AMSTERDAM, Nov. 4, 2019 /PRNewswire/ -- VEON Ltd. (NASDAQ:
VEON) (Euronext Amsterdam: VEON), a leading global provider of
connectivity and digital services, today announces results for the
quarter ended 30 September 2019.
KEY POINTS
- Revenue, EBITDA and equity free cash flow (excluding licenses)
tracking in line with our full year 2019 guidance
- Underperformance in Russia was
offset by strong performances from our Growth Engines (Pakistan, Ukraine, Uzbekistan, Kazakhstan), while our Frontier Markets are
delivering in line with our expectations
- Strong data usage continued to lead service revenue growth,
underpinned by continued network investment
- Good progress against corporate cost reduction and Group cost
intensity targets
- Monitor certified our compliance program; the Deferred
Prosecution Agreement expired
URSULA BURNS, CHAIRMAN AND
CHIEF EXECUTIVE OFFICER, COMMENTS:
"VEON reported a solid nine months and third quarter, with
continuing good operational execution across the Group. Our year to
date revenues increased by 4.6% with year to date EBITDA up 8.8% on
an organic basis. Our service revenue growth for the Group was
largely driven by the strong growth in core access data on the back
of the continued investment in our data networks in the period.
This will remain a key focus for VEON over the medium-term while we
explore new services to drive both new incremental revenues as well
as support our core connectivity business.
Our Russian operation continues to face challenges related to
its network quality gap versus competitors, market pricing
structure, favouring unlimited tariff plans and the effectiveness
of its distribution, which together had an adverse impact on our
customer base dynamics. We remain focused on the Russian market and
although short-term results may continue to be pressured, continued
network investments and further optimization of our distribution
footprint through the balance of 2019 and into 2020 should ensure
our business is strengthened and well positioned for the long
term.
Our Growth Engines (Ukraine,
Pakistan, Uzbekistan and Kazakhstan) continue to deliver strong organic
growth in both revenue and EBITDA for the first nine months of
2019, up 14% and 21% respectively, and the medium-term outlook
remains encouraging. While local and Group reported numbers were
impacted by regulatory changes in Pakistan, the operational performance of the
Pakistan business remains
robust.
Cost improvements across the Group remain a focus area, and
while we are on track to deliver on our guidance on cost savings at
the headquarters level for 2019, we expect to make further progress
across the broader Group in this area over the next couple of
years.
Consistent with our ambition to further simplify our Group
structure, we successfully concluded the mandatory tender offer
(MTO) for GTH, the delisting of GTH and have transferred Jazz
(Pakistan), Banglalink
(Bangladesh) and Med Cable
(Algeria) to VEON Holdings. The
intragroup transfers for Djezzy (Algeria) and Mobilink Bank (Pakistan) are continuing.
The expiration of the Deferred Prosecution Agreement and the
conclusion of the external monitorship are significant and positive
milestones for VEON. We have established effective compliance
and controls programs and demonstrated our continuing commitment to
leading with integrity across our businesses, which both the US
government and the monitor recognized. Reaching this point in
our journey is a great achievement, and we are understandably
pleased with the outcome. Strong ethics, compliance, and
controls remain integral to how we operate and expect others to
operate with us.
We recently announced the appointment of Kaan Terzioglu and Sergi
Herrero as joint Chief Operating Officers and I am excited
about the skills and experience they will bring to bear on the
business as they look to execute on our strategy over the next few
years. I would again like to thank Kjell
Johnsen for his positive impact to the Group over the past
few years.
Managing a complex business such as ours, with operations across
10 emerging markets, will never be without its challenges, but I am
pleased with the continued progress we are making on operational
execution. While Russia is
operating below our expectations, we are working hard to address
this and, notwithstanding this underperformance, I am pleased we
remain on track to deliver on our Group FY 2019 guidance to the
market."
3Q19 RESULTS1
- Reported revenue: USD 2,223 million -4.0% YoY
- Reported EBITDA: EBITDA USD 987
million +16.5% YoY, adjusted for IFRS16 +1.3%
- Group Subscribers: 212 million +0.5% YoY
- Group capital expenditures excluding licenses: USD
377 million, adjusted for IFRS 16 USD 324 million
- Revenue organic2 growth tracking in
line: total revenue decreased by 0.9%
organically2 year on year (YoY) with service revenue
decreasing 0.4% organically2, reflecting the impact of
regulatory changes3 in Pakistan. Excluding these, total revenue
increased by 2.4% organically2 in 3Q19
- Data revenue organic2 growth remains
robust: the momentum in mobile data revenue continued in
the period growing organically2 by 18.4% YoY, with
Ukraine (+36.9%), Pakistan (+25.2%) and Bangladesh (+26.4%) delivering strong
performances on the back of ongoing 4G/LTE investments
- Strong organic2 growth in EBITDA
(pre-IFRS 16): EBITDA (pre-IFRS 16) increased
organically2 by 5.0% YoY to USD
858 million, resulting in an EBITDA margin of 38.6%.
Excluding the impact of the reversal of both the "suo
moto"3 order and the Administration Fee Reversal3, EBITDA increased 11.0%
organically YoY
- Currency headwinds lessened: the impact of currency
movements on reported revenues in the period was limited to
USD 72 million compared to the
USD 179 million headwind in the
second quarter of 2019
- Cost intensity ratio4 pre-IFRS 16 continued to
improve organically2: we recorded a 2.2 percentage
point YoY organic2 improvement in our cost intensity
ratio4, helped in particular by Russia and Ukraine
- Corporate costs8 trending lower: corporate
costs were USD 56 million in 3Q19,
which resulted in a 25% YoY decline in the first nine months of
2019. This is in line with VEON's ambition to reduce corporate
costs by 25% YoY in FY 2019
- Strong equity free cash flow (excluding
licenses)5: adjusting for IFRS 16, the company
generated USD 269 million of equity
free cash flow (excluding licenses)5 during the quarter,
with YTD equity free cash flow (excluding licenses)5 of
USD 902 million
- Cash flow impacted by non-operating items: cash
flow was impacted by a payment of USD 82.3
million related to the Global Telecom Holding S.A.E. ("GTH")
tax settlement (the "GTH Tax Settlement"), the partial payment as
security of USD 225 million for the
license renewal in Pakistan as
well as the USD 296 million interim
dividend payment
KEY DEVELOPMENTS
OUTLOOK
- Kaan Terzioglu and Sergi Herrero appointed as joint Chief Operating
Officers
- The Deferred Prosecution Agreement VEON entered into with the
US Department of Justice expired on 31
October 2019, and the external compliance monitorship has
concluded. VEON's commitment to ethics, compliance, and controls is
unwavering and is reflected in our structures, procedures and daily
ways of working
- VEON Holdings B.V. ("VEON Holdings") successfully concluded
the mandatory tender offer ("MTO") in relation to GTH's shares
not owned by the VEON Group. Following the approval by GTH
shareholders, VEON has completed the intra-group transfers of Jazz,
Banglalink and Med Cable to VEON Holdings
- VEON announced a new Strategy Framework at its Capital Markets
Day in September, identifying new services and future assets as
additional growth opportunities and introducing a flexible dividend
policy to support associated investment needs
- VEON launched a large-scale 5G network trial in Shymkent,
Kazakhstan, as part of its vision
to empower customer ambitions through market-leading technologies
and services while demonstrating our commitment to remain at the
forefront of technology
- In October 2019, VEON Holdings
issued USD 700 million in 4.00%
senior unsecured notes due 2025
- VEON's long-term credit rating was upgraded in September 2019 from BB+ (non-investment grade) to
BBB- (investment grade) by ratings agency, Fitch, reflecting the
increased credit worthiness of the VEON Group
FY 2019 guidance6 confirmed: Low single-digit
organic2 growth for revenue, at least mid-single-digit
organic2 growth for EBITDA and equity free cash flow
(excluding licences) of approximately USD 1
billion. While we are tracking ahead of our guidance, we
note there remains some seasonality around free cash flow
generation.
1 Key results compare to prior year results
unless stated otherwise
2 Organic change is a non-IFRS measure and
reflects changes in revenue, EBITDA and cost intensity ratio, that
excludes the effect of foreign currency movements, the impact of
the introduction of IFRS 16, exceptional income of USD 350 million in respect of revised partnership
with Ericsson and other factors, such as businesses under
liquidation, disposals, mergers and acquisitions. See Attachment C
for reconciliations
3 In June 2018,
the Supreme Court ordered ("suo moto") an interim suspension of the
deduction of taxes and service/maintenance charges on prepaid and
postpaid connections on each recharge/top-up/load levied by mobile
phone service providers. On 24 April
2019, the Supreme Court disposed of the proceedings and
restored the impugned tax deductions, deciding that it would not
interfere in the matter of the collection of public revenue (the
"suo moto" order). On 3 July 2019,
the Supreme Court issued its detailed reasons and, in addition to
confirming its ruling on tax deductions, further clarified that
mobile phone service providers cannot charge customers for service
and maintenance charges, which were approximately 10% of customer
recharges. As a result of this clarification by the Supreme Court,
the Pakistan Telecommunication Authority ("PTA") issued two letters
to Jazz, dated 30 August 2019 and
19 September 2019, requesting Jazz to
refund the service and maintenance charges (the "administration
fees") collected by Jazz between April
2019 and July 2019. Further to
the PTA's directions, on 29 September
2019, Jazz proceeded with crediting these administration
fees to the balances of the affected customers; the amounts
refunded could be used from 29 September
2019 for a period of 45 days. Jazz reversed these
administration fees in 3Q19, and is not entitled to charge these
administration fees going forward (the "Administration Fee Reversal").
4 Cost intensity ratio is defined as service
costs plus selling, general and administrative costs, less other
revenue, divided by total service revenue. Based on FY 2018, in USD
million (3,697+1,701-133)/8,526
5 Equity free cash flow (excluding licenses) is
a non-IFRS measure and is defined as free cash flow from operating
activities less cash flow used in investing activities, excluding
the impact of IFRS 16, M&A transactions, capex for licenses,
inflow/outflow of deposits, financial assets and other one-off
items. EFCF target for FY 2019 is based on currency rates of
20 February 2019, excludes
USD 136 million payment of the GTH
Tax Settlement, includes the one-time cash received in connection
with a revised arrangement from Ericsson of USD 350 million. See attachment C for
reconciliations
6 FY 2019 targets exclude the impact of the
introduction of IFRS 16
7 In June 2018,
the Supreme Court ordered ("suo moto") an interim suspension of the
deduction of taxes on prepaid and postpaid connections on each
recharge/top-up/load levied by mobile phone service providers. On
24 April 2019, the Supreme Court
disposed of the proceedings and restored the impugned tax
deductions, deciding that it would not interfere in the matter of
the collection of public revenue. On 3 July
2019, the Supreme Court issued its detailed reasons and, in
addition to confirming its ruling on tax deductions, further
clarified that mobile phone service providers cannot charge
customers for service and maintenance charges
8 Corporate costs in a non-IFRS financial
measure and represents costs incurred by the holding entities in
the Netherlands, Luxembourg and Egypt, primarily comprised of salary costs and
consulting costs. We also present in this release 'run-rate
corporate costs" in order to represent what our corporate cost
performance would be if results for a given period were annualized
or extrapolated into future periods
Note for 9M19 results:
In Q2 2019, both revenue and EBITDA were positively impacted by
special compensation of USD 38
million related to the termination of a network sharing
agreement in Kazakhstan between
our subsidiary KaR-Tel LLP and Kcell Joint Stock Company ("Kcell")
due to Kazakh telecom JSC's acquisition of 75% of Kcell's
shares.
In addition, in Q2 2019, as a result of the USD 136 million GTH Tax Settlement (see below
"GTH Tax Settlement''), VEON has recorded an additional provision
of USD 56 million with USD 27 million in the EBITDA and USD 29 million in the income tax.
Contents
MAIN
EVENTS.........................................................................................................
7
GROUP
PERFORMANCE.............................................................................................
9
COUNTRY
PERFORMANCE........................................................................................
12
CONFERENCE CALL
INFORMATION.............................................................................
19
ATTACHMENTS......................................................................................................
22
PRESENTATION OF FINANCIAL RESULTS
VEON's results presented in this earnings release are based on
IFRS unless otherwise stated and have not been audited.
Certain amounts and percentages that appear in this earnings
release have been subject to rounding adjustments.
As a result, certain numerical figures shown as totals,
including those in tables, may not be an exact arithmetic
aggregation of the figures that precede or follow them.
All non-IFRS measures disclosed in the document, i.e. EBITDA,
EBITDA margin, EBIT, net debt, equity free cash flow (excluding
licenses), organic growth, capital expenditures excluding licenses,
are reconciled to the comparable IFRS measures in Attachment C.
IMPACT OF IFRS 16 - LEASES ON FINANCIAL INFORMATION
From 1 January 2019, VEON has
adopted International Financial Reporting Standards (IFRS) 16
(Leases). VEON is presenting Q3 2019 results excluding the impact
of IFRS 16 for comparability purposes with prior periods, as well
as presenting reported results which will reflect the new baseline
for future period over period comparisons.
All forward looking targets exclude the impact of the
introduction of IFRS 16 in FY 2019.
All comparisons are on a year on year (YoY) basis unless
otherwise stated.
MAIN EVENTS
REVENUE AND EBITDA
Reported revenue (-4.0% YoY) and EBITDA (+16.5% YoY) were
impacted by both currency movements and IFRS 16 implementation this
year. On an organic1 basis revenue decreased by 0.9% YoY
with EBITDA up 5.0% YoY. While we are tracking ahead of our
guidance, we note there remains some seasonality to
performance.
While reported revenue was impacted by currency movements, the
headwinds in Q3 2019 were limited to USD 72
million, compared to the currency headwinds of
USD 179 million in the 2Q19. The
performance of the Russian ruble and Pakistan rupee will be key currency variables
over the remainder of this year.
During Q3 2019, both reported revenue and EBITDA were
negatively impacted by the reversal of the "suo
moto"2 order, and the Administration Fee Reversal2 in Pakistan. Adjusted for these impacts, organic
revenue would have increased by 2.4% YoY and organic EBITDA would
have increased by 11.0% YoY.
1 Organic change is a non-IFRS measure and
reflects changes in revenue, EBITDA and cost intensity ratio.
Organic change excludes the effect of foreign currency movements,
the impact of the introduction of IFRS 16, exceptional income of
USD 350 million in respect of revised
partnership with and other factors, such as businesses under
liquidation, disposals, mergers and acquisitions. See Attachment C
for reconciliations.
2 In June 2018,
the Supreme Court ordered ("suo moto") an interim suspension of the
deduction of taxes and service/maintenance charges on prepaid and
postpaid connections on each recharge/top-up/load levied by mobile
phone service providers. On 24 April
2019, the Supreme Court disposed of the proceedings and
restored the impugned tax deductions, deciding that it would not
interfere in the matter of the collection of public revenue (the
"suo moto" order). On 3 July 2019,
the Supreme Court issued its detailed reasons and, in addition to
confirming its ruling on tax deductions, further clarified that
mobile phone service providers cannot charge customers for service
and maintenance charges, which were approximately 10% of customer
recharges. As a result of this clarification by the Supreme Court,
the Pakistan Telecommunication Authority ("PTA") issued two letters
to Jazz, dated 30 August 2019 and
19 September 2019, requesting Jazz to
refund the service and maintenance charges (the "administration
fees") collected by Jazz between April
2019 and July 2019. Further to
the PTA's directions, on 29 September
2019, Jazz proceeded with crediting these administration
fees to the balances of the affected customers; the amounts
refunded could be used from 29 September
2019 for a period of 45 days. Jazz reversed these
administration fees in Q3 2019, and is not entitled to charge these
administration fees going forward (the "Administration Fee Reversal").
COST INTENSITY
In Q3 2019, our cost intensity ratio1 improved by 2.2
percentage points YoY to 58.9% pre IFRS 16, mainly due to lower
service costs in Russia and
Ukraine. We are seeing continued
progress on cost across a number of our smaller markets and expect
the contribution from the other markets to become more meaningful
over the coming year. In our 2018 results, VEON announced its
commitment to reduce the Group's cost intensity ratio1
by at least 1 percentage point organically per annum between 2019
and 2021, from 61.8% as reported in FY 2018. This ambition remains
on track.
At the Group level, we still expect the main contributor to cost
intensity improvement for 2019 to be a further reduction in VEON's
corporate costs.
1 Cost intensity ratio is defined as service
costs plus selling, general and administrative costs, less other
revenue, divided by total service revenue. Based on FY 2018, in USD
million (3,697+1,701-133)/8,526
GTH RESTRUCTURING
On 9 September 2019, VEON
announced that its offer to acquire substantially all of the
operating assets of GTH has been approved by GTH's shareholders.
Following that approval, VEON completed the intra-group transfers
of Jazz, Banglalink and Med Cable. GTH's shares were subsequently
delisted from the Egyptian Stock Exchange. The second settlement
payment of USD 82.3 million relating
to outstanding tax liabilities of GTH and its Egyptian subsidiaries
was paid in Q3 2019 by GTH to the Egyptian Tax Authority. As a
result, GTH has resolved all outstanding tax liabilities in
Egypt for the tax years 2000
through 2018.
ISSUANCE OF USD 700 MILLION
SENIOR NOTES
On 9 October 2019, VEON Holdings
issued USD 700 million 4.00% senior
unsecured notes due 2025 (the "Notes"). VEON Holdings intends to
use the net proceeds of the Notes primarily to refinance drawings
on the revolving credit facility used to fund the mandatory tender
offer for GTH MTO and for general corporate purposes.
MONITOR CERTIFIES VEON'S COMPLIANCE PROGRAM
On 31 October 2019, the Deferred
Prosecution Agreement ("DPA") that VEON entered into with the US
Department of Justice on 18 February
2016 expired. This marks the conclusion of the compliance
monitorship required by the DPA and VEON's settlement with the US
Securities and Exchange Commission and demonstrates that VEON
successfully established robust and sustainable compliance and
controls program. VEON's commitment to ethics, compliance, and
controls is unwavering and is reflected in our structures,
procedures and daily ways of working.
PAKISTAN LICENSE
RENEWAL
The ex-Warid license renewal was due in May 2019. Pursuant to directions from the
Islamabad High Court, the Pakistan Telecommunication Authority
("PTA") issued a license renewal decision on 22 July 2019 requiring payment of USD 39.5 million per MHz for 900 MHz spectrum and
USD 29.5 million per MHz for 1800 MHz
spectrum, equating to an aggregate price of approximately
USD 450 million (excluding applicable
taxes of approximately 10%). On 17 August
2019, Jazz appealed the PTA's order to the Islamabad High
Court and is now awaiting a date to be scheduled for the hearing.
On 23 August 2019, the Islamabad High
Court suspended the PTA's order pending the outcome of the appeal
and subject to Jazz making payment in the form of security (under
protest) pending resolution of the appeal as per the options given
in the PTA's order. In September 2019, Jazz deposited 50% of
the disputed license renewal fee (approximately USD 225 million) in order to maintain its appeal
in the Islamabad High Court regarding the PTA's underlying decision
on the license renewal. There were no specific terms and conditions
attached to the deposit. The deposit is recorded within non-current
financial assets in the statement of financial position.
NEW STRATEGY FRAMEWORK AND DIVIDEND POLICY
In September 2019, VEON announced a new Strategy
Framework, supporting a new long-term vision to empower customer
ambitions through guiding choices and connecting customers with
resources that match their lifestyle and business needs. VEON
also announced the formation of VEON Ventures, a new division
tasked with identifying future assets with the potential to scale
the Group's existing products and services or offer adjacent
revenue opportunities.
In order to support appropriate capital allocation, VEON
announced a new dividend policy in September
2019 which will be introduced from financial year 2020,
which targets paying at least 50% of prior year Equity Free Cash
Flow after licenses in dividends to shareholders. Dividend payments
will remain subject to a review by VEON's Board of Directors of
medium-term investment opportunities and the Group's capital
structure. The Group's internal target is to keep Net Debt/EBITDA
at around 2.0x (2.4x post IFRS 16).
Reported total revenue decreased by 4.0% YoY in 3Q19 to
USD 2.2 billion, with good
operational performance being offset by the negative impact of the
"suo moto" order and the Administration Fee
Reversal in Pakistan as
well as by currency headwinds of USD 72
million and the revenue underperformance in Russia. Organically total revenue decreased by
0.9% mainly as a result of the regulatory changes in Pakistan that offset the positive revenue
performance of Ukraine and
Bangladesh. Adjusted for these
negative impacts, organic total revenue growth would have been 2.4%
YoY.
The total revenue organic trend was supported by good organic
growth in mobile data revenue, which increased by 18.4% for the
quarter. Reported mobile data revenue (+14.2%) was impacted by
currency headwinds of approximately USD 22
million. Mobile customers increased YoY to 212 million at
the end of Q3 2019, with customer growth in Pakistan, and Bangladesh, which was partially offset by a
decrease in the customer base in Russia, Uzbekistan and Algeria.
EBITDA increased organically by 5.0% to USD 858 million pre-IFRS 16 in Q3 2019, primarily
due to a good performance in Russia and Ukraine supported by corporate cost reduction.
Reported EBITDA increased by 16.5% YoY, positively impacted by IFRS
16, which offset the negative impact of currency headwinds of
USD 31 million and the negative
impact of Pakistan regulatory
regime changes and reversal of Administration Fee, organic EBITDA
increase would have been 11.0% YoY.
Adjusting for the positive effect of IFRS 16, the Company
generated USD 269 million in equity
free cash flow (excluding licenses) during Q3 2019. Cash flow was
negatively impacted by the payment of USD
82.3 million related to the GTH Tax Settlement. Reported
equity free cash flow (excluding licenses) was USD 370 million in Q3 2019.
VEON's HQ segment consists largely of the costs of VEON's
headquarters in Amsterdam.
Corporate costs were USD 56 million
in Q3 2019, down 40% YoY. VEON is on track to deliver on its target
to reduce corporate costs by approximately 25% in FY 2019 from
USD 359 million in FY 2018 and
maintains the mid-term ambition to halve the run-rate corporate
costs between FY 2017 (USD 431
million) and year-end 2019.
"Other" in Q3 2019 includes the results of Kazakhstan, Kyrgyzstan, Armenia, Georgia, other global operations, services and
intercompany eliminations.
Q3 2019 ANALYSIS
Reported EBITDA increased by 16.5% YoY. EBITDA pre-IFRS 16
increased by 1.3% YoY, as the strong operational performance was
partially offset by currency headwinds and the regulatory changes
in Pakistan. Operating profit
pre-IFRS 16 for 3Q19 was USD 359
million, compared to an operating loss in 3Q18 of
USD 391 million, both affected by
impairments. The Company recorded USD 782
million of impairments (including Bangladesh for USD 451
million and Algeria for
USD 125 million) in 3Q18 and
USD 89 of impairments in 3Q19 related
to Kyrgyzstan.
In Q3 2019, financial income and expenses increased as VEON
recorded a USD 41 million financial
expense, related to the put option liability over the 15%
non-controlling interest in Pakistan. Excluding this additional expense,
the net financial income and expenses decreased YoY (on a pre-IFRS
16 basis), primarily due to lower debt levels, which more than
offset the marginal increase in the cost of debt as a result of an
increase in the Russian ruble-denominated debt portion.
Consequently, profit before tax in Q3 2019 was USD 150 million pre-IFRS 16 and USD 130 million including the impact of IFRS
16.
The pre-IFRS 16 income tax expense was USD 104 million. In Q3 2019, the Company recorded
a net profit of USD 52 million for
the period attributable to VEON's shareholders.
In Q3 2018, VEON booked a gain of USD
1,279 million, presented as profit from discontinued
operations, as a result of the completion of the sale of VEON's 50%
stake in its Italy joint venture
to CK Hutchison.
Capex excluding licenses pre-IFRS 16 increased to USD 324 million in Q3 2019 from USD 311 million in Q3 2018, mainly due to
Yarovaya investments in Russia and
additional network investments in Kazakhstan required as a result of the
termination of a network sharing agreement with Kcell, for which
VEON received compensation recorded as revenue in the previous
quarter. The ratio of LTM capex excluding licenses (pre-IFRS 16) to
revenue for the last twelve months was 17.0%.
Gross debt was broadly stable from Q2 2019 to Q3 2019. Over the
last year, VEON significantly improved its currency mix of debt as
it reduced its exposure to euro denominated debt and increased its
Russian ruble debt exposure.
Net cash from operating activities increased YoY, mainly due to
the improved EBITDA and positive movements in working capital,
which offset the second and final payment of USD 82 million related to the GTH Tax
Settlement.
Net cash flow used in investing activities in Q3 2019 was
affected by the release of the GTH MTO settlement deposit of
USD 668 million, offset by the
payment of 50% of the disputed license renewal fee in Pakistan (approximately USD 225 million) as security (under protest)
in order to maintain its appeal in the Islamabad High Court
regarding the PTA's underlying decision on the license renewal. In
3Q18, net cash flow used in investing activities was affected by
the cash received as a result of the completion of the sale of
VEON's 50% stake in Italy joint
venture to CK Hutchison for a total amount of EUR 2.45 billion (approximately USD 2.8 billion).
Net cash used in financing activities pre-IFRS 16 amounted to
USD 787 million in 3Q19, mainly as a
result of the GTH MTO settlement of USD 604
million and interim dividends payments of USD 296 million. In 3Q18, net cash used in
financing activities was USD 1,121
million, primarily due to the company repaying debt at the
level of HQ Amsterdam and the payment of interim dividends for
2018.
Net debt pre-IFRS 16 in Q3 2019 was USD
6,275 million and the net debt/ LTM EBITDA ratio was 1.7x.
Reported net debt/LTM EBITDA ratio at the end of Q3 2019 was
2.1x.
COUNTRY PERFORMANCE
- Russia
- Ukraine
- Pakistan
- Algeria
- Bangladesh
- Uzbekistan
RUSSIA
In Russia, our operation
continues to face challenges related to network quality, which is
improving, but continues to lag versus competitors, market pricing
structure and the effectiveness of its distribution. These all
together resulted in a decline in our customers base YoY. Against
this backdrop, Beeline continued to make steady progress on network
performance, restoring price discipline through simplified, bundled
offers and distribution optimization during the quarter. Beeline
remains committed to appropriate network investments and further
optimization of its distribution footprint through the balance of
2019 and into 2020.
Total revenue in 3Q19 was RUB 74.7
billion, reflecting a YoY decrease of 2.7%. The decline in
revenue was driven by both service and device revenues. Mobile
service revenue decreased by 1.9% to RUB
58.3 billion, negatively impacted by the VAT increase to 20%
from 18%. The strong growth in VAS, and revenue from mobile
financial services was insufficient to offset the decline in voice
revenue. Data volumes continue to grow strongly. Revenue from
equipment and accessory sales decreased by 10% YoY as we
reduced focus on low-margin sales in the quarter.
While mobile customers decreased by 2.5% YoY to 54.8 million
primarily as a result of a decline in sales through alternative
distribution channels following the expansion of Beeline monobrand
stores, we saw customer numbers increase sequentially by
approximately 450,000 supported with stable churn and an
increase of high-quality sales.
Fixed-line revenues increased by 0.8% YoY, despite the
decrease of approximately RUB 0.2
billion in VWS transit traffic and multinational data
service revenue. Beeline's Fixed Mobile Convergence ("FMC")
proposition continues to play an important role in the turnaround
of the fixed-line business for Beeline. The FMC customer base grew
by 17% YoY in Q3 2019 to more than 1.2 million, which represents a
47% FMC penetration of the broadband customer base.
Beeline continues to focus on the B2B segment, improving its
proposition with new digital offers and solutions to both small and
large enterprises. In 3Q19 B2B service mobile revenue increased by
4.9%.
EBITDA (pre-IFRS 16) increased by 3.5% YoY supporting an EBITDA
margin of 38.0%. The improved EBITDA performance was supported by
lower commercial expenses, primarily as a result of closing
approximately 120 own stores. Lower spectrum costs in 2019 and the
reversal of certain provisions supported EBITDA in the period.
Capex excluding licenses (pre-IFRS 16) decreased by 10.9% as a
result of phasing versus higher capital expenditures during the
first half of the year. During 3Q19, we increased 4G base stations
by 43%. Beeline continues to invest in network development with
strong separate focus on Moscow
and St. Petersburg to ensure it
has high quality infrastructure which is ready to integrate new
technologies. The LTM capex (excluding licenses) to revenue ratio
(pre-IFRS 16) was 18.2% in Q3 2019. Reported capex excluding
licenses increased by 19% YoY during the quarter. The Yarovaya
Law-related investment plans are progressing in alignment with
legal requirements. By the end of FY19 Beeline expects to have an
LTM capex/revenue ratio pre-IFRS 16 of approximately 22%.
UKRAINE
In Ukraine, Kyivstar delivered
another quarter of solid results in a highly competitive market,
supported by our marketing activities and strong growth in data
consumption enabled by ongoing investment in Kyivstar's
network.
Kyivstar had a strong performance in 3Q19, with total revenue
growing by 18.3% YoY to UAH 5.8 billion. The revenue growth was
supported by data revenue growth, CVM (Customer Value Management)
activities, FTTB and FMC subscriber base growth. Mobile service
revenue grew by 18.8% to UAH 5.5 billion, driven by strong
data revenue growth and by the continued monetization of our 4G
network through new customer offers. Growth in data customers and
data usage supported an ARPU increase of 19.9% YoY to UAH 69.
Overall, Kyivstar's mobile customer base decreased by 0.8% to 26.4
million, due to the reduction in multi SIM users on the market.
Despite this, data penetration continued to increase and data
customers grew by 12.1% YoY.
Fixed-line service revenue grew by 10.3% YoY to UAH 333 million,
driven by an increase in the fixed broadband customer base of 11.0%
YoY, while fixed broadband ARPU increased by 4.3% YoY to UAH
74.
EBITDA (pre-IFRS 16) increased by 27.7% YoY, driving an EBITDA
margin of 62.1%. The strong EBITDA growth was supported by revenue
growth, while good cost control in the period further supported
margin expansion. Reported EBITDA increased by 33.1% YoY to UAH 3.8
billion.
Capex excluding licenses (pre-IFRS 16) increased by 61.8% YoY as
a result of a strategic focus on further 4G/LTE roll-out during the
quarter. Reported capex excluding licenses increased by 85.8% to
UAH 1.4 billion.
In July 2019, the National Bank of
Ukraine abolished limits on the
repatriation of dividends. VEON believes that this is a meaningful
step forward in supporting Group cashflows. In 3Q19 Kyivstar
upstreamed UAH 4.5 billion in dividends.
PAKISTAN
Jazz continued to perform well despite the ongoing competitive
nature of the Pakistani market, particularly in data and social
network offers.
In June 2018, the Supreme Court
ordered ("suo moto") an interim suspension of the deduction of
taxes and service/maintenance charges on prepaid and postpaid
connections on each recharge/top-up/load levied by mobile phone
service providers. On 24 April 2019,
the Supreme Court disposed of the proceedings and restored the
impugned tax deductions, deciding that it would not interfere in
the matter of the collection of public revenue (the "suo moto"
order). On 3 July 2019, the Supreme
Court issued its detailed reasons and, in addition to confirming
its ruling on tax deductions, further clarified that mobile phone
service providers cannot charge customers for service and
maintenance charges, which were approximately 10% of customer
recharges. As a result of this clarification by the Supreme Court,
the Pakistan Telecommunication Authority ("PTA") issued two letters
to Jazz, dated 30 August 2019 and
19 September 2019, requesting Jazz to
refund the service and maintenance charges (the "administration
fees") collected by Jazz between April
2019 and July 2019. Further to
the PTA's directions, on 29 September
2019, Jazz proceeded with crediting these administration
fees to the balances of the affected customers; the amounts
refunded could be used from 29 September
2019 for a period of 45 days. Jazz reversed these
administration fees in 3Q19 and is not entitled to charge these
administration fees going forward (the "Administration Fee Reversal").
In 3Q19, the total revenue declined by 7.0% YoY. This YoY
decline was caused by the reversal of the "suo moto" order on
24 April 2019, as well as the
Administration Fee Reversal.
Excluding these impacts, the total revenue growth would have been
~14.3%. Reported service revenue declined by 8.0%, predominantly
driven by the changes from the reversal of the "suo moto" order.
Excluding these impacts, service revenue would have increased by
14.9%. The data revenue growth was driven by an increase in data
customers, doubling of data usage through higher bundle penetration
and continued data network expansion. Financial services revenue
grew as well during this quarter by 43.0% YoY as Jazz Cash increased its 30-day active wallet
subscriber base to 6.2 million with revenue in the quarter of PKR
3 billion, approximately 7% of total revenue.
The customer base increased by 5.6% YoY, supported by higher
data customers on the back of the continued expansion of the data
network. The YoY customer trend reflects our commercial strategy to
focus on high value customers in order to further improve new sale
customer mix, leveraging on network quality of service. The growth
in the customer base was negatively impacted by the regulatory
requirement of handset blocking system of unregistered
handsets (DIRBS- Device Identification Registration and Blocking
System).
EBITDA (pre-IFRS 16) decreased YoY by 13.2%, primarily as a
result of the reversal of the "suo moto" order on 24 April 2019, as well as the Administration
Fee Reversal resulting in an EBITDA
margin (pre-IFRS 16) of 45.3%. Excluding these impacts, the YoY
EBITDA growth pre-IFRS 16 would have been ~14.0%. Reported EBITDA
in Q3 2019 decreased by 6.1% YoY to PKR 22.3
billion.
In Q3 2019, capex excluding licenses pre-IFRS16 increased to
PKR 5.0 billion, mainly due to the
adverse impact of FX. Reported capex excluding licenses increased
YoY to PKR 4.8 billion. At the end of
Q3 2019, the population coverage of Jazz's data network was more
than 56%.
The ex-Warid license renewal was due in May 2019. Pursuant to directions from the
Islamabad High Court, the Pakistan Telecommunication Authority
("PTA") issued a license renewal decision on 22 July 2019 requiring payment of USD 39.5 million per MHz for 900 MHz spectrum and
USD 29.5 million per MHz for 1800 MHz
spectrum, equating to an aggregate price of approximately
USD 450 million (excluding applicable
taxes of approximately 10%). On 17 August
2019, Jazz appealed the PTA's order to the Islamabad High
Court and is now awaiting a date to be scheduled for the hearing.
On 23 August 2019, the Islamabad High
Court suspended the PTA's order pending the outcome of the appeal
and subject to Jazz making payment in the form of security (under
protest) pending resolution of the appeal as per the options given
in the PTA's order. In September
2019, Jazz deposited 50% of the disputed license renewal fee
(approximately USD 225 million) in
order to maintain its appeal in the Islamabad High Court regarding
the PTA's underlying decision on the license renewal. There were no
specific terms and conditions attached to the deposit. The deposit
is recorded within non-current financial assets in the statement of
financial position.
UZBEKISTAN
Increasing mobile data penetration remains the key driver in the
Uzbekistan market. Beeline
Uzbekistan continued to focus on
attracting quality customers and benefited from its position as a
market leader. Going forward, Beeline Uzbekistan will focus on
reducing churn and maintaining its leadership position.
The business delivered a 4.6% sequential improvement in revenue
while YoY total revenue decreased by 8.8% YoY to UZS 594
billion, primarily driven by the negative impact of the reduction
in mobile termination rates (UZS 17 billion) and the introduction
of the 15% excise tax (UZS 80 billion), which were partially offset
by repricing activities. Adjusted for these negative effects, the
growth would have been approximately 7.1% YoY. Mobile data traffic
more than doubled, supported by the continued roll-out of
high-speed data networks, increased smartphone penetration and the
increased penetration of bundled offerings in the customer base.
Beeline Uzbekistan saw its
customer base decline to 8.4 million, down 7.9% YoY as a result of
its strategic focus on high value customers.
EBITDA pre-IFRS 16 increased by 8.1% to UZS 315 billion, driven
by good organic revenue growth notwithstanding a slightly negative
impact as a result of changes in the tax regime. Reported EBITDA
increased by 11.6% to UZS 325 billion.
Capex excluding licenses pre-IFRS 16 decreased to UZS 23
billion, mainly as a result of better phasing of capex, with a
larger part of the network investment during H1 2019. LTM 3Q19
capex to revenue ratio was 16.6%. Beeline Uzbekistan continued to invest in high-speed
data networks, improving 4G/LTE coverage to 26% and increasing the
number of nationwide 3G sites YoY. Improvements to our high-speed
data networks will continue to be a priority for Uzbekistan in 2020.
From January 2019, new tax reforms
were introduced, which aim to simplify taxation in Uzbekistan. The tax authorities introduced a
flat 20% corporate tax rate for mobile operators (prior to this the
corporate tax rate depended on the profitability of mobile
operators), cancelled the revenue tax of 3.2% and introduced an
excise tax of 15% over customer charges. Furthermore, the customer
tax was reduced to UZS 2,000 in FY 2019 from UZS 4,000 in FY 2018.
Tax reforms introduced from January
2019 are expected to have an approximately 15% negative
effect on revenue in FY 2019, while free cash flow impact is
expected to be slightly negative due to utilization of deferred tax
assets. Going forward, there will be a positive impact on equity
free cash flow (excluding licenses). From 1
October 2019, the excise tax has been increased from 15% to
20% to cover VAT reduction from 20% to 15%. The overall impact of
this change in excise tax is expected to be minimal.
ALGERIA
In Algeria, macro challenges
persisted during the quarter, and political uncertainty remains
following the former President's resignation. The market remains
challenging with high levels of competition in both pricing as well
as channel-related incentives. Against this backdrop, Djezzy
continued with its segmented approach, improving its share in its
high value segment while at the same time preserving its share in
the mass market segment, resulting in an improvement in its
relative performance in a declining market.
Djezzy's 3Q19 service revenue was DZD
23.6 billion, reflecting a YoY decline of 3.3%, while
showing a sequential improvement of 5.8% quarter on quarter. Data
revenue increased by 27.8% YoY, due to higher usage and an increase
in data penetration mostly on 4G/LTE. Price competition in both
voice and data drove a continued reduction in ARPU, which declined
by 1.2% YoY. During Q3 2019, Djezzy introduced a modernized and an
updated tariff portfolio which supported ARPU sequential growth of
9.2%. During the quarter Djezzy recorded the highest NPS since 2015
primarily due to positive network reputation and brand
awareness.
EBITDA (pre-IFRS 16) decreased YoY by 11.3%, resulting in
a margin of 41.1%. The decline in revenue remains a challenge
for EBITDA performance, alongside increased HR costs and bad debt
recognition. Reported EBITDA decreased by 2.5% YoY to DZD 10.7 billion.
At the end of 3Q19, Djezzy's 4G/LTE services covered 28 wilayas
and close to 35% of Algeria's
population, while its 3G network covered all 48 wilayas and
approximately 74% of Algeria's
population. In Q3 2019, capex excluding licenses pre-IFRS 16 was
DZD 2.5 billion, representing a 34.6%
increase YoY following continuous investments in network
rollout.
BANGLADESH
The mobile industry in Bangladesh during 3Q19 continued to be
characterized by intense competition. Notwithstanding this market
backdrop and challenging regulatory environment, Banglalink
reported good results and delivered year on year service revenue
growth for the fourth consecutive quarter.
Banglalink continued to focus on acquiring customers in 3Q19.
Customer grew by 2.4% YoY while data customers increased by 9.7% as
a result of simplified and product offers and improved network
availability.
Total revenue in 3Q19 grew by 3.8% YoY, driven by an
acceleration of mobile service revenue, which increased by 5.2% YoY
to BDT 11.2 billion. The revenue
increase was mainly driven by a continued improvement in data
revenue following enhanced network availability, as well as the
continued expansion of Banglalink's distribution footprint. ARPU
increased by 2.4% YoY driven by higher voice and data revenue,
following the introduction of the new bundle portfolio with revised
prices during the quarter. Data revenue increased by 26.4% YoY,
driven by increased smartphone penetration and data usage grew by
83% YoY to 1,344 MB per user.
EBITDA (pre-IFRS16) decreased by 4.0% YoY, as higher revenue was
largely offset by the increase in the minimum tax rate. Excluding
the negative impact as a result of changes in the tax regime EBITDA
would have increased by an additional 7.1%. EBITDA margin (pre-IFRS
16) decreased to 33.2%. Reported EBITDA in 3Q19 increased by 18.1%
YoY to BDT 4.7 billion.
In 3Q19, capex excluding licenses pre-IFRS 16 increased YoY to
BDT 2.1 billion. 3G network
population coverage was approximately 72% at the end of the
period. The roll-out of 4G/LTE is in progress, following the
introduction of this service in February
2018.
In Q2 2019, the tax authority in Bangladesh introduced several changes to the
tax regime: Supplementary Duty increased from 5% to 10% from
subscription revenue; SIM tax increased from BDT 100 to 200; minimum tax rate increased from
0.75% to 2% of revenue and custom duties on smartphones increased
from 10% to 25%. Banglalink expects these tax changes to have a
negative impact of approximately 5.7% on EBITDA for FY 2019.
CONFERENCE CALL INFORMATION
On 4 November 2019, VEON will host
a conference call by senior management at 9.30 CET (8.30 GMT),
which will be made available through following dial-in numbers. The
call and slide presentation may be accessed
at http://www.veon.com
9:30 CET investor and analyst conference call
US call-in number:
+1-631-51-07-495
Confirmation Code: 2163649
International call-in number:
+44(0)2071-928000
Confirmation Code: 2163649
The conference call replay and the slide presentation webcast will
be available until 12 November
2019.
The slide presentation will also be available for download from
VEON's website.
Investor and analyst call replay
US Replay Number: +1(917)677-7532
Confirmation Code: 2163649
UK Replay Number: +44(0)333-3009785
Confirmation Code: 2163649
DISCLAIMER
This press release contains "forward-looking statements", as the
phrase is defined in Section 27A of the U.S. Securities Act of
1933, as amended, and Section 21E of the U.S. Securities Exchange
Act of 1934, as amended. These forward-looking statements may be
identified by words such as "may," "might," "will," "could,"
"would," "should," "expect," "plan," "anticipate," "intend,"
"seek," "believe," "estimate," "predict," "potential," "continue,"
"contemplate," "possible" and other similar words. Forward-looking
statements include statements relating to, among other things,
VEON's plans to implement its strategic priorities, including
operating model and development plans, among others; anticipated
performance and guidance for 2019, including VEON's ability to
generate sufficient cash flow; future market developments and
trends; operational and network development and network investment,
including expectations regarding the roll-out and benefits of
3G/4G/LTE networks, as applicable; spectrum acquisitions and
renewals; the effect of the acquisition of additional spectrum on
customer experience; VEON's ability to realize the acquisition and
disposition of any of its businesses and assets and to execute its
strategic transactions (including the GTH mandatory tender
offer) in the timeframes anticipated, or at all; VEON's
ability to realize financial improvements, including an expected
reduction of net pro-forma leverage ratio following the successful
completion of certain dispositions and acquisitions; our dividends;
and VEON's ability to realize its targets and commercial
initiatives in its various countries of operation. The
forward-looking statements included in this press release are based
on management's best assessment of VEON's strategic and financial
position and of future market conditions, trends and other
potential developments. These discussions involve risks and
uncertainties. The actual outcome may differ materially from these
statements as a result of demand for and market acceptance of
VEON's products and services; our plans regarding our dividend
payments and policies, as well as our ability to receive dividends,
distributions, loans, transfers or other payments or guarantees
from our subsidiaries; continued volatility in the economies in
VEON's markets; unforeseen developments from competition;
governmental regulation of the telecommunications industries;
general political uncertainties in VEON's markets; government
investigations or other regulatory actions; litigation or disputes
with third parties or other negative developments regarding such
parties; the impact of export controls and laws affecting trade and
investments on our and important third-party suppliers' ability to
procure goods, software or technology necessary for the services we
provide to our customers; risks associated with data protection or
cyber security, other risks beyond the parties' control or a
failure to meet expectations regarding various strategic
priorities, the effect of foreign currency fluctuations, increased
competition in the markets in which VEON operates and the effect of
consumer taxes on the purchasing activities of consumers of VEON's
services. Certain other factors that could cause actual results to
differ materially from those discussed in any forward-looking
statements include the risk factors described in VEON's Annual
Report on Form 20-F for the year ended December 31, 2018 filed with the U.S. Securities
and Exchange Commission (the "SEC") and other public filings made
by VEON with the SEC. Other unknown or unpredictable factors also
could harm our future results. New risk factors and uncertainties
emerge from time to time and it is not possible for our management
to predict all risk factors and uncertainties, nor can we assess
the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements. Under no circumstances should the inclusion of such
forward-looking statements in this press release be regarded as a
representation or warranty by us or any other person with respect
to the achievement of results set out in such statements or that
the underlying assumptions used will in fact be the case.
Therefore, you are cautioned not to place undue reliance on these
forward-looking statements. The forward-looking statements speak
only as of the date hereof. We cannot assure you that any projected
results or events will be achieved. Except to the extent required
by law, we disclaim any obligation to update or revise any of these
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements
are made, or to reflect the occurrence of unanticipated events.
Furthermore, elements of this press release contain or may contain,
"inside information" as defined under the Market Abuse Regulation
(EU) No. 596/2014.
All non-IFRS measures disclosed further in this press release
(including, without limitation, EBITDA, EBITDA margin, EBT, net
debt, equity free cash flow (excluding licenses), organic growth,
capital expenditures excluding licenses and LTM (last twelve
months) capex excluding licenses/revenue) are reconciled to
comparable IFRS measures in Attachment C to this earnings release.
In addition, we present certain information on a forward-looking
basis. We are not able to, without unreasonable efforts, provide a
full reconciliation to IFRS due to potentially high variability,
complexity and low visibility as to the items that would be
excluded from the comparable IFRS measure in the relevant future
period, including, but not limited to, depreciation and
amortization, impairment loss, loss on disposal of non-current
assets, financial income and expenses, foreign currency exchange
losses and gains, income tax expense and performance transformation
costs, cash and cash equivalents, long - term and short-term
deposits, interest accrued related to financial liabilities, other
unamortized adjustments to financial liabilities, derivatives, and
other financial liabilities.
ABOUT VEON
VEON is a NASDAQ and Euronext Amsterdam-listed global provider
of connectivity and digital services, headquartered in Amsterdam. Our vision is to empower customer
ambitions through technology, acting as a digital concierge to
guide their choices and connect them with resources that match
their needs.
For more information visit: http://www.veon.com.
CONTENT OF THE ATTACHMENTS
Attachment
A
Customers
22
Attachment
B
Definitions
22
Attachment
C
Reconciliation
tables
24
Average
rates and guidance rates of functional currencies to
USD
For more information on financial and operating data for
specific countries, please refer to the supplementary file
Factbook3Q2019.xls on VEON's website at
http://veon.com/Investor-relations/Reports--results/Results/ .
ATTACHMENT A: CUSTOMERS
ATTACHMENT B: DEFINITIONS
ARPU (Average Revenue Per User) measures the monthly average
revenue per mobile user. We generally calculate mobile ARPU by
dividing our mobile service revenue during the relevant period,
including data revenue, roaming revenue, MFS and interconnect
revenue, but excluding revenue from connection fees, sales of
handsets and accessories and other non-service revenue, by the
average number of our mobile customers during the period and
dividing by the number of months in that period.
Mobile data customers are mobile customers who have engaged in
revenue generating activity during the three months prior to the
measurement date as a result of activities including USB modem
Internet access using 2.5G/3G/4G/HSPA+ technologies.
Capital expenditures (capex) are purchases of new
equipment, new construction, upgrades, licenses, software, other
long-lived assets and related reasonable costs incurred prior to
intended use of the non-current asset, accounted at the earliest
event of advance payment or delivery. Long-lived assets acquired in
business combinations, are not included in capital
expenditures.
Capital expenditures (capex) exc. licenses is calculated as
capex, excluding purchases of new spectrum licenses
EBIT or Operating Profit is calculated as EBITDA plus
depreciation, amortization and impairment loss. Our management uses
EBIT as a supplemental performance measure and believes that it
provides useful information of earnings of the Company before
making accruals for financial income and expenses and net foreign
exchange (loss)/gain and others. Reconciliation of EBIT to net
income attributable to VEON Ltd., the most directly comparable IFRS
financial measure, is presented in the reconciliation tables
section in Attachment E below.
Adjusted EBITDA (called EBITDA in this document) is a non-IFRS
financial measure. VEON calculates Adjusted EBITDA as (loss)/profit
before interest, tax, depreciation, amortization, impairment, gain
/ loss on disposals of non-current assets, other non-operating
gains / losses and share of profit / loss of joint ventures and
associates Our Adjusted EBITDA may be used to evaluate our
performance against other telecommunications companies that provide
EBITDA.
Additionally, a limitation of EBITDA's use as a performance
measure is that it does not reflect the periodic costs of certain
capitalized tangible and intangible assets used in generating
revenue or the need to replace capital equipment over time.
Reconciliation of EBITDA to net income attributable to VEON Ltd.,
the most directly comparable IFRS financial measure, is presented
in the reconciliation tables section in Attachment C below.
EBITDA margin is calculated as EBITDA divided by total revenue,
expressed as a percentage.
Gross Debt is calculated as the sum of long-term notional debt
and short-term notional debt.
Equity free cash flow (excluding licenses) is a non-IFRS measure
and is defined as free cash flow from operating activities less
cash flow used in investing activities, excluding M&A
transactions, capex for licenses, inflow/outflow of deposits,
financial assets and other one-off items. Reconciliation to the
most directly comparable IFRS financial measure, is presented in
the reconciliation tables section in Attachment E below.
An FMC customer is a customer on a 1 month Active Broadband
Connection subscribing to a converged bundle consisting of at least
fixed internet subscription and at least 1 mobile SIM.
Households passed are households located within buildings, in
which indoor installation of all the FTTB equipment necessary to
install terminal residential equipment has been completed.
MFS (mobile financial services) is a variety of innovative
services, such as mobile commerce or m-commerce, that use a mobile
phone as the primary payment user interface and allow mobile
customers to conduct money transfers to pay for items such as goods
at an online store, utility payments, fines and state fees, loan
repayments, domestic and international remittances, mobile
insurance and tickets for air and rail travel, all via their mobile
phone.
Mobile customers are generally customers in the registered
customer base as at a given measurement date who engaged in a
revenue generating activity at any time during the three months
prior to such measurement date. Such activity includes any outgoing
calls, customer fee accruals, debits related to service, outgoing
SMS and MMS, data transmission and receipt sessions, but does not
include incoming calls, SMS and MMS or abandoned calls. Our total
number of mobile customers also includes customers using mobile
internet service via USB modems and fixed-mobile convergence
("FMC").
Net debt is a non-IFRS financial measure and is calculated as
the sum of interest bearing long-term notional debt and short-term
notional debt minus cash and cash equivalents, long-term and
short-term deposits. The Company believes that net debt provides
useful information to investors because it shows the amount of
notional debt outstanding to be paid after using available cash and
cash equivalents and long-term and short-term deposits. Net debt
should not be considered in isolation as an alternative to
long-term debt and short-term debt, or any other measure of the
Company financial position.
Net foreign exchange (loss)/gain and others represents the sum
of Net foreign exchange (loss)/gain, VEON's share in net
(loss)/gain of associates and Other (expense)/income (primarily
(losses)/gains from derivative instruments) and is adjusted for
certain non-operating losses and gains mainly represented by
litigation provisions.
NPS (Net Promoter Score) is the methodology VEON uses to measure
customer satisfaction.
Organic growth in revenue and EBITDA are non-IFRS financial
measures that reflect changes in Revenue and EBITDA, excluding
foreign currency movements and other factors, such as businesses
under liquidation, disposals, mergers and acquisitions.
Reportable segments: the Company identified Russia, Pakistan, Algeria, Bangladesh, Ukraine, Uzbekistan and HQ based on the business
activities in different geographical areas.
Total revenue in this section is fully comparable with Total
Operating revenue in MD&A section below.
ATTACHMENT C: RECONCILIATION TABLES
RECONCILIATION OF CONSOLIDATED EBITDA
RECONCILIATION OF CAPEX
RECONCILIATION OF ORGANIC AND REPORTED GROWTH RATES
RECONCILIATION OF VEON CONSOLIDATED NET DEBT
RECONCILIATION OF EQUITY FREE CASH FLOW (EXCLUDING
LICENSES)
EBITDA RECONCILIATION FOR COUNTRY
Q3 2019
Q3 2018
9M 2019
9M 2018
RATES OF FUNCTIONAL CURRENCIES TO USD
Please see link for VEON's full 3Q19 Financial Results:
PDF:
https://mma.prnewswire.com/media/1022236/VEON_3Q19_ER_RESULTS.pdf
CONTACT INFORMATION:
INVESTOR RELATIONS
Nik Kershaw
ir@veon.com
CORPORATE COMMUNICATIONS
Kieran Toohey
pr@veon.com
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SOURCE VEON Ltd.