Virgin Media O2 will then sell it to nexfibre, which is majority-owned by its parent companies, Global Liberty and Telefónica
Investment firm LetterOne has been forced to sell its British broadband provider, Upp which operates in the East of England, on national security grounds. LetterOne acquired Upp in 2021 with the aim of creating a £1 billion fibre access network to compete against BT’s Openreach.
Virgin Media is to acquire Upp then sell it on to nexfibre sometime in the next year. nexfibre is a joint venture owned by Virgin Media O2’s parent companies, Liberty Global and Telefónica, and InfraVia Capital Partners.
A spokesperson for Virgin Media O2 explained the two-step transaction saying, “This partnership model is a very efficient and effective way of acquiring Upp and mirrors the model that exists today between Virgin Media O2 and nexfibre with regards to network expansion.
“Virgin Media O2, as an experienced major ISP, is well placed to serve Upp’s customers and carry out necessary integration and simplification work. This ensures the assets nexfibre acquires, given it is a network and wholesale focused entity, are ready to go from day one.”
Another UK government surprise
The government somewhat surprisingly ordered the sale of Upp last year having decided LetterOne’s involvement was a national security risk – the UK’s National Security and Investment Act has only been invoked a handful of times.
LetterOne has no sanctions against it and rapidly severed links with its oligarch owners when Russia invaded Ukraine. None of the proceeds from the sale, announced today, will end up in the pockets of sanctioned individuals.
No exact figure was put on the transaction but “high tens of millions” was the FT’s estimate, citing “people familiar with the terms”.
Wave of consolidation?
Although under rather odd circumstances, the deal is being seen by some as a sign of the expected consolidation among altnets as the cheap money supplies dries up and the emphasis begins to shift from the number of premises passed to how many subscribers have signed up.
Upp has about 4,000 retail and business customers and offers broadband services to about 175,000 premises in the east of England.
Virgin Media O2 and said that more than £350 million more would be invested to pass a total of more than 500,000 premises by 2026.
Lutz Schüler, CEO, Virgin Media O2 (pictured), said in a press statement that his company and had a “clear strategy in place to be the biggest fibre challenger in the country, offering greater choice and competition to the BT status quo”.
Andrea Salvato, Chairman of nexfibre said in the same statement, said that the deal would help “build and expand our network in suburban and semi-rural areas, closing the digital divide and boosting local economies”.