BT purchase to go ahead following UK government security review
Key points
An Indian conglomerate has received approval to purchase a 24.5% stake in telecoms company BT, following a review under the National Security and Investment Act (NSIA).
The decision was revealed on 16 December in a notice of final order under the NSIA. The order was the second this month and the 14th in 2024, compared to the four in 2023 and 13 in 2022 when the NSIA first came into effect.
The order requires BT to establish a National Security Committee “to oversee strategic work that BT performs which has an impact on or is in respect of the national security of the United Kingdom.”
Content of the ruling
The NSIA Final Order is available on the UK government website (LINK). The notice is shorter than many other final orders. It provides little detail on the functioning or composition of the mandated National Security Committee. For example, it does not indicate whether any members of that committee will be appointed by the UK government, or will have been required to undergo government vetting. This has been a requirement in six previous NSIA final orders (read more here).
The ruling underlines that the NSIA is not focused solely on countries identified as adversaries of the UK. Although acquisitions involving Chinese-controlled entities are likely to face an elevated level of scrutiny, this decision indicates that the participation of any foreign entities is grounds for scrutiny. Notably the previous decision, issued on 11 December, concerned an acquisition involving a US entity (LINK).
Increasing number of NSIA rulings
The UK government has now issued more rulings under the NSIA in 2024 than it did in 2022, the year the NSIA came into effect. This comes after a relatively quiet 2023.
The graphic above shows the number of NSIA Final Order notices the government has published, broken down by quarter.* If the initial peak in H2 2022 is viewed as an anomaly stemming from the law coming into effect, then the direct of travel is for a steady increase in rulings under the NSIA. This aligns with the figures presented in the government’s annual report on the NSIA (LINK).
Implications of the decision
Given its importance to the UK’s telecommunications infrastructure, including government and military communications, the purchase of a stake in BT was always going to be subject to substantial scrutiny.
Mergers and acquisitions in sectors such as defence, aerospace, and telecommunications will very likely involve scrutiny under NSIA, regardless of the nationality of the companies involved.
The UK government is likely to continue to expand its use of the NSIA in the context of great power competition and conflict, amid a blurring of economic and national security.
There remains a degree of opacity around the requirements mandated in NSIA final orders - however, a holistic and proportionate approach to protective security, combined with good security governance, is a central theme of recent rulings.
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*This data tracks the date when the notice was first issued. Seven of the 31 notices issued to date have been followed by notices of variation or revocation and are now listed on the government website under the date of the most recent amendment.
