Digital Services In Emerging Markets Will Spark Mixed Prospects

Key Takeaways

• Expansion in digital services and focus on young, urban markets are driving subscriber growth, high-margin revenues, and improved earnings quality.
  
• Asset-light restructuring and digital asset monetization efforts are freeing capital, boosting operational efficiency, and unlocking shareholder value.
  
• Exposure to currency volatility, shrinking revenue base, lower digital margins, rising competition, and high leverage threaten VEON's earnings growth and ability to invest for the future.

Catalysts

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

• VEON is aggressively expanding digital service offerings (including fintech, super apps, ride-hailing, entertainment, and AI-driven products) in emerging markets that are rapidly digitalizing and seeing surging demand for mobile internet and data; this positions the company to achieve significant ongoing subscriber growth and strong ARPU uplift, directly supporting future revenue and EBITDA growth.
  
• The company is capitalizing on large, young, and increasingly urban populations in core markets (e.g., Pakistan, Bangladesh, Ukraine), which are likely to drive continued uptake of digital financial services (like JazzCash), enabling recurring, high-margin fee-based revenue streams, and supporting net margin expansion and higher earnings quality over time.
  
• Ongoing shift toward an asset-light operational model and restructuring (including tower sales, selective market exits, and 4G-focused infrastructure investments) is driving operational efficiency, freeing up capital for reinvestment or shareholder returns, and improving ROIC, which is expected to boost long-term net margins and capital returns.
  
• VEON is executing on opportunities to crystallize hidden value in its fast-growing digital and fintech assets (e.g., possible monetization/partial IPOs of JazzCash, Kyivstar listing, or separate tracking structures for digital businesses), which could positively re-rate the stock, unlock shareholder value, and enhance its balance sheet for further growth or returns.
  
• The company's execution of pricing power, digital ecosystem integration, and push for increased 4G and smartphone penetration is driving a rapid increase in high-ARPU Multiplay customers, which currently generate over 3x the ARPU of legacy subs; as this segment grows, blended ARPU and overall revenue are set to rise, further supporting profitability and cash flows.

VEON Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming VEON's revenue will grow by 7.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 11.6% today to 11.3% in 3 years time.
• Analysts expect earnings to reach $645.7 million (and earnings per share of $9.06) by about June 2029, up from $532.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $731.0 million in earnings, and the most bearish expecting $564.4 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 11.1x on those 2029 earnings, up from 7.2x today. This future PE is lower than the current PE for the US Wireless Telecom industry at 18.7x.
• Analysts expect the number of shares outstanding to grow by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.44%, as per the Simply Wall St company report.

Risks

• The company's core markets remain exposed to macroeconomic and currency volatility (e.g., Pakistan, Ukraine, Kazakhstan, Bangladesh), which could unpredictably impact VEON's revenue and earnings-especially as financial results are quoted in USD and local currencies can depreciate significantly in times of crisis, eroding reported growth and margin gains.
  
• Ongoing asset sales and market exits-including the deconsolidation of TNS+ and the announced sale of Kyrgyzstan operations-shrink VEON's revenue base, reduce potential operating leverage, and could impair the company's ability to generate future earnings growth at scale.
  
• Digital services, while growing rapidly, deliver structurally lower EBITDA margins than traditional telecom; as VEON's mix shifts further to digital (now 16.5% of revenue), overall group margins and long-term profit growth could be pressured, especially if operating costs rise due to heavy investments or competition.
  
• Intensifying competition from OTT providers (e.g., WhatsApp, Skype) and alternative connectivity technologies (e.g., 4G, 4.9G, satellite-based services) threaten VEON's traditional voice/data lines and could cap ARPU expansion and revenue growth if network investments and digital strategies do not offset these declines.
  
• High leverage (gross debt $4.63 billion) combined with recurring need for refinancing (recent $200 million bond issuance, ongoing asset-light strategy) exposes VEON to higher interest costs if global or frontier-market rates rise, constraining future capital allocation for growth initiatives and potentially squeezing net margins and free cash flow.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $83.44 for VEON based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $100.0, and the most bearish reporting a price target of just $71.5.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $5.7 billion, earnings will come to $645.7 million, and it would be trading on a PE ratio of 11.1x, assuming you use a discount rate of 7.4%.
• Given the current share price of $55.3, the analyst price target of $83.44 is 33.7% 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.