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04/28/22 3:35 PM

#122 RE: #121

$VEON Ltd. (VEON) CEO Kaan Terzioglu on Q1 2022 Results -
Earnings Call Transcript//Apr. 28, 2022 2:37 PM

VEON Ltd. (NASDAQ:VEON) Q1 2022 Earnings Conference Call April 28, 2022 8:30 AM ET

Company Participants

Nik Kershaw - Group Director of Investor Relations

Kaan Terzioglu - Chief Executive Officer

Serkan Okandan - Group Chief Financial Officer

Conference Call Participants


00:08 Good morning and good afternoon, ladies and gentlemen, and welcome to VEON'S First Quarter Trading Update for the period ended March 31, 2022. I'm Nik Kershaw VEON's Group Director of Investor Relations. I'm pleased to be joined in the room today by Kaan Terzioglu, our Group CEO; as well as Serkan Okandan, Group CFO; and Alex Bolis, Head of Corporate Strategy Communications and Investor Relations.

00:31 Today's presentation will begin with an overview from Kaan, followed by a financial review from Serkan, and Kaan will then come back and close before we move to the Q&A. All participants will be in listen-only mode, and the question-and-answer session today will be facilitated through the Q&A function. If you could please share any questions you have in the Q&A function in Zoom. We have already received a number of questions from investors. In the Q&A session, we will repeat the details of the question and the name of the institution. We will look to answer as many of the questions as we can in the time allotted, and in the interest of time, we make group together some of the questions that are related.

01:10 Before getting started, I would like to remind you that we may make forward-looking statements during today's presentation, which involves certain risks and uncertainties. These statements relate in part to the company's anticipated performance and operational guidance, future market developments and trends, operational and network developments and network investments and the company's ability to realize its targets and commercial and strategic initiatives, including current and future transactions. Certain factors may cause actual results to differ materially from those in the forward-looking statements, including the risks detailed in the company's Annual Report on Form 20-F and the other recent public filings made by the company with the SEC. The trading updates in the presentation, each of which includes reconciliation of non-IFRS financial measures today can be downloaded from our websites.

02:01 With that, let me hand over to Kaan.

Kaan Terzioglu

02:04 Thank you, Nick. Good morning, all, and welcome to the presentation of our first quarter trading update.

02:10 Before we start going through the numbers, I would like to say that this has been a challenging and character building time for our Group. At the same time, all of our teams have shown exceptional focus, while staying the course and delivering positive results. In particular, I want to thank our colleagues in Ukraine, who in unbelievably difficult circumstances have kept the Kyivstar network functioning. They have undertaken extraordinary humanitarian actions to support Kyivstar's customers and communities.

02:45 Now, let me start with some key figures for the quarter. Group revenues grew by 9.8% year-on-year on a local currency basis, in line with the growth in the second half of 2021. Local currency EBITDA for the quarter was up 5.7% adjusted for exceptional charitable donations and employee support works during the quarter, normalized EBITDA was up 7.3%. CapEx was $367 million, down 6.2% year-on-year. Given the current operating environment, CapEx for the full year will be lower than we previously anticipated.

03:33 Importantly, all our operations are generally self-funding for their requirements. In addition to this, we have $1.3 billion in cash held at the headquarters level. That said, let me give you more detail on our performance in March, which better reflects the current operating environment. First and foremost, we prioritized protecting our people, wherever and whenever needed during these times. In March, we faced the full impact of the current conflict on our operations. Despite this, our 4G subscribers were up 24.3% year-on-year passing the 100 million mark, and March revenues were up 8.6% in local currency.

04:26 Reported currencies revenues were down 11.9%, impacted by currency volatility. Our decentralized governance model empowered local management teams to drive their country operations effectively. At the Group level, we continued with our financial derisking, reinforced through debt management and prioritizing liquidity. The financial performance of Ukraine remained strong and our operations were kept up and running throughout the month. We will cover this in more detail in coming slides.

05:04 On the next slide, you see that VEON is a global company operating in nine countries and providing service to 220 million subscribers, which is an essential humanitarian service. We are committed to our industry's mission of improving lives through telecommunication services and access to mobile internet. As a sector, we enabled billions of people around the world to connect to their loved ones through vital opportunities and fair information.

05:40 An important driver of our strategy and Q1 results is our progress in implementing our digital operator strategy enabled by our 4G investments over the last two years. Over the past year, our 4G users increased by 24.3% improving revenues as we continued building our digital platform. I am proud that we have now exceeded 100 million 4G user milestone, actually including Algeria, our 4G users are at 108.3 million. Over the last two years, our 4G penetration grew from 29.2% to 48.8% and we are consistently progressing towards the 70% penetration mark that we have previously indicated. Our data and digital revenues were up 15.8% year-on-year in local currency terms.

06:42 On Slide 10, we provide further granularity into the progress of our digital operator strategy and customer base transformation. Our Multiplay subscribers, who are the users of at least one of our digital services on top of our 4G data and voice services have increased 28% year-on-year and reached 29.7 million. Multiplay customers typically demonstrate materially higher engagement levels. In the first quarter, Multiplay ARPU, average revenue per user, was 3.8 times more than a Singleplay voice user, while the churn is only 40% of that of a Singleplay voice user.

07:34 We have achieved well balanced growth across all our operations due to a higher subscriber base with higher 4G penetration, with increased consumption of digital application and disciplined inflationary pricing. We also saw strong momentum across markets in terms of EBITDA. In Ukraine and Kazakhstan, you will notice the normalized EBITDA, as well as reported. This shows the adjustments for charitable donations and extraordinary employee support during the quarter for the events that has unfolded in Kazakhstan in January and later in Ukraine.

08:14 Let me now take you through the individual performances of our large markets, including Uzbekistan this time. I will start with Ukraine. We have lost one of our engineers in Bucha. Thanks to him and hundreds of Kyivstar engineers. We are working tirelessly and we kept our networks functioning. The work of our team in Ukraine has been extraordinary. As of today, 92% of our network sites remain operational and we continue to roll out new sites.

08:50 National roaming has been strengthened through network sharing amongst the domestic operators. We continue to support the safety and security of our people. We are helping our 3,900 employees through economic support and temporary accommodation, our communities through charitable donations and nursing homes, our customers by waiving top up and internet fees and offering free education services. We have seen millions of refugees' flew the country and we continue to support these customers with services such as roam like home.

09:29 I would like to commend our fellow domestic and international telecom operators, industry associations and vendor communities for their exemplary partnership at this difficult time. In these exceptional circumstances, Kyivstar has delivered another quarter of impressive results, with double-digit revenue growth, up 15.1% and a normalized EBITDA growth of 9.3%. The strength and resilience of our operations is shown by our March numbers with both total and service revenues up by 16.7%. This was the seventh consecutive quarter of double-digit revenue growth for Kyivstar, whose growth in Q1 is consistent with the increases reported over the past two years despite unprecedented challenges.

10:22 We do acknowledge the uncertainties that prolongation of the conflict will bring with regards to our operational performance, but I would like to take this opportunity to thank the team once again for their dedication to keeping our customers connected.

10:39 Let's turn to Russia, Beeline's extensive 4G rollout over the previous two years has proven of fundamental importance on our ongoing operations. We have 25.3 million 4G users, up 9.2% year-on-year, they now account for 56% of Beeline Russia's total customers. Beeline recorded year-on-year growth in terms of both revenue and EBITDA. Total revenue grew by 5.6% with service revenue growth of 4.1%.

11:13 In March, total revenues grew 3.6% and service revenues grew 3.7%. Handset availability remains a challenge for the whole market. We note the impact of the unprecedented currency volatility with the March average exchange rate used for consolidation being RUB104.1 per dollar, impacting reported revenue numbers, which declined 25.9% year-on-year.

11:47 Let's take a look at our performance in Pakistan, where we continued to gain market share. It is encouraging to see Jazz growing revenues by 9.1% year-on-year. This was delivered despite the 5% increase in withholding tax from 10% to 15% and the 30% reduction in mobile termination rates. Today, 49% of our customers enjoy our 4G services, 17% of our subscribers are Multiplay's customers consuming at least one of our digital services like JazzCash or Tamasha accounting for 35% of our subscriber revenues.

12:33 JazzCash continued to grow in Q1 2022 with monthly active users up 12.2% year-on-year to 15.7 million. The average revenue per user of JazzCash among Jazz subscribers are 40% higher than the average Jazz -- average revenues per user. We recently applied for a digital retail banking license to support our financial services offering and take it to the next level. We strongly believe JazzCash represents a real value opportunity for our company and for our shareholders.

13:13 For Tamasha, monthly active users increased 35% year-on-year to 1 million and total watch time increased an impressive seven-fold year-on-year. Tamasha user ARPU is 2.4 times higher than the average Jazz user ARPU. We have secured a 15-year extension of our spectrum license in 900 and 1,800 megahertz bands for a total of $486.2 million. We have made an initial payment of PKR44.5 billion, equivalent to $243.1 million. This payment was funded through a local banking facility, which matures in 2031, the balance payable in equal installments over five years.

14:11 Turning to Kazakhstan. Following the difficult start to 2022, services are rapidly restored to full operation. The unrest in January was quickly addressed by the government. Despite the loss of services in some areas for up to 10 days, Beeline Kazakhstan reported its fourth consecutive quarter of growth above 20%. Two of three subscribers in Kazakhstan are 4G customers driving the exceptional performance in revenue and EBITDA. The growth of our data and digital revenue was up 39.5%, driven by the higher use of our digital applications. Our financial services offering simply has reached 125,000 users. Users of our second brand Izi, a fully digital operator now exceeds 100,000. Due to the success of these and other digital services, our average revenue per user in Kazakhstan is up 21.1% year-on-year.

15:20 Slide 16 is about Bangladesh. Growth in Bangladesh has accelerated in line with our decision to invest in our nationwide coverage. We recorded revenue growth of 8.6% year-on-year in the quarter, gaining market share in Q1 with a full quarter revenue acceleration in the month of April to about 10%. Our 4G subscriber base was up 40% to 12.5 million and data revenues increased by 22%. Over the past two years, our 4G penetration in Bangladesh has more than doubled from 16% to 35%, driven by Toffee, our video platform, 9% of our subscribers account for more than 18% of our subscriber revenues, demonstrating the impact of digital applications and Multiplay subscriber base.

16:19 In March, Banglalink launched the country's first digital health platform Health Hub with the goal of making healthcare affordable and accessible to millions of Bangladeshies. We concluded the acquisition of a further 40-megahertz spectrum in 2,300 band funded again through a local banking syndicate. This doubles out spectrum holding in Bangladesh and ensures we retain the leading position in spectrum per subscriber. We are progressing well with our rollout plans for 2022. In Bangladesh, our 11,400 strong tower portfolio has been ring-fenced and torch with potential buyers are progressing.

17:09 Uzbekistan for the first time featuring along. A remarkable turnaround story for the Group. Our revenues grew 22.6% and EBITDA grew 24.5%, and we are back to being number one in customer market share. The Uzbekistan economy is opening up to international investors and this is encouraging us in our outlook for the country. We will continue to facilitate the digital transformation of the countries. 4G subscribers reached 4.7 million with a 4G penetration of 62%, a 12 percentage point increase year-on-year, 1 percentage point every single month. This is in-turn supported the 31.5% increase in data revenues which is a key driver of our overall performance.

18:05 Let me also give you a slight update on the other markets. Georgia reported 4G subscriber growth of 16.4% year-on-year, representing a 4G penetration of 71.3%. Revenues grew by 13.7% and EBITDA up 22.7%. Kyrgyzstan reported subscriber growth of 21.5% year-on-year, penetration of 63.5%. Multiplay customers more than doubled over the year. Revenues grew 9.7% with EBITDA up 26.5%.

18:46 Let me also mention Algeria, which we have not consolidated since Q3 2021, since we exercised our put option. Djezzy remains one of the strongest brands in the country, a role model enterprise and continues to perform strongly, reaching high-single digit growth in Q1. The valuation of the put option has been finalized and it is set at $682 million for our stake in the operator. We remain committed to ensuring a smooth transition as Djezzy is well placed to lead Algeria's digital transformation.

19:28 Let me focus some of our digital products. On the fintech side, JazzCash has increased its user base by 12.2% year-on-year, serving 15.7 million customers and now also serving 145,000 merchants, a growth rate of 61% last year. The total number of transactions processed by JazzCash reached $518 million, up 40.3% year-on-year. Gross transaction value for the last 12 months was close to PKR3.5 trillion, about $20 billion equivalent. This amounts to approximately 6.5% of gross domestic product of Pakistan.

20:20 Looking at entertainment services, Banglalink's Toffee is the number one entertainment platform in the country and grew 87% year-on-year to 6.3 million users. Over 75% of this user base are non-Banglalink customers, with an average watch session of 20 minutes. The entertainment platform Tamasha replaced Jazz TV last October and has now more than 1 million monthly active users, up 35% year-on-year with increasing levels of customer engagement, rebranding of Jazz TV as Tamasha is a demonstration of our efforts to provide all access entertainment services.

21:12 Let me pause there and hand the call over to Serkan to discuss our first quarter financial results in more detail. Serkan?

Serkan Okandan

21:21 Thanks Kaan. Good morning or good afternoon to everyone. In the coming slides, I will elaborate on the financial highlights in this Q1 trading update. As we have already stated in the notice to readers on Slide three of this trading update, the numbers presented today have been compiled according to IFRS standards and reviewed by the management, but have not been externally reviewed or audited.

21:48 Moving first to our revenues, in Q1 '22, we saw strong performance across all our markets, with Kazakhstan, Ukraine, Georgia and Uzbekistan, all delivering double-digit growth. Russia reported revenue growth of 5.6% and Pakistan recorded growth of 9.1%. The strong growth in Pakistan comes despite changes to taxation legislation and the reduction in mobile termination rates, which impacted our revenues negatively. Adjusting for these two developments, underlying revenue growth in Pakistan would be double-digit as well.

22:29 In Kazakhstan, the 20% revenue growth was delivered despite the headwinds from the unrest in January. The overall revenue performance for the quarter was supported by strong 4G adoption and the continued increase in data usage. I would also like to highlight that, reported revenues were impacted by high FX volatility, especially in Russia and particularly during the month of March. As Kaan mentioned, the average ruble exchange rate used in our US dollar financials in March was RUB104.1.

23:07 Moving onto Slide 22 which outlines our EBITDA performance in greater detail. Local currency EBITDA was up by 5.7%, although this was impacted by extraordinary charitable donations and employee support expenses in Kazakhstan and Ukraine. Adjusting for these expenditures, normalized EBITDA would be up by 7.3% year-over-year, a very solid result. All our operating countries, Pakistan, Georgia, Uzbekistan and Kyrgyzstan witnessed double-digit EBITDA growth, while in Russia, EBITDA increased by 2.8% year-over-year, marking fourth consecutive quarter of growth.

23:51 I must also note that the share of energy cost to total OpEx is approximately 12% for the Group and we have seen a notable increase in energy costs across our markets. The overall effect on the Group has been an increase of approximately 25% in energy costs, which is a significant increase for this expense line. Over the time as we do for inflation in general, we will address the specific cost increase through appropriate pricing across our operations.

24:27 Turning now to Slide 23, I will expand a little on VEON's balance sheet. Our total cash position stands at $1.9 billion, with $1.3 billion at the headquarter level. This position is held in both US dollars and Euro and highlights the Group's continued strong liquidity position. We have also made good progress on Algeria production, with the valuation process completed at $682 million for our stake in Djezzy.

25:03 Our leverage ratio improved slightly versus year-end '21 and was 2.4 times at the end of the first quarter. At the Group level, gross debt decreased quarter-over-quarter, primarily because of the weakening ruble, as well as the repayment of VEON bonds matured in March. We will actively address our exposure to sanction banks. We early settled the bilateral loan from VTB in March and the Group has no further position outstanding to VTB.

25:39 We are also winding down our exposure to Sberbank and Alfa-Bank through the innovation of RUB90 billion bilateral debt to our subsidiary in Russia. I would also like to highlight that net debt excluding lease liabilities decreased to $5.4 billion, bringing our leverage ratio, excluding leases to 1.8 times. HQ net debt also fell to $3.7 billion following the novation of the US Ruble denominated debt from Sberbank and Alfa-Bank.

26:17 Moving to Slide 24, we show our debt and liquidity positions in detail. Our gross debt excluding leases reduced to $7.1 billion, with a total cash position of $1.9 billion. As I previously mentioned, $1.3 billion of this cash is at the HQ level. Our net debt currently stands at $5.2 billion, excluding leases and at $7.8 billion including leases.

26:51 Looking at the currency breakdown, 45% of net debt is denominated in rubles with the tower transaction completed in December of last year supporting our move towards a more balanced currency mix across our debt portfolio.

27:09 Turning now to Slide 25, we have some details on the impact of the recently concluded RUB90 debt novation to Russia. Excluding Russia, net debt at the Group level stands at $4.9 billion with net debt at the Russia level totaling $2.8 billion.

27:32 Moving to Slide 26, we outline the Group's debt maturity schedule. As you can see from the chart, we have a favorable maturity schedule for the near-term with no further material repayment at the HQ level for the remainder of 2022. Our next upcoming obligation is $529 million bond maturing in Q1 '23 followed by a $700 million bond in second quarter '23. It is also important to note that we have and continue to meet all our legal obligations for all interest and capital payments due on our debt in a timely fashion.

28:20 Turning to Slide 27, we detailed changes in our cost of debt and average debt maturity. In recent years, we have worked to increase local currency funding focusing to align our debt with revenues. While this is a positive development from a fixed risk perspective, it does come with a higher cost of debt. Higher funding costs in some operating countries, particularly in Russia and Pakistan after increases in Central Bank benchmark interest rates have also impacted our average cost of debt which now stands at 7.7%. Meanwhile, our average debt maturity remains stable at 3.3 years.

29:08 Now I would like to hand over to Kaan for his closing remarks.

Kaan Terzioglu

29:12 Thank you, Serkan. Let me close our presentation with a summary of our priorities ongoing. It will continue to be our number one priority to protect our people and their families. They are our major assets in terms of providing the services to the countries that we serve at.

29:36 Number two, service continuity is our priority when it comes to providing essential humanitarian services reaching to our customers in nine countries and business continuity will be following the service continuity as we ensure the services that are available and through the business continuity properly monetized [indiscernible].

30:01 Three, we will continue protecting in all circumstances the good standing of our company providing appropriate liquidity and capital structure. Four, all our businesses will continue to deliver growth. And five, our active portfolio management remains focused on monetization opportunities as we execute our asset-light strategy.

30:29 With these priorities in mind, I would like to thank you for your attention, to all the 224 people who are online currently, and I will hand over to Nik Serkan, we can move to Q&A session. Thank you.

Question-and-Answer Session

A - Nik Kershaw

30:44 Hi. Good afternoon to everyone again. Thanks very much, we have had a number of questions come in already. I think we're going to start off firstly with a question that's coming from [indiscernible]. Firstly, a comment on the exemplary work that has been done by Kyivstar, the first question and that's to you Kaan is, why is VEON not listing Jazz and Banglalink on the restricted stock exchanges in a reasonable timeframe to unlock the big value opportunity, which has also further improved our relationships with the governments?

Kaan Terzioglu

31:17 Thank you very much for the question, and thank you for your comments about the efforts and the spectacular work by – especially by the Ukrainian team. I appreciate that. Of course when it comes to financial results and decisions of the management modern efforts, results count. I would like to highlight that you have exactly pinpointed the right area of creating value, when we look at the -- some of the parts valuation of our company, it is no surprise that as the aggregator of multiple operators VEON name might be foreign to investors, but our assets, especially in Bangladesh with Banglalink brand and Jazz in Pakistan are crown jewels of those economies and are very much known by all the investor base when it comes to local markets.

32:05 As the markets evolve and capital markets develop in these countries, we will be looking forward to looking how we leverage this from the best perspective of our shareholder base. And we can hardly say that we congratulate you for pointing the opportunity and it will be on our radar.

Nik Kershaw

32:26 And the next question of similar vein is, why is VEON not listing JazzCash and potentially even selling a stake to fintech player to unlock some of the hidden value in JazzCash?

Kaan Terzioglu

32:37 Unlocking value whether on public platforms or private platforms is clearly a high agenda item for us. With regard to JazzCash, we have been implementing our strategies step by step and recently implementing and applying for the digital banking license is an important milestone. As we progress, we will explore both public and private opportunities as we create value for the company.

Nik Kershaw

33:05 The next question is coming from Excel Capital in London. Maybe Kaan, if you can comment on how the conflicts in Ukraine has impacted the performance, both in Russia and Ukraine with respect to both the operations, potential network investments and demand?

Kaan Terzioglu

33:21 So thank you very much, Michael, Gabriel, Darvis and thanks a lot for your continued support to our company and confidence. I'm very glad to see shareholders like yourself taking attention on our company's operations and investments. Clearly, the conflict has impacted on our operations in both countries. And especially, when it comes to our Ukrainian operations, the humanitarian disaster has been observed on a day-to-day basis by our people on the ground, themselves under the impact as well.

33:55 The nature of the business in these difficult times as people increase their mobility and almost 70% of the people, including our employees have been moving from their homes to alternative locations was visible. Our offices were opened as shelters not only to our people and their families, but also people on the road. Most of our employees are working from different locations today, about 10% out of the country.

34:23 In the last two years, COVID has taught us a lesson in terms of how to keep a company up and running from remote locations, whether our people are outside of the country, in the country in different cities [Technical Difficulty] and support our customers in the best way we can and that showed actually its impact in terms of our network operations, only 8% as of yesterday of our base stations are not operational.

34:53 We will be looking forward to reconstruct the network and repair to 100% levels as soon as the conflict stops. And as you can imagine, currently the investment plans that we have created for both Ukraine and Russia is not going to be continuing as the plans were. And the demand continues to be at the same levels despite the fact that it is coming from maybe different revenue lines not necessarily from consumer business, but from roaming, from international connectivities and so forth. And we expect actually that this level of operation to be supported by us and continuing to see even in the month of April double-digit growth in Ukraine despite the difficulties.

Nik Kershaw

35:43 And the next question to you, Serkan, also from -- what is the magnitude of CapEx delayed to preserve liquidity and over what timeframe do you expect to catch up on our initial capital investment base?

Serkan Okandan

35:55 Thank you, Nik. First of all, I should say that we have made sizable investments, especially in 4G networks during the last couple of years across our footprint. And as a result of this, our CapEx investments was naturally slowing down because of the sizeable investment in the previous couple of years. So, having said that, our spectrum acquisitions in local companies and the CapEx plans in all our course are fully funded locally. So our HQ cash is immune from the CapEx rollout [indiscernible] investments in acquisition of licenses are immune. So as a result, we expect our CapEx in '22 in absolute numbers to be lower than the CapEx investments that we did in '21.

Nik Kershaw

36:49 And thank you. And the last question from Excel is over to you Kaan. Could you may be provide an update on potential non-operating sources of cash over the next couple of years, tower sales, Algeria put or any other options, local financing, et cetera?

Kaan Terzioglu

37:05 Thank you. And as you have heard from us, we are executing and we continue to execute on our asset-light strategy and this started with the sale of our towers last year in Russia, which generated almost $1 billion of cash. And if we continue with our execution in Pakistan, Bangladesh, Kazakhstan and Ukraine, all our tower assets are ready to be crystallized in terms of value, we truly believe that no operator today can afford to run its own towers, network sharing and independent tower operators are facts of our new reality and will drive the delayering of the telecoms industry and we will be pioneering that change.

37:49 In addition to tower transactions, we also believe that private and public placement of our digital assets, whether it'd be entertainment platforms like Toffee or financial services platforms like JazzCash are also important value creation opportunities. We should also not forget that local markets are getting stronger and our brands are right for local investors in certain countries, which we will also consider when the right climate approaches.

38:19 I would like to also highlight Algeria, we have been working with the Algerian government and the Sovereign Fund of Algeria in a very cooperative manner over the last year. And finally, final valuation of our stake has been agreed as we have indicated in our press release at $682 million. We do expect continuation of our share repurchase agreement as planned and that will be over the next couple of quarters. So I think that summarizes the noncash opportunities that we have in front of us.

Nik Kershaw

38:53 Good. The next question comes from [indiscernible] New York, this is to you Serkan, and for Kazakhstan, which is held under the Russian business, are we able to separate this out and provide -- kind of then provide additional credit support for the bonds?

Serkan Okandan

39:06 Thank you, Nik. First of all, it is true that we are holding our Kazakh operations via VimpelCom in Russia that is historically there. However, in the last couple of years, we have restructured our Group shareholding structure and we moved our investments in Armenia, in Uzbekistan, and recently in Kyrgyzstan from VimpelCom umbrella to VEON Holdings umbrella and we are working a similar transaction for Kazakhstan as well with other considerations as well. So we are working on it and we will decide and execute to the best interest of our shareholders and all the stakeholders in the coming months and years.

Nik Kershaw

39:50 And then on the other ruble based states, the Holdco, does the funding for the interest there come from Holdco or from the Russian subsidiary?

Serkan Okandan

39:59 The issuer is VEON Holdings B.V. and the debt service will be done by VEON Holdings B.V. as well.

Nik Kershaw

40:05 Great. Now I've got quite a number of questions, I'm going to just group a few of them together. I think we'll first jump onto some liquidity questions and this maybe can follow them in a logical sequence. Serkan, could you just update us on the current liquidity and cash needs from a headquarters perspective?

Serkan Okandan

40:22 Okay. So as we discussed in the presentation, we had $1.9 billion cash at the group at the end of March, out of which $1.3 billion is at HQ and until end of the year we do not have any debt repayment obligations, the next one is in February next year. And after novation of the rubel debt to Russia, the interest costs staying at the HQ level for this year is around $245 million.

Nik Kershaw

40:51 Could you give us an update on the revolving credit facility?

Serkan Okandan

40:56 As you know, we have utilized $430 million from RCF back in February and we used that amount to repay our bond maturing beginning of March. Currently, we have $692 million on our committed undrawn facility. That amount is after the cancellation of the committed lines from Alfa-Bank and Raiffeisen Russia. As a result of a new legislation in Russia, they had to cancel their commitments as per the RCF facility. So as of now, Alfa-Bank and Raiffeisen Russia are not still in the RCF facility.

Nik Kershaw

41:36 And then still to you Serkan, after the novation of the ruble debts, has Russia still have intercompany debts to headquarters?

Serkan Okandan

41:44 Yes, they do. After we did the novation on RUB90 billion debt, we have canceled the same amount of intercompany loans and also we have released VEON Holdings B.V. from its current position. But after this transaction, we still have around RUB57 billion intercompany debt in ruble, plus we have $125 million debt as well from VimpelCom towards VEON Holdings B.V.

Nik Kershaw

42:16 Great. Could you comment on how much cash Russia upstreams to the Group?

Serkan Okandan

42:24 Currently, there is no possibility or any upstream, because there are certain capital controls put in place in Russia. Unless VimpelCom has certain licenses from the Ministry of Finance, so-called C account, VimpelCom has applied to the Ministry of Finance for a license and it is still waiting for the approval of the Ministry. However, having said that, we are not planning any upstream -- material streaming of dividends from Russia this year. So there won't be any significant impact on our plans for this year.

Nik Kershaw

43:01 Great, thanks. Kaan there is another question. Can you update us on the cash requirements from our operating expense?

Kaan Terzioglu

43:07 So about two years ago, we started decentralization of our company and that really also touched the governance structure, as well as the way we decided on capital allocations. We have completed the decentralization to the level that all our operating companies can stand on their feet and they do not necessarily require cash injections from us. And even when we do major renewals of licenses or spectrum acquisitions, we have a mechanism in place and availability of the credits from local facilities, so that we can fund them locally. So that has been our ultimate objective. I'm glad to see that over the next 12 months, we will not see any need for injecting cash to any of our operations.

Nik Kershaw

43:51 And it was to you Kaan, are we going to be providing any updated revenue and profitability guidance on the group level for this full year?

Kaan Terzioglu

43:59 Although we see our monthly operations and the impact, I think it would be un-prudent for us to provide any guidance for 2022. So I will refrain from that.

Nik Kershaw

44:09 Great. Moving now to a couple of questions on Ukraine and also to you Kaan, what challenges are you facing in keeping the network running in Ukraine?

Kaan Terzioglu

44:19 So first of all, the team has done a great job, really unavailability of our base stations have differed from 800 to 1,200 over these days as we continuously fixed the base stations, provided gasoline for the generators, as well as built over two hundred new ones. I expect these efforts to continue, and currently we are at 92% availability on our radio area network and 100% availability on our core services.

Nik Kershaw

44:55 Thanks. And how has the conflict impacted the operational performance in Ukraine?

Kaan Terzioglu

45:02 As I mentioned, the operational performance is of course has two important components, service continuity and business continuity. I think we did a great job on both fronts. There has been instances, of course, where we had specific outages regionally and they have been all addressed at the right time. I want to thank specifically for enabling the national roaming, I think it was a historical moment when the three operators decided to do national roaming, so that our network actually functions as one being redundancy factors.

45:38 And secondly, I also would like to thank to support our customers who are outside of the country in refugee status, 27 operators from Europe, they all participated in lowering the cost of interconnects and roaming services and big thanks to them as well.

Nik Kershaw

45:57 Thanks. And then a couple of questions on Russia, can you describe the impacts of the Russian economic conditions on PJSC VimpelCom? And will the current environment impact the ability to deploy network across Russia?

Kaan Terzioglu

46:11 I'm sure you're well aware of the impacts of the sanctions, but specifically, there are two issues in terms of the volatility of the currency, which we have seen resulting in our operations and reported results. As we have noticed during the month of March, our average rubles currency, if you look weighted average day-to-day basis was RUB104.1, so that of course has a major impact. But more importantly, I think we should be focusing on export controls. Clearly, there are different vendors that are supporting us and they have different ways of addressing these issues. Clearly, we have all the means to continue our investments as far as the compliances require. But I can see that, as we move on, I'm thankful that we have completed most of our infrastructure investments in the past and that will give us the quality of the service that we provide from a humanitarian perspective in Russia.

Nik Kershaw

47:10 Great. I think to you Serkan, what does the current environment mean for our CapEx guidance for 2022?

Serkan Okandan

47:19 Due to the ongoing developments and uncertainty, it is difficult to give a guidance for CapEx. However, what we can say at this moment in time, we should expect a lower CapEx in absolute numbers compared to '21 this year as we look to preserve liquidity across the Group.

Nik Kershaw

47:36 And then Kaan for you, the status of the Algerian put option and sort of process and how that’s going?

Kaan Terzioglu

47:45 Well, I tried to explain during my summary, but it's been a very collaborative and positive dialog with the national Sovereign Fund of Algeria. There was a pre-defined process and the pre-defined process required a third valuation. We are done with that now. So the next step is to follow the rules explained in our shareholders' agreements, which is again is going to be done according to the plans.

Nik Kershaw

48:11 Great. Thanks very much, gentlemen, and thank you very much for everyone that's dialed in. I know there are a number of individual questions that we didn't cover. I'll make sure we come back to each question individually. We will also be coming back to all of you both through our monthly CEO latest from Kaan as well as our next quarterly results. So thank you very much everyone. If you do have any additional questions please reach out, and I will get back to you all. Thank you so much.

Kaan Terzioglu

48:34 Thank you.

Serkan Okandan

48:35 Thank you all.
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