The European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) have made the single largest foreign direct investment (FDI) investment into Ukraine since the war started. 

"The EBRD and IFC will each provide $217.5mn in long-term debt to support a landmark project involving two leading Ukrainian telecom groups, lifecell and Datagroup-Volia, which recently merged to form a new group, Datagroup-Volia-lifecell. The investment will support the merged group in enhancing the resilience of the phone network and improving digital connectivity across Ukraine," the EBRD said in a press release emailed to bne IntelliNews.

To mitigate investment risks, a portion of the EBRD’s and IFC’s loans will be covered by guarantees provided by the government of France and the European Union under the Ukraine Investment Framework.

Antoine Armand French Minister of the Economy, Finance and Industry said: “France is committed to supporting the resilience and reconstruction of Ukraine’s economy, which will require attracting large private investments in key sectors. This is why we have launched guarantee facility programs with both the EBRD and IFC to de-risk new private investments in Ukraine. This landmark project is the first utilization of these facilities. It will ultimately help better connect businesses and people across Ukraine. And we look forward to supporting other projects."

The merger combines fixed-line provider Datagroup-Volia with mobile operator lifecell to form DVL, now Ukraine’s second-largest telecoms firm. 

Mykhaylo Shelemba, CEO of Datagroup-Volia-lifecell said: “I thank the IFC and the EBRD for their trust and support and look forward to this long-term partnership, which will enable a significant investment programme, including investments in the network, licenses, equipment and expansion of fixed and mobile communications infrastructure in Ukraine. Ukrainian businesses have huge potential for investment, which should continue, even in these difficult times.”

The majority of DVL will be owned by NJJ, part of French telecom tycoon Xavier Niel’s group, with Horizon Capital holding a minority stake. The French government and the European Commission are backing the project with guarantees.

Xavier Niel, Founder of Iliad Group and NJJ Holding said: “We are delighted to reach this significant milestone with international institutions IFC and the EBRD. Without their support, the completion of our major investment in Ukraine’s telecoms sector would not have been possible. Our long-term financial partnership with the EBRD and IFC underscores our shared commitment to Ukraine’s economic growth and highlights the country’s promising investment potential.”

As the largest single foreign direct investment into Ukraine by a major strategic investor since Russia’s invasion, the project is expected to send a strong positive signal to investors. 

Mark Bowman, EBRD Vice President, Policy and Partnerships, said: “The telecoms sector has been essential to Ukraine’s welfare and economic resilience since the war began. This operation will result in a large and reliable telecommunications operator, important domestically, as well as a very significant international investment in the Ukrainian economy, which we are proud to be part of.”

It is also critical for Ukraine’s ongoing war effort, as telecoms play a vital role in government functions and education, which have increasingly moved online. It will deliver improved mobile connectivity to 10mn subscribers and provide faster and more reliable fixed broadband access to around 4mn homes. 

Makhtar Diop, IFC Managing Director said: “By strengthening digital connectivity and network resilience, we are delivering a vital service to millions of Ukrainians while reaffirming our commitment to the country. This project is the largest foreign direct investment by a major strategic investor since Russia’s invasion. It sends a strong message to global investors about the resilience and significant potential of Ukraine's economy."

The project will also support the telecoms sector’s recovery from the estimated $1.9bn in direct damages and $750mn in losses incurred since Russia’s invasion, the EBRD said. 

Jean-Noël Barrot Minister for Europe and Foreign Affairs said: “The recovery and reconstruction of Ukraine will require the mobilisation of both public and private actors investing in Ukraine’s future. This investment the largest in over ten years - is a testimony of our commitment to a strong and lasting economic partnership with Ukraine. I am confident that it will serve as a flagship to highlight the wealth of investment opportunities and pave the way for other projects in the future.”

The merger strengthens the company’s agility by enabling efficient use of both fixed and mobile networks, providing flexibility in areas such as energy savings. The newly formed DVL aims to extend mobile connectivity to 10mn people and deliver fixed internet to fourmn households.

The EBRD has restarted its activities in Ukraine, despite the ongoing hostilities and has been providing critical support to allow the economy to continue to function. Since February 2022, the EBRD has deployed €5bn in Ukraine, focusing on supporting energy security, vital infrastructure, food security, trade and the private sector, alongside key policy reforms. The EBRD’s Board of Governors has approved a capital increase of €4bn to support further investment at this level in wartime making the bank the single largest investor into the country.