Indian tycoon snaps up BT stake – is a trade deal in store?

A general view of the BT Tower in central London...

(Image credit: Vuk Valcic/SOPA Images/LightRocket via Getty Images)

published 19 August 2024

The news was enough to send BT’s share price sharply upwards. On 12 August, it was announced that the French dealmaker Patrick Drahi was selling the 24% stake he has acquired in BT over the last few years to India’s Bharti Global. Run by the billionaire Sunil Bharti Mittal, Bharti Global is one of India’s largest conglomerates, with interests in telecoms, media, space and other sectors, and has started pushing out aggressively into the rest of the world. BT’s shares were up by 6% that morning as the stake was announced and are now up by 33% over the last six months, partly as a result of the turnaround plan put in place by new chief executive Allison Kirkby, and partly due to speculation that there may eventually be a full-scale takeover bid for the company.

Bharti might be looking at it purely as an investment, it may be looking for partnerships for its telecoms operations back at home, or it might be considering a full-scale takeover. If it does decide to take full ownership of BT, that will pose a stiff test for the government. Should one of our largest companies, and especially one in such a sensitive area as telecoms, be allowed to be taken out by an Indian conglomerate?

Why not? India’s fast-growing economy is generating lots of wealth – its stock market is close to overtaking China’s when measured by total capitalisation – and there are close ties between the two countries. Tata has been an excellent owner of Jaguar Land Rover and, while its ownership of the steel industry has been more controversial, it is hardly its fault that the government is imposing ridiculous net-zero targets on the industry. Many more smaller-scale investments have contributed a lot to the British economy, while many UK companies have built substantial operations in India.

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But if an Indian firm is to be allowed to take a major stake, and perhaps full control, of an asset as important as BT, then shouldn’t we ask for something in return? A trade deal, perhaps? A major agreement with India has been under negotiation ever since the UK left the EU, but ministers have not been able to get it across the line. There have been disagreements over visas for Indian workers and a range of other issues. But given that a deal with the US does not look likely to happen any time soon, one with India would be by far the biggest prize of the UK’s post-Brexit trade strategy. India has already overtaken the UK as measured by total GDP (although admittedly that is not much of an achievement anymore) and it is expected to overtake Germany in 2027 and Japan in 2029 to become the third-largest economy in the world.

Just as significantly, a deal with India would cement the UK’s pivot towards the Pacific started when we signed up for the CPTPP free-trade zone that stretches across most of Asia and much of South America as well. The Asia-Pacific region is growing rapidly and it is a lucrative market for the mix of legal, financial and consulting services that the UK has become very good at exporting. With India added too, Britain would have the opportunity to embed itself deeply into the region’s commercial infrastructure. Add it all up, and a trade deal with India could well unlock a wave of investment, exports and jobs, as well as cementing the UK’s place in the Asian trading system.

The Labour government may be keener on restoring relations with the EU, but once it takes a realistic look at the figures it will surely realise that the booming Pacific regions are far more attractive than a stagnant France, Germany and Italy, and anyway, there is no reason not to do both at the same time. On announcing the deal, Mittal opened the door to precisely that, arguing that the investment would lead to “elevating and broadening India-UK ties”. Mittal is a close ally of Indian prime minister Narendra Modi, and has been a leading advocate of more trade between the two countries. A trade deal with India would be a big prize, and well worth losing control of a telecoms company for – it is likely to be just a matter of asking for it to be wrapped up as quickly as possible.

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.