Advanced Mobile Technologies Will Drive Digital Expansion In Emerging Markets

Key Takeaways

• VEON's ecosystem and digital service focus enable high-margin growth and greater user engagement, setting it apart from traditional telecom competitors in emerging markets.
  
• Strategic financial moves, including asset monetization and segment IPOs, offer headroom for reinvestment and could drive a rerating of the company's value.
  
• Geopolitical instability, market concentration, heavy digital investment, rising competition, and currency risks threaten VEON's revenue stability, margin growth, and debt profile.

Catalysts

A digital operator, provides telecommunications and digital services to corporate and individual customers in Pakistan, Ukraine, Kazakhstan, Uzbekistan, and Bangladesh.

• Analysts broadly agree VEON's digital service revenues are a key driver, but they may be materially underestimating the speed and scale; direct digital revenues could represent over a quarter of group revenue within two years as multiplay adoption and fintech penetration accelerate, with significantly higher ARPU and stronger net margin contribution, far outpacing traditional telecom peers.
  
• The analyst consensus sees Kyivstar's US listing mainly as a visibility event, but this could serve as a powerful rerating catalyst and trigger further segment-specific IPOs; with Kyivstar's high free cash flow, zero external debt, and "scarcity value" as a Ukraine growth proxy, both VEON's sum-of-the-parts and consolidated earnings multiples could re-rate upwards.
  
• VEON's strategic advantage as the dominant digital operator in large, underserved, fast-urbanizing emerging markets positions it for outsized organic subscriber and revenue growth as smartphone/internet adoption surges and middle classes expand, supporting rising ARPU and durable long-term earnings expansion.
  
• The company's unique ecosystem strategy-leveraging low customer acquisition costs, super app rollouts, and vertical integration in financial, health, entertainment, and mobility services-provides a long runway for cross-selling, higher user engagement, and sticky, scalable, high-margin digital revenues, accelerating top and bottom line growth beyond current market expectations.
  
• VEON's successful deleveraging and asset-light transformation-paired with ongoing monetization of tower/infra assets and ambitious local-currency balance sheet management-creates ample headroom for aggressive reinvestment into digital innovation and potentially outsized shareholder returns, significantly boosting future free cash flow and earnings resilience.

VEON Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on VEON compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming VEON's revenue will grow by 7.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 11.2% today to 16.5% in 3 years time.
• The bullish analysts expect earnings to reach $843.2 million (and earnings per share of $11.52) by about July 2028, up from $457.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 7.0x on those 2028 earnings, down from 8.0x today. This future PE is lower than the current PE for the US Wireless Telecom industry at 22.2x.
• Analysts expect the number of shares outstanding to decline by 0.78% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.81%, as per the Simply Wall St company report.

VEON Future Earnings Per Share Growth

Risks

• VEON's revenues and profits remain highly exposed to geopolitical instability, such as ongoing war and political unrest in Ukraine and Bangladesh, which has recently led to cyberattacks, regulatory barriers, and unstable demand and could result in revenue volatility or unexpected costs impacting earnings.
  
• The company's revenue concentration in Uzbekistan, Pakistan, Bangladesh, and Kazakhstan subjects it to significant macroeconomic and currency risks, as demonstrated by EBITDA declines in Uzbekistan and market disruptions in Bangladesh, posing ongoing threats to future revenues and net margins.
  
• VEON's digital expansion requires substantial up-front investment, as evidenced by capital intensity exceeding guidance and declining equity free cash flow, suggesting near-term margin compression and a risk that the profitability timeline for digital and fintech services will be longer than anticipated.
  
• Intensifying competition from both telecom incumbents and new digital entrants, such as Iliad in Ukraine and new operators in Kazakhstan, increases the risk of price wars, ARPU erosion, and market share loss, directly pressuring revenue growth and EBITDA margins.
  
• High exposure to local currencies for earnings alongside outstanding U.S. dollar and euro-denominated debts creates persistent foreign exchange risk, and although management is moving to reduce mismatches, any sharp currency devaluation in core markets could erode net income and worsen the debt burden.

Valuation

• The assumed bullish price target for VEON is $69.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of VEON's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $69.0, and the most bearish reporting a price target of just $60.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $5.1 billion, earnings will come to $843.2 million, and it would be trading on a PE ratio of 7.0x, assuming you use a discount rate of 7.8%.
• Given the current share price of $52.0, the bullish analyst price target of $69.0 is 24.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.