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EBRD and IFC to fund newly merged telecoms company

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Merger involves Ukraine's Lifecell and Datagroup-Volia

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Ukrainian economy has been battered by war

By Olena Harmash

KYIV, Oct 10 (Reuters) - The European Bank for

Reconstruction and Development and the International Finance

Corporation will fund Ukraine's newly merged telecoms company

with $435 million, the lenders said on Thursday.

The project is the largest direct foreign investment of the

war unleashed by Russia's invasion of Ukraine in February 2022.

A consortium of investors led by French billionaire Xavier

Niel announced last month the completion of a transaction to

acquire and merge Ukraine's Lifecell mobile operator with the

country's Datagroup-Volia service provider.

The EBRD and IFC will each provide $217.5 million to help

finance the acquisition, Holger Muent, EBRD's director of

telecommunications, media and technology, told Reuters.

"That is the game changer," he said in an interview online,

confirming earlier plans to make the investment.

"It will create the second-largest operator of that kind in

the country and that leads to higher speed, better coverage,

lower energy consumption for the network, and more redundancy in

the network as well."

Ukraine's largest telecoms provider is Kyivstar, which is

owned by the Amsterdam-listed VEON.

The consortium is led by NJJ, a French telecoms investment

holding company owned by Niel. NJJ has partnered with Horizon

Capital, a leading Ukraine-based private equity fund, and

Mykhailo Shelemba, former CEO of Datagroup-Volia, now CEO of the

newly merged group.

'REAFFIRMING COMMITMENT' TO UKRAINE

To mitigate risks, a portion of the EBRD's and IFC's loans

is being covered by guarantees provided by the government of

France and the European Commission.

"By strengthening digital connectivity and network

resilience, we are delivering a vital service to millions of

Ukrainians while reaffirming our commitment to the country,"

said Makhtar Diop, IFC's managing director.

"It sends a strong message to global investors about the

resilience and significant potential of Ukraine's economy."

The invasion has battered the Ukrainian economy, sending

millions of people fleeing as cities and infrastructure are

regularly bombed. The Kyiv School of Economics (KSE) estimates

that Ukraine's losses from the war total $1.164 trillion.

The economy contracted by around a third in 2022, the first

year of the full-scale invasion, before returning to modest

growth.

The KSE research estimated that indirect financial losses

sustained by digital infrastructure and the IT sector stood at

$19.3 billion. In addition to damaged infrastructure and lost

revenue, Ukrainian telecoms companies have suffered additional

losses due to myriad challenges in the energy sector.

Russia stepped up its bombardments of Ukrainian power

infrastructure in March, disabling half the country's available

generating capacity and causing regular, long blackouts for

millions of people.

EBRD's Muent said the merged company would be more resilient

to power outages since part of the data traffic from its mobile

network could pass through fibre optic cables, consuming less

energy. He also pointed to the sector's growth potential with

Ukraine looking to modernize and rebuild its economy.

In nearly 32 months of war, the EBRD has provided more than

4.8 billion euros ($5.26 billion) to Ukraine. IFC has invested

$1.6 billion, including more than $1.1 billion of its own funds

and $530 million mobilized from other investors.

($1 = 0.9130 euros)