Investors Target European Operators

Over the past couple of years, I’ve monitored an interesting trend of telecom operators — or their wealthy financial backers — taking equity stakes in major European providers.

Some of these investments have been substantial and bring an opportunity to influence strategy. Others are much smaller and seemingly more opportunistic.

BT has been at the centre of a lot of the recent action. A few weeks ago, Bharti Global agreed to buy the 24.5% stake in the operator held by Patrick Drahi. The French billionaire’s Altice empire is saddled with debt and has been pursuing asset sales for some time, so his exit was little surprise.

However, few saw the Indian company as a potential acquirer, and the deal marks an interesting turnaround given that BT owned a 21% stake in Bharti Airtel between 1997 and 2001. It’s also a major vote of confidence for new BT CEO Allison Kirkby, who has made an impressive start to the daunting task of turning the company’s ailing fortunes around.

But Bharti Global isn’t the only company that has made a recent move on BT. Investment firms controlled by telecom investor and billionaire Carlos Slim — who founded and still controls Latin American giant America Movil and has previously acquired stakes in KPN and Telekom Austria — took 3.2% in the company in June 2024, before upping it to 4.3% in September.

This move feels more about capitalizing on an undervalued stock than anything more ambitious; but Mr Slim is a shrewd and serial investor, so we shouldn’t rule anything out. And let’s not forget that Deutsche Telekom still owns a 12% stake in BT. In 2023, CEO Tim Hoettges said this investment was his “biggest ever mistake”, so if the Mexican wanted to up his position, he could find a willing seller.

Middle East operator e& has been steadily buying into Vodafone. It took an initial 9.8% stake in May 2022 for about $4.4 billion and currently owns just over 15%. Next February, its CEO Hatem Dowidar will take a seat on the Vodafone board.

In 2023, the two companies announced a wide-reaching strategic partnership across Europe, the Middle East and Africa, spanning enterprise, technology, procurement and wholesale. This suggests a long-term collaboration between the two companies, and I expect e& to increasingly seek to influence Vodafone’s strategy.

Under Margherita Della Valle — who has been Vodafone CEO on a permanent basis for 18 months — Vodafone has undergone much structural change, notably pulling out of two of its most challenging markets. It has already exited Spain in a deal with UK-based Zegona Communications and is selling its Italian arm to Swisscom (see Vodafone Results, Fiscal 1Q24/25).

A full takeover of Vodafone by e& appears unlikely, however, after the UK government declared its investment a national security risk because of Vodafone’s role as a supplier to government departments. Under the National Security and Investment Act, which came into force in 2022, the government has the power to block foreign takeovers of companies in industries that have ties to national security.

e& has also bought into Eastern Europe. In September, it received regulatory clearance to purchase PPF Telecom’s telecom assets in Bulgaria, Hungary, Serbia and Slovakia.

In addition to e&’s investments, in late 2023, Liberty Global took a surprise near-5% stake in Vodafone. This felt like a far more opportunistic move — CEO Mike Fries commented at the time how Vodafone’s stock price did not reflect its underlying value and confirmed that Liberty Global isn’t seeking a seat on the board.

Still, it’ll offer the US firm some helpful insight into Vodafone’s strategy, which could better shape its European activities. This includes VodafoneZiggo, an existing joint venture between the two companies in the Netherlands.

Another investor in Vodafone is French billionaire Xavier Niel. The Iliad Group founder took a 2.5% stake in September 2022 through his Atlas Investissement vehicle.

Mr Niel has been among the most active investors in the European telecom sector in recent times. Last month, through another one of his investment arms, NJJ Holding, he completed a deal to buy Ukraine’s lifecell. It forms part of a broader plan to create a “national telecom champion” following the purchase of fixed-line and pay-TV provider, Datagroup-Volia.

In late 2023, Mr Niel oversaw the acquisition of a 6% stake in Belgian operator Proximus, and earlier in 2024 his NJJ Holding arm took almost 20% in Tele2, giving him exposure to four new markets — Sweden, Estonia, Latvia and Lithuania. The move soon prompted the Iliad Group to set out an ambition to become Europe’s fifth-largest mobile operator. In its three main markets of France, Italy and Poland, it already has about 50 million customers.

And Mr Niel’s ambitions don’t stop at Europe. He’s also trying to take over Latin American operator Millicom through Atlas Investissement, which already holds a 29% stake. However, his latest bid in August was rejected.

Other recent moves in Europe include Digi Communications’ purchase of Portugal’s Nowo and the controversial acquisition of a near-10% stake in Telefonica by Saudi’s STC.

My colleague Ian and I discuss this topic in this year’s Predictions event, available to watch now. With telecom operators’ stock prices remaining precariously low, further deals — including potential takeover moves — could be on the cards, and these future investments are something we’ll be keeping a close eye on.