UK Government Faces Legal Fight with Russian-Founded Investment Firm over Forced Sale of ISP

The owners of British broadband provider Upp have asked for a judicial review of a government order demanding the sale of the ISP, reports the Financial Times. LetterOne, an investment firm established by Russian oligarchs, purchased Upp in 2021 as part of a plan to construct a broadband network that would compete with BT in Eastern England. However, founding oligarchs Mikhail Fridman, Petr Aven and German Khan were hit by sanctions following the invasion of Ukraine. In December 2021, the British government issued a national security order requiring LetterOne to sell Upp. LetterOne’s management team responded by arguing they are no longer influenced by Fridman, Aven and Khan after they departed from their official positions with LetterOne and their shareholdings were frozen.

The British government have only used its powers under the National Security and Investment (NSI) Act a few times since the legislation was passed in early 2022. One of the most obvious motivations for this law was to prevent communications and technology assets coming under the control of hostile governments. It has mostly been used to block agreements that would allow Chinese organizations access to intellectual property in advanced technology. The order to sell Upp was the first time NSI was used in relation to sanctioned Russians.

Some intelligent businesspeople have a gift for pretending to be stupid when Russian money has been used to acquire telecoms assets. The reason we refer to Russian ‘oligarchs’ is because large amounts of money were made by men who exploited positions of power in order to enrich themselves following the fall of the Soviet Union. It makes sense for them to shift their money into companies like Turkcell and VEON, two other telcos in the LetterOne stable. And when Russian mobile operator Vimpelcom accepted a USD795mn punishment for bribes that were paid to gain access to the Uzbekistan telecoms market we were all supposed to forget who Vimpelcom was when they rebranded themselves as VEON and employed head office staff that spoke with Dutch accents instead of Russian accents. Governments were also supposed to ignore the dodgy transfers of shares between the Russian oligarchs controlling British telco Truphone, although the US Federal Communications Commission finally checked who really owned Truphone and issued a USD600,000 fine for a decade of inaccurate ownership disclosures.

A simple pattern has emerged over time: well-paid businessmen insist there is no connection between dirty money and international telecoms, then a while later they admit — whoopsie! — they may have been mistaken. Decide for yourself how many honest mistakes can be made before it is appropriate to doubt the honesty of the people making the mistakes. All of these shenanigans were somewhat tolerable when internationalism was credibly promising peace between nations that traded with each other; this period was also incredibly beneficial to rich investors in electronic communications. But corruption is not so easy to tolerate when it poses a national security threat as well as the usual tax-dodging and consumer-raping.

The invasion of Ukraine, tacitly supported by China’s autocrats, was the confirmation that the internationalists could not keep their promises about a version of capitalism that would end hostility by making everyone rich. Some have got rich, most have not, and internationalism became a footrace between an elite few who aspired to hog all the wealth and power. Perhaps the people running Upp could theoretically increase the choice available to British broadband consumers without compromising national security. But why take the risk when the stakes are so high? Even if LetterOne’s judicial review proves successful in overturning the UK government’s order then this would only demonstrate that Western countries need to pass tougher laws to defend national security. We must protect themselves from the coalition of despots and crony capitalists who see the dominion over networks as another way to further their aims whilst strangling their opponents.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.