By Paul Sandle and Mathieu Rosemain

LONDON/PARIS (Reuters) -Telecoms billionaire Patrick Drahi has bought a 12.1% stake worth about 2.2 billion pounds ($3.1 billion) in BT Group, backing its ambition to build a nationwide fibre broadband network.

Drahi’s newly-created vehicle Altice UK announced the holding in a statement on Thursday which drove BT’s shares to a 17-month high. They were trading up 7.7% at 197 pence at 1422 GMT.

Altice UK is owned by Next Alt, dealmaker Drahi’s private holding, which also controls SFR, the second largest telecoms operator in France behind Orange.

“Altice holds the board and management team of BT in high regard and is supportive of their strategy,” Altice UK, a company formed for the purpose of holding the BT stake, said.

“Altice UK has informed the BT board that it does not intend to make a takeover offer for BT,” it added.

BT, Britain’s biggest broadband and mobile operator, is recasting itself as the British national champion to upgrade the country’s broadband network which lags other markets such as Spain.

It plans to extend fibre broadband to 25 million homes and businesses by 2026, and it is seeking a partner to help fund the work. It is also considering selling a stake in its sports TV operation.

Drahi, known for buying undervalued telecoms assets, said BT had a significant opportunity to upgrade and extend its full-fibre broadband network.

“We understand that the expansion of the broadband network is one of the UK Government’s most important policy objectives and a core part of its levelling up agenda,” he said.

The stake makes Altice BT’s largest shareholder, ahead of Deutsche Telekom which owned 12.06% of BT based on recent filings, Refinitiv data shows.

BT noted Altice’s statement of support for its management and strategy. It said it welcomed all investors who recognised the long-term value of its business and the important role it plays in the UK.

“We are making good progress in delivering our strategy and plan,” it said.

VOTE OF CONFIDENCE

Analysts at Jefferies said the investment was a “signal of confidence” in BT’s strategy.

“A key issue now is how Altice intends to unlock value,” they said, adding that encouraging BT to spin off its independently operated Openreach network seemed most likely.

Altice UK has ruled itself out of making a full takeover offer for six months by virtue of its statement.

Drahi, who lives between Switzerland, the United States and Israel, bought cable company Numericable in the early 2000s, and later acquired SFR from Vivendi. He recently took SFR’s parent company Altice Europe private in a buyout.

He also controls France’s most-watched news channel BFM TV, and owns the largest telecoms firm in Portugal and the second largest operators in both Israel and the Dominican Republic.

Praised for his financial acumen, he suffered a fall from grace in 2017 when Altice Europe’s shares plummeted after a report signalled it would not grow in France, fuelling fears that his group would not be able to pay its huge debts.

Drahi responded to investor concerns by ousting the chief executive and spinning off Altice’s U.S. arm.

Morgan Stanley and BNP Paribas advised Drahi.

($1 = 0.7098 pounds)

(Additional reporting by Rachel Armstrong, Sarah White, Sudip Kar-Gupta, Nadine Schimroszik and Gwenaelle Barzic; Editing by Alexander Smith, Jason Neely and Elaine Hardcastle)