Dear VEON Stakeholder,

I am writing to you to provide an update on our strategic progress and the latest achievements in several key areas of importance for VEON Group. In addition, you will likely have seen that today VEON Ltd. invited holders of VEON Holdings B.V.’s 2023 Notes to contact VEON Ltd. with a view to shortly commencing discussions in relation to the 2023 Notes.

Our primary aim is to achieve a liquidity and capital structure that ensures the Group’s long-term financial stability and puts VEON in the best position to deliver growth in the years ahead.

Since my last letter, we have seen a continued increase in 4G users, and we reported double-digit local currency revenue growth across five of our seven markets for 8M 2022. VEON is well positioned to continue its strategy of developing our digital operator business in our high-growth markets (Pakistan, Bangladesh, Kazakhstan, Uzbekistan and Kyrgyzstan), and we plan to advance these investments in the coming years.

Liquidity update

Over the past seven months VEON Group has successfully strengthened its HQ liquidity position, and this will remain a key priority going forward. In addition, our operating companies continue to be self-sufficient in their financing needs. Most recently, in August, we announced the completion of the sale of our Algerian operator Djezzy to our regional partner FNI, delivering proceeds of USD 682 million. Following the sale of Djezzy, our total cash position stands at USD 3.2 billion, including USD 2.5 billion held at the HQ level as of 7 October 2022.

We have also made good progress on our strategy to optimize the Group capital structure for the longer-term, taking into consideration the challenges that we face in the current environment. Today we invited our 2023 noteholders to contact VEON Ltd. in order to engage in discussions with these noteholders, with the aim to maintain a stable capital structure in the longer-term, which we consider in the interest of all stakeholders. In this context, I would like to underscore that VEON Group continues to meet all its interest and capital payments and is not in default on any of its bonds or bank debt.

Growth markets and sectors

As we look to achieve growth in the years ahead, I want to highlight the five of our seven markets that have demonstrated exceptional growth this year, specifically Bangladesh, Pakistan, Kazakhstan, Uzbekistan and Kyrgyzstan. With our strategic focus on expanding our digital operator business, these geographies represent significant opportunities for growth beyond what can be achieved in more mature markets. Pakistan and Bangladesh, for example, have the largest populations in Asia outside of China and India, but are forecast to grow significantly faster between now and 2035, according to the World Bank.

These rising populations represent potential growth in our customer base in markets where VEON Operating Companies (OpCos) have established themselves as leading providers of converged connectivity services and digital offerings in adjacent sectors. In addition to population increases, International Monetary Fund forecasts show continued GDP growth across all the Asian economies where VEON OpCos are present.

These geographies represent potential growth hotspots for digital services. In Central Asia and Southern Asia, internet adoption stands at 66% and 46% of the population, respectively, compared to 98%, 94% and 92%, respectively, for Northern Europe, Western Europe and North Americaⁱ.

Only 44% of the population in Southern Asia is connected to a mobile broadband package, with 4G accounts making up only 62% of theseⁱⁱ. This 4G connectivity is a core enabler of essential digital services ranging from education and healthcare to banking, e-commerce and entertainment.

We see a clear opportunity to improve digital inclusion in these underserved regions, making a positive change to local economies where mobile connectivity is often the only way to obtain these key services. Pakistan, for example, is home to 2.8% of the world’s population, but 8% of the world’s unbanked adultsⁱⁱⁱ. This underlines the significant growth potential for our JazzCash and Mobilink Microfinance Bank's digital financial service offerings, aimed at empowering millions of users through greater financial inclusion. We are also broadening our digital education offerings to reach 36 million unconnected school-age children in Eastern Europe and Central Asia.

VEON’s recent 8M trading update supports our belief in the growth potential of our OpCos in Bangladesh, Pakistan, Kazakhstan, Uzbekistan and Kyrgyzstan, all of which reported continued double-digit increases in local currency revenue. This was driven by a 16.5% Group-wide YoY increase in 4G users to 105.8 million, which now represents 52% of the Group’s customer base. We remain committed to expanding 4G coverage across our operations, and this will drive increased engagement across the digital businesses we operate in adjacent sectors, such as financial services, media, education, and healthcare.

Digital operator strategy

Our digital operator strategy continues to demonstrate solid results across our markets. This strategy rests on the goal of providing VEON’s growing number of 4G customers with the data-enabled digital services that they may need during any of the 1,440 minutes in a day. This drives both data usage and engagement, supported by the digital offerings of VEON’s OpCos. In Pakistan, the digital financial services platform JazzCash recorded an increase in monthly active users of 17.6% YoY for 8M 2022, bringing the total up to 16.1 million MAUs.

The recent round A investment by VEON Ventures in the SME lending platform Dastgyr in Pakistan is delivering synergistic results for JazzCash, with over 250,000 new merchants in the process of being added using the JazzCash wallet and 120,000 new merchants able to access the Dastgyr e-commerce solution. We believe that this kind of strategic partnership benefits both our own operating performance and the value of our venture investments.

In Ukraine, Kyivstar has acquired a majority stake in Helsi, a leading e-health platform. The app is connected to more than 1,600 public and private healthcare institutions throughout Ukraine and more than 30 million people have registered with the system within the first 8 months of the year.

We have also continued to expand digital services via new initiatives. In Bangladesh, the digital entertainment service Toffee has launched a new program that enables content creators to monetize their work. Toffee users will also be able watch the FIFA World Cup in Qatar, which will undoubtedly attract more users to the platform. Last month, Banglalink also reached the milestone of 5 million MAUs of its self-care application (78% YoY growth), and VEON OpCos now bring relevant, transformational self-care service to 35 million customers across our footprint.

Beeline in Russia has introduced Beeline Cloud, which delivers virtual server capacity, data storage systems, resources for high load and powerful computing, and remote employee workstations. In August 2022, the service saw 5x year-on-year revenue growth. Beeline Cloud also provides an environment for developing digital products for its B2B customers. 

Finally, in Kazakhstan, our music and audio streaming service IZI continues to expand. We have now made IZI accessible to all people in Kazakhstan and we continue to add content, including three new radio stations showcasing music by local artists.

Connectivity and humanitarian support across our markets

Connectivity and digital services are key elements of our strategy, but they also represent a basic humanitarian need that our OpCos continue to fulfill across our markets. In Ukraine, Kyivstar continues its exceptional work to protect its network from both physical and cyber threats. Thanks to the team’s diligent efforts, 93% of the network remains operational. Kyivstar has become a pivotal leader in Ukraine’s cybersecurity efforts. The company is cooperating with local authorities as well as international partners to implement best practices and become a hub to help other companies secure their connectivity and operations.

Elsewhere, VEON has been supporting people in Pakistan who have been impacted by the recent floods. Via Jazz, JazzCash and Mobilink Microfinance Bank, we have provided free connectivity in flood-affected areas, in addition to the ongoing distribution of emergency supplies, as part of our PKR 1 billion (USD 4.5 million) pledge to humanitarian relief efforts.

We are also contributing to Pakistan’s economic recovery through various initiatives, including programs that support the region’s farmers and promote financial inclusion of female entrepreneurs and marginalized groups. As part of these efforts, we have held policy dialogues with Pakistan’s Minister of IT & Telecoms, Minister of Finance and the Chairman of the Pakistan Telecommunication Authority to discuss reforms to help accelerate the country’s digital transformation.

We have furthered our commitment to boost connectivity in other markets, such as Uzbekistan and Bangladesh. We just announced new initiatives aimed at bridging the IT talent gap in Uzbekistan and supporting the country’s plan to become a major IT hub in Central Asia. Beeline Uzbekistan will be opening a regional hub for AdTech services, bringing in leading digital advertising expertise, in addition to expanding its big data analytics and cybersecurity labs in the country.

In Bangladesh, Banglalink is set to double internet speeds with its next generation 4G network, increasing productivity and boosting economic growth among the country’s 92.8% of internet users that rely on 4G for access to digital services. Banglalink’s new 4G network uses the 2.3 GHz spectrum that the operator secured in April 2022, making it the first operator in Bangladesh to deploy next generation TDD technology.

We welcome your questions

Should you have any questions on the topics covered in this letter, or other matters related to VEON Group, please do contact our IR team via ir@veon.com. Thank you for your continued trust in and support of our company.

Kaan Terzioğlu – VEON Chief Executive Officer

ⁱ We Are Social / Kepios: https://datareportal.com/reports/digital-2022-global-overview-report

ⁱⁱ GSMA: https://techwireasia.com/2022/07/gsma-only-44-of-asia-pacific-population-is-connected-to-the-internet/

ⁱⁱⁱ Tabadlab/Global Findex 2021: https://tabadlab.com/pakistans-unbanked/