Research reports- Telecom
Kyivstar Group: Defying the odds in war-torn Ukraine
• Kyivstar Group, Ukraine’s clear market leader (47% market share), is one of the world’s most profitable telcos
• Q2 25 revenue grew 26% in UAH and 21% in US$ terms, with 10% from digital activities (including Uklon’s ride-hailing)
• Based on peer EV/ EBITDA multiples and a boost from returning refugees, we estimate Kyivstar Group’s post war fair value at US$18.00
Please see Important Information at the end of this report.
Kyivstar Group, Ukraine’s leading telecom operator, successfully listed in the U.S. on Friday, 15 August, through its merger with Cohen Circle Acquisition Corp. II, marking a rare capital markets debut for a Ukrainian corporate affected by war. The transaction comes against a backdrop of elevated investor uncertainty: the ongoing conflict with Russia, Ukraine’s fragile fiscal position and capital controls, and volatile hopes of a swift peace settlement.
Kyivstar Group continues to deliver strong financial performance and maintain its market leadership despite extraordinary challenges, and the listing provides a fresh lens through which to assess its standalone value. In this note, we evaluate Kyivstar Group’s fundamentals and consider the implications for investors.
Kyivstar Group is Ukraine’s largest telecom provider, with a dominant 47% share of mobile subscribers. Although historically 96% of revenue comes from mobile services, it is strategically reorientating, from a telecom stock with digital addons towards being Ukraine’s foremost digital services company with telecoms capabilities. In Q2 25, the first time consolidation of fast-growing local ride-hailing company Uklon saw digital revenues’ share of the top line grow from 3% to 10%. The company is targeting 18% for this metric in the next 3 years. With its high cash balance, the company can aim for this target through both organic and inorganic growth initiatives.
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VEON: Forecasts raised on strong execution. ADS liquidity is improving
• We raise our forecasts on macro stability in Pakistan and growing digital momentum in Ukraine, which also benefits from Uklon
• We now see 10% revenue and 11% EBITDA growth (US$) in 2025. The EBITDA margin should rise c60bps, boosted by Pakistan and Bangladesh
• Despite seeing improved ADS liquidity, VEON trades at a 30% EV multiples discount to EM peers
Please see Important Information at the end of this report.
We revise our 2025 forecasts following recent developments in Pakistan and Ukraine, VEON’s two largest markets, where improved macro stability, strong digital traction and new business drivers (including the Uklon acquisition) support a more constructive outlook. In Pakistan, improved FX stability and easing geopolitical tensions have supported stronger top line visibility, building on Q1’s 17% beat. In Ukraine, our updated estimates include the integration of the Uklon ride-hailing platform from Q2 25, alongside continued momentum in digital and multiplay services. We now see 2025 group revenue of US$4.4bn (+10% yoy, +3% vs. prior estimate) and EBITDA of US$1.9bn (+11% yoy, +3% vs. prior estimate), with a slight improvement in the EBITDA margin to 42.8% (vs 42.2% in 2024). More detailed forecasts are presented at the end of this report.
The ADS currently trade at 3.3x 2025 EV/ EBITDA, representing a 30% EV multiples discount relative to EM peers. 2025 PE is 9.2x. Our ADS fair value is unchanged at US$67.50. We see the planned US listing of Kyivstar in Q3 25 as a key catalyst for the ADS price, although this timing is subject to a wide range of factors. A resolution to the war in Ukraine would offer further upside to our base case. Key downside risks include slower top line growth due to in-country socio-political volatility, higher financing costs due to risk aversity, and heightened price competition.
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VEON: How Kyivstar is defying the odds in war-torn Ukraine
• Kyivstar is Ukraine’s largest telco (48% subscriber market share). Its 55.6% EBITDA margin compares well with peers
• Q1 25 revenue grew 50% in UAH and 37% in US$ terms. We see 10% of 2025 revenue from digital assets
• Based on differing DCF and peer multiples approaches, Kyivstar’s mid-point equity valuation ranges from US$1.4bn to US$2.9bn
Please see Important Information at the end of this report.
VEON shares have given up a third of their value in less than a month. We think the key driver of this downturn has been a sober re-assessment of the prospects for a swift, negotiated peace settlement to be achieved between Russia and Ukraine, and concerns over Ukraine’s finances. Nevertheless, the current share price leaves a lot on the table for investors. Assigning a zero valuation to Kyivstar, VEON’s Ukrainian business, would drop our base fair value from US$67.5 to around US$47.0. In this note, we examine how Kyivstar is delivering strong financial performance, despite severe operational challenges, and consider the potential implications for VEON investors of various valuation scenarios.
Kyivstar is Ukraine’s largest telecom provider, with a dominant 48% share of mobile subscribers. Although historically 96% of revenue comes from mobile services, it is also a key player in Ukraine’s nascent digital transformation, driving innovation and growth despite the challenging geopolitical environment. The Q2 25 first-time consolidation of fast-growing local ride-hailing company Uklon, will boost digital revenues’ share of the top line from 3% to 10%.
In Q1 25, Kyivstar posted 50% yoy UAH revenue growth, reflecting both pricing adjustments and robust cross-selling, with consequent ARPU (average revenue per user) gains. This deeper customer engagement has more than offset currency volatility, keeping 2 inam Ali Zaidi Ali@inam.ae 17th June 2025 US$ revenue growth comfortably in the black (+37%yoy). The company’s EBITDA margin stands at an industry-leading 55.6%.
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VEON: Phase 3 of US$100mn buyback starts
• VEON has announced the third phase of its US$100mn buyback programme, signaling its belief that its ADS are undervalued
• Asset sales should boost transparency. Together with a potential bond private placing they will also enhance VEON’s liquidity
• Following recent price weakness, VEON trades at an EV/ EBITDA discount to EM peers and to our US$67.50 fair value estimate
VEON has launched the third phase of its US$100mn share buyback programme, allocating up to US$35mn for additional ADS repurchases. Management commented that it views the shares as undervalued. The first two phases were executed in December 2024 and May 2025, during which the company repurchased US$65mn worth of shares at an average price of US$45.59. All repurchased shares are being held as treasury shares. Separately, VEON is evaluating issuing a sub-benchmark (typically less than US$500mn), privately-placed bond with a tenor of up to four years, as part of its broader capital planning and to support strategic growth initiatives. This bond issue would represent an important step on the road to regaining full capital markets access for the group.
Please see Important Information at the end of this report.
VEON is a digital telecom operator focused on five emerging markets, Pakistan, Ukraine, Kazakhstan, Bangladesh and Uzbekistan. Following its exit from Russia in October 2023, the group has repositioned its portfolio toward markets with long-term growth potential and rising demand for mobile and digital services. Its strategy centres on asset-light operations, local-market leadership and digital services monetisation, particularly in fintech and content. VEON aims to unlock value through infrastructure divestments and potential listings of key assets such as Ukraine’s Kyivstar (IPO planned for Q3 25), Pakistan’s JazzCash and its local telco operations. These moves support deleveraging and highlight optionality in the portfolio. Strong operating positions and early-mover advantage in digital platforms leave VEON well-placed to drive margin expansion and shareholder value over time. The ADS currently trade at 3.3x 2025 EV/EBITDA and 7.7x PE, representing a 30% EBITDA multiple discount to emerging market peers. We see the potential US listing of Kyivstar in Q3 25 as a key positive ADS price catalyst. Our ADS fair value is US$67.50.Downside risks include increased geopolitical instability and heightened price competition.
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VEON: Revising forecasts. Structural growth with multiple catalysts
• With US tariff uncertainty lifting global risks, we take a more conservative view. But we still see 6% US$ top line and 8% EBITDA growth in 2025
• The EBITDA margin should rise c50bps in 2025; cost normalisation in Ukraine and a rebound in Bangladesh are key drivers
• Even after rising over 5x from its 2022 lows, VEON still trades at a discount to EM peers despite its superior growth prospects
Please see Important Information at the end of this report.
VEON’s operational performance in 2024 underscored the resilience of its business model. While near-term margin pressure persists in selected markets, the group is making solid progress against its strategic objectives, including growing the weight of its digital revenues, boosting transparency via operating company listings, and returning cash to shareholders. Following updated management guidance, we now see 2025 group revenue of US$4.3bn (+6% yoy) and EBITDA of US$1.8bn (+8%), with a slight improvement in the EBITDA margin to 42.8% (vs 42.2% in 2024). More detailed forecasts are presented at the end of this report. Our ADS fair value is unchanged at US$67.50. The economic fallout from raised US import tariffs represents a downside risk to our forecasts. An end to Russia’s hostilities in Ukraine would generate upside to our base case.
We revise our 2025 outlook to reflect updated guidance and market conditions
We revise our 2025 forecasts, lowering revenues to US$4,259mn (-1% vs. prior estimate), EBITDA to US$1,821mn (-6%), and net profit to US$351mn (-20%). These changes reflect the impact of the TNS+ sale in Kazakhstan, ongoing economic pressures in Bangladesh, and higher running costs in Ukraine. Our revised forecasts for 2026 and 2027 also reflect these trends, with modest reductions in revenue and EBITDA growth. We nevertheless expect the firm to maintain a positive growth profile, with revenues growing 6% in 2025, 7% in 2026 and 6% in 2027 (in US$ terms), with market conditions expected to stabilise next year and the digital transformation strategy continuing to yield results.
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VEON: 2024 results - strong growth and strategic moves in digital services
• VEON delivered 8% 2024 top line growth (in US$), fueled by Pakistan and Kazakhstan, and 63% yoy growth in digital revenue
• 2025 LCY growth guidance; 12-14% top line, 13-15% EBITDA. Capex intensity will stay high, at 17-19% of sales
• Despite its solid growth outlook, VEON trades at a sizeable discount to EM peers. Estimated ADS fair value: US$67.50
Please see Important Information at the end of this report.
VEON's 2024 results showed an acceleration in the top line, with 8% yoy growth (in US$ terms), up from -2% in 2023 and within the 8-10% 2024 guidance envelope. Gearing (net debt/ EBITDA,
excluding leases) declined to 1.3x, via strong cash generation. For 2025, VEON targets 12-14% yoy revenue growth in LCY (12.8% in 2024) and 13-15% EBITDA growth (10.0% in 2024). Capex intensity will likely remain elevated, at 17-19% of sales (20.6% in 2024), due to continued investment in network resilience in Ukraine, expanding the digital portfolio in Pakistan and accelerating the 4G network rollout in Uzbekistan. VEON’s multiplay strategy continues to drive value; there was an 18% yoy rise in multiplay clients in 2024, while digital revenue rose 63% yoy (in US$) to comprise 11.5% of the top line (12.6% in Q4). In this note, we also discuss the Uklon acquisition and VEON’sevolving digital assets strategy. Our ADS fair value estimate is US$67.50
2024 results: VEON becomes a US$4bn company
During 2024 VEON reported a revenue of US$4,004mn (+8% yoy in US$, +15% in LCY), in line with our US$4,006mn expectation. The strong top line performance was helped by direct digital
revenues of US$460mn (which grew 63% and now account for 11.5% of the group total). Underlying revenue was US$4,238mn (+15% yoy), which adjusts for USD68mn of revenue impact from
identified items including the cyberattack impact in Ukraine, political unrest in Bangladesh and the
TNS+ sale in Kazakhstan.
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VEON: Q3 24 - accelerating growth, strengthening digital momentum
• Q3 24 results: top line growth accelerated to 10% yoy (in US$) and gearing fell. Bangladesh
is a weak spot; civil unrest, weaker currency, and new taxes
• VEON has provided FY 2024 US$ growth guidance; 8-10% top line, 4-6% EBITDA. Capex intensity remains high, at 18-19% of sales
• A 16% yoy rise in multiplay clients drove digital revenue up 35% yoy (in US$). 12% of the top line is now digital, up from 9% last year
Please see Important Information at the end of this report.
VEON's Q3 2024 results showcased the company's strong (10%) US$ top line growth, reflecting the success of its multiplay strategy. The company revised down its FY 2024 LCY growth guidance(primarily due to deceleration in blended inflation rates, civil unrest in Bangladesh, and the sale of TNS+ in Kazakhstan), setting a new target of 12-14% revenue growth in LCY and EBITDA growth of 9-11%. In US$ terms, these targets translate to 8-10% for the top line and 4-6% for EBITDA. Direct digital revenue now accounts for 12% of the top line (from 9% last year), with strong cashflow generation and lower leverage.
VEON’s ADS price has risen almost 70% since the beginning of the year. It now trades at 2.9x 2025 EV/ EBITDA and 5.6x 2025 PE. This is still a 30% discount to emerging market peers. Our ADS fair value is US$45. Political instability and economic unrest in Bangladesh are key concerns.
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VEON CMD
• Rising digital revenues will enable LCY revenue growth to rise to 16-19% pa. Equity FCF is targeted at US$0.9-1.0bn by 2027
• Minority stake sales will showcase the multiple value-generating assets in the portfolio. Tower/ network sharing will release cash
• Our new forecasts are at the conservative end of management guidance. Our ADR fair value estimate rises to US$45.
Following management’s presentation of VEON’s medium-term strategy and key 2027 targets, we have revised our forecasts to account for the growing weight of fast-growing digital assets. The multiplay strategy is helping to differentiate the firm’s offering, improving its ability to push through price increases. Meanwhile asset disposals will continue to generate cash and reduce the future capex load. Reduced gearing will lower interest expenses, allowing equity free cashflow to rise. Our new forecasts are at the lower end of management guidance. We see VEON delivering c8% pa top-line growth to 2027 (in US$), with EBITDA rising by c10% pa. Our new fair value estimate for the ADRs is US$45. The shares are trading at 2.6x 2024 EV/ EBITDA, a 40% discount to peers. Upside risks include the delivery of revenue growth towards the top end of management guidance. Downside risks include the possibility that the company cannot pass on inflationary cost increases to its customers.
Please see Important Information towards the end of this document.
Report highlights
• We have lifted our revenue forecasts for the company reflecting management’s assertion that its digital strategy is helping it to push through inflationary price increases
• Our top-line estimates are at the lower end of management guidance. And our equity free cashflow forecast is below the company’s 2027 target. Effective strategy execution could therefore deliver positive surprises relative to our expectations.
• Our new ADR fair value estimate is US$45, a 25% increase. At this level, the ADRs would be at a 20% discount to peers, reflecting conservative valuation model assumptions
• Our financial model assumes cash distributions to shareholders resume from 2025 onwards; we factor in a US$1.58 dividend this year ie a c6% yield on the current price.
• VEON’s digital assets portfolio will be a key driver of value. For example, Turkish fintech Papara’s recent acquisition of Pakistani payment platform Sadapay implies a US$500mn valuation for JazzCash, equivalent to roughly 25% of VEON’s current market cap.
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VEON: Q1 24 results preview
• FX headwinds have knocked 15-20% off top-line growth over each of the past two years. This won’t be the case in Q1
• Expect VEON’s US$ revenue growth to move firmly into positive territory this year; a double-digit increase is possible
• Accelerated growth will highlight the sizeable discount to industry peers at which the shares trade.
VEON is due to release Q1 24 results on 16 May, with a management call scheduled on the same day. We expect solid top-line and EBITDA growth (7% and 12%, respectively, in US$), as the strong underlying operating performance we have seen in recent quarters continues, but with a substantial easing of currency headwinds. This performance is likely to highlight the discounted valuation at which the shares trade. Our fair value for the ADRs is US$36.
Important Information
Disclaimer: This document is for information purposes only and does not constitute investment research. This document does not constitute investment advice, nor provide any recommendation to buy, hold, sell or trade any asset or security. inam has produced this document in good faith but does not give any guarantee regarding the accuracy of the information contained therein. inam does not bear any liability for any damages or losses in connection with the use of this document. The content is not intended for distribution or use by any person in any jurisdiction in any country where such distribution or use would be contrary to law or regulation.
Disclosures: This report has been commissioned by VEON Limited and independently prepared and issued by inam for publication. All information used in the publication of this report has been compiled from information provided to us by VEON and from publicly available sources that are believed to be reliable but we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of inam at the time of publication. VEON has had no editorial input into the contents of this note, and inam’s fees are not contingent on VEON’s approval of the research.
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VEON Ltd Raising forecasts – solid execution on costs, capex, gearing and digitalisation
• We lift our numbers ahead of the Q4 trading update, given strong Q3 delivery, upgraded guidance and multiplay traction
• Despite its superior growth prospects, VEON trades at a sharp discount to peers. Our ADR fair value estimate is US$36
• Key volatility drivers: regulatory uncertainty in Ukraine, LetterOne ownership concerns, macro/ politics in Pakistan
Strong Q3 results, raised management guidance, and growing evidence that the multiplay strategy is gaining traction lead us to raise our forecasts for VEON. We lift our FY 23 revenue estimate by 2% and EBITDA by 6%. In FY 24 our estimates are increased by 8% and 12%, respectively. We also raise our ADR fair value estimate by 20% to US$36. Key downside risks include potential asset confiscation in Ukraine, sanctions relating to LetterOne’s ownership and macro instability/ political instability in Pakistan. Upside risks include faster than expected asset sales or transformational partnerships to boost the digital strategy.
Raising our forecasts on effective execution of the multiplay strategy:
Q3 23 results were stronger than we had expected, notably via ARPU-driven revenue growth, reduced capex intensity and better EBITDA margins. Gearing levels declined (although they have since risen slightly). Management also raised full year guidance. With the digital multiplay strategy gaining traction, we have revisited our estimates for 2023 and beyond. Key changes are summarised below. We have raised our FY 23 revenue forecast by 2% and net profit by 15%. In 2024, our projections are lifted by 8% and 34% respectively.
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VEON Ltd: The digital strategy is key to growth, customer engagement and value generation
• The symbiosis between VEON’s digital assets and telco operations generates real value: higher ARPU, lower churn
• Digital assets also help to lower customer acquisition costs. This could be a game changer in Bangladesh (Toffee)
• Super app status is a realistic target in several markets: investment will be needed to build scale/ cement leadership.
VEON’s digital revenues currently account for just 2% of the top line. But this figure hugely understates the importance of digital products to the overall franchise. Multiplay customers (defined as those using VEON’s voice and data services, plus at least one of its digital products) tend to have higher ARPU and lower churn than other customers; as a group, these customers generate 35% of group revenues, with this proportion almost doubling over the past two years.
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VEON: Ukraine concerns are driving price weakness; we assess confiscation scenarios
• Reports have suggested scenarios ranging from zero change to full confiscation of VEON’s Ukraine asset, Kyivstar
• Our preliminary analysis suggests a worst-case impact of US$15.2 per ADR is priced in. But full clarity may take time
• The ADRs are already off US$6 from their intra-October peak, and trading well below peers/fundamentals.
We outline three scenarios that could play out for VEON in Ukraine. As highlighted in our recent note on the company, a worst-case scenario in this country seems to be largely priced in. Therefore, any clarification of the current uncertainty could be received positively by the market, particularly if it draws a line under concerns relating to the firm’s ownership structure. We explore these themes further below.
Recent price weakness reflects Ukraine concerns:
VEON’s shares are down almost 30% from their recent peak on 3 October. We think the key driver of this weakness has been concerns over the potential confiscation by Ukraine of Kyivstar, the largest telco operator in the country and a key asset in VEON’s portfolio.
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VEON: Q2 24 results – accelerating growth, better transparency
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Q2 24 results: the top line accelerated to 12% yoy - digital revenues are growing rapidly
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Despite rising over 40% year-to-date, VEON still trades at a c40% discount to its emerging market peers
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The US$100mn buy-back programme sends a powerful valuation signal. Euronext delisting will consolidate liquidity
Please see Important Information at the end of this report.
VEON’s Q2 24 results demonstrated the company’s ability to deliver top line growth, as its multiplay strategy continues to bear fruit. Full year LCY growth guidance (16-18% top line, 18-20% EBITDA) was reiterated. Two welcome new areas of disclosure were for direct digital revenues (now 10% of the top line) and cashflow upstreaming from the operating companies (US$280mn in H1). Earlier this month the company also signaled its intention to buy back US$100mn shares, positively signaling both its liquidity position and its view on valuation. The shares currently trade at 2.7x 2024 EV/EBITDA and 5.3x PE, a roughly 40% discount to peers. Our ADS fair value is US$45. Q2 24: double-digit US$ revenue and EBITDA growth, US$1bn+ top line VEON scored two post Russia-era firsts in its Q2 24 results. Total revenue exceeded US$1bn. And both revenue and EBITDA yoy percentage growth was in double-digits. The strong top line performance was helped by direct digital revenues (which grew 83% and now account for 10% of the group total). EBITDA grew 11% yoy, with the margin falling 0.6% points to 44.7%. VEON’s cash balance improved, notably at the HQ level; US$280mn cash was up-streamed from operating companies in H1 24. However, gearing ratios increased slightly, with debt issuance in Pakistan and Bangladesh offsetting early HQ debt redemptions. This is in line with the strategy outlined at the recent Capital Markets Day; local debt issuance will reduce currency mismatch risk. There are no upcoming debt maturities until April 2025; maturities in 2025 total cUS$600mn.
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VEON Q1 24 report
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Adjusting for one-offs, US$ top-line growth accelerated to 12% yoy in Q1 24, while the EBITDA margin widened to 45%..
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Gross debt has declined, and the maturity profile has lengthened. Asset sales will further strengthen the balance sheet.
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Easing FX headwinds should focus investor attention on VEON’s discount valuation multiples. Our ADR fair value is US$36.
Please see Important Information at the end of this report.
VEON reported Q1 24 revenue of US$942mn, up 7% yoy and EBITDA of US$386mn (flat yoy). Adjusting for one-off measures, top-line and EBITDA growth were c13% yoy. Also stripping out FX headwinds, the yoy growth rate for both metrics was 17%. Accelerating top-line growth reflects the success of the multiplay strategy, with users of the firm’s digital assets portfolio typically delivering higher ARPU with lower churn. VEON shares are up over 30% year-to-date but still trade at a c35-55% discount to their peers. With FX headwinds potentially easing, and asset sales likely to lower gearing levels, investor interest in this name should increase. The forthcoming Capital Markets Day (6 June) should provide further clarity on strategy and the outlook for the business
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Q1 24 results: stronger than expected after adjusting for one-offs:
Several factors impacted reported results this quarter, with a US$47mn hit to EBITDA from retention incentives offered to customers in Ukraine (post the December 2023 cyberattack), a US$7mn negative impact in Bangladesh (relating to the tower sale transaction), and US$2mn relating to higher adtech spending in Uzbekistan. Relative to our estimates, which had already factored in some negative impact in Ukraine, reported revenues were broadly in line. Excluding these one-off items, revenues beat our expectations; underlying growth momentum (ex-Ukraine) has accelerated. Reported EBITDA was below our expectations, but on an adjusted basis was again somewhat better. Reported PBT was weaker than we had expected, but on an adjusted basis was also higher, reflecting the stronger top-line but also benefitting from some FX gains in the period.
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VEON: 2024 results preview, Kyivstar listing, raised fair value estimate
• VEON’s 2024 results are due on 20 March. We estimate 2024 revenue of US$4.0bn (+8% yoy) and EBITDA of US$1.7bn (+4%)
• Key focus areas: 2025 guidance; operational updates (Ukraine, Bangladesh); IPO plans (Kyivstar, JazzCash); buy-backs/ dividends
• We raise our ADR fair value estimate to US$67.50, from US$45.00, on lowered risks in Ukraine and Pakistan
Please see Important Information at the end of this report.
VEON will release its 2024 trading statement on 20 March. Group revenue is forecast at US$4,006mn (+8% yoy), underscoring VEON’s solid operational momentum. We see EBITDA of
US$1,672mn (+4% yoy), with the EBITDA margin at 41.7% (-1.8pps yoy). More detailed forecasts are presented at the end of this report.
The company continues to explore strategic moves to improve transparency and lift shareholder value, including a potential US listing of Kyivstar. VEON today announced it has signed a definitive business combination agreement with Cohen Circle Acquisition Corp, valuing this asset at an enterprise value of US$2.0bn (ie 3.6x 2024P EBITDA). Kyivstar could be listed in Q3 25, with VEON holding an 87% stake in the business. The transaction will shine a light on VEON’s profitable and resilient Ukrainian operations and raise around US$0.2bn cash for the firm.
Our estimated ADR fair value rises to US$67.50 (from US$45.00). Asset values have risen in both Ukraine and Pakistan, largely reflecting lower risk perceptions. In Ukraine, Trump is bringing
Zelensky and Putin to the negotiating table, increasing the likelihood of an end in hostilities. InPakistan, the schism between the political elite and army has narrowed. We have reduced the cost of capital for both countries in our DCF model, as outlined later in this report
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VEON FY23 update
• VEON yesterday cancelled its US$805mn revolving credit facility, signalling its balance sheet recovery
• Recent FY23 results showed strong top lines in Kazakhstan, Pakistan and Uzbekistan. Cyberattacks were a drag on Ukraine
• Asset disposals will continue although timeline is uncertain. Towers, fintech assets and minority stakes all on the table.
VEON continues to make progress along several dimensions: top line growth, EBITDA margins, capex intensity, free cashflow generation, balance sheet strength, and enhanced digital offerings. Potential asset sales are an additional attraction. Accordingly, we expect the sizeable discount to peers at which the shares trade to close. Our fair value estimate for the ADRs is unchanged at US$36.
Please see the Important Information at the end of this report.
RCF cancellation showcases the recovery in VEON’s balance sheet:
VEON yesterday announced the cancellation of its US$805mn revolving credit facility, which it could have kept open until March 2025. The initial impact will be to reduce cash to US$0.9bn and gross debt to US$3.9bn. Net debt is unchanged. The move will save an estimated US$40mn+ in annual interest charges and signals a further step in the company’s balance sheet recovery. Earlier this month, VEON received a BB- credit rating from both S&P and Fitch, opening the door to renewed issuance activity. More likely, in our view, VEON will look to raise local currency financing at the operating company level; its local units are industry leaders well-known to banks and other local funding sources. In parallel, the firm has a wide-ranging asset disposal programme in place, encompassing around 27.6k towers and its digital assets, with the potential sale of minority stakes in local operating companies also on the table. Management appears to have taken the view that these options, together with operating cashflow generation, mean that VEON no longer needs to pay for the balance sheet flexibility provided by the RCF.
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VEON Ltd: Raising forecasts ahead of Q4 23 trading update
• We lift our numbers ahead of the Q4 trading update, given strong Q3 delivery, upgraded guidance and multiplay traction
• Despite its superior growth prospects, VEON trades at a sharp discount to peers. Our ADR fair value estimate is US$36
• Key volatility drivers: regulatory uncertainty in Ukraine, LetterOne ownership concerns, macro/ politics in Pakistan.
Strong Q3 results, raised management guidance, and growing evidence that the multiplay strategy is gaining traction lead us to raise our forecasts for VEON. We lift our FY 23 revenue estimate by 2% and EBITDA by 6%. In FY 24 our estimates are increased by 8% and 12%, respectively. We also raise our ADR fair value estimate by 20% to US$36. Key downside risks include potential asset confiscation in Ukraine, sanctions relating to LetterOne’s ownership and macro instability/ political instability in Pakistan. Upside risks include faster than expected asset sales or transformational partnerships to boost the digital strategy.
Raising our forecasts on effective execution of the multiplay strategy
Q3 23 results were stronger than we had expected, notably via ARPU-driven revenue growth, reduced capex intensity and better EBITDA margins. Gearing levels declined (although they have since risen slightly). Management also raised full year guidance. With the digital multiplay strategygaining traction, we have revisited our estimates for 2023 and beyond. Key changes are summarised below. We have raised our FY 23 revenue forecast by 2% and net profit by 15%. In 2024, our projections are lifted by 8% and 34% respectively
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VEON: Full year guidance raised as revenues accelerate and margins widen
• The Q3 23 results tick many boxes: an accelerating top line, rising margins, lower capex intensity and reduced gearing
• The digital strategy is building momentum; multiplay subscribers grew 23% and multiplay revenues rose 42%
• Russia exit clears the way for bond/equity index inclusion, credit rating resumption. Ukraine is a key source of risk.
VEON reported Q3 23 revenues of US$945m, up 6% yoy (19% higher in local currency). EBITDA increased 17% yoy toUS$444mn, with the EBITDA margin widening four percentage points to 47.0%. Capex intensity fell to 13.9% of sales. On the back of these numbers, management has again raised its FY 23 guidance (after last doing so in Q2 23) and signalled that many of the positive trends will extend into 2024 and beyond.
Based on our forecasts, VEON trades at 2.2x 2024 EV/ EBITDA, a substantial discount to industry peers. Our fair value estimate for the ADRs is US$31.0. Upside risks include increasing interest in VEON by mainstream investors following its Russia exit, rapid growth in digital revenues and further asset sales. Downside risks include scope for the confiscation of Ukrainian assets and macro uncertainty in Pakistan.
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VEON: Russia exit gives investors access to secular growth at low multiples
• The recently-completed Russia exit lets western investors benefit from VEON’s leadership in high-growth Asian markets
• Ongoing asset sales will strengthen the balance sheet, simplify operations and boost transparency. Buybacks are possible
• The digital multiplay strategy supports market share gains via reduced churn, higher ARPUs and lower acquisition costs.
VEON is a US$1.1bn market cap EM telco listed on Nasdaq and Euronext, with over 150mn customers. Itis the market leader in Ukraine, Kazakhstan, Kyrgyzstan, Pakistan and Uzbekistan and ranks third in Bangladesh, giving it exposure to markets with significant growth potential (via improved smartphone penetration and data demand) and low price compression risk (these are already amongst the cheapest global telco markets).
The firm’s digital multiplay strategy is helping to grow market share, via lower churn, higher ARPU and improved customer acquisition. Better free cashflow generation (via efficiency improvements and lower capex intensity) and potential asset disposals should further strengthen a balance sheet that is already less geared than peers, potentially opening the door to a buy-back programme.
Despite these positive attributes, the shares are trading at a substantial discount to peers, at 2.5x2023EV/ EBITDA and 3.3x PE (2024 multiples are 2.2x and 3.4x, respectively). Key risks relate to the ongoing conflict in Ukraine and political instability in Pakistan