Veon decides to quit Russia while it’s ahead

Netherlands-based operator group Veon has put its Russian business up for sale.

In a short announcement the company said it is conducting a competitive sales process in relation to its Russian operations. “Veon’s management is currently exploring options in an effort to ensure that an optimal outcome is achieved for all relevant stakeholders, including Veon, its Russian operations, its shareholders, its creditors, its customers and its employees working both in and outside of Russia.”

Veon has been in an especially tricky spot since the Russian invasion of Ukraine earlier this year, since it has operations in both countries. While it should, in theory, be possible to navigate a business through such choppy waters, the international response has made doing business in Russia especially fraught.

The US and its allies have sought to assist Ukraine as much as they can, short of their own direct military intervention. A primary technique has been to issue severe sanctions directed at the Russian economy and individuals tied to the ruling regime. This quickly escalated to farcical levels, such as the banning of Russian athletes from the Wimbledon tennis tournament, but the message was clear – you have to pick a side.

In the telecoms world, the likes of Ericsson and Nokia have already fled the country and no western company will now do business there if they know what’s good for them. Almost half of Veon’s shares are owned by LetterOne, which was set up by Mikhail Fridman, who is one of the so-called Russian oligarchs heavily affected by the sanctions regime. Fridman stepped down from the board of LetterOne to protect it from collateral damage but Veon must still feel highly exposed to the political crossfire resulting from the war.

With that in mind the only surprise about this move is that it took so long. While Russia is by far Veon’s biggest territory, accounting for around half of its revenues, the risks are presumably still considered too great. Since there’s little sign of the conflict resolving itself any time soon, the Veon management seems to have concluded now is as good a time as any to extract what value it can from such an impossible situation.

While no companies based west of Ukraine would probably touch Veon Russia with a bargepole, there’s plenty of money elsewhere in the world held in countries that haven’t overtly picked a team in the war. The good news for Veon shareholders is that its Russian numbers don’t seem to have dropped off since the conflict started, so it’s still a healthy business. It will be intriguing to see who emerges as the winner of this competitive sales process.

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