Veon hints at M&A with new executive appointment from private equity

Veon has never been a company to give much away when it comes to future plans, but it is hard not to speculate on what the appointment of a new executive to head up its M&A team means.

The operator – headquartered in Amsterdam but Russian in origin – named two new executives to its group leadership team this week: Alex Bolis joined the company as Group Head of Corporate Strategy, Communications and Investor Relations at the start of April, while Dmitry Shvets arrived at the telco on Thursday in a new role, that of Group Head of Portfolio and Performance Management.

A telco creating a new executive-level role always raises interest; sometimes we know what that means for the operator’s strategic direction, other times not. Add ‘M&A’ into the job description and then tongues really start to wag. And that is the case here.

Key to Shvets’ role will be oversight of Veon’s performance management and M&A teams, the telco said.

That is not a lot to go on. Presumably Veon already has an M&A team, so this could be little more than a structural move.

But it’s worth noting that Shvets has a background in private equity; he previously served as head of Russia and CIS at TPG. Given that PE interest in telecoms assets has been hot for a number of years and remains so, we can’t help but wonder whether Veon is on the hunt for new assets.

Just over a year and a half ago Veon shared a diversification plan that made its core connectivity business just one of three strategic pillars, the other two being new digital services and future assets.  Those second and third pillars mainly involve investment in the development of new technology – Veon gave the example of hiking investment in digital financial services in Pakistan to illustrate the types of opportunities its future assets pillar might cover – but a desire to expand into adjacent markets often brings with it the acquisition of technologies or skills that it would not make sense to develop in-house.

Back in September 2019 the telco trotted out the usual statements around its ability to “execute on…investment opportunities in a way that maximizes returns for shareholders,” which frankly tells us nothing. But there are always investment opportunities of one sort or another in this market.

“Portfolio optimisation” has been a key phrase for Veon in recent years, effectively meaning it has been a seller, rather than a buyer. It reminded us of this at its full-year 2020 results announcement in February, highlighting the sale of its operations in Armenia, agreed in October. However, since then it has completed the long-planned acquisition of a 15% stake in Pakistan Mobile Communications Limited, owner of the Jazz brand, to give it sole ownership.

“This was a year in which we made further progress in building out our digital platforms across the three verticals of fintech, adtech and entertainment. We continue to see immense opportunity for the  digital business across our various operations and this will remain a key driver of the long-term growth prospects for our Group.” said Veon’s co-CEO Sergi Herrero, in a statement accompanying its 2020 numbers.

The results announcement made less-than-inspiring reading, in no small part due to Covid-19, but Herrero made reference to decent performances in Pakistan, Ukraine, and Kazakhstan. “While continuing to support our growth markets, we shall dedicate new focus on cost efficiencies across the Group, as well as further optimizing our capital structure and streamline our portfolio,” he said.

All of which seems to imply that Shvets’ role atop the M&A team will involve selling rather than buying, but you never know.