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

Mikhail Fridman was forced to leave the LetterOne investment fund after Russia invaded Ukraine. Credit: Pavel Golovkin/Pool/REUTERS

Virgin Media O2 buys broadband Internet business from a fund set up by a sanctioned oligarch after the government ordered the sale on national security grounds.

Telecommunications giant reached an agreement to buy Upp from LetterOne, an investment group founded by Ukrainian-born billionaire Mikhail Fridman in 2013.

The sale, believed to be worth tens of millions of pounds, was ordered last year by then business secretary Grant Shapps.

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

Mr Fridman and his Russian business partner Petr Aven were forced to leave LetterOne after they were attacked by EU sanctions following Russia's invasion of Ukraine.

The EU said Mr Friedman «actively supported materially or financially and benefited from Russian actors responsible for the annexation of Crimea and the destabilization of Ukraine.»

Mr Friedman denies ties to the Kremlin and calls the sanctions «unfair ”.

Friedman and Aven's stakes in LetterOne have been frozen and they cannot sell their shares or receive any financial benefit while they are under sanctions.

Petr Aven has also frozen his stake in LetterOne and cannot sell shares or receive any financial benefit while he is under sanctions. Photo: Epsilon/Getty Images North America

Upp was required to conduct a security audit on its network. prior to sale, and no proceeds will be given to sanctioned individuals.

While LetterOne complied with the sale order, the company is seeking legal review, claiming that its ownership poses no security risk.

< p>If approved, the review will be a major test of strict national security laws. it went into effect in 2021.

LetterOne bought Upp, formerly known as Fiber Me, in June 2021. The company is one of many broadband contenders known as «alternative networks» that are seeking to take over BT with their own full fiber networks.

The company is behind a £1bn project to roll out high-speed internet connectivity in East Anglia. The company aims to cover one million premises with full-fiber broadband by 2025.

This acquisition is a partnership with Nexfibre, a joint venture between VMO2 parent companies Liberty Global and Telefonica, and French private equity firm InfraVia Capital.

VMO2 said it will complete Upp's current construction plan before the network is acquired by Nexfibre. The move will expand Nexfibre's presence to 175,000 locations. The company said it will invest more than £350 million in the East of England by 2026.

Lutz Schüler, chief executive of VMO2, said: “Building on the solid foundation that exists today, Virgin Media O2 and Nexfibre have a clear strategy to become the largest fiber competitor in the country by offering more choice and status quo competition to BT.”

LetterOne, which also owns Holland & Barrett himself is not under sanctions, but seeks to distance himself from Russia.