Several catalysts on the horizon for VEON

At the results, management was upbeat about the prospects for 2025. VEON plans to list its Ukrainian Kyivstar business in H225, which will allow it to crystallise value in a potentially fast-recovering business that has excellent potential for the coming five years, assuming the war in Ukraine is resolved. Further operational entities may be listed in the future, should conditions be favourable and VEON see the value in such a move. VEON has resumed its buyback, committing to deploy US$35m in the second tranche of its US$100 programme. In addition, the tax hikes in Bangladesh have now been reversed, and, while we do not assume that H125 will see year-on-year growth in Bangladesh, it is possible that H225 will see a sequential recovery.

Upgrading EPS for 2025e through 2027e

We have raised our 2025e adjusted EPS by 7.5% to US$7.41, 2026e by 10.4% to US$8.68 and 2027e by 6.7% to US$10.67. Our new estimates assume similar year-on-year growth in 2025 compared to our previous estimates, factoring in potential further disruption in Bangladesh offset by Ukraine, where we have raised our EBITDA estimates for 2025 and 2026 by 3.4% and 8.3%, respectively.

Valuation: DCF valuation gives fair value of US$60.4

We value VEON using a DCF, as its asset-light strategy is likely to drive strong growth in free cash flow. Using a WACC of 17.0%, our DCF delivers a fair value of $60.4/share, implying 32% upside. We believe our estimates may have scope for upside, while the improving tax situation in Bangladesh and IPOs of Kyvstar and other subsidiaries are potential positive catalysts. VEON trades on 3.8x FY26e EV/EBITDA, 7% below the peer average, and 7.7x FY26e P/E, 23% below peers. Over the last six months, VEON shares rallied 50% and we believe they could continue to close the gap to our US$60.4 fair value.

Investment summary

Q424 results were a solid beat versus our estimates

VEON reported Q424 revenue of US$998m, 1.2% ahead of our estimate, Q424 EBITDA of US$408m, 11.1% ahead of our estimate and Q424 EBIT of US$225m, 27.9% ahead of our estimate, due to lower-than-expected group and interdivisional charge. Q424 net income was US$81m, a full 43.6% ahead of our estimate. FY24 capital expenditure was US$743m, 18.6% of FY24 sales and above our previous estimate of US$619m. We have raised our capex estimates for 2025e and 2026e to US$694m and US$679m, from US$635m and US$654m, respectively. Q424 revenues were marginally above our estimates in most end-markets.

‘A digital services company with a telecoms licence’

At end 2024, VEON announced that it had nearly 160m active customers and it has been aggressively increasing its digital services customer base. In 2024, VEON generated US$4,004m in revenue, and its direct digital revenues contributed US$460m, 11.5% of total revenue. On the FY24 results conference call, CEO Kaan Terzioğlu described VEON as a ‘digital services company with a telecoms licence’, and we believe this is the correct way to look at VEON. The company continues to pursue services that are aligned with VEON's ‘4G for All’ and digital operator strategies, which aim to convert single-service users into multiplay subscribers; an approach that has led to increased customer retention and higher revenue generation.

Uklon acquisition marks a further step into the realm of digital services

On 19 March 2025, VEON’s subsidiary Kyivstar announced the acquisition of Uklon, Ukraine’s leading ride-hailing and delivery platform. This strategic move marks Kyivstar’s expansion into new digital consumer services, complementing VEON’s digital strategy. Uklon operates in 27 cities across Ukraine, partnering with over 100,000 drivers. In 2024, the company facilitated more than 100m rides and over 3m deliveries. Additionally, Uklon expanded its operations into Uzbekistan in 2023, entering the delivery business and launching enterprise services like Uklon AdTech.

Starlink partnership will provide synergies

In addition to the Uklon acquisition, VEON has added a Starlink partnership to its digital services portfolio. Kyivstar partnered with Starlink to provide direct-to-cell satellite connectivity in Ukraine, with initial messaging services expected to be operational by Q425. Furthermore, VEON is advancing plans to list Kyivstar on the Nasdaq Stock Market through a business combination with Cohen Circle Acquisition Corp. I, aiming for completion by Q325. This move is set to make Kyivstar the first Ukrainian company listed in the US, with VEON retaining at least an 80% ownership stake post-listing.

Kyivstar IPO, and potential for more operating company listings

VEON has committed to an IPO of its Ukrainian Kyivstar business in H225 and, at the FY24 results, CEO Kaan Terzioğlu stated that the company is committed to listing other operational entities, should it provide a benefit to the company and should the market conditions be appropriate. Kaan has made it clear that the next business to be listed after Kyivstar would be the Pakistan entity, which has a mature digital finance platform and a strong number one market position. We think it is unlikely that VEON would seek to list its Bangladeshi business ahead of a more convincing stabilisation of the political situation in the country. However, a recovery in Bangladesh would clearly be an additional potential positive catalyst in 2025.

Options for capital returns

The US$100m share buyback that VEON announced on 31 July 2024 is to take place over several tranches. The first US$30m was executed following the July 2024 announcement, and the second US$35m was announced at the FY24 results on 20 March 2025. There remains a further US$35m to be spent on the authorised buyback. On the FY24 conference call, VEON’s CEO pointed out that capital returns to shareholders could take several forms. No commitment was made regarding the resumption of a dividend. The company has previously said that it intends to pay 50% of its free cash flow to equity in the form of dividends, but we believe that the company may prefer to return this cash in the form of buybacks.

Bangladesh should see a return to stability through 2025 and 2026

Bangladesh’s partial tax rollback indicates a more practical regulatory stance

The year 2024 was a particularly difficult year for Telecom operators in Bangladesh, and Bangladesh is an important contributor to VEON group, representing 13% of 2024 revenues and 11% of EBITDA in 2024. The country is currently politically tense and provides some uncertainty for VEON going forward into 2025. At its Q324 results on 14 November 2024, VEON announced that its subsidiary Banglalink was facing issues due to the 6 June announcement by the National Board of Revenue (NBR) that the supplementary duty on mobile services would rise. In the budget for the FY24–25, the Bangladeshi government increased the VAT on the purchase of SIM cards from BDT200 to BDT300. This is a one-time tax that consumers pay when they purchase a new SIM or replace an existing one. Additionally, the supplementary duty on SIM-enabled telecommunication services was raised to 20%, marking a significant shift from the previous 15%.

More recently, in January 2025, the NBR of Bangladesh revised the supplementary duty (SD) on mobile phone services, reducing it from 23% back to 20%. This adjustment effectively reversed the earlier 3% increase. Additionally, the NBR withdrew the 10% supplementary duty on internet service providers (ISPs). These changes were part of broader efforts to rationalise tax rates and alleviate financial pressures on consumers. The tax changes contributed to VEON’s revenues falling 9% y-o-y in 2024 and EBITDA falling 16% y-o-y, with the second half of the year feeling the brunt. H224 revenues were down 18% y-o-y, and EBITDA was down 23% y-o-y. We see the cancellation of the previous increases as positive and look for normalisation of the situation through 2025 and 2026.

The social and political backdrop remains somewhat uncertain

The Awami League government, under Prime Minister Sheikh Hasina, continues to maintain a firm hold on power but opposition parties, including the Bangladesh Nationalist Party (BNP), are actively contesting electoral legitimacy and democratic transparency. Political polarisation has increased, with occasional street demonstrations and protests reported in the press. Interest rates are currently hovering around 10% which has led to rising living costs, contributing to social discontent among the population. Issues such as urbanisation pressures, youth unemployment (estimated at approximately 11%) and demands for improved public services dominate public discourse. General elections were held in Bangladesh on 7 January 2024 with the Awami League, winning the election for the fourth consecutive time with less than 10% of the eligible voters voting according to an Election Commission.

Ukraine may see big changes in 2025

President Trump appears determined to mediate a swift end to the conflict

Since our last note on 10 February 2025, President Trump has made a concerted effort to engage with President Zelensky and European stakeholders to effect a swift end to the war in Ukraine. In 2024, Ukraine represented 23% of revenues and 31% of EBITDA. We believe that the likelihood of an end to the war in 2025 has risen in that period, and have consequently revised our sales and EBITDA estimates for 2025 and 2026. An end to war would likely involve the return of a meaningful proportion of the Ukrainian population that emigrated since the start of the war, and potentially an influx of people involved in the rebuilding of the country. This would clearly be a positive for VEON.

We summarise the key news since our last note below:

• 18 March 2025: following a call with President Putin, President Trump reported that they had agreed on an immediate ceasefire concerning strikes against energy infrastructure in Ukraine. He described the conversation as ‘highly productive,’ emphasising mutual efforts to end the conflict. During a phone call with President Trump, President Putin agreed to a temporary 30-day halt to attacks on Ukraine’s energy infrastructure but did not commit to a full ceasefire. He emphasised the need to eliminate the root causes of the conflict and expressed readiness to negotiate further.
• 19 March 2025: President Putin agreed in principle to a US-proposed 30-day ceasefire in Ukraine but highlighted that more discussions were needed to finalise the terms and ensure lasting peace. He expressed support for the idea but noted the necessity of addressing issues with US counterparts.
• 20 March 2025: President Trump announced that the US would soon sign a minerals and natural resources agreement with Ukraine, aiming to bolster US production of critical minerals and provide financial assistance to Kyiv. He noted that recent talks with Presidents Putin and Zelensky had led to a tentative 30-day pause in attacks on energy infrastructure.
• 25 March 2025: in a news conference, President Zelensky confirmed that Ukraine had agreed to stop using military force in the Black Sea as part of efforts to de-escalate the conflict.

Financials

Following a challenging 2024, VEON’s performance should stabilise in 2025

As the issues in Bangladesh are in the process of being resolved, and the difficult 2024 in Ukraine looks set to transition into a potential cessation of the conflict, we believe that overall 2025 should see a broadly stable financial performance versus 2024. We estimate that revenue will grow 2.0% y-o-y in 2025, but then accelerate in 2026 with 3.9% y-o-y growth. We expect a slightly better EBITDA performance, with 2.7% y-o-y growth to US$1,737m in 2025, and then 9.1% growth to US$1,896m in 2026. Our new reported EPS estimates look for a slight fall year-on-year to US$4.85 in 2025, US$5.98 in 2026 and then growth of 20% to US$7.83 in 2027. Our normalised EPS estimates strip out the US$148m in one-offs that boosted 2024 earnings, and are US$7.41 and US$8.68 in 2025e and 2026e, respectively, up 7.5% and 10.4% versus our previous estimates.

Valuation

VEON stock remains at a discount to EM peers on EV/EBITDA and P/E

On 3.8x 2026e EV/EBITDA and 3.4x 2027e EV/EBITDA, VEON’s valuation is 7% and 16%, respectively, below the averages for our selected emerging market (EM) and frontier telecom universe. On P/E, VEON trades on 7.7x 2026e and 5.8x 2027e, 23% below and 37% below the peer group averages. Assuming VEON resumes paying a dividend on 2026 earnings, at a rate of 50% of free cash flow to equity, as guided by the company, it would have a 5.5% 2026e yield, versus 7.1% for the EM telecom universe.

DCF valuation gives a fair value of $60.4 per share

VEON’s free cash flow was somewhat depressed in 2024, but we expect it to recover strongly, from $845m in 2025 to $1,369m in 2030. Its asset-light strategy, as well as the stabilisation and recovery of its core markets in Ukraine, Pakistan and Bangladesh, will take until 2027 to complete. We therefore believe that a discounted cash flow (DCF) with an explicit period to 2030, and a terminal value (TV) period thereafter, is a good way of capturing the value of the assets and strategy. With operations exclusively in frontier markets, it is important to capture the risks associated with the markets and the potential for (continued) long-term depreciation of the currencies relative to VEON’s reporting currency, the US dollar. Our DCF yields a fair value of $60.4/share.

Our key DCF assumptions are as follows:

• Risk-free rate: we use a base of 10-year treasury bonds, which currently trade on a yield of 4.6%
• Cost of debt: we apply a 490bp premium to 10-year US treasury bond yields to arrive at a pre-tax cost of debt of 9.5%, which is the current yield of VEON’s corporate bond.
• Equity risk premium: we use an average of the equity risk premia for the markets that VEON operates in, weighted by EBITDA contribution, as supplied by NYU Stern.
• Country risk premium: we use an average of the country risk premia for VEON’s markets, again weighted by EBITDA, from the NYU Stern database.
• Beta: we use a Beta of 1.4x. VEON is well-diversified across multiple geographies with no significant US-based business.
• Terminal value growth: we assume 3.5% long-term growth.