LetterOne Appeal Forced UK Sale of Broadband Network Upp to Nexfibre

LetterOne, the investment firm behind alternative network provider Upp’s £1bn project to deploy a new full fibre (FTTP) broadband ISP network across 1 million premises in the East of England (here), has asked the High Court of Justice in London to rule it was unlawfully ordered to sell the network by the UK Government.

Just to recap. Upp’s efforts to roll out the new network were dealt a significant blow in December 2022, after the UK Government ordered LetterOne – an investment firm that previously received significant backing from several prominent and now sanctioned Russians – to sell its entire stake in Upp in order to “prevent, remedy, or mitigate the risk to national security” (here).

NOTE: Virgin Media is the only ISP on nexfibre’s network via an “exclusive partnership” (here), but they plan to add more ISPs via wholesale in the near future (here). Virgin Media’s own network will shortly also open up to wholesale via NetCo (here).

The move came despite the fact that LetterOne itself was not under any sanctions after its oligarch founders resigned from the group’s board in 2022. The investment company then froze the shareholdings of those individuals (who jointly own less than 50% of the company) and said they had no operational involvement in the business.

At the time, LetterOne said they “believe that L1 ownership of Upp is not a threat to national security in any way” and pointed out 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.”

However, despite LetterOne launching a legal challenge against the government’s decision during spring 2023 (here), the investor ended up selling Upp to rival network operator Nexfibre in September 2023 (here). At that point Upp’s network had only covered 175,000 premises and is today still in the process of being integrated into Nexfibre’s network, while their customers (c.4,000) were shifted to retail ISP partner Virgin Media (O2).

The most recent development is that LetterOne’s related appeal against the decision by Britain’s National Security and Investment Act has now reached the hearing stage at the High Court of Justice in London. Day 2 of 4 of the hearing (AC-2023-LON-000405) took place yesterday before Mrs Justice Farbey DBE, which saw LetterOne ask the court to rule that it was unlawfully ordered to sell Upp.

According to Reuters, LetterOne’s lawyer, Tom Hickman, said that “a comprehensive package of legally binding measures” would have prevented Upp’s ultimate beneficial owners, which include sanctioned oligarchs Mikhail Fridman and Petr Aven, from exerting any improper influence over Upp. But Hickman argued their proposal was rejected because government officials feared a potential risk that Britain’s allies might perceive its response as too soft on Russia.

The company added that Upp was ultimately sold for less than it had invested into the company, while the Government’s lawyers – acting for the Secretary of State for Business, Energy and Industry – maintained that the decision to order the sale of Upp was justified on national security grounds. The hearing continues.

The case represents the first real challenge of Britain’s relatively new national security law to reach the High Court. A ruling against the government wouldn’t enable LetterOne to take back Upp (that ship has long since sailed), but it could expose the government to a damaging financial claim and highlight weaknesses in the new law.

Recent Posts