Altice, Drahi's investment arm and the firm’s biggest shareholder, increased its stake from 12.1 per cent to 18 per cent in December last year, increasing fears that the business could be ripe for a takeover.
The government will now seek to examine the move using “call-in powers” under the new National Security and Investment Act.
Kwarteng will have the power to either clear the move or, “if necessary and proportionate”, impose certain conditions on the investment or block it completely.
The new Bill also specifically allows the government to halt a single investor from owning more than 25 per cent in a business deemed to be of national significance.
BT maintains the telephone cables and exchanges connecting nearly all UK homes and businesses to the broadband and telephone network through its Openreach operation.
“BT Group will fully co-operate with this review,” the company said in a statement.
On announcing his investment last year, Drahi said he had no plans to take the business private, as he snapped up a further 585 million shares to increase his stake.
The government said it was “monitoring” the investment at the time.
Drahi is said to be worth £9 billion, with his fortune made in the telecoms sector. He also bought the Sotheby’s auction house in 2019.
He made his first purchase of BT shares in June, and interest in the telecoms giant has heated up in recent months with reports that other international players are eyeing up the business.
Ben Barringer, equity research analyst at Quilter Cheviot, said: “The timing of this review into Drahi’s stake in BT is interesting.
“The fact he has been raising his stake in the company has been well known and is not news, so the fact the government has decided to act now shows it may want to be seen to flex its muscle on key national infrastructure.
“Furthermore, the national security act is relatively new and given the interest in BT and Vodafone recently there is clearly a desire to review the independence of these companies and potentially prevent flagship UK companies from falling into overseas ownership.
“This news is likely to weigh on the shares of BT while the stake is under review. It is a company that was hoping to start its transition to focusing on the fibre rollout after it announced the joint venture of BT Sport with Discovery.”
Mike Clancy, general secretary of digital and tech union Prospect, said: “BT is one of the jewels in the crown of UK R&D [research and development] and tech innovation so it is right that the government is taking an active role in scrutinising its future.
“Whatever happens with the future ownership of the company, the government also needs to ensure that our national interest, infrastructure and jobs are protected. BT is too important to our future economic needs.”