VEON sees green shoots after tough 2020

VEON, the emerging-markets operator that counts Russia as its biggest market, signaled that business showed signs of recovery in the latter half of 2020 after a coronavirus-blighted performance in the first six months of the year.

The group said growth on a local currency basis returned in the fourth quarter (Q4) of 2020. "Encouragingly, almost all operations saw improved year-on-year trends in the quarter compared to [the third quarter of 2020], demonstrating resilience to COVID-19 restrictions across our markets," VEON said.

In Q4 2020, revenue increased by 1.4% in local currency terms, but on a reported basis fell by 11.3 % year-on-year to US$1.99 billion. Group EBITDA for the quarter was also up 0.8% in local currency terms, "led in particular by the strong double-digit EBITDA growth from Ukraine and Kazakhstan," but fell 11.6% on a reported basis to $826 million.

According to co-CEO Kaan Terzioğlu, group revenue in local currency terms increased by 5% in December alone despite the significant drop in roaming.

In 2020 as a whole, group revenue fell 10% on a reported basis to $7.98 billion while EBITDA dropped 18.1% to $3.45 billion. VEON noted that full-year results were in line with guidance.

Serkan Okandan, Group CFO, said VEON has introduced new financial guidance for 2021, which anticipates low to mid-single-digit local currency year-on-year growth in both group revenue and EBITDA and capex intensity of 22-23%.

Okandan added that VEON will not be paying a dividend for the full year 2020 in line with its previous guidance. "Our immediate focus remains on prioritizing network and digital investment," he said. He indicated that a dividend might be possible for 2021, as the group continues to improve its results, portfolio and capital structure, although he stressed that the final decision will be made later this year by the board.

Keeping trim

As previously indicated, VEON has already been streamlining its portfolio and has also concentrated more decision-making responsibilities at the local operating companies. For example, the group has appointed CTOs at the nine operating companies (opcos) that will remain after the planned sale of its Armenian business.

VEON had recognized that its "one-size-fits-all" approach to the regional opcos was not the best way to go in terms of determining local digital strategies. It now allows the country operations to set their own agenda based on their better understanding of the local market. Following the sale of its subsidiary in Armenia to Team LLC for $51 million, VEON will be present in Algeria, Bangladesh, Georgia, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Ukraine and Uzbekistan.

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Co-CEO Sergi Herrero reiterated that VEON is constantly reviewing its portfolio. "We do that on a monthly basis. We are selling Armenia because we felt it was an operation where we were positioned to extract the maximum value," he said. Herrero also indicated that a decision will be made about the future of its Algerian business on July 1 this year.

Driving up 4G and setting towers free

VEON is maintaining a strong focus on the construction of its 4G network and said 38% of its total base is now served by 4G, with 80 million 4G subscribers out of a total subscriber base of 213.5 million. Total operational capex amounted to $1.89 billion in 2020, representing a capex intensity of 23.7% that was within guidance range.

Terzioğlu stressed that the aim is to increase 4G penetration to 70%-75%, although he did not provide a specific time frame.

He did expand on the group's plan to leverage its tower portfolio, which suggests that VEON is set to follow the example of Tier 1 operators such as Deutsche Telekom, Telefonica and Vodafone.

He described the group's portfolio of 50,000 towers as a "hidden" set of assets. The first step will be to establish dedicated business units in each country, with the aim of exploring the opportunities that these assets can generate for each individual market and for the group as a whole.

Herrero also stressed the ongoing focus on digital services and content to help drive growth. In Russia, for example, the group plans to retain its focus on three digital areas: FinTech, AdTech and entertainment. Beeline in Russia has already formed partnerships with Alpha Bank to sell co-branded services and with X5 Retail in the AdTech field. Beeline TV forms a core element of its entertainment strategy, meanwhile.

Other verticals include financial services, such as the JazzCash service in Pakistan; and e-commerce, with ShopUp in Bangladesh.

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— Anne Morris, contributing editor, special to Light Reading

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