VEON might not be done with digital transformation, but the company is certainly no longer shouting it from the rooftops.

The most notable thing about the operator's latest results update was the focus on good old-fashioned core telco metrics, and how little it brought up digital at all. The vision, said acting CEO and Executive Chair Ursula Burns, is to be a "lean, efficient, emerging markets-focused connectivity and Internet services business." Leanness and connectivity, it would seem, take precedence over anything more dramatic.

It all points to a markedly different approach from that of Jean-Yves Charlier, who quit as VEON CEO in March with his "digitalization" plans looking ragged. (See VEON CEO Quits Amid Investor Gloom and VEON's Digital Overhaul Much More Than Rebranding.)

Figure 1: Kingmaker? Russian oligarch Mikhail Fridman sits on the board of VEON as the chairman of LetterOne, the operator's biggest shareholder.

Since then, the Amsterdam-headquartered operator, which serves around 240 million customers in Russia and various emerging markets, has dropped all mention of initiatives once deemed critical. (See VEON: When Transformation Goes Bad.)

Those include a mobile app announced in early 2017, to accompany VEON's name change from VimpelCom. That app was supposed to become VEON's main touchpoint with customers and a way to support new services developed with partners like MasterCard and Red Bull. But it had only 8.3 million customers at the end of 2017, when VEON last provided an update.

Inside the company, there appears to be some recognition that too much time was spent promoting the mobile app last year, with not enough comment on other digital activities, including investments in a data management platform, business support system (BSS) and enterprise support system. VEON has also had little to say about its network functions virtualization (NFV) project with ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). (See ZTE ban and Iliad entry blow Wind Tre of course.)

Given the Chinese vendor's near-death experience, after it was banned from buying US components, that is not such a surprise. But no other initiatives came up during today's earnings call on second-quarter results. And there was scant reference to any of them in the financial documentation. In fact, only the BSS project, a $1 billion deal with Ericsson AB (Nasdaq: ERIC), was acknowledged: Djezzy, VEON's relatively small Algerian subsidiary, has now migrated to this platform, the operator said. Georgia appears to be the only other market in which a similar migration has occurred. (See ZTE Racks Up $790M Q1 Loss on US Ban.)

The BSS project seems to have proven a lot more challenging than VEON expected. Its original goal in June 2016 was to replace legacy IT systems in 11 national markets with the Ericsson technology. "We have a pretty clear plan and believe that in a two- to three-year timeframe we should be through with the major steps of the transformation," said Yogesh Malik, VEON's chief technology officer, at the time. Meeting those targets now looks tough. (See VimpelCom Aims for BSS Overhaul by 2019.)

Next page: Don't mention digital

Don't mention digital
Other than in the full name of Banglalink, VEON's Bangladeshi business, the word digital, previously bandied around like a new greeting, turns up only once in VEON's earnings presentation.

"The 'digital agenda' gets a cursory mention on the list of near-term priorities in the presentation but is at the bottom of a list of more pressing issues such as finding a new CEO," says James Crawshaw, a senior analyst with Heavy Reading.

While the search still goes on, that incoming CEO will probably not have Charlier's freedom to plot a new course. "The moves we are making and the strategic direction we've set, both in the portfolio and the organizational structure, are areas I do not expect to change when we appoint a permanent CEO," Burns told analysts on today's earnings call. "These are logical moves vetted with the board and management team … The new CEO will add some skills around the edges, but the strategy and direction will be the same."

VEON's board, of course, includes Mikhail Fridman, the Russian oligarch and the chairman of LetterOne, which -- with its 47.9% stake -- is VEON's biggest shareholder. Fridman's alleged ruthlessness and activism are the stuff of corporate legend, and his battles with UK oil giant BP in Russia have been well chronicled in recent years. He seems likely to have the keenest interest in who succeeds Charlier.

After the transformation mistakes of the past, VEON's current priority is to double down on the main connectivity business and slash costs to improve profitability, says Alex Kazbegi, an analyst with Russian investment bank Renaissance Capital.

"All the money spent before has gone nowhere," he said in comments emailed to Light Reading. "They are very lucky to have sold Italy and are now mostly cost cutting, focusing on core emerging and frontier markets and paying a decent dividend."

The sale of its 50% stake in Italy's Wind Tre has been welcomed by analysts worried that new entrant Iliad is now "killing the market," in the words of Kazbegi. The divestment should reduce VEON's ratio of net debt to earnings (before interest, tax, depreciation and amortization) to about 1.7, although investment activity in Pakistan and Bangladesh, where VEON aims to buy out local partners, will lift it to 1.8. (See Iliad Grabs 1M Customers by Day 50 of Italian Odyssey.)

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

Despite an array of competitive and regulatory challenges, VEON is performing well at an operational level in most markets. Battered by currency headwinds, its sales fell 6.1% year-on-year in the second quarter, to about $2.3 billion, while EBITDA sank 8%, to $857 million. But on a purely organic basis, sales were up 3% and EBITDA rose 4.8%, the company said.

VEON's net loss, meanwhile, narrowed to $138 million from $258 million a year earlier, when it was hit by some impairment charges. Strip out discontinued operations, and it turned a small profit of $32 million, compared with a loss of $173 million a year earlier.

Efforts to cut costs are also proceeding well. Corporate expenses dropped 43% in the second quarter, to $54 million, and VEON expects annual costs to halve between 2017 and 2019, to about $216 million. Employee numbers fell by 2,000, or about 5% of total headcount, in 2017. And some management restructuring should help in future. All of the operating units now report to Kjell Johnsen, VEON's chief operating officer. Aleksandr Komarov, the CEO of Beeline Kazakhstan, is now in charge of Ukraine's Kyivstar as well, with Peter Chernyshov, the former Kyivstar CEO and head of Eurasia, leaving in the shake-up. Aamir Ibrahim's sole position is now CEO of Pakistan's Jazz. Previously, he was also head of emerging markets.

But if digitalization has slid down the agenda, it has not dropped entirely out of sight. The looming departure of Christopher Schlaeffer, VEON's chief digital officer, means the operator's digital strategy is now rudderless, and raises questions about its future digital direction. Schlaeffer did not respond to a message enquiring about the reasons for his move. Yet the mobile app, BSS and NFV initiatives are still afloat, and VEON is seeking a replacement for Schlaeffer.

Without another strategic turn, or a surprising surge of digital confidence, that individual may end up keeping a very low profile.

— Iain Morris, International Editor, Light Reading