VEON Ltd., a global digital operator that provides converged connectivity and online services, announces a trading update for the third quarter and nine months ended 30 September 2022, including selected financial and operating results:
In 3Q22, VEON recorded USD 2,077 million in total revenues, representing +3.6% YoY growth in reported currency (+3.4% YoY in local currency). Service revenues saw a +7.9% YoY increase in reported currency (+7.8% YoY in local currency) and reached USD 1,968 million. EBITDA of USD 889 million was flat YoY both in reported currency (0.0% YoY) and local currency (+0.7% YoY). Capex of USD 404 million was 6.0% higher than in 3Q21, whilst capex intensity was 3.6 p.p. lower than last year (21.6%). Total cash and cash equivalents were USD 3.3 billion, with USD 2.6 billion held at the HQ level.
Commenting on the results, Kaan Terzioğlu said:
“In the third quarter we demonstrated once again the resilience of VEON Group, as our focus on 4G penetration and the digital operator strategy continued to deliver growth despite unprecedented macroeconomic and geopolitical challenges. This quarter, 4G users saw a 15.1% year-over-year increase, reaching 52.7% of our customer base, moving closer to our target of 70% 4G penetration. Growth in subscribers, higher 4G penetration and an expanded portfolio of digital services are driving solid revenue performance across our countries, while inflationary pricing and good cost management have enabled us to withstand tough headwinds, such as rising energy costs, changing tax regimes, natural disasters in Pakistan and the humanitarian crisis in Ukraine.
We continue to focus on our core priorities of protecting our people and delivering the essential humanitarian services of communication and connectivity. In line with our commitment to ensuring the long-term stability of the business, we have also further strengthened our liquidity position, with USD 3.3 billion in cash at the end of 3Q22, of which USD 2.6 billion was held at HQ level.“
3Q 2022 highlights:
- Revenue of USD 2,077 million, +3.6% YoY (+3.4% YoY in local currency)
- Service revenue of 1,968 million, +7.9% YoY (+7.8% YoY in local currency)
- EBITDA of USD 889 million, 0.0% YoY (+0.7% YoY in local currency)
- Capex of USD 404 million, capex intensity -3.6p.p. YoY
- Net debt / EBITDA of 2.41x versus 2.51x in 3Q21
- Total cash and cash equivalents of USD 3.3 billion, with USD 2.6 billion at Headquarters
- 203 million mobile subscribers, up 0.8% YoY
- 107 million 4G users, up 15.1% YoY, with 52.7% penetration of customer base
For 3Q22, VEON reported revenue growth in both reported and local currency, as well as stronger liquidity, with Group cash and cash equivalents of USD 3.3 billion as of 30 September 2022.
Group revenues increased by 3.6% YoY in reported currency terms (+3.4% in local currency). Growth in service revenues, up 7.9% in reported currency terms (+7.8% in local currency), was a key driver of the Group’s strong revenue performance. Non telecom related revenues in Russia continued to decline and constituted 7.9% of total Group reported revenue in 3Q22 versus 10.4% in 3Q21.
In 3Q22, Group EBITDA was flat YoY in reported currency terms (+0.7% in local currency), with Group EBITDA margin of 42.8% (-1.5 p.p. YoY). To protect the profitability margins of the business, we remain focused on implementing planned cost-efficiency measures across the Group and on implementing inflationary pricing.
Group EBITDA YoY performance was impacted by a number of extraordinary non-recurring items in 3Q22 and in 3Q21, as noted in the Country Performance section. Excluding these one-off items, Group EBITDA increased 1.9% YoY in local currency.
In 3Q22, we reported growth of 0.8% YoY in our subscriber base. The Group continued to focus on the overall customer experience in our 4G networks.
This supported the 15.1% YoY increase in our 4G users, which reached 107.1 million, with 14.1 million users added over the previous 12 months. 4G subscribers now account for 52.7% of our total subscriber base, up 6.5 p.p. from a year ago.
On the back of our growing 4G penetration, we have been able to expand our digital operator offerings across our operations. This has driven the growth of our multiplay customer base (+24.5% YoY), which reached 33.4 million during 3Q22. Multiplay customer ARPU is 4.3 times higher and churn is 2.4 times lower than single play voice-only customers.
Our financial services business in Pakistan, JazzCash, ended the quarter with 16.7 million MAUs, an increase of 20.0% YoY. In Bangladesh, our streaming business, Toffee, achieved the 7.0 million MAUs milestone (+11.0% YoY) with 3.3 million average daily users (+55.1% YoY) in 3Q22.
Group capex was USD 404 million, driven in particular by increased network investment in Ukraine, Kazakhstan, Bangladesh and Uzbekistan, in line with our growth strategy. At 21.6%, capex intensity continues to decrease (-3.6 p.p. YoY).
We closed the quarter with total cash of USD 3.3 billion, including USD 2.6 billion at the HQ level. Our operations are largely self-funding and do not require financing from the HQ to fund their operations, including capex.
In Ukraine, the team continued to keep the country connected, with around 90% of our radio network operational at quarter end. However, recent damage to Ukrainian power infrastructure has had an impact on network availability. Kyivstar’s revenues were up 5.2% in local currency (-18.8% YoY in reported currency) as the weakness in the Ukrainian hryvnia negatively impacted reported growth rates. Kyivstar’s 4G customer base grew 4.7% YoY, and our customers consumed more data, with usage rising 29.7% YoY. EBITDA was down 10.7% YoY in local currency (-31.1% in reported currency) in 3Q22. EBITDA performance was impacted by the change in revenue mix impacting margins, operational cost pressures, indexation of frequency fees, and by charitable donations and the staff care program, as Kyivstar continues to support its employees and the community.
Russia reported a 3Q22 revenue decrease of 6.1% YoY in local currency (+16.1% YoY in reported currency). Revenue was impacted by a 58.5% decline in equipment revenue due to lower device sales, while the YoY strength of the Russian ruble supported the growth in reported financial performance. 3Q22 mobile service revenue was up 2.1% YoY in local currency, as the continued growth in the 4G customer base drove mobile data revenue higher by 7.5% YoY in local currency. In Russia, EBITDA increased 7.3% in local currency (+32.7% YoY in reported currency). This marks the sixth consecutive quarter of EBITDA YoY growth in local currency.
Pakistan revenues increased 12.0% YoY in local currency (-17.1% YoY in reported currency), driven by strong growth in data revenue, despite the negative impact of the increase in withholding tax from 10% to 15% on 16 January 2022 and the further reduction in mobile termination rates in 2H22. The Jazz team continued to deliver balanced growth in subscriber base (+5.0% YoY) and ARPU (+4.3% YoY) in 3Q22. The weakness in the Pakistani rupee negatively impacted financial performance in reported currency. EBITDA in Pakistan declined 6.8% in local currency (-30.8%YoY in reported currency).
In Kazakhstan, revenues increased 23.1% YoY in local currency (+10.3% in reported currency), another quarter of strong growth supported by further expansion of our mobile customer base (+7.3% YoY), higher data usage (+18.8% YoY) and inflationary pricing of tariffs. This was the sixth consecutive quarter of local-currency revenue YoY growth in excess of 20%, while Beeline reached 69% 4G penetration in the customer base (+7.0 p.p. YoY). EBITDA increased 9.2% in local currency terms (-2.2% in reported currency).
In Bangladesh, Banglalink’s revenues increased 11.6% YoY in local currency (-1.4% YoY in reported currency). This was the second quarter of double-digit local currency revenue growth. Banglalink’s execution of its digital operator strategy, 4G focus and nation-wide expansion continues to deliver results, increasing the number of data and, in particular, 4G users, driving growth in data consumption. Banglalink demonstrated balanced expansion of its subscriber base (+6.4% YoY) and ARPU (+5.4% YoY) in 3Q22. EBITDA decreased 2.1% in local currency (-13.4% in reported currency).
In Uzbekistan, revenues increased 22.4% YoY in local currency (+19.2% in reported currency), a fifth consecutive quarter of double-digit local-currency revenue growth and a third consecutive quarter of local-currency revenue growth above 20%. This was driven by a 35% YoY expansion in the 4G subscriber base, and a solid increase in data revenues, which were 40.0% higher YoY. EBITDA in Uzbekistan increased 7.9% in local currency (+5.0% in reported currency).