Global digital communications operator VEON (office in the Netherlands) announced the completion of its exit from Russia and the sale of its Russian asset to Vimpelcom. The terms of the deal do not provide for the possibility of repurchase, i.e. the completion of operations in the Russian market is complete and final for VEON
As Kyivstar President Alexander Komarov comments, “after a long series of legal procedures, our 100% shareholder VEON puts an end to its relationship with the Russian telecom market. This will mean strengthening the company’s development strategy in six other markets, including Ukraine”. In particular, in the next three years, VEON plans to invest 600 million dollars in Ukraine, which will be used to restore the telecom network and develop digital services and new mobile technologies.
Oleksandr Komarov emphasized that Kyivstar has been operating as usual, and since the beginning of Russia’s full-scale invasion has already invested UAH 8.2 billion in the development of the country’s telecom market, paid UAH 15.2 billion in taxes to the state, and provided support to state bodies, military, security and law enforcement agencies in the amount of more than UAH 1.4 billion, including bonuses and services without additional payment in the amount of UAH 577 million.
In addition, Kyivstar is now preparing the network to operate in conditions of possible power outages, for which it has invested UAH 988 mln. By the end of 2023, 110 thousand new batteries will be installed at Kyivstar’s base stations.
Background on Kyivstar
Kyivstar is Ukraine’s largest electronic communications operator, serving 24.1 million mobile subscribers and over 1.1 million Home Internet subscribers as of June 2023. The company provides services using a wide range of mobile and fixed technologies, including 4G, Big Data, Cloud solutions, services for cyber defense, digital TV, and others. Kyivstar helps subscribers, society and the country to overcome the difficulties of wartime. Since the beginning of the full-scale war, the company has allocated more than UAH 1.4 billion of assistance to the state, military, society and subscribers. The only shareholder of Kyivstar is the international VEON Group. The Group’s shares are freely traded on the NASDAQ (New York) and Euronext (Amsterdam) stock exchanges. Kyivstar has been operating in Ukraine for over 25 years and is recognized as the largest taxpayer in the telecom market, the best employer and a socially responsible company.
Investments of Ukraine’s largest mobile operator Kyivstar in energy independence amounted to UAH 920 million for the entire period of the full-scale invasion of the Russian Federation, the company’s press service said.
“The national telecom operator prepares in advance for possible winter blackouts and provides the telecom network with diesel generators, long-lasting batteries, uninterruptible power supplies. Since the beginning of the full-scale war Kyivstar has invested UAH 920 mln in energy independence of telecom networks,” the press release says.
In particular, Kyivstar has allocated more than UAH 680 mln for autonomous operation of mobile communications, and for Home Internet – UAH 240 mln.
The company uses more than 2.5 thousand stationary and mobile diesel generators, thanks to which all key base stations, switches and critical telecom equipment have backup power. The base stations are equipped with 37 thousand new long-life batteries, which can operate without external power supply for 4-6 hours.
“Kyivstar plans to install 50 thousand uninterruptible power supply units by the end of the year, which will allow to achieve autonomy of 70% of fixed Internet networks in case of power outages.
The company is also developing energy-efficient GPON technology.
“Development of “Home Internet” network with the use of GPON technology is planned in the fourth quarter of 2023″, – specified in the press service of the company.
Kyivstar communication services are currently used by 24 million subscribers, “Home Internet” services – more than 1 million subscribers.
Ukraine’s largest mobile operator Kyivstar increased its UAH revenue by 16.8% in the second quarter of 2023 compared to the same period of 2022 – to UAH 8.609 billion (in dollars it decreased by 6.5% – to $235 million), according to the report of its parent company VEON on Thursday.
According to it, Kyivstar’s EBITDA profit in hryvnia increased by 11.6% to UAH 5.085 billion (down 10.7% to $139 million in dollars) compared to the same period last year, while its EBITDA margin decreased by 2.9 percentage points (p.p.) to 59%.
“Despite the challenging operating environment, Kyivstar’s revenue and EBITDA growth accelerated in the reporting quarter. “Kyivstar and VEON have committed $600 mln over the next three years, investing in rebuilding Ukrainian infrastructure through communication and digital services,” the report says.
It is specified that revenues from mobile services grew by 17.1% y-o-y to UAH 8.066 billion thanks to the growth of data consumption by 25.6% to 9.9 GB per user per month, (in money the growth amounted to 17.6% to UAH 4.679 billion) compared to the same period last year and the increase in roaming.
As for EBITDA, VEON notes the impact of a 33% YoY increase in electricity tariffs, UAH 92 mln of charitable donations, and staff and customer support programs in the second quarter of 2023. As a result, these operating expenses reduced the company’s EBITDA margin by 2.7 p.p. – to 59.1%.
It is pointed out that the number of Kyivstar 4G users reached 13.1 million (+13.5% year-on-year) and now accounts for 54.3% of the total subscriber base (+7.7 p.p. year-on-year).
“The growth in the number of 4G users combined with new value propositions ensured a 22.6% increase in ARPU – to UAH 110.2 – year-on-year,” the report said.
At the same time, Kyivstar’s overall mobile subscriber base decreased by 2.6% year-on-year to 24.1 million, as it continued to be affected by the number of Ukrainians living outside of Ukraine.
It is noted that Kyivstar supported access to key services, including digital health, information and entertainment services. The number of Kyivstar’s multi-user subscribers increased by +37.8% year-on-year, while multi-user revenues grew by 51.7% year-on-year.
According to the report, Kyivstar-controlled Helsi Ukraine, the country’s largest digital health platform, increased the number of registered users to 25.4 million patients, up from more than 25 million a quarter earlier.
The number of downloads of the Helsi mobile application increased by 0.4 million to 5.4 million in the second quarter, while the number of medical appointment bookings through the platform remained at around 1.8 million for the quarter.
It is indicated that Kyivstar TV’s streaming service ended the quarter with nearly 1.1 million users, representing a +35.0% year-on-year growth. In Q2 2023, 2,500 Kyivstar TV customers enjoyed the recently introduced ‘Kids Profile’, a special portfolio of content for children, while around 11,600 customers enjoyed educational content available on the platform for free.
However, overall, the number of fixed-line customers decreased by 4.5% to 1.1 million over the year, while revenue growth in the sector amounted to 7.5% to UAH 483 million.
It is noted that in accordance with the strategy “4G everywhere” in the second quarter of 2023, Kyivstar connected 80 more settlements to its 4G network, added about 270 new 4G base stations and upgraded almost 1,600 more base stations to 4G standard. Capital expenditures increased by 35.1% year-on-year to UAH 1.395 billion. As of the end of June, the Kyivstar team was maintaining almost 94% of the radio network.
According to the report, in total for the first half of 2023, Kyivstar’s revenue in UAH increased by 11.2% to UAH 16.956 billion, EBITDA by 6.2% to UAH 10.006 billion, and capital investments by 28.6% to UAH 2.176 billion.
Including in the mobile segment, revenue growth amounted to 11.7%, to UAH 15.897 billion (of which data transmission – by 10.2%, to UAH 9.15 billion), while in fixed-line communications – only 1.5%, to UAH 946 million.
“Kyivstar is Ukraine’s largest telecommunications operator. It provides communication and data transmission services based on a wide range of mobile and fixed technologies.
Overall, VEON’s revenue in Q2 decreased by 4.3% y-o-y to $916 mln, while EBITDA fell by 10.6% to $415 mln.
The president of Kyivstar, the market’s largest mobile operator, Oleksandr Komarov, expects the sector to grow in 2023 due to continued demand for modern communication services, the effect of a low base and de-occupation, but this growth will be relatively small due to a decline in the active subscriber base and a reduction in profitability.
“The main factor of any market is its capacity in terms of the number of consumers. We see it stabilizing around the level of about 10% of the active base that was before the war. Geographically, we have stabilized. Moreover, I expect that there will be some de-occupation, and we will be able to grow at the expense of the returned territories,” he said in an interview with Interfax-Ukraine.
Komarov added that the first quarter of 2022 was still “more or less normal,” but in the following months the market began to decline.
“That is, I think that the industry will recover a bit in the second, third, and fourth quarters: not only because it is growing, but also because the comparison bases have fallen significantly,” the Kyivstar president explained his expectations.
He also noted that communication services are critical services for consumers, and therefore demand for them is not elastic. “Moreover, the crisis encourages people to spend more on telecommunications: people want to reserve their ability to stay in touch. During the blackouts, we had an incredible growth of new connections across the Ukrainian telecom market,” Komarov said.
Kyivstar’s president also pointed to the continued demand for more modern communication services, naming LTE and 4G services as the key drivers, which had been driving the market growth of 15% annually in the last three years before the war.
“In 2022, the market grew by 5%, while LTE consumption grew by almost 30% year-on-year, with the LTE customer base increasing by only 4%. That is, consumption is the main driver that continues to pull this market upwards: people need more mobile Internet,” stated the head of the largest mobile operator.
Among the factors that will negatively affect revenues, he pointed to the ongoing decline in the active roaming subscriber base due to the protracted war. According to him, it is slow because it is restrained by the “roaming like at home” service.
Komarov emphasized that this service and a number of other factors have led to a significant increase in the company’s expenses, which has put pressure on profits and reduced profitability.
“In the first quarter, Kyivstar’s total revenue in hryvnia grew by 6% year-on-year, while profit grew by only 1%, and overall profitability decreased to 59% from 62% in 2022,” the company’s president said.
Among the factors, he named an increase in the share of negative or very low-margin income, such as roaming, rising risk costs, restoration costs, and social assistance. In particular, Komarov said, Kyivstar provided financial charity and bonus services worth UAH 1.08 billion over the 15 months of the war.
“Of course, it is also inflation: cost inflation, electricity inflation, wage inflation, etc.”, added the CEO.
Komarov noted that Kyivstar’s investments and expenditures are largely made in foreign currency, and the devaluation of the hryvnia has led to a year-on-year decline in purchasing or investment power in foreign currency of 8%.
“As a company that is integrated into domestic consumption on the one hand and purchasing equipment from international suppliers on the other, we have to understand that the pre-war formula of average industry profitability will not work for the next few years. We will face significant pressure on profitability,” stated the head of the largest mobile operator.
He also said that it would be impossible to raise telecom tariffs to the extent necessary to compensate for the increase in costs.
According to him, certain inflationary elements are built into pricing. In addition, customers follow their consumption by switching from old tariff plans to new ones. On average, there are up to 100 thousand such migrations per month, Komarov said.
As reported earlier, Kyivstar increased its hryvnia revenue by 6% in the first quarter of 2023 (down 17.2% in dollars) compared to the same period in 2022, to UAH 8.346 billion. EBITDA increased by 1% in UAH (down 21.2% in USD) year-on-year to UAH 4.921 billion.
The subscriber base in the first quarter of 2023 amounted to 24.3 million, down 6.7% year-on-year, while the number of 4G users increased by 4.2%, or 600 thousand, to 13.3 million, and 4G penetration in the subscriber base reached 54.6%.
Ukraine’s largest mobile operator Kyivstar will receive $600m of investment from its parent company VEON over the next three years to implement infrastructure projects, including in the liberated territories, expand 4G coverage, focus on 5G reconstruction, support operator services and charity.
VEON announced the investment commitment at the Ukraine Recovery Conference in London (URC2023), according to a statement on the company’s official website Wednesday.
“Global digital operator VEON will invest the equivalent of $600 million in its subsidiary Kyivstar over the next three years. The investment will cover Kyivstar’s infrastructure projects, providing essential communications and 4G services across the country, developing high-quality digital services available to all Ukrainians, and community support projects,” the statement reads.
The company notes that investments will be made to support Kyivstar services as well as digital verticals that will have a positive social impact on the Ukrainian society. They will allow to expand the operator’s network from “LTE everywhere” and fiber to the reconstruction focused on 5G, to provide high-quality Internet coverage for millions of users.
With the planned expansion of 4G networks Kyivstar plans to increase 4G coverage to 98% in Ukraine, including in small and remote settlements in three years. The investments will be used to expand the network connectivity.
In addition, Kyivstar will continue to provide funds for charity support. In VEON reminded that from the beginning of the full-scale invasion, the operator has allocated 1.1 billion UAH (about $32.5 million) for these purposes.
“As part of its investment commitment, Kyivstar will continue working with leading Ukrainian NGOs and community initiatives, supporting charitable projects with donations and socially responsible business partnerships,” the press release said.
“The last 16 months have shown the world that communications really is a lifeline for Ukraine. Thanks to the dedication of our team of 4,000 people and the support of our parent company VEON, Kyivstar plays a key role in ensuring the sustainability and recovery of Ukraine from February 24, 2022,” Kyivstar President Alexander Komarov is quoted in the statement.
On his Facebook page, Komarov also noted that the parent company’s investment will allow Kyivstar to restore communications in territories that will be vacated, build new network facilities, increase 4G coverage in the suburban area and on highways, and develop new digital products and services for Ukraine and local communities.
“Kyivstar is the largest mobile communications operator in Ukraine with 24.3 million mobile subscribers and over 1.1 million home internet subscribers. The company provides services based on mobile and fixed-line technologies, including 4G, as well as innovative services such as Big Data, IoT, cloud solutions, digital TV, digital health, etc.
Since the full-scale invasion, Kyivstar’s technicians performed about 150 thousand repairs, which is twice as much as before the invasion, reconnected 800 settlements, modernized and deployed about 10 thousand 4G base stations and installed 32 thousand new batteries to ensure the continuity of communication in case of the blackout.
Kyivstar is 100% owned by VEON, an international group headquartered in the Netherlands.
VEON is a global digital operator that currently provides convergent communications and online services to more than 160 million customers in six dynamic emerging markets VEON is listed on NASDAQ and Euronext Amsterdam.
The largest Ukrainian mobile operator Kyivstar in the first quarter of 2023 increased its hryvnia revenue by 6% (in dollars it decreased by 17.2%) compared to the same period in 2022, to UAH 8.346 billion, according to a report by the parent company VEON.
According to it, during the reporting period, Kyivstar increased its EBITDA by 1% in hryvnia (in dollars, the figure decreased by 21.2%) compared to the same period last year – up to UAH 4.921 billion, and its EBITDA margin decreased by 2.9 percentage points (p.p.) – to 59%.
The company clarified that revenues from mobile services increased by 6.7%, to UAH 7.830 billion.
In addition, the operator noted that in the first quarter of 2023, the consumption of minutes per subscriber (MoU) decreased by 11.7%, to 551 from 624 in the same period last year. At the same time, the use of mobile Internet over the same period increased by 23.4% – up to 9.5 gigabytes per subscriber, while the average revenue per user (ARPU) increased by 13.3% – up to UAH 106.
The subscriber base in the first quarter of 2023 amounted to 24.3 million, 6.7% less than a year earlier, at the same time, the number of 4G users increased by 4.2%, or 600,000, to 13.3 million in a year, and now 4G penetration in the subscriber base is 54.6%.
As for the Kyivstar fixed network, its revenues decreased by 4.2%, to UAH 463 million, and the number of users by 7%, to 1.1 million.
At the same time, the company noted a 27.7% increase, to 1 million, in the number of users of Kyivstar TV’s streaming business and the recent launch of the Children’s Profile in it.
According to the report, Kyivstar’s capital expenditures increased by 18.4% over the reporting period, to UAH 780 million.
According to the company, Kyivstar’s capital expenditures were aimed at maintaining the main networks in the country, as well as the sustainability of the business. The Kyivstar team was able to keep almost 90% of the radio network as of the end of March 2023.
During the quarter, 81 settlements were connected to the 4G network, 215 new base stations were added and another 460 were converted to 4G.
In the first quarter of this year, VEON did not record significant impairment losses related to operations in Ukraine and no impairment losses related to operations in Russia.
