Veon upbeat on emerging markets but hints at more asset sales

The telecoms group shared its growth plans at its Capital Markets Day on Thursday, including fairly ambitious targets for revenue and earnings hikes over the next three years. And Chief Executive Kaan Terzioglu took the opportunity to wax lyrical about the market potential in Veon's operating footprint.

"Over the past three years, we have transformed our companies into digital operators and demonstrated that emerging markets are in fact an exciting growth opportunity for global investors," Terzioglu claimed.

"As our investors will hear at our Capital Markets Day, we are optimistic about the potential of our markets, and confident in the foundations that we built with our digital operator strategy to capture wallet share," the CEO said, in a statement. "We remain focused on turning this operational success vision into investor value with further steps in delayering our business and enhancing the accessibility of our assets to local investors."

Given that Veon has made much of its asset-light strategy of late, and that it has just brokered a deal to sell its stake in Kazakhstan wholesaler TNS+ to local investment partner DAR Group, it's not too much of a stretch to deduce from those comments that more sales could be on the cards.

Following its exit from Russia towards the end of last year, Veon's assets centre on its mobile operator footprint in Eastern Europe and Central Asia. Its biggest market in revenue terms is Pakistan – it generated 30% of its top line there last year – and that's where it expects to derive a fair amount of growth in the coming years.

Veon's 2023-2027 projected growth trajectory includes 16%-19% CAGR in group revenues in local currency terms and 19%-22% CAGR in EBITDA. Within that, it predicts Pakistan will generate 19%-22% CAGR in revenues, the biggest hike of all its operating companies, aside from Uzbekistan, which is a much smaller outfit.

Those targets seem bold, particularly by western mobile operator standards. But in fact they are in line with Veon's recent performance.

In 2023 it posted on-year revenue growth of 16.4% in local currency terms to $3.7 billion at group level, or 17.9% growth normalised for one-off items, although that was a decline of 1.5% on a reported basis. Pakistan turned in growth of 23% on a normalised basis, while the group's second-largest market Ukraine grew by 10.4%; its target for the next three years is somewhere between 10% and 13%.

Key to Veon's strategy for maintaining this level of growth is to increase the proportion of revenues it derives from non-connectivity services in all markets – it is shooting for 24% in Pakistan, for example – and to tap into the AI opportunity, or augmented intelligence, as it dubs it at this stage; Veon has just unveiled its snappily-titled AI1440 strategy to that end.

The telco is also keen to expand into adjacent verticals and to build up its customer bases in bpth 4G and multiplay services. It hasn't had a lot to say about 5G thus far though.

Like many of its peers, the operator is also looking at reducing leverage and generating cash; it targets equity free cash flow of US$900 million-$1 billion by 2027.

That's what investors like to hear. And, depending on the T&Cs, another sale announcement might not go down too badly either.