British telecommunications group Truphone, owned by Russian oligarch Roman Abramovich and associates, is bought for £1 by two European tech entrepreneurs.

Truphone has appointed restructuring specialist FRP Advisory to proceed with the sale of the company’s assets after sanctions imposed on the Russian billionaire by UK and EU authorities cast doubt on the group’s future.

The company was valued at £410m in 2020 and received over £300m of investment from Abramovich and his two Russian business partners Alexander Abramov and Alexander Frolov.

Hakan Koç, a German businessman who co-founded used car company Auto1, and his partner Pyrros Koussios, a former telecommunications executive and private equity investor, will own 90% and 10% of the company respectively.

The fire sale gives a first indication of the fate that is likely to befall companies that have become entangled in Russia‘s invasion of Ukraine.

Businesses in the West that had imposed sanctions on members of their board of directors, or among their owners and investors, have faced a litany of problems since the February invasion, including a loss of customers, difficulties in accessing funding and damage to their public reputation.

Abramovich was forced to sell Premier League football club Chelsea after being hit with sanctions, with a £4.25billion deal reached last month.

Truphone, in which Abramovich has a 23% stake and Abramov and Frolov most of the rest, has posted 15 consecutive years of losses, including £16million in 2020.

The telecom group sells contracts to corporate customers, including banks, who want a secure network and avoid roaming charges for employees. It also provides in-app sims to a range of tech companies, including Apple.

Koç took Auto1, formerly backed by Japanese conglomerate SoftBank, to the public market in Germany last year, raising 1.8 billion euros and valuing the company at 10 billion euros.

Although Auto1 has already received funding from Target Global, a venture capital firm formerly run by Frolov’s son, Koç says neither he nor Koussios have a direct relationship with any of Truphone’s current owners and have never met them.

As part of the sale, which is expected to be completed this month, the current owners have pledged to invest more than £10million in the business and will take on certain contractual responsibilities, according to people familiar with the deal. .

One-time payments and debts – including a $660,000 fine from US regulator the Federal Communications Commission related to misrepresentation of the company’s ownership structure – will be paid by the current owners of Truphone .

Depending on the terms of the sale, if the business performs well and crystallizes its value through a public listing or a capital increase, the current Russian owners will receive up to one-third of the initial funds that they invested, said people briefed on the deal. If Abramovich remains sanctioned at that time, he will not receive those funds.

The plan to sell Truphone to Koç was first reported by The Times.