How the UK’s telecoms industry became a billionaire’s playground
Xavier Niel and Sunil Mittal are poised to shake up Vodafone and BT after placing big bets on the UK’s major operators
In early July, one of Xavier Niel’s bankers boarded a flight to the United Arab Emirates with a simple instruction: find out whether Vodafone’s largest shareholder, Emirati telecom group e&, was willing to sell.
A week later, the deal was done.
Last Friday’s announcement that the French billionaire had spent £4.4bn to acquire e&’s 16.2 per cent stake propelled Vodafone’s shares up by 12 per cent. Investors are betting that Niel will drive greater cost-cutting, help Vodafone grow its share of the retail market and ultimately boost its profit margins.
Niel, whose discount mobile and broadband provider Iliad upended the French market, is the third industry tycoon to invest in the UK’s telecoms sector in little over two years.
India’s “telecoms tiger” Sunil Bharti Mittal paid £3.2bn for a 24.5 per cent stake in BT in 2024. That came shortly after Mexican billionaire Carlos Slim acquired a 3 per cent stake in the same company.
Provided Niel gains regulatory clearance for his purchase, the chief executives of Vodafone and BT — Margherita Della Valle and Allison Kirkby respectively — will both have demanding industry heavyweights marking their homework as they attempt far-reaching overhauls of the companies they lead.
At BT, Mittal is already pushing Kirkby to move faster on rolling out fibre networks and maximising the potential of its three consumer brands: BT, EE and Plusnet.
After Niel’s stake purchase, which may also be subject to UK national security clearance, analysts expect the man who aggressively disrupted the French market to pressure Della Valle to slash costs.
He has form. Latin American operator Millicom, in which Niel owns a 46 per cent stake, told analysts that after acquiring Telefonica’s former businesses in Ecuador, Uruguay, Colombia and Chile over the past year, it cut the workforce by about 30 per cent at each company.
At Sweden’s Tele2, in which Niel holds a 19 per cent stake, staff numbers were cut by roughly 15 per cent last year.
“This could potentially be a transformational change for Vodafone,” said James Ratzer, analyst at New Street Research. “Everything is on the table: aggressive cost reductions — given his track record — will be plan A and M&A will be plan B. He will keep management on their toes,” Ratzer added.
Vodafone is already beginning to make some of the changes Niel is expected to demand.
The FTSE 100 company, which employs some 91,000 people, announced plans in May 2023 to cut 11,000 jobs globally by 2026. It appointed Pilar López as its new finance chief last year in part because of her perceived ability to cut costs, according to a person familiar with the decision.
One reason Vodafone and BT appeal to Niel and Mittal is their depressed share prices. The London-listed groups have underperformed European peers including Deutsche Telekom, Orange and Telecom Italia over the past decade. Like other UK companies, they have suffered from sustained capital outflows from the London stock market.
Niel has long had his eye on the UK’s largest mobile operator. He previously held a 2.5 per cent stake in Vodafone and has regularly considered taking a larger position, according to people familiar with his thinking.
The decision to invest now was partly because Della Valle has already done some of the hard yards of a multiyear turnaround effort, according to people familiar with the deal.
Since being promoted to the top job in 2023, Della Valle has sold Vodafone’s struggling businesses, such as those in Spain and Italy. Meanwhile the company has bolstered its position in its strongest markets, most notably with the acquisition of CK Hutchison’s Three in a deal that consolidated the UK’s mobile market from four operators to three.
Niel believes that Della Valle’s changes have improved Vodafone, which he once dubbed “too fat”, but that there is still more to be done. The tycoon wants the company to do more to maximise the potential of its brand with consumers and exploit its global reach, which extends to more than 20 countries, according to people familiar with his thinking.
The billionaire was also optimistic that regulators in Brussels would approve in-market consolidation on the continent in the wake of the UK deal, they added.
A telecoms industry executive said they expected Niel to push Della Valle to find a deal to consolidate the German mobile market from four to three players, similar to its UK move.
Vodafone has considered making an acquisition in Germany but has not yet made any decision on any move to acquire a rival, according to a person familiar with the matter. Vodafone declined to comment. A representative for Niel also declined to comment.
By piling into Vodafone when it is midway through an overhaul, Niel has mirrored the timing of Mittal’s move on BT. The tycoon behind India’s Bharti Airtel first invested after Kirkby laid out her plans in May 2024 to cut costs and refocus the former UK state monopoly on its home market.
Since then, Mittal, who subsequently took a seat on BT’s board, has pushed Kirkby to speed up her turnaround. Since his investment, BT has accelerated cost-cutting, expanded its Openreach fibre network and agreed to merge its struggling international unit with that of Verizon.
While Kirkby’s changes have focused more on operational improvements, Della Valle’s overhaul has been more structural, which analysts say will leave Niel plenty of room to push on cost-cutting. His immediate focus is examining Vodafone’s IT outsourcing, according to people familiar with his thinking.
Before Niel can exert any influence at Vodafone, however, he must pass a regulatory examination which could take the best part of a year. One aspect that may concern EU regulators is Niel’s controlling stake in Irish operator Eir, a rival of Vodafone Ireland.
In addition to regulatory checks, a UK national security review is also likely under legislation that gives the government power to scrutinise acquisitions in 17 key areas of the economy, including communications and data infrastructure.
If cleared, he will then be able to push for a board seat, although no decisions have yet been taken on whether he will do so, according to people familiar with Niel’s thinking.
Yet the mere presence of a powerful industry disrupter, like Mittal at BT, will cast a long shadow over Vodafone’s central London headquarters.
“I’m sure that Vodafone will see some opportunities here,” said Karen Egan, head of telecoms at Enders Analysis. “But there will be nervousness too.”