Executive Summary / Key Takeaways

• Digital Inflection Achieved: VEON crossed a defining threshold in September 2025 when monthly digital service users surpassed telecom SIM users for the first time, signaling the company has completed its transformation from connectivity provider to digital operator. This validates a strategy that generates 3.8 times the ARPU of voice-only customers while requiring materially less capital intensity.

• Balance Sheet Repair Unlocks Strategic Optionality: The Russia exit reduced net debt/EBITDA from over 3.0x to 1.13x, while the Kyivstar (KYIV) NASDAQ listing crystallized $2.5 billion of value for an 89.6% stake that trades at 2.3x book value. This de-risking provides firepower for the $100 million share buyback program and future digital acquisitions without compromising financial stability.

• Frontier Market Positioning Captures Unmet Demand: Operating in markets representing 7% of global population with 90 million people still lacking 4G access, VEON's digital ecosystem—spanning financial services processing 80% of Pakistan's Raast payments to ride-hailing with 70% Ukrainian market share—addresses massive underserved needs that global tech giants cannot easily penetrate due to localization requirements and payment infrastructure gaps.

• AI 1440 Strategy Creates Localized Moat: The development of native-language LLMs (Kazakh, Ukrainian, Urdu) and agentic AI features across 143 million monthly active users builds switching costs that traditional telecom competitors and international OTT players cannot replicate. This technological differentiation supports pricing power and sustains 19.7% EBITDA growth despite macro headwinds.

• Valuation Disconnect Offers Asymmetric Risk/Reward: Trading at 5.51x earnings and 3.91x EBITDA while digital revenues grow 63% annually, VEON's market cap of $3.45 billion fails to reflect either the $2.5 billion Kyivstar stake alone or the emerging platform value of its digital services, creating potential for significant re-rating as digital contributions approach 25% of revenues over the next 18 months.

Setting the Scene: The Making of a Digital Operator

VEON Ltd., founded in 1992 as VimpelCom and headquartered in Dubai since its strategic relocation, has spent the past seven years executing one of telecom's most radical transformations. The company began as a traditional mobile operator selling gigabytes and voice minutes across emerging markets, but around 2018, Beeline Kazakhstan initiated a digital operator strategy that would redefine VEON's identity. This was not a mere rebranding exercise—it represented a fundamental shift from infrastructure owner to services company with a telco license, a move that would prove prescient as AI and digital platforms became the primary battleground for customer engagement.

The company's geographic footprint spans Pakistan, Ukraine, Kazakhstan, Uzbekistan, and Bangladesh—markets representing over 400 million people and 7% of global population. This positioning provides an edge in frontier economies where 90 million people remain unconnected to 4G networks and where digital financial services, entertainment, and commerce face massive unmet demand. While global tech giants struggle with localization and payment infrastructure in these regions, VEON's established telco presence provides a low-cost customer acquisition channel and trusted brand that creates an insurmountable distribution advantage.

VEON's competitive positioning reflects this dual strength. Except for Bangladesh, where it ranks second in telecom subscribers, VEON holds the #1 market position across all its operating countries. More importantly, in Bangladesh, the company leads in digital services—its entertainment platform and super apps outperform pure-play competitors. This leadership demonstrates VEON's ability to win even where its core connectivity market share lags, proving the digital operator model can transcend traditional telecom boundaries.

The industry structure in these markets favors integrated players. Fragmented regulatory environments, currency volatility, and infrastructure gaps create barriers that pure-play OTT providers cannot easily overcome. VEON's strategy leverages its telco license as a Trojan horse: acquire customers through connectivity, then deepen engagement through financial services, entertainment, ride-hailing, and healthcare platforms. This approach generates 55.4% of customer revenues from multiplay users who consume at least one digital service beyond voice and data, a segment growing 23% year-on-year while generating 3.8 times the ARPU of voice-only subscribers.

Technology and Strategic Differentiation: The AI 1440 Moat

VEON's "AI 1440" strategy—embedding augmented intelligence into every minute of the customer day—represents the technological foundation of its competitive moat. Unlike competitors who treat AI as a feature, VEON is building native-language large language models and agentic AI capabilities that create culturally resonant experiences impossible for global platforms to replicate. In Kazakhstan, Kaz-LLM operates in four languages (Kazakh, Turkish, English, Russian) powering agentic features across digital services. In Ukraine, Kyivstar Tech co-develops the country's first sovereign Ukrainian language model with the Ministry of Digital Transformation. This localization transforms AI from a generic tool into a culturally intelligent assistant that understands local context, idioms, and customer needs.

The multiplay strategy serves as the economic engine for this technological differentiation. With 4G penetration reaching 68% of the customer base—up 4.6 percentage points year-on-year—VEON has built the connectivity foundation necessary to deliver digital services at scale. Multiplay customers don't just generate higher ARPU; they exhibit stronger engagement, higher data consumption, more frequent voice usage, and improved retention. This creates a virtuous cycle: as digital engagement surpasses mobile engagement (which occurred in September 2025), VEON's platforms become the primary customer interface, unlocking new monetization through advertising, cross-sell, and premium services.

The digital services portfolio demonstrates the breadth of this moat. Financial services account for 54% of digital revenues and grew 33% year-on-year, with JazzCash in Pakistan processing over 80% of all Raast payments value under the Prime Minister's Cashless Society initiative. The platform disbursed 153,000 micro loans daily in Q3 2025, averaging $30-40 each—providing lifeblood to small businesses while building a risk management database that strengthens credit scoring capabilities. Entertainment platforms like Tamasha in Pakistan and Toffee in Bangladesh leverage AI recommendation engines reaching 35 million monthly active users, with AI driving over one-third of live TV sessions and nearly 60% of video-on-demand plays. The AI news channel alone became Tamasha's third most-watched channel, demonstrating how localized AI content can outperform international streaming giants.

Uklon, the ride-hailing acquisition completed in April 2025 for $160 million, exemplifies VEON's asset-light expansion strategy. With 3.6 million users and 70% market share in Ukraine's ride-hailing and delivery market, Uklon contributed $21.7 million in revenue and $9.3 million in EBITDA in Q2 2025. This acquisition proves VEON can acquire and integrate digital businesses that are immediately EBITDA-accretive while leveraging its telco infrastructure for distribution. Management plans to expand Uklon's capabilities to other markets over the next four quarters, creating a scalable template for digital service rollouts.

The asset-light strategy extends to infrastructure partnerships. The Engro (ENGRO) tower deal in Pakistan will generate over $550 million in proceeds through cash payments and loan guarantees, while the Starlink partnership brings direct-to-cell satellite connectivity to Ukraine and potentially all VEON markets. These moves transform fixed infrastructure costs into variable partnerships, reducing capital intensity while expanding coverage. Management explicitly stated that borrowing in hard currency is not good practice in these environments, and the path to asset-light involves recycling hard currency debt at headquarters with local currency leverage—exactly what the Engro transaction accomplishes.

Financial Performance: Evidence of Transformation

VEON's Q3 2025 results provide compelling evidence that the digital operator strategy is working. Revenue exceeded $1 billion while EBITDA surpassed $500 million, with EBITDA growing 19.7% year-on-year in U.S. dollar terms. On a like-for-like basis adjusting for the TNS+ divestment, Uklon acquisition, and Kyrgyzstan sale, revenue growth would have been 10%—demonstrating underlying momentum that outpaces both inflation and nominal GDP growth across VEON's markets. This outperformance shows the company can implement fair pricing while capturing greater wallet share, a hallmark of competitive moat strength.

The digital revenue trajectory tells a more important story. Direct digital revenues grew 63% year-on-year to $198 million, now representing 17.8% of total group revenues versus 11% a year ago. Management expects this contribution to increase by approximately one percentage point per quarter, putting VEON on track for digital revenues to exceed 25% of total by late 2026. Digital services carry structurally lower capital intensity than traditional telecom, ensuring comparable cash conversion despite lower margins. The result is sustainable EBITDA growth with improving capital efficiency—a combination that supports multiple expansion.

Multiplay customer economics drive this margin expansion. The 55.4% of customer revenues generated by multiplay users grew 23% year-on-year, while the 3.8x ARPU multiple sustains even as the segment scales. This defies the typical pattern where premium tiers see ARPU compression as they grow. It implies that VEON's digital services create genuine value that customers will pay for, not temporary promotional discounts. The operating leverage is evident in EBITDA margin expansion of 320 basis points year-to-date, reaching levels that reflect the scalability of digital platforms over fixed telecom infrastructure.

Balance sheet repair provides the financial foundation for this transformation. Net debt excluding leases stood at $1.72 billion as of September 2025, with leverage improving to 1.13x EBITDA from over 3.0x before the Russia exit. Cash reserves of $1.67 billion include $653 million at headquarters, giving VEON comfortable capacity to redeem 2025 debt maturities. This de-risking removes the going-concern uncertainties that previously weighed on the stock and enables management to commit to shareholder returns through the $100 million share buyback program while investing in digital growth.

The Kyivstar listing crystallizes this value creation. Trading on NASDAQ under ticker KYIV since August 2025, Kyivstar's market valuation of $2.8 billion compares to $1.25 billion of equity on VEON's books—2.3x book value. VEON's retained 89.6% stake is worth $2.5 billion at market price, representing 72% of VEON's entire market capitalization. The market assigns a significant premium to VEON's digital assets when valued separately, suggesting the consolidated valuation embeds a substantial discount for complexity and emerging market risk.

Outlook and Guidance: Accelerating Digital Momentum

Management's raised 2025 guidance reflects confidence in the digital acceleration. Revenue growth is now expected at 13-15% in local currency terms, with EBITDA growth of 16-18%—both raised from previous ranges. In U.S. dollar terms, this translates to 7-8% revenue growth and 10-11% EBITDA growth, assuming stable exchange rates. The guidance assumes a blended weighted average inflation rate of 8.2%, and management explicitly states that results will outpace both inflation and nominal GDP growth. This demonstrates pricing power in environments where many competitors struggle to pass through cost increases.

Capital intensity guidance of 17-19% (excluding Ukraine) represents a structural decline from the 20.6% reported in 2024, which was elevated by war-related investments. This trend signals the asset-light strategy is working—partnerships and network sharing are reducing the capital required to grow. The result should be expanding free cash flow conversion, which reached $584 million on a last-twelve-months basis in Q3 2025. Management's commitment to maintaining this range while digital revenues scale implies that free cash flow growth could accelerate, providing more capital for buybacks or digital acquisitions.

The digital revenue trajectory is equally important. With digital contributions increasing roughly one percentage point per quarter, VEON should exit 2025 with digital representing over 20% of total revenues. This approaches the threshold where investors may begin valuing the company as a digital platform rather than a telecom utility. Management's commentary suggests they are "very happy with that progress," indicating confidence in sustaining this pace. The broad-based nature of digital growth—spanning financial services, entertainment, ride-hailing, enterprise platforms, and premium brands—reduces dependence on any single vertical and creates cross-sell opportunities within the super app ecosystem.

Shareholder returns demonstrate management's conviction. Phase 1 of the $100 million buyback program was completed in less than a year, repurchasing nearly 3% of shares outstanding. Phase 2 was approved in Q4 2024, and another $100 million program was approved in Q3 2025. This signals that management views the stock as undervalued relative to the digital transformation's potential. More importantly, it suggests that going-concern uncertainties—which previously prevented capital returns—have been definitively resolved, removing a key overhang on the valuation.

Risks and Asymmetries: What Could Break the Thesis

Geopolitical exposure remains the most material risk to VEON's thesis. The Ukraine war directly impacts Kyivstar, which represents a significant portion of group EBITDA. While the business emerged stronger from the Q1 2024 cyberattack, with all operating metrics showing positive trends, continued conflict creates execution risk and could disrupt the digital services rollout. Similarly, political unrest and macroeconomic pressures in Bangladesh forced Banglalink to restructure its distribution model in H2 2024. These disruptions highlight that VEON's frontier market positioning, while offering growth potential, carries volatility that pure-play digital platforms avoid.

Currency volatility presents a persistent challenge. With operations in Pakistan (PKR), Kazakhstan (KZT), Uzbekistan (UZS), and Bangladesh (BDT), VEON faces constant translation and economic exposure. While management has reduced hard currency debt and increased local currency leverage through asset-light partnerships, material depreciation could still inflate reported costs and pressure margins. This creates a headwind to U.S. dollar-denominated results even when local currency performance is strong, potentially masking the underlying digital transformation's success.

Competitive threats from global OTT players and regional challengers could erode digital margins. Netflix and other streaming services compete for entertainment dollars, while fintech startups target financial services. However, VEON's localization advantage and integrated payment solutions (critical in markets with low credit card penetration) create switching costs. The risk matters most if global players develop localized strategies or if regional competitors replicate VEON's multiplay model. Management's observation that they "welcome" new competitors like Iliad (ILD) in Ukraine and Qatari investors in Kazakhstan suggests confidence, but increased competition could pressure the 3.8x ARPU premium.

Execution risk in scaling digital services across five diverse markets could strain management bandwidth and capital. Each market requires regulatory navigation, local partnerships, and tailored product development. The Uklon expansion plan—rolling out to new cities over four quarters—must be replicated across other digital verticals. VEON's valuation premium to traditional telecoms depends on sustaining digital growth rates above 50% annually. Any slowdown or misallocation of capital could cause investors to revert to valuing the company on legacy telecom multiples.

Competitive Context: Positioned for Outperformance

VEON's competitive positioning against emerging market telecom peers reveals structural advantages. Compared to MTN Group (MTN), which grew fintech revenues 24.9% in H1 2025, VEON's 63% digital revenue growth demonstrates superior momentum. MTN's African focus limits direct overlap, but both compete for emerging market capital. VEON's asset-light model and AI integration provide faster innovation cycles than MTN's infrastructure-heavy approach, implying higher long-term returns on invested capital despite smaller scale.

Versus Telenor (TEL), which grew service revenues just 2.7% in Q3 2025, VEON's 7.5% reported revenue growth (10% like-for-like) shows stronger execution. In overlapping markets like Pakistan and Bangladesh, VEON's digital ecosystem approach contrasts with Telenor's more traditional connectivity focus. Telenor's enterprise services and 5G investments target mature market stability, while VEON's frontier market positioning captures growth that Telenor cannot access. This suggests VEON's strategy is better suited for the next decade of emerging market digital adoption.

Ooredoo (OQ)'s 3% revenue growth and infrastructure-led strategy highlight VEON's differentiation. While Ooredoo focuses on fiber and 5G in oil-dependent economies, VEON's mobile-first digital platforms address underserved consumers and enterprises. VEON's lower capital intensity (17-19% vs Ooredoo's higher infrastructure spending) implies better free cash flow conversion and agility to pivot with market demands. The risk is Ooredoo's government backing in Qatar provides stability that VEON's more volatile markets lack.

Zain Group (ZAIN)'s 15% revenue growth and agile operations in Middle Eastern markets show competitive strengths, but VEON's larger addressable population and AI differentiation create superior long-term potential. Zain's IoT focus complements rather than competes with VEON's consumer digital services, but both target digital inclusion in emerging markets. VEON's proprietary LLMs and agentic AI capabilities provide a technological edge that Zain's more traditional telecom model cannot easily replicate.

Valuation Context: The Digital Discount

At $49.80 per share, VEON trades at a market capitalization of $3.45 billion with an enterprise value of $6.56 billion. The valuation metrics reveal a company priced as a legacy telecom despite executing a digital platform transformation. The price-to-earnings ratio of 5.51 and enterprise value-to-EBITDA multiple of 3.91 sit at significant discounts to both emerging market telecom peers and digital platform comparables. The market has not yet re-rated VEON for its digital revenue growth (63% annually) and improving capital efficiency.

The balance sheet strength supports a higher valuation. With net debt-to-EBITDA of just 1.13x and $1.67 billion in cash ($653 million at headquarters), VEON has de-risked its capital structure post-Russia exit. The company generated $584 million in last-twelve-months equity free cash flow, implying a price-to-free-cash-flow ratio of 24.61. While not cheap in absolute terms, this multiple appears reasonable for a company growing EBITDA at 19.7% with digital revenues approaching 20% of the total.

The most compelling valuation argument lies in VEON's sum-of-parts. The Kyivstar stake alone—89.6% of a $2.8 billion market capitalization—represents $2.5 billion of value, or 72% of VEON's total market cap. This implies the market ascribes minimal value to VEON's other operations, including the market-leading Jazz business in Pakistan and rapidly scaling digital platforms across four other countries. This suggests either Kyivstar is overvalued (unlikely given its 2.3x book value reflects market confidence) or VEON's remaining assets are significantly undervalued.

Peer comparisons reinforce this disconnect. MTN trades at 9.6x EBITDA despite slower digital growth, while Telenor commands 17.3x EBITDA with minimal emerging market exposure. VEON's 3.91x EBITDA multiple implies a "risk discount" for frontier market operations that may be excessive given the company's demonstrated resilience and digital momentum. The key variable for re-rating is digital revenue mix—once digital exceeds 25% of total revenues, investors may begin applying platform multiples rather than telecom multiples to the entire business.

Conclusion: The Digital Platform Premium Is Coming

VEON has executed one of the telecom industry's most successful transformations, evolving from a gigabyte seller to an AI-powered digital operator in frontier markets where unmet demand creates extraordinary growth potential. The September 2025 milestone—digital users exceeding telecom users—validates a strategy that generates 3.8x ARPU from multiplay customers while reducing capital intensity through asset-light partnerships. This is not a telecom story; it is a platform story that happens to own telco licenses.

The financial evidence is compelling: 63% digital revenue growth, 19.7% EBITDA growth, and net debt/EBITDA reduced to 1.13x. The Kyivstar listing unlocked $2.5 billion of value, demonstrating that VEON's assets command premium valuations when properly recognized. Yet the consolidated stock trades at just 5.5x earnings and 3.9x EBITDA, reflecting a market that still views VEON through a legacy telecom lens.

The central thesis hinges on two variables: the pace of digital revenue mix shift and management's ability to sustain growth while navigating frontier market volatility. If digital revenues continue increasing one percentage point per quarter, VEON will exit 2026 with a quarter of its business growing at 50%+ rates—forcing a re-rating. If geopolitical and currency risks remain manageable, the balance sheet strength provides downside protection while the digital platform offers upside optionality.

For investors, the risk/reward is asymmetric. Downside is limited by a de-risked balance sheet, strong cash generation, and a Kyivstar stake worth nearly the entire market cap. Upside comes from the market recognizing that VEON has built a digital platform moat in markets where global competitors cannot easily play. The digital operator premium is not yet priced in—but the data suggests it is only a matter of time.