VEON Ltd. (NASDAQ:VEON) Q3 2023 Earnings Call Transcript

As I said earlier, this is new VEON, VEON 2.0, a stronger company that is running harder and faster. Going through our portfolio of growth trends, over the last two years, we have delivered an average of 17% cumulative average growth rate across our markets. Let me put this in context. As we have successfully executed our 4G-led multiplay strategy, growth has accelerated in 2022. Ukraine, a country at war, has grown 13%. Pakistan and Bangladesh both experienced macro volatility and hence we have also grown double digits. This is not a quarterly one-off. This is a structural growth in our markets where 4G penetration remains still low and nearly half of the potential customers are still using feature phones. Growing in emerging markets is never easy, and many of you will wonder how much of our growth is because of inflation.

As you can see above, across the group, we have consistently grown well above inflation and believe that trend can continue. Group A symbolizing all the markets, including markets at war, Group B, markets without war, and both has been delivering consistently above inflation growth rates because we are able to tap and penetrate into adjacent markets and digital services. Let me give you a brief snapshot across the portfolio of service revenue and EBITDA growth among countries. In Ukraine, Kyivstar delivered another quarter of double-digit local currency growth. This is a testament to the team’s hard work to keep Ukraine and Ukrainians connected, while also ensuring healthy business performance. Across our Central and South Asian markets, year-on-year, local currency service revenue growth range from 15.2% in Bangladesh to 29% in Pakistan.

Looking at EBITDA performance excluding Uzbekistan, local currency EBITDA grew at rates ranging from 18.9% in Bangladesh to 36.4% in Pakistan. And EBITDA expanded faster than revenue in every market. Uzbekistan was negatively impacted this quarter by extraordinary one-offs that we will later discuss. Shifting gear. Let me share our 4G and multiplay highlights. These are the key metrics driving our operational and financial performance and underpin our 4G for all and digital operator strategies. Year-on-year growth in 4G users demonstrates the continued impact of our 4G for all strategy, with 4G users up almost 13% year-on-year to 92 million in Q3. 4G penetration also rose 7.1 percentage points to 58.8, bringing us closer to our group target of 70.

This growth in 4G users has been underpinned by investments into expanding our 4G network. The third quarter saw us increase the number of 4G sites by 14% year-on-year, reaching a total of 61,000 sites. In Q3, multiplay users grew 23.1% year-on-year to almost 30 million, representing almost 24% of the user base. Local currency revenue in this segment grew almost 42% year-on-year to reach $85 million, representing 42% of our B2C revenues. We see the compounding effect of our dual 4G for all and digital operator strategies in our multiplay segment. Expanding 4G access enables us to convert more single play users to higher ARPU doubleplay and multiplay subscribers. They use both 4G connectivity and our digital services, spend more time with us, entertain with us, bank with us, educate themselves and result in less churn and drive higher revenue generation.

Moving on to the country performance section, we will start with Kyivstar, as usual. VEON and Kyivstar are committed to supporting Ukraine, both in our everyday efforts to keep Ukraine and Ukrainians connected, and with our long-term commitment to invest in rebuilding Ukraine’s mobile telecoms infrastructure. It is a result of Kyivstar’s success that Secretary Pompeo has joined our Board as well. In the third quarter, nearly a hundred percent of Kyivstar network was operational in Ukraine-controlled territories. While CapEx declined 11% year-on-year, we connected 54 new settlements during the third quarter and continue to install or upgrade base stations. Kyivstar has also made significant progress to ensure network resilience with power storage and generation capacities installed across key sites.

Kyivstar continues to grow its 4G user base, which reached almost 14 million in the third quarter, rising 57% of the user base. While Ukraine remains an extremely challenging operating environment, Kyivstar delivered double digit local currency revenue and EBITDA growth, supported by rising 4G penetration and increases in both doubleplay and multiplay users. In addition to our plans to invest in rebuilding Ukraine’s telecom infrastructure, we are committed to helping Ukrainian communities tackle the challenges they face right now. In the third quarter, Kyivstar donated UAH 57 million to a range of initiatives, including demining of the arable land and recovery projects, including hospitals. Helsi is the furthest along in terms of our digital healthcare offerings across our portfolio.

It provides online consultations with medical professionals and is a vital part of Kyivstar’s digital operator portfolio. It provided 1.9 million appointments in the quarter alone and serves 26 million users, virtually the entirety of the Ukrainian population that has online access. Helsi provides an example of what we are in the process of building across our portfolio. Let me pause here for a second and share with you a few points regarding Kyivstar. VEON is the owner of Kyivstar. We are fully committed to Ukraine, the Ukrainian people, and their future. We are a vital provider of communication and digital services to the country, which would not be possible without us. We will do everything in our power to make sure that our shareholders are protected.

We have a very robust internal effort to safeguard our interests and those of our shareholders. We are actively engaged with Ukrainian officials, a delegation from VEON, including myself, visited Kyiv recently, and this constant coordination will continue. We are using all resources alongside various government and international institutions to protect and preserve the rights of VEON and the rights of international investors. Moving to Pakistan, Jazz, our operating company in Pakistan gained market share and further accelerated its growth despite the challenging macroeconomic environment. Jazz’s successful execution of our digital operator strategy combined with disciplined cost control, helped drive revenue growth of 27% and EBITDA growth of 36% year-on-year.