telecom conglomerate América Móvil, and a large chunk of his wealth.
Less affluent BT shareholders might take heart from his interest. This Slim slice of BT — all shares — will not make much difference in terms of governance. In BT’s embarrassment of billionaires, Franco-Israeli magnate Patrick Drahi has 24 per cent, while Germany’s Deutsche Telekom holds 12 per cent.
However, a well-capitalised and informed investor such as Slim might offer a buyer for the overhang of Drahi’s stake should he need to depart. Dollar bonds of some of his other businesses have fallen sharply this year. Their yield spreads against US benchmarks have widened.
None of this matters if BT cannot lift its free cash flow as promised to pay its long-suffering shareholders. Right now, consensus analyst forecasts see this scenario playing out. That is the key if Kirkby is to avoid a Mexican stand-off with — or between — BT’s larger shareholders.
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