Exploring VEON Results: no dividends with good results

Exploring VEON Results: no dividends with good results

Exploring VEON Results: no dividends with good results


Sales structure

Veon's main activities are related to telecommunication services, which the company provides in eight countries. The most important are Russia, Pakistan, Ukraine, Kazakhstan and Bangladesh, since they bring in total to the holding 96,5% of all income.

Russia. Key VEON segment, which brings to the holding 50% income. The main brand is Beeline. Over the past few years, financial results upset shareholders due to the departure of VEON from the top three mobile operators. For this reason, the company has been looking for a buyer for its Russian business for several years., but so far it has been possible to sell only part of it - the tower infrastructure.

In the second quarter of 2022, the Russian division showed mixed performance: sales in local currency decreased by 0,8% against the background of a reduction in the mobile audience on 6%, and in dollar terms, revenue, vice versa, increased by 12,2%, to $1.053 billion, thanks to the strengthening of the ruble.

Pakistan. An emerging market with great prospects, where more than half of the country's citizens are younger 24 years. Main brands — Jazz, the country's largest mobile operator, and JazzCash, a digital payment platform with 16 million active users.

During the reporting period, the local currency segment was able to maintain double-digit growth rates: revenue increased by 11,1%, to 63 billion Pakistani rupees, thanks to 8% growth of the mobile audience, while in dollar terms, the indicators decreased by 12%, to $0.325 billion, due to the devaluation of the rupee in the second quarter.

Ukraine. VEON's third most important geographic business division. The main brand is Kyivstar. The total audience of the segment is almost 25 million active users.

Ukrainian business presented neutral results: year-on-year sales were virtually unchanged at $0.252 billion, the total audience decreased by 4%, but at the same time on 11,9% the number of users has increased, who use Kyivstar 4G infrastructure.

Kazakhstan. A small fast-growing segment with Beeline as the main brand. Besides, the company develops the Simply digital banking platform, Online TV BeeTV and the application "My Beeline". The division's audience is 10.3 million users.

Kazakhstan segment showed an increase in financial results in local currency by 20%: sales increased by 20,2%, up to 70.716 billion tenge, amid strong demand for mobile services in the country. In dollar terms, revenue increased by 16,3%, to $0.160 billion.

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Bangladesh. Another growing market for VEON, which is at an early stage of development of its mobile and digital services. The main brands are the mobile operator Banglalink and the free video platform Toffee.

Segment revenue increased by 6,3% in dollar terms and on 11,1% in local currency due to the growth of the user audience, rapid expansion of 4G networks and improvement of the quality of data transmission services after the acquisition of additional frequencies.

Sale of assets. In August, VEON announced, that he finally closed the deal to sell his stake in the Algerian division: for 45.5% of the local operator Djezzy, the holding received $682 million. Besides, management got rid of the Georgian segment for $ 45 million.

Sales structure by geography, billion dollars

2к2021 2к2022 Change in dollars Change in local currency
Russia 0,939 1,053 12,2% −0,8%
Pakistan 0,37 0,325 −12,1% 11,1%
Ukraine 0,257 0,252 −2% 3,9%
Kazakhstan 0,137 0,16 16,3% 20,2%
Bangladesh 0,14 0,14 6,3% 11,1%
Uzbekistan 0,047 0,056 18,7% 25,2%
Georgia 0,009 0,007 −19,8% −27,2%
Kyrgyzstan 0,01 0,012 16,2% 12,1%
Corporate expenses −0,008 −0,006 32% 32%
total revenues 1,902 2,008 5,6% 6%


VEON's net profit in the second quarter of 2022 increased by 43,5%, to $0.183 billion, thanks to the sale of the Algerian division: holding additionally recorded an income of $ 0.061 billion. Without it, the result would have been at the level of last year - $ 0.123 billion.

The company's EBITDA increased by 13% in dollar terms and on 14,1% in local currencies on the back of double-digit growth in almost all major geographical divisions. The dynamics of each segment is as follows:

  1. Russia: +11,6%.
  2. Pakistan: +19,8%.
  3. Ukraine: −4,8%.
  4. Kazakhstan: +26,9%.
  5. Bangladesh: +3,3%.
  6. Uzbekistan: +165,6%.
  7. Georgia: −32,7%.
  8. Kyrgyzstan: −57,7%.

Key financial results of the company, billion dollars

2к2021 2к2022 The change
Revenue 1,902 2,008 5,6%
EBITDA 0,808 0,913 13%
EBITDA margin 42,5% 45,4% 2,9 P. P.
Net profit 0,183 0,127 43,5%
FCF 0,040 0,017 −23%
net debt 7,780 9,969 28,1%

Arguments for and against

VEON has two key growth drivers. The first is the further development of digital services in Pakistan, Kazakhstan, Bangladesh and Uzbekistan, which will help raise the ARPU indicator to the Russian level. The company's ARPU in 2021:

  1. Russia - 79,95 $.
  2. Pakistan — 19,35 $.
  3. Ukraine — 40,26 $.
  4. Kazakhstan — 57,47 $.
  5. Bangladesh — 16,06 $.
  6. Uzbekistan — 27,32 $.
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The second driver is infrastructure monetization. VEON intends to monetize its cell towers in Pakistan within 9-12 months, Ukraine, Kazakhstan, Bangladesh and Uzbekistan, as before in Russia. Company's current tower assets, which are for sale:

  1. Pakistan – 10.5 thousand towers.
  2. Ukraine — 12.5 thousand towers.
  3. Kazakhstan — 4.4 thousand towers.
  4. Bangladesh – 5.5 thousand towers.
  5. Uzbekistan — 3.7 thousand towers.

If you focus on past VEON transactions, then the approximate price level for one cell tower can be in the range from 63 thousand to 72 thousand dollars. In 2017, the company agreed to sell 13,000 cell towers in Pakistan for $940 million., and in 2021 gave a similar business in russia for $ 970 million, the buyer then received 15.4 thousand towers. Estimated value of VEON assets to be sold:

  1. Pakistan - $661 million to $756 million.
  2. Ukraine — 787—900 million dollars.
  3. Kazakhstan — 277-317 million dollars.
  4. Bangladesh - $346 million to $396 million.
  5. Uzbekistan — 233—266 million dollars.
  6. The final result is 2.3-2.6 billion dollars.

The main problem of VEON is the lack of dividend payments due to infrastructure difficulties. International holding with an office in the Netherlands, probably, will not be able to pay dividends to shareholders due to restrictions from the Central Bank of the Russian Federation and European governments.

What's the bottom line?

VEON showed good financial results in the second quarter of 2022: revenue increased by 5,6%, EBITDA - on 13%. In addition, the holding's management announced the sale of its infrastructure assets: Up to 35 thousand cell towers can be sold in the following 12 months with potential revenue of $2.6 billion.

Is it worth looking at the purchase of VEON shares now?, especially after that, how the holding's quotes have fallen from 130 to 130 since the beginning of the year 40 R? In the current situation, it will be difficult for the company to restore its capitalization., as this will require the lifting of infrastructure sanctions, That, probably, will not go anywhere in the medium term. Therefore, it is safer now to buy shares of other telecommunications companies..

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