December 20, 2022
The British government has ordered the sale of Upp, a regional broadband provider owned by oligarch-backed investment company LetterOne, citing concerns around national security.
LetterOne acquired Upp in 2021 as part of a £1bn plan to build a regional British broadband network to compete with BT that would have covered 1mn premises in eastern England by 2025.
Its owners, including Russian oligarchs Mikhail Fridman, Petr Aven and German Khan, have been put under sanctions in various jurisdictions.
Grant Shapps, secretary of state for business, energy and industrial strategy, on Monday said that LetterOne’s ownership of Upp represented a “risk to national security”.
Under the UK’s National Security and Investment Act that came into effect this year, Shapps ordered LetterOne to sell Upp within a specified period. The government has also told Upp to complete a security audit of its broadband network prior to sale.
LetterOne, which owns retailer Holland & Barrett, has been seeking to sever links to its founders to prevent sanctions against the company, including cutting its owners from decision making and freezing their shares and dividends.
LetterOne said it was disappointed by the decision. In a statement, it said that “L1 is not sanctioned and has taken fast, decisive action to put in place strong measures to distance L1 from its sanctioned shareholders. They have no role in L1, no access to premises, infrastructure, people and funds or benefits of any description.”
It added that Upp “already has processes in place that remove any perceived threat to national security”, with a UK leadership team and a governance model with only UK, US and EU personnel on the board of directors.
“We believe that L1 ownership of UPP is not a threat to national security in any way,” it said.
The deal was welcomed when it was first agreed by former prime minister and local MP Liz Truss, who said that “the £1bn investment and hundreds of jobs by Upp is great news”.
The National Security and Investment Act came into force on January 4 2022, and allows the UK government to review transactions up to five years after they are struck.
The law has only been used a few times this year, including to stop an IP licensing agreement between Beijing Infinite Vision Technology and the University of Manchester.
Most recently, the acquisition of Newport Wafer Fab by Chinese-owned semiconductor manufacturer was blocked, using the retroactive powers to review a transaction from before the start of NS&I Act.
The sale of Upp marks the first time that the act has been used in a deal involving sanctioned Russian individuals.
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