VEON (VEON) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 6, 2026

CALL PARTICIPANTS

• Group Chief Corporate Development Officer - Anand Ramachandran
• Group Chief Executive Officer - Kaan Terzioğlu
• Group Chief Financial Officer - Burak Özer

TAKEAWAYS

• Total Revenue -- $1.31 billion, representing 17.2% year-over-year growth driven by demand for digital services and ARPU expansion.
• Group EBITDA -- $577 million, increasing 10.1% year over year despite margin pressure from a VAT increase in Kazakhstan.
• Digital Revenue -- $355 million, growing 45.9% year over year and now accounting for 27.2% of total group revenue.
• Digital EBITDA -- $128 million, up 54.5% year over year with a 36.0% margin.
• Net Profit -- $225 million, compared to a loss of $127 million in the prior-year period following the absence of non-cash charges.
• Diluted Earnings per ADS -- $2.67, reflecting improved operational performance across the company's five markets.
• Full-Year Revenue Guidance -- 16% to 18%, an upward revision from the previous 15% to 18% range.
• Full-Year EBITDA Guidance -- 10% to 12%, raised from the prior range of 9% to 12% based on performance year to date.
• Capital Returns -- $200 million executed through buybacks year to date, resulting in the cancellation of 1.5% of outstanding shares.
• Net Debt to EBITDA -- 1.05x, supported by a 4-year average maturity and $2.03 billion in total cash and cash equivalents.
• Multiplay Customers -- 44.7 million, representing 34.0% of the mobile customer base and generating 4.2 times higher ARPU than voice-only users.
• Financial Services Revenue -- $166 million, up 54.2% year over year as the company scales its digital wallet and banking operations.
• Nano-loan Volume -- $166 million in total disbursements during the third quarter, with the company processing over 230,000 loans per day in Pakistan using a 4-week repayment cycle.
• Nano-loan Recovery Rate -- 93.2%, representing a 1.7 percentage point increase compared to the prior-year period.
• Satellite-to-Mobile Reach -- 13.2 million subscribers as of late October, following service integration with Starlink in Kazakhstan, Bangladesh, and Ukraine.
• Pakistan Performance -- $522 million in revenue, representing 28.9% growth led by the expansion of the digital operator and financial services businesses.
• Kazakhstan EBITDA -- $94 million, a decline from $115 million last year due to the VAT increase and prior-year tax rebate normalization.
• Digital Life Revenue -- $123 million, reflecting 60.7% growth driven by entertainment and healthcare service expansion.
• Digital Enterprise Revenue -- $66 million, a 11.9% increase year over year.
• Mobile Subscriber Base -- 152.3 million customers, remaining broadly stable as the company continues to migrate users to 4G and 5G services.
• CapEx Intensity -- 18.2% for the last 12 months, though management reported intensity excluding Ukraine was 15.4%.
• Loan Portfolio Quality -- 89.0% of loans at Mobilink Microfinance Bank are collateralized, with a loan-to-deposit ratio of 47.0% as of the end of the quarter.
• Digital Bank Capitalization -- 16.8% capital adequacy ratio for Mobilink Microfinance Bank, which is comfortably above the 15.0% internal target.
• Uzbekistan Performance -- $86 million in revenue, up 11.0% year over year as the company acquired Perfectum to strengthen its standalone 5G spectrum portfolio.

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RISKS

• Terzioğlu stated, "In Kazakhstan, EBITDA is still below last year as we absorbed the VAT impact and the last year's tax rebates," noting the transition resulted in lower margins for the segment.
• Terzioğlu stated that the business in Bangladesh faced a "soft economy with persistent energy outages as an added challenge" during the quarter.

SUMMARY

VEON Ltd. (NASDAQ:VEON) reported double-digit growth for the third quarter of 2026, reflecting the expanded contribution of digital services across its five markets. Management reported that digital revenue now accounts for over 27% of the top line, leading to an upward revision of the full-year performance outlook for both revenue and EBITDA. The company stated that operational efforts focused on scaling the digital financial ecosystem in Pakistan and Bangladesh while integrating satellite-to-mobile services through a partnership with Starlink. Management indicated that the capital allocation strategy prioritizes balance sheet resilience alongside an annual buyback commitment of at least $200 million.

• Management reported that multiplay customers churn at half the rate of voice-only customers and provide 8.4 times the lifetime value over the customer's duration.
• The company established the VEON Digital Financial Group to unify fintech, payments, and digital banking operations under a single strategic framework.
• Terzioğlu stated that 6G technology will be defined by weaving terrestrial and satellite networks into a single seamless layer of connectivity.
• The company announced the closing of the OLX transaction in Kazakhstan to further expand its classified marketplace platform.
• CEO Terzioğlu indicated that connectivity provides a super foundation for low-cost customer acquisition and distribution capability.
• CFO Özer noted that free cash flow, excluding asset disposal proceeds, grew 91.8% year over year.
• The company announced an agreement to take a controlling interest in Jungo TV and the All Women's Sports Network to diversify its entertainment business.

INDUSTRY GLOSSARY

• DO1440: Digital Operator 1440, a strategic goal to engage customers for all 1,440 minutes of a day through a variety of digital services.
• AI1440: An extension of the DO1440 strategy focusing on the integration of artificial intelligence into customer service and digital offerings.
• Multiplay: A service model where a single customer utilizes mobile connectivity alongside one or more digital services.
• MMBL: Mobilink Microfinance Bank Limited, the group's subsidiary providing banking and financial services in Pakistan.
• Nano-loans: High-frequency, small-denomination digital loans provided to customers through mobile financial platforms.
• Mukto Pay: The company's recently launched digital payment service platform in Bangladesh.
• GTV: Gross Transaction Value, representing the total monetary volume of transactions processed through a digital platform.
• ADS: American Depositary Shares, a financial instrument that allows foreign shares to be traded on U.S. stock exchanges.

Full Conference Call Transcript

Operator: Hello, and welcome to VEON's third quarter 2026 results presentation. For those of you who have joined the Zoom webinar, if you would like to ask a question, you can use the raise hand button, which can be found on the black bar at the bottom of your screen at any time to join the queue to ask a question, and you will be called upon during the Q&A session. For those of you watching on the webcast, if you would like to submit a written question, please use the ask a question tab at the top right of your screen. These questions can also be sent in at any time during the presentation.

As a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Anand Ramachandran, you may begin.

Anand Ramachandran: Thank you. Good morning and good afternoon, everyone. Welcome to VEON's third quarter 2026 earnings call. I am Anand Ramachandran, Group Chief Corporate Development Officer. Next to me is Kaan Terzioğlu, our Group CEO. Next to him, Burak Özer, our Group CFO. Kaan will start off, cover strategy and operations, Burak the financials, and then we will take your questions. In response to your feedback, we have made three enhancements to our disclosures this quarter. First, we are providing like-on-like growth figures for revenue, EBITDA, and profit, together with reconciliations. Second, EBITDA margins for financial services, digital life, and digital enterprise, the three pillars of our digital business.

Third, we are providing standalone financial information for our digital operator and financial services businesses in Pakistan. The aim is simple, to show you more about how these businesses perform. Today's presentation includes forward-looking statements and non-IFRS measures. Reconciliations and risk factors are in our earnings release and SEC filings. With that, let me pass the call to Kaan.

Kaan Terzioğlu: Thank you, Anand, and good morning, everyone. We had another strong quarter. Let me start by explaining how we define our business at VEON today. Connectivity is the foundation of our business, not the destination, but the foundation. It gives us scale, distribution, and trusted relationships with our customers. A super foundation enabling low-cost customer acquisition, know your customer abilities, and unbelievable distribution capability. On top of that foundation, we built our three digital growth engines, now reaching more than 220 million customers. Digital services deepen engagement increases loyalty, and loyal customers stay longer and spend more. This is the source of sustainable growth and cash flows, which we reinvest and continue more value for our shareholders.

We believe we are in the very early stages of this opportunity. This quarter shows the model at work. Revenues grew 17.2%, and EBITDA grew 10.1%. Digital revenues grew by 46% and now makes up 27% of revenue with a 36% margin. Excluding Kazakhstan, where EBITDA declined due to isolated issues, mainly due to taxation impact, our EBITDA would have grown 18%, and margins were sustained year-on-year. To be clear, we are comfortable with the year-on-year trends and expect the margins to improve from here. Growth is turning into cash. Operating cash flow is up 47% year to date, and leverage is low at 1.05x with a four-year average maturity across the board.

Our strong cash generation allows us to increase returns to shareholders. Having completed $200 million of buybacks since August 2024, we have doubled our annual commitment to at least $200 million a year. Year to date, we have already executed $200 million of buyback and canceled 1.5% of outstanding ADSs. We are halfway through our current program, which remains in execution. Our performance gives us the confidence to raise the midpoint of full year 2026 revenue and EBITDA outlook. Beyond these results, we are also building the next components of the flywheel.

In addition to what is on the slide, we today announced the closing of the OLX transaction, a leading classified marketplace platform acquisition in Kazakhstan, further expanding our digital ecosystem. We also announced an agreement to take a controlling interest in Jungo TV and All Women's Sports Network. All Women's Sports Network and Jungo TV brings unique, cost-effective, sustainable content to more than 80 million entertainment customers in our markets. It also provides our platforms outreach across 65 countries. This is a bridge to audiences well beyond our footprint, particularly to more than 30 million strong diaspora from our markets having access to digital entertainment and augmented by our financial services, especially remittances.

I would like to draw your attention to the fact that part of the consideration is settled in 1.2% of our existing Kyivstar shares at a reference price of $18, a 39% premium to yesterday's close, with a 12-month lockup and orderly sell-down rules. We are focused on three objectives that we pursue consistently: build AI-based digital banks, expand the digital ecosystem, and drive consolidation in our markets. Let us look at the numbers in more detail. Third quarter revenues was $1.31 billion, up 17.2%. EBITDA was $577 million, up 10.1%. Telecom and infrastructure revenues grew 9.2%, while digital service revenues grew 46%. Digital service EBITDA up 54% to $128 million. Group net profit was $225 million.

Like-for-like, revenues grew 15.8% and EBITDA 9.8% for the quarter. For the first nine months, like-for-like revenue grew 16.4% and EBITDA by 12.3%. Group EBITDA margin was 44.1%. Burak will take you through the details later. This page shows our revenue does not depend on any single market. Pakistan led the way with revenues up almost 29% and EBITDA up 26%. In Kazakhstan, EBITDA is still below last year as we absorbed the VAT impact and the last year's tax rebates. I am happy with the recovery quarter-on-quarter as we act to rebuild momentum. In Bangladesh, revenue held broadly flat in a soft economy with persistent energy outages as an added challenge.

Yet, this was the fourth consecutive quarter of year-on-year growth. Importantly, our digital businesses continue to grow strongly in all five markets. We are applying a consistent playbook and adapt it to local market conditions. Our partnership with Starlink Mobile delivers results. Starlink direct-to-device services now connect over 13 million subscribers across our markets, with services now live in Kazakhstan, Bangladesh, alongside Ukraine. Let me be clear on how we see satellite. Not as a competitor, but as a perfect addendum to our terrestrial networks, running on our spectrum, over our customer relationships, compliant with sovereign license requirements.

For a country at war like Ukraine, for the vast distances of Kazakhstan, for a market where energy outages interrupt the networks like Bangladesh, or floods and earthquakes that happen, the value of uninterrupted connectivity is priceless. Because it sits on our spectrum and our core network, satellites extends our reach. It does not replace it. This is where we are a pioneer in our industry. 6G will be all about weaving terrestrial and satellite networks into one seamless layer of connectivity. While everybody talks about it, we are executing on that vision today. Digital continues to scale and now reaches more than 221 million customers, including 64 million digital-only users.

The quarter-on-quarter movements reflect seasonality in the timing of marquee events like FIFA World Cup or cricket tournaments. Underlying momentum remains healthy and strong. That engagement is translating into profit. Third quarter digital revenue rose 46% to $355 million. EBITDA rose 55% to $128 million and 36% margin. For the first nine months, that is $1 billion of revenue and $346 million of EBITDA. For the first time, we are disclosing EBITDA margins for the three digital engines, and they are healthy across the board. Financial services at 32.7%, digital life at 39.6%, and digital enterprise at 37.5%. With last 12 months CapEx intensity of just 6.9%, digital services scales on efficient capital and generates cash.

Digital is now a substantial profitable growth engine, and we see significant runway for growth ahead. Multiplay is the flywheel in action. Multiplay customers have grown from around 35 million two years ago to almost 45 million today. That is over 50% of our smartphone user base. Compared to voice-only customers, they generate 4.2x the average revenue per user and churn at half the rate. Over a lifetime, that is a 8.4x value. As customers adopt digital services, they use more data and voice and spend more with us and stay longer. That is why multiplay customers already generate significantly higher value. Financial services is one of the clearest example of our flywheel in action.

We have brought our financial services assets together under VEON Digital Financial Group, which already serves 60 million customers. One unified group strategy executed locally. Pakistan proves it can be done at scale. Let me tell you more about it. In Pakistan, we have built a complete financial ecosystem, over $400 million of revenue and nearly $50 million of profit in nine months. It runs at scale, with more than 65 million registered accounts and 1 million active merchants. Over the last 12 months, the value of transactions on our platform was worth around 17% of Pakistan's gross domestic product.

Given how large this business has become, we are adding more granular disclosures so you can better evaluate it against peers. Nano-loans show the engine at work. They make up $166 million of our $486 million loan book. But the real story is velocity, over 230,000 loans a day, resulting in total disbursements of over $400 million in the quarter. These are four-week loans, turning over and over again, helping customers meet everyday financial needs, like a taxi driver covering his fuel in the morning, like a small business owner purchasing ingredients, fulfill customer orders, and repay the loan from the proceeds. These are small transactions individually, but at scale, every cycle multiplies through the economy.

It is critical that we grow with credit discipline. Nano loan recoveries, measured to final outcome, reached 93.2%, up 1.7 points. NPL ratio for term loans fell 2.3 points to 8.1%. And our loan-to-deposit ratio of 47% sits comfortably in the range you would expect of a best-in-class bank. JazzSure, formerly TPL Insurance, extended our financial services ecosystem. We start where we can leverage our connectivity platform to remotely monitor the risk. Connected cars for motor insurance, connected devices for handset protection, and mini health and life packages for our subscribers. I hope these disclosures make the value drivers easier to access and show the discipline we bring as we build financial services across our footprint.

Bangladesh is where we will execute this playbook next. We recently launched Mukto Pay, our digital payment service, and Bangladesh Bank has now approved our digital banking license. The opportunity is substantial. 180 million people, a large diaspora sending money home, and a big portion of the population still outside the official banking system. We see significant opportunity to expand access and advance financial inclusion in Bangladesh. I will now pass the call to Burak to run you through the financials.

Burak Özer: Thank you, Kaan. For the third quarter, revenue grew 17.2% to $1.3 billion, and EBITDA grew 10.1% to $577 million. EBITDA margin was 44.1% against 47% a year ago. As Kaan pointed out, this reflects the increasing contribution by digital services to group revenue, as well as the VAT increase in Kazakhstan, which was one of the drivers of lower margins in Kazakhstan. In the third quarter, telecom and infrastructure delivered a 47.2% margin. Digital EBITDA, growing at 54.5%, delivered a 36% margin. Third quarter profit was $225 million against a loss of $127 million a year ago, which carried non-cash charges for the Kyivstar listing and the currency translated adjustments from the sale of Kyrgyzstan operations.

For the nine-month period, last year's figures included a $502 million gain on the sale of our Pakistan towers. On a like-for-like basis, nine months profit grew 25.5% year-on-year. Turning to cash, operating cash flow rose 39.4% to $450 million, and 46.9% to $1.3 billion for the nine-month period. Free cash flow, which we previously called equity-free cash flow, was $201 million. Last year's $303 million included $230 million of asset disposal proceeds. This year, that figure is $61 million. Excluding these, free cash flow grew 91.8% year-on-year. Our underlying cash generation continues to strengthen, and asset monetization supports this. We will keep executing on both. For us, asset monetization is not one-off.

It is the systematic delivery of our asset-light strategy executed with discipline. Moving to the balance sheet. We ended September with $2.03 billion in cash. Including $755 million at headquarters and $532 million of Pakistan banking deposits. Net debt excluding leases was $1.78 billion. Leverage improved to 1.05x. We repaid $210 million of syndicated debt in the quarter. Average debt maturity is now four years versus 2.7x A year ago, and four point nine years at headquarters versus 2.3x a year ago. Let me pass the call back to Kaan on capital allocation and outlook.

Kaan Terzioğlu: Thank you, Burak. Let me step back and show you how we think about capital allocation. It starts with cash generating strength of our businesses. Telecom and infrastructure gives us scale and predictable cash. Digital services adds growth at scale. Together, they are turning earnings into cash. As you can see, operating cash flow at $1.3 billion, up 47%. We are, of course, focused on converting operating cash into free cash flow. We invest where returns are visible and hold CapEx intensity inside our guided range, and we unlock value from our assets. When an asset is worth more to someone else, we monetize it and recycle the capital. We have three clear priorities for free cash. First, shareholder returns.

We have doubled our buyback commitment to at least $200 million a year. Year-to-date, we have already executed $200 million and canceled 1.5% of outstanding ADSs. Our current program will repurchase and cancel 2.9 million ADSs, roughly 3.8% of issued shares. We have repurchased 1.5 million ADSs to date, roughly halfway through, and the program remains in execution. Every single share we buy back will be canceled. Second, a strong balance sheet. Our leverage remains conservative at one point zero five times, supported by a well-managed maturity profile of four years. Third, invest for growth. Investment that strengthens our core, scales digital, and deepens our relevance to customers. Capital discipline is the first filter we apply.

We pursue opportunities to meet that bar and walk away from what does not. Message is simple. Growth creates cash. Cash is allocated with discipline to accelerate value, and we will deliver on all three: returns to shareholders, balance sheet resilience, and growth. With nine months of the year behind us, our performance gives us the confidence to raise the lower end of both of our revenue and EBITDA guidance. We now expect full year revenue growth of 16%-18% and EBITDA growth of 10%-12%. CapEx intensity, excluding Ukraine, is unchanged at 15%-17% of revenues. This is a disciplined upgrade supported by performance year to date.

Finally, I look forward to seeing you in New York at our Capital Markets Day in 10 days, where we will lay out the next chapter of VEON strategy and our plans for creating long-term value. Let me leave you one key message. Connectivity is the foundation and grows organically. Digital services accelerates our growth. The flywheel results in double-digit growth and rising cash flows. Thank you. We are now happy to answer your questions.

Operator: Thank you. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn to ask a question, you will receive a prompt to be promoted as a panelist. Please accept, wait a moment, and once you have been introduced, you may unmute yourself, turn your video on, and ask your question. Written questions can be submitted on the webcast by using the ask a question tab at the top right of your screen. As a reminder, we are allowing analysts one question and one related follow-up today.

If you wish to ask more questions, please raise your hand again and rejoin the queue. We will pause for a moment to allow the questioners to enter the queue. Our first question comes from the line of Bharath Nagaraj at Cantor Fitzgerald. Please unmute your audio, turn your video on, and ask your question.

Bharath Nagaraj: Hello. Hi. Thank you for the presentation, and congrats on another good quarter. I have one question on the EBITDA margin that you said is set to expand from here. Did you mean at the group level, and what are the drivers for that? And related to that, I just want to understand from a Kazakhstan point of view, is 40% the new kind of structural margin post the VAT reset, or is there any path back towards the mid-40s or higher? Thank you.

Kaan Terzioğlu: Thank you very much, Bharath, for the question. Kazakhstan had a very specific quarter where we were impacted by, at the revenue side, VAT increase and last year's tax rebates coming in on Q3. So that is kind of an isolated case. As I mentioned, if you would exclude that, our EBITDA growth was also around 48% year-on-year. I believe from this point on, naturally, there will be a dilution impact of the 36% margin digital business. I still believe that we will be from 44% onwards improve the EBITDA margin despite that. Frankly speaking, the impact in Kazakhstan will also improve over the time as we normalize the impact of price increases as well as the tax rebate normalization.

Burak Özer: And just to add on top of that, the Kazakhstan impact is already visible between Q2 and Q3, where the margin has improved in Kazakhstan.

Kaan Terzioğlu: Yeah, true. Thank you, Bharath.

Bharath Nagaraj: Thank you.

Operator: Thank you. Our next question comes from Jake Ng at New Street Research. Please unmute your audio, turn your video on, and ask your question.

Jake Ng: Hi. Just two questions. Thanks for the additional disclosure on Starlink direct-to-cell customers this quarter. Are you seeing this direct-to-cell service support higher pricing or help attract new customers in your markets? Secondly, could you share how overall consumer ARPU, so including both mobile and digital services, trended in Pakistan and also Kazakhstan in 3Q? I think you previously used to disclose this metric for each country.

Kaan Terzioğlu: Let me start with the second question you asked. I will check our disclosures, and we will provide, if need be, also the country level multiple ARPU. It is a very, very similar picture in all the countries that we operate in. We actually see the customers who also consume our digital services consume more data and generate about 4x to almost 4.5x more ARPU, and same impact on the side of the churn. So it is quite a standardized, actually, multiple, as we say.

With regard to the Starlink, naturally, the answer is when you are in a country, in a land-mined area, lack of coverage like Kazakhstan because it is too big, or you are in a country where networks may be on and off due to energy outages, having been connected is a priceless value addition to the value proposition. You can imagine that we are currently enjoying a period where we are the only operator which does this. But I believe over the time, people will see more offers of similar nature. But I do see that as a major differentiator of the customer acceptance, excitement.

I was in Dhaka actually two days ago, and I have seen literally some customers trying to get outside of the coverage area just to see the satellite sign on their phones. So I think this is really an exciting offer that we brought to these markets. As I mentioned, terrestrial and satellite network integration is what the main feature of 6G will be. And we are demonstrating that even today, there are opportunities to show value in this technology. Because it uses our spectrum, our core network, and because licenses that we have basically complies with national security rules, it is a perfect fit. We do not see it as a competitor on the other side.

It is a complementary service.

Anand Ramachandran: Jake, mobile ARPUs are something we have disclosed at the country level. For Pakistan, you will see they grew 7% year-on-year. Clearly, combined with the subscriber growth, they drove a 14% increase in telecom and infrastructure revenues for the Pakistan digital operator business. Kazakhstan, they were down 10% year-on-year, and that is obviously driven by the VAT impact, as Kaan pointed out, and the fact that we are looking to improve tariffs, and that is taking us a little more time than we thought. Let us take it offline for any other metrics that you want to know. It is all available, and very happy to take it offline.

Jake Ng: Thank you. Thank you, Anand.

Kaan Terzioğlu: Thank you, Jake.

Operator: Thank you. Our next question comes from Ali Zaidi at inam. Please unmute your audio, turn your video on, and ask your question.

Ali Zaidi: Hi, guys. Thank you for the opportunity, and congratulations on your latest results. I have a couple of questions. The first one is related to Pakistan. The recovery rate on the nano-loans for JazzCash and MMBL is around 93%, and we have seen that nano-loan book is scaling at a very fast pace. How do you see this rate settling over the longer term, and are you happy with it? The second question is that with Mukto Pay now live in Bangladesh, how do you see the Bangladesh financial service opportunity as compared to Pakistan? Yeah.

Kaan Terzioğlu: Ali, thanks a lot for the questions. First of all, 93.2% and improving. We are very comfortable with this rate. There are two important elements of our financial services business, and it is our ability both to acquire merchants, so there is a small business element to that, and then there are transaction, of course, value that we drive, and then the nano loans. All these three, including the store value capabilities we have at MMBL Bank in terms of taking deposits, are extremely accretive, and this is the model we are now exporting to Bangladesh.

Bangladesh is slightly smaller population compared to Pakistan, but from an economic activity perspective, I consider Bangladesh actually at par, and the opportunity is definitely as big as Pakistan. Also, we should not forget that there is another market that we are after, and that is the diaspora and the remittances flowing into Pakistan and also Bangladesh. In both of those countries, $60 billion each is the amount of remittances flowing. Most of that money is flowing to our customers' wallets. Now with Mukto Pay, we will also take our fair share. As we deploy our digital bank in Bangladesh, we will have the same capabilities of also storing value on our bank accounts.

Anand Ramachandran: Kaan, if I may add, given that we are disclosing these numbers for the first time, these recovery rates did not happen by accident, right? These have been over the years a buildup of proprietary data-driven credit models, now utilizing AI analytics capabilities built on tons of customer transaction behavioral data. I would, in fact, encourage all of you, invite all of you to visit Pakistan and the team, and this is something which is to be seen to be believed.

As Kaan pointed out, these are skill set-specific behavioral assets that we have built up over a period of time, and we believe these are unique differentiators that lead to these kind of numbers that we can proudly show for the bank and hopefully sustain over time.

Ali Zaidi: Thank you so much.

Kaan Terzioğlu: Thank you, Ali.

Operator: Thank you. Our next question comes from Ahmed Mostafa at inam. Please unmute your audio, turn on your video, and ask your question.

Ahmed Mostafa: Hello, everyone. Thanks for the presentation. I have two questions. First, could you walk us through the commercial rationale for creating VEON's Digital Financial Group and how you expect it to improve growth and profitability? Second, on JazzCash, you have mentioned that around 46% of transaction value is currently chargeable. So, how much scope is there to increase that share, and what would be the main drivers?

Anand Ramachandran: Let me take both those questions. The VEON Digital Financial Group, as we scale our assets, clearly Pakistan, we have proven that at scale. Bangladesh, we now have the license. It is something we want to do in the other markets as well. So there is a lot of, I guess, pretty specific skill sets to do with the financial business. We do not run the business like telcos, so kind of bringing it across into a separate group to leverage the common knowledge we have, to leverage best practices. This will be, as we have said, one strategic framework, but run very locally with local nuances in mind.

So that is the real intention of kind of bringing these businesses under the DFG, so that we can exploit synergies, avoid mistakes, and learn from each other's best-in-class habits. And obviously, over time, as we look to create value in these assets and illuminate value in these assets, these give us extra optionality to do so. Second question is a very interesting one. Yes, look, the market's still at a very early stage of growth. We're probably still scratching the proverbial tip of the iceberg. 15% of GDP is where transactions are at. So there's a combination of looking to encourage customer adoption and therefore offering a bunch of things for free or at very nominal rates.

Second, obviously, working with the government to encourage financial inclusion. So I'd like to see this as one potential indicator of both volumes, because we want to drive financial inclusion in the market, and these are things that we want to do. Obviously, over time, as we grow the businesses, these are potential opportunities for us as well to kind of grow what takes we take out of it. But again, we'll be slow and deliberate over time, because the primary motive to us is really to enrich the customer, be more relevant to the customer, and over time, obviously, look to create value for the customer and the economy.

Ahmed Mostafa: All right. Thank you.

Kaan Terzioğlu: Thank you, Ahmed.

Operator: Our next question comes from Vincent Fernando at Zero One Investment Research. Please go ahead.

Vincent Fernando: Great. Congratulations on the quarter. This is the first time we can see the Pakistan financial services as a full P&L. Saw that the GTV is up 79% and active merchants more than doubled. Now that you have the digital banking license and Mukto Pay live in Bangladesh, which parts of the Pakistan model do you expect to carry over, in terms of, I guess, the first things that you would prioritize as you go to other markets, such as Bangladesh? What should we look at, sort of, for, to see the first proof of, let's say, your proven Pakistan playbook now rolling out in Bangladesh? Thank you.

Kaan Terzioğlu: Sure. Vincent, first of all, we believe Pakistan model and Bangladesh model could be a perfect match in terms of replication. Pakistan model, if you look how we made our network be relevant to the country, merchant acquisition. It's very critical that we acquire the merchants, deployment of QR code payment capabilities. On the other side, of course, launching the digital wallet and becoming a player on mobile payments. But the payments is not the real value driver for making profits. Actually, you need to be able to store value in the bank accounts, your own bank accounts. Digital banking license is critical.

That's why we have MMBL in Pakistan, and that's why we were now allowed to do a digital banking in Bangladesh as well. And that ability to then monetize the velocity that will be driven about from your shopping window, which will be the marketplace. Actually, the one component that I would like to develop also see in Bangladesh is the marketplace or classifieds, and we can carry some of our capabilities, maybe Kazakhstan to Bangladesh from that regard. But our flywheel is very simple. The foundation telecom acquires the customer, has the KYC component.

The shopping window is the marketplace, and the bank basically from the shopping window takes the business opportunities, and the money flows from a merchant bank account on our bank to a merchant bank account, to a consumer bank account on our bank. Money stays with us. But we make the money from the velocity through nano-loans and payments. As long as we can build this flywheel, which we have successfully done in Pakistan, we will successfully do the same in Kazakhstan. Bangladesh is a huge opportunity for us.

Vincent Fernando: Okay, thank you. I'll save my other questions for offline. Thank you.

Kaan Terzioğlu: Thank you, Vincent.

Operator: Our next question comes from Himanshu Porwal at Gramercy. Please unmute your audio and ask your question.

Himanshu Porwal: Hi. Good morning, good afternoon. Thank you very much for the presentation, and congratulations on strong results. I have a question on financial services. I see it currently accounts for almost 13% of your total group revenue. What is your target going forward, and especially considering the Pakistan financial services? Could you elaborate on the average loan size? What sort of provisioning coverage do you have on the book? And what is the headroom versus the minimum capital adequacy ratios? And if you expect any parent capital injection to fund future growth. Thank you.

Kaan Terzioğlu: Sure. Himanshu, I would suggest that from a midterm outlook perspective, this is best to be shared at the Capital Markets Day 10 days from today. Let's wait for that because I don't want to give any selective disclosures at this stage. From a market perspective, I believe financial services business in the countries that we operate at, in emerging and frontier markets, is a bigger business than telecoms. I will just stop there.

Anand Ramachandran: Can I?

Kaan Terzioğlu: Go ahead. On the capital adequacy ratio.

Himanshu Porwal: But does it not produce the tail risk of operating like a bank or financial services rather than a telecom company?

Kaan Terzioğlu: Oh, I don't see that as a risk. I see that as an opportunity, and we will operate our telecom companies like a telecom company. We will operate our banks like a bank.

Burak Özer: On the capital adequacy ratio, we will be looking not to go below 15%. Whether this will need capital injection, no, the current velocity of our business is enough to sustain that capital ratio. At the same time, again, if we go into digital banking after getting the license, in line with our growth projections, we might be injecting capital into that bank. But definitely, that will be not more than what we see today is.

Anand Ramachandran: Himanshu, one of the reasons to start providing this level of detail is just to get people familiar with the amount of discipline we bring to the business. Provisions, ECL, look, we don't want to overload people with data, but we can assure you in the 20-F, you have data for last year. It's all pretty stable, and we will start providing more detail on this as we go along. So I'd rather say that, look, we want to get people used to the kind of data we are providing. We'll take your feedback on what additional data we can provide, because our intention is to assure you of the discipline that we bring to this process.

As Kaan pointed out, this is a significant opportunity for us, and this is something where we see a significant tailwind and significant scale for us to look to operate in. At the same time, we want to do it with significant discipline, and that's why the disclosure, so we can take investors along and assure you that we will do it in the right way with the right absolute capital discipline.

Burak Özer: Another data point to add is today, 89% of the loans that we give out at MMBL is collateralized.

Himanshu Porwal: What is the average ticket size? Is that something you can share?

Anand Ramachandran: Yes, the average ticket size for the nano-loans was PKR 600, roughly, give or take. It was PKR 5,700. Sorry, average loan size, the average term loan size was PKR 634,000. It's in the earnings release. Average nano loan size was PKR 5,700. That's roughly around $20. So it's all available in the earnings disclosure. This is the kind of information we want to get you more comfortable with.

Kaan Terzioğlu: Term loan average size around $3,000, right?

Anand Ramachandran: Right.

Kaan Terzioğlu: Yeah.

Burak Özer: Yes.

Himanshu Porwal: Got it. Thank you very much.

Kaan Terzioğlu: Thank you. Thank you, Himanshu.

Operator: Your next question comes from.

Kaan Terzioğlu: Happy Diwali.

Operator: Apologies. Your next question comes from Dan Ridsdale at Edison Group. Please go ahead with your question. Dan, please unmute your audio.

Dan Ridsdale: Apologies. It is very positive to see the growth in digital services and the margin expansion, particularly in fintech. We have obviously seen the IPOs of Airtel Money, seen the IPOs of Mynt recently at healthy multiples, and it does look as if international groups are attracting higher multiples than single country. I was interested to see the consolidation of your fintech, and I was just wondering whether those IPOs had shifted your thoughts about a potential valuation, the timing and structure of a valuation crystallization event in fintech.

Kaan Terzioğlu: I have been also very closely monitoring the valuations of both GCash and Airtel Money. I think they are encouraging, and it shows actually the potential of the business. Clearly, we tackle our markets market by market, but on the other side, we are not blind that there are synergies, there are best practices, and there are capabilities when it comes to credit scoring and loyalty technologies. As we build our businesses, we will create the right synergies, and especially when it comes to international money transfers and remittances. By definition, this is a capability that we have to build at the center in a very strong way with AML controls.

That is why we brought in a chief payments and digital assets officer, both addressing the capabilities in terms of remittances, including either fiat currency or stablecoins. That will be the first steps towards creating a multi-country financial services group. That is why we named it VEON Digital Financial Group, and it will be our value-generating unit in the future.

Dan Ridsdale: Thank you very much.

Kaan Terzioğlu: Thank you.

Operator: Your next question comes from Stella Cridge at Barclays. Please unmute your audio and go ahead.

Stella Cridge: Hi there, everyone. Many thanks for all the updates today and the additional disclosures as well. I wondered if we could ask about the Uzbekistan market. You announced the acquisition there. If you could talk about this entity, what the market share is at the moment, what kind of opportunities you see in Uzbekistan, perhaps the EBITDA contribution that we could include going forward, and how this will be funded. That would be great.

Kaan Terzioğlu: Super. Stella, thanks a lot for allowing me to talk about Uzbekistan a little bit. Uzbekistan is a remarkable transformation story. In the last nine years, the new president of Uzbekistan, Shavkat Mirziyoyev, has turned into a closed economy, almost at the level of North Korea, into a globally connected liberal economic platform. In the same time, this double landlocked country turned itself into a well-connected country to the digital economy. We see this transition, and as a 40 million population country, growing 1 million a year, represents a huge opportunity. Still, the penetration rates of mobile services is below 100%, is actually around high 80s.

I truly believe that the structure of the culture, very similar to Kazakhstan, with high family values, and we know how to play in these markets, providing real value for the families and fixed mobile convergence. The acquisition we have done, Perfectum, is a very good example of that. Perfectum is the only standalone 5G operator in the region, actually, and may be one of the handful ones around the world. It gives us a unique spectrum fleet, already deployed standalone 5G network, and ability to deploy very fast fixed wireless access solutions for a fiber-poor environment. That's why I consider Uzbekistan as one of our star growth markets of the future.

Burak Özer: From a funding perspective, half of the acquisition will be funded from the HQ cash, half will be debt that will be funded through the operations.

Stella Cridge: In terms of EBITDA that it might bring from the close date?

Anand Ramachandran: Let's wait on for that at the right point in time, Stella. When we provide the guidance for next year, it will be included as part of that.

Stella Cridge: Okay. So perfect. Thanks so much for that.

Kaan Terzioğlu: Thank you Stella.

Operator: Your final question of today comes from the line of Adrian Cundy at Emerging & Frontier Capital LLP. Please unmute your audio and go ahead.

Adrian Cundy: Hi, Kaan, Burak, Anand. Greetings from another frontier market of Vietnam. Most of my questions have been answered by yourself, by press release, by earlier participants, particularly as relating to Perfectum and to the Bangladesh digital bank and wallet. But maybe I could ask something a little bit more granular on Perfectum. Clearly, from what I can tell, it is very much a spectrum-driven acquisition and network assets. It puts you on par or better with both Uztelecom or Mobiuz and the other operator in the market from that capacity.

So maybe could you give us some idea on what your 5G CapEx in Uzbekistan might look like in the coming year or two, in terms of also your consolidated sales in that market, given its low customer base? Just from a, Burak, just from an accounting perspective, you have bought an asset with debt and equity. Is there any risk that you might have to look at some kind of impairment on. Have you paid any goodwill that might result in impairment, or does the spectrum that you have acquired in a network sort of increase the overall value of your existing Uzbek footprint and there is no risk there? That is on Uzbekistan.

Just on Bangladesh and the digital bank and the wallet, what kind of sort of capital base do you think that financial services is going to need this year, next year, and the year after, over three years? And how much is that sort of relative to your existing EBITDA in the country?

Kaan Terzioğlu: Sure. Let me start with the Uzbekistan. When we looked into the opportunity in Perfectum, clearly spectrum was one of the attractive things, but the other thing is the synergies that we will be able to drive from merging the two networks and also deploying the fixed wireless capabilities in addition to our fiber assets. So the synergies and the spectrum well justifies the position. But we have to keep in mind that still there is another privatization going on with Mobiuz. We would like to see what is the outcome of that. And I still believe that there is further room in the market for a market consolidation of network companies, network infrastructures.

It is really important that countries like Uzbekistan adapt a network sharing strategy in order to maximize the network performance, accelerate the deployments, and lower basically the cost of the networks. We will be actively looking for further consolidation opportunities or network companies, infrastructure company formations. But currently, even if nothing more happens, we are very happy with the Perfectum asset in terms of the spectrum it provides us and the ability to create synergies from our joint networks coming together. With regard to Bangladesh, how much capital we will need. The secret sauce of digital banking, and specifically AI-driven digital banking, is not only about the wallets and payments, it is about ability to store value.

And when I talk about store value, there are two important components. One is the float that you will have on your digital wallet and where the float sits. Because as the float sits in bank accounts, and as the merchant acquisition drives more POS, and the POS also drives bank account volumes, practically you create a very balanced portfolio of deposits funds. Then within the central bank regulatory environments, you can leverage that and create already a very sustainable and strong lending power. So, I do not see any significant deployments of our own capital into this, but of course, utilizing a systemic credit scoring and well-managed capital adequacy ratio is going to be critical for successful operations.

But that is why when we enter into markets, we always go through digital banking licenses. I do not think standalone digital wallet businesses is credible in terms of driving nano-lending type of opportunities.

Burak Özer: On the capital, it is not a triple-digit million. I mean, there is definitely a business case that we have sent in to the Bangladesh Bank to get this digital license. We did not disclose the amount, but it is not definitely a triple-digit million, as I said, for the capital.

Anand Ramachandran: Bangladesh, Burak generates $200 million, give or take, EBITDA per annum. It is probably going to be, like Burak said, it is not a three-digit, it is much lower than a three-digit number, and there is probably ability to stagger it over time. Relative to the EBITDA, it is not going to be a number that moves the needle significantly either way. That is probably the best way to leave the answer for now.

Burak Özer: On the accounting question, we are currently going through the purchase price allocation, but eventually we are acquiring a business, not asset. That is how we will account for it. Any impairment, if any, will be determined after a year according to the business plans we set for the entity and the synergies that we will get in the operation.

Adrian Cundy: Net, I think it is a positive move across the board, and I think in Bangladesh, going hand-in-hand of a license puts you in a better place than, say, bKash standalone, because bKash has to answer to its bank, and you are going hand-in-hand with a bank and a wallet. All good. Congratulations on what was a pretty good result over the quarter, certainly operationally. Hopefully we will be a little bit more accurate on the net income line next time. But we were spot on EBITDA, so we are happy. I look forward to seeing you in New York.

Kaan Terzioğlu: Thank you very much, Adrian. Thank you for your confidence in us.

Adrian Cundy: I am flying to Vietnam, from Vietnam to New York on the November 15th, so I might turn up tired, but I am going to be there.

Kaan Terzioğlu: Thank you so much. Looking forward to seeing you there in person.

Adrian Cundy: Excellent. Bye-bye.

Operator: Thank you. We have one additional question from Himanshu Porwal at Gramercy. Please unmute your audio and ask your question.

Himanshu Porwal: Hi. Yeah, just wanted to follow up a bit about your refinancing. I mean, any plans to refinance or pre-fund your headquarters maturities?

Kaan Terzioğlu: Burak?

Burak Özer: Again, we just, as Kaan said, we closed a syndicated loan in the headquarters. We are looking into it. Definitely our target is to keep the maturity level above four years, which is the current level today. So, there is no need. What I always said is we have this 1.5x CapEx as a ratio in terms of our net debt to EBITDA ratio. So eventually, if something comes up that is worth investing in, we will be looking into getting into more debt, but there is no refinancing considered at this point.

Anand Ramachandran: I guess the other way to look at this question, Himanshu, as we've discussed before, we would want to keep our credit investors well updated with what we do. You've been very loyal to us. We are a company that does many things, so if ever there is a need to raise capital, we can move very quickly, and therefore we'd want to keep all our stakeholders fully updated on what we are doing, and therefore keep your comfort levels with us at an optimal level. It just increases our flexibility on the financing front.

Kaan Terzioğlu: Thank you, Himanshu.

Himanshu Porwal: Thank you, [Kaan]. Appreciate that.

Operator: Thank you. We have no further questions at this time. I will now hand back to Anand Ramachandran for closing remarks.

Anand Ramachandran: Well, thank you very much, as always, for taking the time to attend our call. As Kaan pointed out, we look forward to seeing all of you, if not a whole lot of you, in New York in 10 days' time, when Kaan will be talking about the next chapter at VEON, and we will be talking about a bunch of the businesses that we spoke about today in more detail. As always, any follow-up questions, we are here. Thank you again, and goodbye till the next time.

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