Orange has cut and run from its shareholding in UK telco BT, after a year of a nosediving share price, caused by Brexit, job cuts and an Italian accounting scandal.
Today BT is worth just £28bn and its share price is at £281. When the deal for BT to buy the largest UK mobile operator, EE, BT’s share price was £433. Under that deal, EE’s co-owners, Orange and Deutsche Telekom, received cash and shares. In Orange’s case, it gained £3.4bn in cash and a 4% stake in the combined BT/EE entity.
The deal is a complicated one, selling a third of Orange’s shares to BT and another third against a new bond. BT will shell out some £200m and another £520m will be issued in bonds due in 2021, though bondholders can choose to remain with the debt rather than swap for shares until they are due. This deal will leave Orange with a 1.33% shareholding in BT.
The BT/EE acquisition was preceded by a series of efforts by the telco – which spun off its original mobile business, Cellnet, now Telefonica O2, in 2001 – to get into wireless and quad play services via MVNO arrangements and WiFi-first offerings enabled by its 5m hotspots and homespots across the UK. That threatened to drive down mobile prices in a manner somewhat similar to the effect of Free Mobile in France and made it more attractive for either EE or O2 to be acquired by BT. EE won that race, with BT paying around £12.5bn in cash and shares.
The Deutsche Telekom part of the deal always looked to be longer term. It became the largest shareholder in BT, owning around 12% and the German firm has so far made it clear that it is happy to remain a long time partner for BT. Its CEO, Timotheus Höttges, said at the time of the deal: “We are laying the foundations for our two companies to work together in the future.”