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

VEON

Investor Relations

Nik Kershaw

ir@veon.com