Niel's Ukraine operation gets US$435 million in funding

The International Finance Corporation (IFC), part of the World Bank, and the EBRD will each provide $217.5 million in long-term debt to converged operator Datagroup-Volia-Lifecell. The financial bodies did not provide hugely detailed information on what the investment will be used for, but said it will help with enhancing phone network resilience and improving digital connectivity across the country.

A consortium led by French businessman Xavier Niel's NJJ Holding investment company completed the acquisition of fixed telco Datagroup-Volio and mobile operator Lifecell a month ago. The plan was to merge the two businesses, but as it stands, they seem to be continuing to operate as standalone entities. Together though, they serve 10 million mobile customers and provide fixed broadband access to 4 million homes.

"We are delighted to reach this significant milestone with international institutions IFC and EBRD. Without their support, the completion of our major investment in Ukraine's telecom sector would not have been possible," Niel said.

The scale of the new entity, coupled with the operational expertise of its new shareholders – US private equity firm Horizon Capital is also a part of the NJJ-led consortium – and the financial support of the IFC and EBRD, will also help it improve protection against cybersecurity threats and introduce more competitive products and services, amongst other things, it said.

And, of course, the new investment will aid in the telecoms sector's recovery from the effects of the war in Ukraine. The companies put the direct damages incurred since Russia's invasion at an estimated $1.9 billion, with losses incurred coming in at $750 million.

"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, in a statement. "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."

Niel and his partners are not the only ones investing in the telecoms sector in Ukraine though.

Veon, which owns market leader Kyivstar, in June disclosed that it would invest $1 billion in the market over the next five years. It said it will spend the money on building out networks and digital services, possibly including acquisitions.

Kyivstar had 23.4 million mobile customers as of the end of June, putting it well ahead of Lifecell and also number two operator Vodafone, which claimed 15.9 million at the same date. Kyivstar and Vodafone also provide fixed broadband services, hence NJJ's drive to bring together Datagroup-Volia with Lifecell.

Naturally, all three operators face much greater challenges than converged players in most other markets, but some healthy competition between them should be beneficial for the broader market and for Ukrainian consumers.