The European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), a member of the World Bank Group 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.
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 telecom 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 fiber 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.
