VEON names new bosses as CEO Burns steps aside

VEON's Ursula Burns is stepping aside as CEO to make way for Kaan Terzioğlu and Sergi Herrero, who will split the leadership role following the latest management shake-up at the huge, emerging-markets operator.

Details of the appointments came as VEON, which serves more than 200 million customers internationally, reported a healthy increase in earnings for its 2019 fiscal year, thanks to the success of cost-saving activities. On a like-for-like basis, EBITDA (earnings before interest, tax, depreciation and amortization) rose 9.6%, to around $4.2 billion, with sales up 3.4%, to about $8.9 billion. VEON's net profit fell 11% after accounting changes, to $683 million, due partly to interest and tax payments.

The CEO appointments represent promotions for Terzioğlu and Herrero, who joined VEON in October as co-chief operating officers. Terzioğlu previously led Turkcell and is highly regarded in the telecom sector for his "digitalization" achievements there, while Herrero was formerly the global director of payments and commerce partnerships at Facebook. Burns remains as chairman of VEON.

The leadership change is the second in just two years, after Jean-Yves Charlier quit in March 2018 amid investor unhappiness with VEON's efforts to build its own digital platform. But while Charlier left abruptly under a cloud, the latest moves have a more positive feel and were planned for several months, according to a source close to the matter.

VEON's share price was trading up 2% this morning in Amsterdam, where the company is headquartered, and it has risen about 22% since Terzioğlu and Herrero joined.

In a separate move, VEON also today announced that Vasyl Latsanych would step down as CEO of Beeline Russia, its largest subsidiary that generates about half of its total revenues. Latsanych, who joined VEON in January 2018 from rival operator MTS, is to leave at the end of June. In its earnings statement, VEON said it would announce a successor "in due course."

While the operator gave no direct explanation for his departure, it acknowledges that the performance of the Russia business has been a disappointment, with "customer perception … still lower versus competitors."

Beeline lost 700,000 mobile customers last year and blamed under-investment in its mobile networks for the setbacks. It has been taking corrective action and has already seen improvements in recent months, but a full turnaround will take "several quarters," said Burns during an earnings update last November.

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Good results in other markets -- including Pakistan, Ukraine, Uzbekistan and Kazakhstan -- helped to offset the difficulties in Russia, and VEON is now guiding for low-single-digit growth in sales this year, on a local-currency basis, as well as mid-single-digit growth in EBITDA.

On the cost front, VEON expects 21-22% of its revenues to go into capital expenditure in 2020, down from about 23% in 2019. Investments will go mainly toward improving network coverage as well as ensuring VEON is compliant with Russia's new counter-terrorism law, dubbed Yarovaya, which requires the country's telecom operators to spend more on data storage.

VEON has been slashing corporate costs, closing retail stores in Russia and streamlining other parts of its business in its effort to bolster margins. Corporate costs fell 23% in 2019, to $277 million, said the company in its latest update.

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— Iain Morris, International Editor, Light Reading

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