A vote of confidence in the company? That’s always a board’s default spin on events when a billionaire buys a large stake, purrs politely about management but is slightly mysterious about his long-term intentions. The pitch is rarely convincing because billionaires are not generally the type to sit back and simply collect a stream of dividends. They tend to want something.
It’s too soon to be confident about the motives behind Patrick Drahi of Altice’s purchase of a 12.1% stake in BT, worth £2bn. But, on this occasion, the non-threatening interpretation may be correct. Or, at least, it looks the most likely line for a while.
For starters, the French-Israeli Drahi must know that a foreign-backed bid for BT (which can’t now happen anyway for six months) would provoke a political storm. The company, committed to spending £15bn on fullfibre broadband rollout in the UK in the next five years, is almost the definition of too-important-to-mess-with. It is probably not a coincidence that every time BT seems engulfed by financial crisis (2009-10 and again last year) the regulatory weather suddenly improves.
The latest outbreak of peace with Ofcom allowed BT to get its longed-for “fair bet” on long-term fast-fibre returns. Rishi Sunak, the chancellor, then made life sweeter by creating “super deductions” on infrastructure spending for two years, a tax policy that could almost have been designed with BT in mind.
That points to a second reason to favour the “vote of confidence” theory. If he wished, Drahi could have thrown a large sum at a fibre insurgent – CityFibre, say. But backing BT to remain streets ahead looks a sounder bet than ever if the regulatory set-up remains stable. If the plan to reach 25m premises by the end of 2026 is achieved, the company should emerge with control of about two-thirds of the UK’s fibre infrastructure. And the kit, remember, is meant to last decades.
Drahi, presumably, still wants something. But it may be only a seat on the board (hard to refuse since Deutsche Telekom, with a similar-sized stake, already has one) to give him a voice in any future spinoff of Openreach, the broadband subsidiary. Any tycoon-style craving for immediate excitement may be satisfied just by leveraging the £2bn investment via debt, on which front Altice revealed nothing.
We’ll await events but, on day one, BT’s relaxed view of its new shareholder is reasonable.
Morrisons’ executive pay rebellion was as big as they come
David Potts, Morrisons’ chief executive, regarded it as “a badge of honour” that the supermarket chain’s profits halved last year. It was evidence, he said, that “feeding the nation” was the priority during the pandemic. Now Morrisons has a sticker of shame to add to its collection: a 70% vote against its pay report, which is about as big as rebellions come.
Without Covid costs, profits would have risen, argued the remuneration committee, therefore executives should get full bonuses. Kevin Havelock, the chair of the pay committee, called it a sensible use of “discretion”. Most investors, it seems, saw a brazen case of playing fast and loose.
As argued here on Wednesday, sometimes the bosses, even when they have been working overtime, have to take bad profits numbers on the chin. Without the “adjustment”, Potts’s overall pay packet would still have been about £3m, rather than the £4.2m he actually got. It ought to have been enough.
At least Morrisons spared us standard guff about “engaging” with shareholders and instead expressed “sincere regret” that it couldn’t convince the voters. To demonstrate that sincerity, Havelock may care to let somebody else assume bonus-awarding duties. Yes, he was re-elected to the board. And, yes, the pay vote was merely advisory – but 70% is very clear advice.
Regulators’ severe line on cryptocurrencies looks justified
Hate cryptocurrencies; cool with stablecoins. That’s the gist of the views from the Basel Committee on Banking Supervision, whose opinion matters because it sets standards for banks in critical areas like capital buffers.
In short, when holding a cryptocurrency such as bitcoin, banks should set aside enough capital to protect themselves against the risk of the asset becoming worthless. By contrast, stablecoins – digital coins that are pegged to a real currency – can be treated more like conventional assets.
The crypto crew may spy an establishment plot to prevent bitcoins from going mainstream, but Basel’s severe line looks justified. Cryptocurrencies have no inherent worth and, in the sweep of financial history, have been around for about five minutes so cannot be considered a permanent store of value. The possibility of a complete crash must exist.