UK cites security risk as it orders sale of Russian-backed broadband provider

The British government has ordered the sale of Upp, a regional broadband provider owned by LetterOne, an investment company backed by oligarchs, 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. It 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, said on Monday 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, including cutting out 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.

“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 security act came into force on January 4, 2022, and allows the UK government to review transactions up to five years after they are struck.

Also on Tuesday Shapps used powers under the act to block the proposed acquisition of HiLight Research by SiLight, a Shanghai semiconductor company, again citing national security concerns.

The Department for Business said HiLight’s technology had the potential “to be used to build technological capabilities which may present national security risks to the UK”.

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 a Chinese-owned semiconductor manufacturer was blocked, with retroactive powers being used to review a transaction from before the NS&I Act came into effect.

The sale of Upp marks the first time the act has been used in a deal involving sanctioned Russian individuals.

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