(Bloomberg) — Veon Ltd., the third-largest mobile-phone provider in Russia, expects to see a smaller share of its business coming from that country over the next few years as it emphasizes growth in Central and Southeast Asia.
Chief Executive Officer Kaan Terzioglu has been in a tough spot with the war in Ukraine and subsequent sanctions imposed on Russia by the U.S., European Union and the U.K. The company receives nearly half of its revenue from the country and about 15% from Ukraine, where its towers have been destroyed and its offices turned into shelters.
“I think over time we’d expect to see more moderation of our Russian operations because our businesses in Kazakhstan, Bangladesh, Uzbekistan and Pakistan are really booming,” Terzioglu said in an interview from Veon’s headquarters in Amsterdam.
Veon was founded in Moscow in 1992 as VimpelCom, one of the nation’s first cellular-phone providers. Today it’s a Dutch-domiciled telecommunications giant serving over 217 million customers in nine countries. It’s the largest mobile operator in war-torn Ukraine.
Terzioglu sees the share of Veon’s revenue coming from Russia dropping below 30% over the next three years. He’s considering public stock offerings or private placements to accelerate growth in some of the company’s internet-related businesses in Asia.
Ukraine is Veon’s third-largest market with its Kyivstar brand. Managing both Kyivstar and the Russian Beeline businesses at the same time is “not an easy task but it’s a challenge we have coped with,” Terzioglu said, adding that the company has “taken enough measures in order to put necessary Chinese walls in between these operations.”
In Ukraine, 997 sites, or roughly 8% of Veon’s total network, are down due to energy losses and destruction of infrastructure because of the war.
“It is saddening to say that we have lost one employee in Bucha, but thanks to hundreds of employees like him we manage to keep our networks up and running,” Terzioglu said, adding that another employee is in custody.
The company employs 3,900 workers and doesn’t operate in areas that aren’t controlled by Ukraine. It converted its offices in the country into shelters and its employees have continued to work through the invasion to allow millions of Ukrainians to stay connected.
The company doesn’t have any plans to upstream any cash from its operations in Ukraine amid capital controls.
Debt Management
The company’s finances took a hit direct hit from Russia’s invasion of Ukraine. Revenue dropped by 0.4% to $1.82 billion in the first quarter after coming in last year at $7.8 billion. Earnings before interest, taxes, depreciation and amortization fell by 4% to $775 million in the same period and its stock has dropped by more than 60% since the start of the year.
The company said Thursday it will also report material impairment charges for assets in Ukraine and Russia during this year. Earlier this month, it transferred two group-level loan agreements with Sberbank and Alfa-Bank totaling 90 billion rubles to its Russian unit VimpelCom.
Still, it faces little threat in the near term as the company has $1.9 billion in cash against $1.2 billion in bond payments due by April of next year.
Of its total cash, $1.3 billion is parked at its headquarters with less than $100 million in Russia. Veon also has access to a revolving credit facility of about $700 million and expects its stake sale in Algeria’s Djeezy to bring in $682 million, according to its trading update.
Cash and undrawn credit at the holding-company level “should comfortably cover debt and other central costs through 2022, so there’s no near-term threat,” according to Bloomberg Intelligence analyst Tom Ward. But 2023 maturities of $1.2 billion at the holding company “may pose an issue,” he said.
Billionaire Sanctions
“We expect that this cash is enough to self-fund all the operations we have locally,” Terzioglu said. The company doesn’t expect to face any problems with international lenders due to sanctions.
LetterOne Investment Holdings, founded by Russian billionaire Mikhail Fridman, owns 47.9% of Veon. Fridman was recently sanctioned by both the European Union and the U.K., and stepped down from the boards of Veon and LetterOne.
“We have a clear policy of complying with the regulations,” Terzioglu said. “Neither me, nor any member of our management team or board members haven’t had any contacts with Mr. Fridman since he has resigned from our board.”
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