Virgin Media buys broadband business from sanctioned Russian oligarch’s fund

Virgin Media O2 has bought up a broadband business from a fund set up by a sanctioned oligarch, after the Government ordered the sale on national security grounds.

The telecoms giant has reached a deal to buy Upp from LetterOne, an investment group founded by Ukrainian-born billionaire Mikhail Fridman in 2013.

The sale, understood to be valued at tens of millions of pounds, was ordered last year by then-Business Secretary Grant Shapps.

He said the move was necessary to prevent, remedy or mitigate the risk to national security.

Mr Fridman and his Russian business partner Petr Aven were forced to step down from LetterOne after they were hit with EU sanctions following Russia’s invasion of Ukraine.

The EU has said that Mr Fridman “actively supported materially or financially and benefited from Russian decision‐makers responsible for the annexation of Crimea and the destabilisation of Ukraine”.

Mr Fridman has denied links to the Kremlin and branded sanctions “unfair”.

Mr Fridman and Mr Aven have had their stakes in LetterOne frozen and are unable to sell their shares or receive any financial benefit while under sanctions.

Upp was required to complete a security audit of its network prior to the sale and no proceeds will go to sanctioned individuals.

While LetterOne has complied with the sale order, the company is seeking a judicial review, arguing that its ownership does not pose a security risk.

If granted, the review would be a major test of strict national security laws that came into force in 2021.

LetterOne bought Upp, formerly known as Fibre Me, in June 2021. The company is one of a number of challenger broadband firms known as “alt nets” that are looking to take on BT with their own full-fibre networks.

The company is behind a £1bn project to roll out the high-speed internet connections in East Anglia. It aims to reach one million premises with full-fibre broadband by 2025.

The takeover is a partnership with Nexfibre, a joint venture between VMO2’s parent companies Liberty Global and Telefonica, alongside French private equity firm InfraVia Capital.

VMO2 said it will complete Upp’s current build plan before the network is acquired by Nexfibre. The move will expand Nexfibre’s footprint by 175,000 premises. The company said it will invest more than £350m in the east of England by 2026.

Lutz Schüler, chief executive of VMO2, said: “Building on the strong foundations that exist today, Virgin Media O2 and Nexfibre have a clear strategy in place to be the biggest fibre challenger in the country, offering greater choice and competition to the BT status quo.”

LetterOne, which also owns Holland & Barrett, is not under sanctions itself but has sought to distance itself from Russia.