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Rudderless VEON Keeps Digital on Down-Low

Iain Morris
8/2/2018
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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

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James_B_Crawshaw
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James_B_Crawshaw,
User Rank: Blogger
8/2/2018 | 2:31:49 PM
Strategic turn
I think the problem here lies in the renaming from Vimpelcom to VEON. If they change the name to something like Eranu or perhaps Uvavu then I think the whole digital transformation thing could work out. 

https://youtu.be/iNvR_ICKc5c
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