BUSINESS LIVE: Bharti buys major BT stake; FTSE 100 CEO pay soars; Heathrow gets boost from summer holidays

Heathrow Airport has blamed a policy introduced under the previous Conservative government for a “devastating” drop in passenger numbers

Britain’s busiest airport reported a drop of 90,000 passengers on routes covered by an electronic travel authorisation (ETA) system, which was introduced in 2023 and costs £10 per person.

India’s Bharti Enterprises has agreed to buy a 24.5 percent stake in BT from the telecoms company’s largest shareholder, Altice UK.

The Indian conglomerate’s international investment arm, Bharti Global, has entered into an agreement to immediately buy a 10 percent stake in BT and a further 14.5 percent once “appropriate regulatory approvals are received.”

Bharti told shareholders on Monday it has no plans to fully acquire the company and that it will support BT’s management team and strategy, including its plans to roll out 5G technology in the UK.

Susanah Streeter, head of money and markets, Hargreaves Lansdown:

‘BT was the biggest gainer in early trading, jumping more than 6% on news that India’s Bharti Global will buy a large chunk of the business. It will acquire a 24.5% stake from Altice UK, with almost 10% of that stake transferring immediately.

“This step is reassuring as Bharti Global clearly believes that the group offers untapped value in the long term.

‘It clearly sees great potential in Openreach, which is responsible for maintaining and expanding the new fibre networks. It hopes to reach 25 million premises by 2026 and appears well on its way to achieving this.

‘It is also likely that this was fuelled by indications that the costs of building 5G infrastructure have peaked. And as new customers move onto the new networks, there is potential for lower operating costs.’

London-listed stocks are showing global gains this morning after ending a turbulent week with declines. Stocks linked to commodities and the strength of BT Group are providing further support.

Most subsectors are on an upward trend, with the personal goods category up 1.5 percent, posting the biggest gains, helped by a 1.6 percent gain at top player Burberry.

The construction and materials sector is the only exception, down 0.4 percent. This sector was hit by Marshalls, a supplier of garden and roofing products, which posted a 3.5 percent decline after a 19 percent drop in half-year profits.

On the data front, investors are awaiting the U.S. consumer price index figures due out on Wednesday, which will provide an indication of the Federal Reserve’s stance on rate cuts in September.

This week also sees the release of UK inflation figures and gross domestic product data as investors anticipate the Bank of England’s next rate cut.

Among individual stocks, BT Group rose 6.3 percent after India’s Bharti Enterprises announced it would acquire a 24.5 percent stake in the telecoms giant for around £3.2 billion, buying out its largest shareholder.

Stagecoach profits have risen again as passengers return to buses, but the over-60s are staying away despite their free travel benefits.

Britain’s largest bus and coach operator has benefited from government-backed schemes to boost public transport use after the pandemic, such as free travel for children under 22 in Scotland.

In January 2023, a £2 cap on rates was introduced across the UK to help people struggling with the cost of living crisis. This cap was extended until the end of this year.

Catherine Mann, an external member of the Bank of England’s Monetary Policy Committee, has warned that prices of goods and services will rise again and that it could take years for wage pressures in the economy to dissipate.

Mann voted against this month’s rate cut, telling a Financial Times podcast that she rates her support for an aggressive approach at 7 out of 10, down from 10 out of 10 earlier this year, when she voted to raise rates further from a 16-year high of 5.25 percent.

“There is an upward trend in both the wage formation process and the price process. It may well be that this is structural, as it has emerged during the period of very high inflation in recent years,” she said.

“It will take a long time for that increase to go away,” she added.

The CPI returned to the BoE’s 2 percent target in May, but this week’s figures are likely to show the index higher again, at 2.3 percent. The BoE predicts the index will reach around 2.75 percent later this year as the impact of last year’s fall in energy prices fades.

Mann said she saw upward pressure on wages as wages for the lowest paid rose fastest, putting pressure on pay scales and creating potential demand in the coming years from higher paid workers to restore the pay rises they previously enjoyed.

Richard Hunter, Head of Markets at Interactive Investor:

‘A decent open for the main index was marked by welcome strength in beleaguered shares of Diageo after a rare upgrade from the broker.

‘Shares have fallen 27% over the past year due to weaker operations in Latin America and consumers drinking less premium drinks.

‘BT was the standout performer, however. Shares rose more than 6% at the open after it was announced that Bharti Global had agreed to buy a 24.5% stake in the company. This comes on top of the 15% rise BT has enjoyed in the past year.

‘On the other hand, a broker downgrade left JD Sports in the red at the open, although the price movement did little to change the trend that has seen the share price rise 21% over the past six months.

‘The FTSE100 is up 6.3% so far this year and remains alert as a safe haven investment should volatility elsewhere continue.

‘The economic theme will continue in the UK too, with the release of both unemployment and inflation figures later in the week.

‘The recent rate cut by the Bank of England is not expected to be repeated this year. The figures will show whether the cut was justified at this point.

‘Recent market volatility has wiped out some of the FTSE250’s gains in recent weeks, although the index is still up 5% so far this year.’

Heathrow Airport hopes to reach a record 8 million passengers in a single month after travel numbers surged ahead of the summer holidays and the Paris Olympics.

Passenger numbers rose 4.2 percent in July compared to a year earlier, leaving Britain’s largest airport just 20,000 passengers shy of the 8 million passenger milestone.

Thomas Woldbye, CEO of Heathrow, said:

‘Team GB’s performance in Paris was an inspiration to the nation and to Team Heathrow.

‘In July, we broke passenger records almost every day and are now chasing our unprecedented goal of serving 8 million passengers in a single month.

‘I am proud that despite a few potential challenges that could have tripped us up, our team remained focused on the goal of making every trip better and delivered a medal-winning start to the summer holidays.’

City executives earned an average of £4.2m last year, while CEO pay at FTSE 100 companies hit a record high.

Analysis shows that the average salary of CEOs at the largest companies listed in London rose by 2.2 percent in 2023.

And this year, pay is likely to rise even further, as top executives at major companies have received huge pay raises.

India’s Bharti Enterprises is set to acquire a 24.5 percent stake in BT, taking over telecom giant Patrick Drahi, who will become the group’s largest shareholder.

Bharti said the £3.2bn deal did not indicate an intention to bid for BT as a whole, which Drahi first stepped into in 2021.

The Indian company said it would acquire an initial 9.99 percent stake and then seek to acquire the remaining 14.51 percent after regulatory approvals, including a voluntary application for approval under the U.K.’s National Security and Investment Act.

BT shares have risen 24 percent in the past six months as the fruits of its long-term investment plan to build out the country’s fibre network become apparent.

BT Chief Executive Allison Kirkby said: “We welcome investors who recognise the long-term value of our business, and this significant investment from Bharti Global is a huge vote of confidence in the future of BT Group and our strategy.

‘BT has a long history of working with Bharti Enterprises and I am delighted that they share our ambition and vision for the future of our company.

“They have a proven track record in the industry and I look forward to a positive partnership with them in the months and years ahead.”