VEON publishes 2Q23 trading
update
Strong results, full-year revenue guidance
raised
Amsterdam, 3 August 2023 07:00
CEST – VEON Ltd. (NASDAQ: VEON, Euronext Amsterdam: VEON),
a global digital operator that provides converged connectivity and
online services, announces selected financial and operating results
for the second quarter and six months ended 30 June 2023, excluding
the results of the Russian operations, as they are classified as
‘held for sale’ and ‘discontinued operations’ as of 24 November
2022.
In 2Q23, VEON’s local currency growth continued
to accelerate. Total revenues reached USD 916 million – a decrease
of 4.3% YoY in reported currency, while the local currency
performance rose by 19.6% YoY. Service revenues were USD 882
million, -4.0% YoY in reported currency (+19.6% in local currency),
and EBITDA was USD 415 million, -10.6% YoY in reported currency
(+13.6% YoY in local currency). Capex in 2Q23 was USD 171 million,
a decline of 16.6% YoY, with capex intensity for the last twelve
months at 19.6%,and 18.7% in the quarter. Total cash and cash
equivalents as of 30 June 2023 amounted to USD 2.4 billion,
excluding banking operations in Pakistan, with USD 2.0 billion held
at the headquarters (“HQ”) level.
Commenting on the results, Kaan Terzioğlu said:
“In 2Q23, VEON continues to accelerate its revenue growth, which
reached 19.6% YoY in local currency, fueled by market share gains
and digital expansion across all our operations.
“With our Digital Operator strategy and a solid
track record of execution, VEON’s operating companies have
consistently expanded their value proposition, delivering digital
experiences in adjacent verticals: digital financial services,
digital entertainment, digital learning, digital healthcare and
many more. As of the end of the quarter, customers who benefit from
our digital services as well 4G voice and data, account for 22% of
our base and 40% of our subscriber revenues. We also serve
the broader mobile users in our markets with our all-access digital
services.
“Completing the sale of our Russia operations
and financial disciple remain our top priorities. We have closed
the quarter with a strong liquidity position, with Group holding
cash and cash equivalents totaling USD 2.4 billion, nearly 2.0
billion of which was held at headquarters level as of June
30th.”
Q2 2023 highlights
- Revenue of USD 916 million, -4.3% YoY (+19.6% YoY in local
currency)
- Service revenue of USD 882 million, -4.0% YoY (+19.6% YoY in
local currency)
- Multiplay and doubleplay 4G revenues of USD 453 million, +8.6%
YoY (+31.1% YoY in local currency)
- EBITDA of USD 415 million, -10.6% YoY (+13.6% YoY in local
currency)
- Capex of USD 171 million, -16.6% YoY, with 2Q23 capex intensity
of 18.7%
- Total cash and cash equivalents of USD 2.4 billion, +5.8% YoY,
with USD 2.0 billion at Headquarters
- 156 million mobile customers, -0.6% YoY
- 88 million 4G users, up 15.9% YoY, with 56.8% penetration of
customer base
VEON accelerates its double-digit growth
in local currency revenues and EBITDA in 2Q23, driven by further
execution of Digital Operator strategy. Group liquidity position
remains strong with Group cash and cash equivalents at USD 2.4
billion.
Group revenues decreased by
4.3% YoY during 2Q23 in reported currency due to the adverse impact
of FX rates, while increasing by 19.6% YoY in local currency
terms.
2Q23
YoY performance |
Reported |
Local
currency |
|
|
|
Total revenue |
(4.3%) |
19.6% |
|
|
|
Ukraine |
(6.5%) |
16.8% |
Pakistan |
(16.6%) |
22.2% |
Kazakhstan |
17.8% |
19.4% |
Bangladesh |
(3.0%) |
17.1% |
Uzbekistan |
17.5% |
20.9% |
Kyrgyzstan |
14.0% |
22.2% |
Three operating companies reported local
currency revenue growth above 20% YoY, with the local currency
revenue growth at the other three operating companies, including
Ukraine, rising well above 15% YoY. We continued to expand market
share across all our countries of operation. Service
revenues decreased by 4.0% YoY in reported currency and
rose by 19.6% YoY in local currency.
In 2Q23, Group EBITDA decreased
by 10.6% YoY in reported currency terms (+13.6% in local currency),
with Group EBITDA margin of 45.3% (-3.2 p.p. YoY).
Strong local currency EBITDA growth was achieved even as energy
costs increased across the Group by c.54% YoY.
The Group’s YoY EBITDA performance was also
affected by extraordinary non-recurring items in Kazakhstan in 2Q22
(c.USD 4.3 million), in Uzbekistan in 2Q22 and 2Q23 (c.USD 20.4
million and USD 0.7 million respectively), and in Kyrgyzstan in
2Q22 (c.USD 1.6 million) as described in the Country Performance
section. Excluding these one-off items, Group EBITDA increased by
20.3% YoY in local currency terms.
In 2Q23, we reported 155.8 million mobile
subscribers, flat YoY. The Group 4G user base grew
by 15.9% YoY, reaching 88.5 million, with 12.1 million 4G users
added over the past 12 months. 4G users now account for 56.8% of
our total subscriber base, up 8.1 p.p. from a year earlier,
supporting further conversion of subscribers into multiplay users
who use at least one of our digital services in addition to 4G data
and voice.
Our operating companies continued to focus on
the execution of VEON’s Digital Operator strategy
(“DO1440”). We aim to deliver digital experiences for every minute
of the day through services powered by our 4G network across our
key adjacent markets, including financial services, healthcare,
education and entertainment.
Our multiplay B2C customers,
those who make use of at least one of our digital services on top
of our voice and data services, increased by 28.5% YoY to 28.1
million, representing 22.2% of the user base and accounting for
40.2% of VEON’s B2C revenues.
Multiplay B2C customer ARPU is 3.7 times higher,
and churn is 1.7 times lower, than for voice-only B2C customers.
With a higher share of multiplay customers, ARPU levels in each of
our operating companies also increased at rates ranging from 8.9%
to 27.4% YoY in 2Q23.
Our media streaming services, including Toffee
in Bangladesh and Tamasha in Pakistan, remain important drivers of
the growth in our multiplay customers. Toffee reached 9.0 million
monthly active users (“MAUs”), a 31.9% YoY increase, while Tamasha
in Pakistan reached 4.3 million MAUs, representing a 2.6-fold YoY
growth.
Our digital financial services business in
Pakistan, JazzCash, reported 14.7 million monthly active users and
increased its 12-month total transaction volume by 33.2% YoY.
In 2Q23, Group
capex was USD 171.4 million (-16.6% YoY) with
capex intensity in for the last twelve months of 19.6% (-1.2p.p.
YoY) and 18.7% in the quarter.
We closed the second quarter with total
cash and cash equivalents of USD 2.4 billion, excluding
banking operations in Pakistan, with USD 2.0 billion at the HQ
level. Our local operations remain self-funding.
In Ukraine, the team continued
to focus on keeping the country connected while also delivering
double digit growth in both revenue and EBITDA. Around 94% of our
radio network remained operational at the end of the quarter.
Kyivstar’s revenues were up 16.8% YoY in local currency (-6.5% YoY
in reported currency). Kyivstar’s 4G customer base grew 13.5% YoY,
with data usage rising 25.6% YoY. EBITDA increased by 11.6% YoY in
local currency (-10.7% YoY in reported currency) in 2Q23. The
EBITDA performance was impacted by ongoing operational cost
pressures, including electricity and fuel costs, and continued
charitable donations, as well as staff and customer support
program. In June 2023, Kyivstar and VEON announced their commitment
to invest the equivalent of USD 600 million in the recovery of
Ukraine over the next three years.
Pakistan revenues rose 22.2%
YoY in local currency (-16.6% YoY in reported currency), a strong
result given the challenging macroeconomic environment. A further
devaluation of around c.41% YoY in the Pakistani Rupee in the
quarter negatively impacted financial performance in the reported
currency. Jazz grew its 4G users (+10.9% YoY) and ARPU (+27.4% YoY)
in 2Q23. EBITDA rose by 23.4% YoY in local currency (-15.8% YoY in
reported currency) despite higher energy and fuel prices compared
to 2Q22.
In Kazakhstan, revenues
increased 19.4% YoY in local currency (+17.8% YoY in reported
currency). This was driven by the further expansion of our mobile
customer base (+4.9% YoY), higher data usage (+15.0% YoY) and
inflationary pricing. Beeline Kazakhstan reached 4G penetration of
71.0% (+1.6 p.p. YoY) making it the first operation to achieve
VEON’s target of 70% 4G penetration in the customer base.
EBITDA rose by 19.8% YoY in local currency terms
(+18.0% YoY in reported currency). Excluding an extraordinary
one-off item in 2Q22, underlying EBITDA grew 26.2% YoY in local
currency.
In Bangladesh, Banglalink’s
revenues increased 17.1% YoY in local currency (-3.0% YoY in
reported currency) supported by strong growth in data revenue,
which was up 20.3% YoY. This was Banglalink’s fifth consecutive
quarter of double-digit local currency revenue growth. The
operator’s nationwide network expansion supported the 33.8% YoY
growth in 4G users. Banglalink delivered balanced growth in its
subscriber base, which was up +7.9% YoY, and ARPU, which grew +8.9%
YoY. EBITDA increased 17.9% YoY in local currency (-2.4% YoY in
reported currency).
In Uzbekistan, revenues
increased 20.9% YoY in local currency (+17.5% YoY in reported
currency), a sixth consecutive quarter of revenue growth above 20%.
This was driven by a 23.6% YoY expansion of the 4G subscriber base
and a robust increase in data revenues. EBITDA declined 37.9% YoY
in local currency (-40.0% YoY in reported currency) impacted by
extraordinary one-offs in 2Q22 and 2Q23. Excluding these one-off
items, underlying EBITDA grew 8.3% YoY in local currency impacted
by higher regulatory fees as Beeline Uzbekistan continued to build
capacity for future growth and to serve its growing network.
As we deliver on our Digital Operator strategy
targets across the Group, we have raised our guidance for 2023
local currency revenue growth to 16-19%, and EBITDA growth guidance
remains at 10-14%. VEON’s 2023 outlook for the Group’s capex
intensity is in the range of 18%-20%.
Key recent developments
- VEON and Rakuten to cooperate in Open
RAN and digital services to rebuild Ukraine’s
infrastructure. On 2 August 2023, VEON announced that it
has signed a Memorandum of Understanding (MoU) with Rakuten
Symphony, a subsidiary of the leading technology conglomerate,
Rakuten Group. The two companies will start exploring cooperation
in Ukraine, with the goal of accelerating the reconstruction of the
country’s infrastructure, through collaboration on open radio
access networks (Open RAN) and digital services.
- VEON Group announces share awards for
members of Board and management team. On 25 July 2023,
VEON announced share awards to its members of the Board and
management team. The share awards for the management team is the
second tranche of VEON’s Deferred Share Plan, which was
detailed in our press release dated 18 July 2022, or as a result of
a discretionary grant. For the Board members, the share grant comes
in recognition of their extraordinary commitment, professionalism
and sound judgement as they steered VEON, supporting the execution
of Group’s priorities and digital operator strategy during an
exceptionally challenging year.
- VEON files form 20-F for financial
year 2022, Nasdaq confirms listing rules compliance. On 24
July 2023, VEON announced that it has filed its Annual Report on
Form 20-F for the year ended December 31, 2022 (the “Form 20-F”)
with the U.S. Securities and Exchange Commission at www.sec.gov.
The Form 20-F is also available on the Investor Relations section
of the company’s website www.veon.com. As a result of its Form 20-F
filing, the Listing Qualifications Department of The Nasdaq Stock
Market (“Nasdaq”) confirmed that it has regained compliance with
the Nasdaq listing rules through the exception granted by Nasdaq
for its delayed filing.
- VEON publishes FY2022 Integrated
Annual Report. On 10 July 2023, VEON published its 2022
Integrated Annual Report (IAR), showcasing not only strong
financial and business performance but also emphasizing significant
Environmental, Social, and Governance impact, underscoring the
company's commitment to diversity and inclusion across its
markets.
- VEON shareholders approve new Board,
Morten Lundal elected new Chair. On 30 June 2023, VEON
announced its new Board of Directors (Board) following the
Company’s Annual General Meeting (AGM) that was held on 29 June
2023. VEON shareholders approved the Board-recommended slate of
seven directors, including six directors currently serving on the
Board – Augie Fabela, Yaroslav Glazunov, Andrei Gusev, Karen
Linehan, Morten Lundal and Michiel Soeting – and Kaan Terzioğlu,
the Chief Executive Officer (CEO) of the VEON Group. The Board
elected Morten Lundal as the Chair and the new committees approved
for the Board as well and their composition in its first meeting
following the AGM.
- VEON publishes audited financial
statements for year ended 31 December 2022. On 25 June
2023, VEON announced that it has published its Dutch Annual Report
– 2022, including consolidated financial statements for the year
ended 31 December 2022 prepared in accordance with International
Financial Reporting Standards as adopted by the European Union and
with Part 9 of Book 2 of the Dutch Civil Code (the “Consolidated
Financial Statements).
- VEON to invest USD 600 million in
Ukraine’s recovery. On 21 June 2023, VEON announced that
it will invest, through its subsidiary Kyivstar, the equivalent of
USD 600 million in the recovery of Ukraine over the next three
years. The investment will span Kyivstar’s infrastructure projects,
ensuring essential connectivity and 4G services throughout the
country, the development of superior digital services accessible to
all Ukrainians, and community support projects.
- VEON management changes. On
16 June 2023, VEON announced that Omiyinka Doris has been appointed
Group General Counsel in permanent capacity, effective June 1,
2023. Omiyinka has served as VEON’s Acting Group General Counsel
and a member of the Group Executive Committee since October 2022.
Previously, she was VEON’s Deputy General Counsel for SEC /
Disclosure, Finance and Governance. On 19 July 2023, VEON announced
changes to its management team, creating a leaner Group management
in line with its portfolio size, while strengthening operating
company boards. Group Head of Portfolio Management Dmitry Shvets,
Group Chief People Officer Michael Schulz and Group Chief Corporate
Affairs Officer Matthieu Galvani will be stepping down from their
executive roles effective 1 October 2023. They will continue to
support the VEON Group as directors on VEON’s Operating Company
Boards. VEON’s Group Executive Committee (GEC) will comprise 3
members - Group Chief Executive Officer Kaan Terzioglu, Group Chief
Financial Officer Joop Brakenhoff and Group General Counsel
Omiyinka Doris – with a flatter Group leadership team
structure.
- Announcement of currency exchange option. On 9
June 2023, VEON provided some further details regarding its ruble
denominated notes, reiterating the currency election terms for the
holders of ruble denominated notes issued under the
U.S.$6,500,000,000 Global Medium Term Note Programme (the
“Programme”) of VEON Holdings B.V. (the “Issuer”).
- VEON enters the final stages in the
sale of its Russia operations. On 30 May 2023, VEON
announced that it has submitted all necessary documentation to
Euroclear, Clearstream and registrars for cancellation of VEON’s
Eurobonds held by its subsidiary, PJSC VimpelCom. With this, the
Company enters the final stages in the closing of the sale of
VEON’s Russia operations, which was announced on 24 November 2022.
According to the terms of the VEON Bonds, the registrar is required
to cancel the VEON Bonds purchased by a subsidiary of VEON and
surrendered to the registrar for cancellation. Both conditions to
cancellation have now been met.
Additional information
View the full 2Q23 trading update
View 2Q23 trading update presentation
View 2Q23 factbook
About VEON
VEON is a global digital operator that currently
provides converged connectivity and online services to nearly 160
million customers in six dynamic markets. We are transforming
people’s lives, empowering individuals, creating opportunities for
greater digital inclusion and driving economic growth across
countries that are home to more than 7% of the world’s population.
Headquartered in Amsterdam, VEON is listed on NASDAQ and Euronext
Amsterdam. For more information, visit: https://www.veon.com.
Notice to readers: financial information
presented
VEON's results and other financial information
presented in these financial statements are, unless otherwise
stated, prepared in accordance with International Financial
Reporting Standards ("IFRS") based on internal management
reporting, are the responsibility of management, and have not been
externally audited, reviewed, or verified. As such, you should not
place undue reliance on this information. This information may not
be indicative of the actual results for any future period.
Notice to readers: impact of the conflict
The ongoing conflict between Russia and Ukraine
and the sanctions imposed by the United States, member states of
the European Union, the European Union itself, the United Kingdom,
Ukraine and certain other nations, counter-sanctions by Russia and
other legal and regulatory responses, as well as responses by our
service providers, partners, suppliers and other counterparties,
and the consequences of all of the foregoing have impacted and, if
the conflict, sanctions and such responses continue or escalate,
may significantly impact our results and aspects of our operations
in Russia and Ukraine, and may significantly affect our results and
aspects of our operations in the other countries in which we
operate. We are closely monitoring events in Russia and Ukraine, as
well as the possibility of the imposition of further sanctions in
connection with the ongoing conflict between Russia and Ukraine and
any resulting further rise in tensions between Russia and the
United States, the United Kingdom and/or the European Union.
Although our Russian operations are now classified as ‘held for
sale’ and ‘discontinued operations’ and do not contribute to our
comparison base or actual reported numbers in this release (except
as specifically stated), our operations in Ukraine continue to be
affected by the conflict. We hope that there will be a peaceful and
amicable resolution and are doing everything we can to protect the
safety of our employees, while continuing to ensure the
uninterrupted operation of our communications, financial and
digital services.
The comprehensive sanctions on investment and
vendors in Russia and the ongoing conflict between Russia and
Ukraine have had a significant impact on the Company’s operations
and business plans in Russia and Ukraine and may continue to have a
significant impact on the Company’s operations and business plans
in Ukraine. During the six months ended 30 June 2023, we recorded
significant impairment charges related to the Russian operations.
However, we may need to record further impairment charges in the
future, which could be significant if the conflict continues or
escalates and as more information becomes available to management.
It is possible further impairment charges may rise to such a level
on an accounting basis as to require additional analysis of true
asset values in order to determine the true value of assets to be
compared to liabilities as outlined in the provisions of our debt
agreements.
Disclaimer
VEON’s results presented in this document are,
unless otherwise stated, based on IFRS and have not been externally
reviewed and audited. The financial information included in this
document is preliminary and is based on a number of assumptions
that are subject to inherent uncertainties and subject to change.
The financial information presented herein is based on internal
management accounts, is the responsibility of management and is
subject to financial closing procedures which have not yet been
completed and has not been audited, reviewed or verified. Certain
amounts and percentages that appear in this document have been
subject to rounding adjustments. As a result, certain numerical
figures shown as totals, including those in the tables, may not be
an exact arithmetic aggregation of the figures that precede or
follow them. Although we believe the information to be reasonable,
actual results may vary from the information contained above and
such variations could be material. As such, you should not place
undue reliance on this information. This information may not be
indicative of the actual results for the current period or any
future period.
This document contains “forward-looking
statements”, as the phrase is defined in Section 27A of the U.S.
Securities Act of 1933, as amended, and Section 21E of the U.S.
Securities Exchange Act of 1934, as amended. These forward-looking
statements may be identified by words such as “may,” “might,”
“will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,”
“intend,” “seek,” “believe,” “estimate,” “predict,” “potential,”
“continue,” “contemplate,” “possible” and other similar words.
Forward-looking statements include statements relating to, among
other things, VEON’s plans to implement its strategic priorities,
including operating model and development plans; anticipated
performance, including VEON’s ability to generate sufficient cash
flow; VEON’s assessment of the impact of the conflict surrounding
Russia and Ukraine, including related sanctions and
counter-sanctions, on its current and future operations and
financial condition; future market developments and trends;
operational and network development and network investment,
including expectations regarding the roll-out and benefits of
3G/4G/LTE networks, as applicable; spectrum acquisitions and
renewals; the effect of the acquisition of additional spectrum on
customer experience; VEON’s ability to realize the acquisition and
disposition of any of its businesses and assets and to execute its
strategic transactions in the timeframes anticipated, or at all;
VEON’s ability to realize financial improvements, including an
expected reduction of net pro-forma leverage ratio following the
successful completion of certain dispositions and acquisitions; our
dividends; completion of VEON’s sale of its Russian operations; and
VEON’s ability to realize its targets and commercial initiatives in
its various countries of operation.
The forward-looking statements included in this
document are based on management’s best assessment of VEON’s
strategic and financial position and of future market conditions,
trends and other potential developments. These discussions involve
risks and uncertainties. The actual outcome may differ materially
from these statements as a result of, among other things: further
escalation in the conflict surrounding Russia and Ukraine,
including further sanctions and counter-sanctions and any related
involuntary deconsolidation of our Russian and/or Ukrainian
operations; demand for and market acceptance of VEON’s products and
services; our plans regarding our dividend payments and policies,
as well as our ability to receive dividends, distributions, loans,
transfers or other payments or guarantees from our subsidiaries;
continued volatility in the economies in VEON’s markets;
governmental regulation of the telecommunications industries;
general political uncertainties in VEON’s markets; government
investigations or other regulatory actions; litigation or disputes
with third parties or regulatory authorities or other negative
developments regarding such parties; the impact of export controls
and laws affecting trade and investment on our and important
third-party suppliers' ability to procure goods, software or
technology necessary for the services we provide to our customers;
risks associated with our material weakness in internal control
over financial reporting; risks associated with data protection or
cyber security, other risks beyond the parties’ control or a
failure to meet expectations regarding various strategic
priorities, the effect of foreign currency fluctuations, increased
competition in the markets in which VEON operates and the effect of
consumer taxes on the purchasing activities of consumers of VEON’s
services.
Certain other factors that could cause actual
results to differ materially from those discussed in any
forward-looking statements include the risk factors described in
VEON’s Annual Report on Form 20-F for the year ended 31 December
2022 filed with the U.S. Securities and Exchange Commission (the
“SEC”) on 24 July 2023 and other public filings made from time to
time by VEON with the SEC. Other unknown or unpredictable factors
also could harm our future results. New risk factors and
uncertainties emerge from time to time and it is not possible for
our management to predict all risk factors and uncertainties, nor
can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements. Under no circumstances should the
inclusion of such forward-looking statements in this document be
regarded as a representation or warranty by us or any other person
with respect to the achievement of results set out in such
statements or that the underlying assumptions used will in fact be
the case. Therefore, you are cautioned not to place undue reliance
on these forward-looking statements. The forward-looking statements
speak only as of the date hereof. We cannot assure you that any
projected results or events will be achieved. Except to the extent
required by law, we disclaim any obligation to update or revise any
of these forward-looking statements, whether as a result of new
information, future events or otherwise, after the date on which
the statements are made, or to reflect the occurrence of
unanticipated events.
The sale of VEON’s Russian operations is subject
to customary closing conditions, including receipt of requisite
regulatory approvals and licenses from relevant government
authorities. There can be no assurance that the requisite approvals
will be received or that such sale will complete.
Furthermore, elements of this document contain
or may contain, “inside information” as defined under the Market
Abuse Regulation (EU) No. 596/2014.
Contact Information
VEONInvestor RelationsNik Kershaw
ir@veon.com
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