Veon navigates some bumps on its route out of Russia

Netherlands-based Veon has agreed a minor tweak to the management buyout of its Russian arm VimpelCom.

It is coming up to a year since Veon agreed to offload VimpelCom to a group led by the unit’s CEO, Aleksander Torbakhov, for $2.1 billion. It was agreed initially that a big chunk of the purchase price would be covered by VimpelCom taking on and cancelling a portion of Veon’s debt.

This week, Veon revealed that the transaction will now be entirely funded this way.

Veon also seems to still be waiting for regulatory clearance for the transfer of some of the bonds. In a statement, it explained that it has been given the green light regarding approximately 95 percent of them, and these will be transferred prior to closing. The remaining bonds will be transferred as soon as regulators give Veon the nod, but this could take place after the deal’s closure.

“I am pleased with the progress we have achieved in our exit from Russia despite the complexities of the transaction,” said Veon group CEO Kaan Terzioglu. “Our exit strategy is the optimal solution for all our stakeholders – our customers, employees, creditors and investors world-wide. I would like to thank our stakeholders for their patience and continued support.”

Sanctions against various of Russia’s financial institutions have made it harder for Veon to settle its affairs there.

For starters, a management buyout funded by a debt transfer represented its only realistic chance of a quick exit. Veon could hardly have expected international banks to be willing or even able to fund an investment into Russia. Similarly, a VimpelCom rival like MegaFon might have been keen to make an offer, but sanctions would presumably have made it impossible for it to make payments to a company based outside Russia.

Then there was the Eurobonds issue. In May, Veon took measures to cancel Veon Eurobonds held by VimpelCom. The latter was unable to receive interest on these because Russia’s Eurobonds clearing house, the National Settlement Depository (NSD), was subject to EU sanctions. However, regulatory approval for the sale of VimpelCom was conditional upon Veon addressing this particular issue.

Getting the VimpelCom deal over the line will remove a significant distraction for Veon, which has a lot of work to do in Ukraine, where it operates under the Kyivstar brand.

In June, it announced a $600 million plan to rebuild Kyivstar’s 4G and fibre infrastructure over the next three years. It said at the time that its engineers had carried out 150,000 repairs since Russia commenced its invasion in February 2022.

Looking further ahead, Veon also has an eye on Open RAN.

In August, it signed an MoU with Rakuten Symphony covering the deployment of Open RAN-based 5G networks that will support various new digital services. It’s not clear when this deployment will kick off, but it underscores where Veon’s longer term priorities lie.

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