Good day, ladies and gentlemen and welcome to VEON Full Year 2020 and Fourth Quarter 2020 Results Webcast and Conference Call. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to hand the conference over to Mr. Nik Kershaw, Head of Investor Relations. Please go ahead, sir.

Good day, everyone. Welcome to VEON’s fourth quarter and year end results presentation. Nik Kershaw here, Group Head of Investor Relations. I am pleased to be joined on the line today by Kaan and Sergi, our Group Co-CEOs, along with our group CFO, Serkan Okandan and Alexander Torbakhov, our CEO for Beeline Russia, will join us for the Q&A session at the end. Today’s presentation will begin with an overview and some highlights of the past year from Kaan. Following this, we will do a detailed review on Russia by both Kaan and Sergi. Sergi will then discuss some of our other larger markets with Serkan giving a review of our fourth quarter financial results. We will then hand it back to Sergi to discuss our outlook and priorities for 2021. As ever, we will ensure that there is ample time for your questions, but we would ask you that you say this for the end of the presentation. Before getting started, I would like to remind you that we may make forward-looking statements during the presentation, which involve certain risks and uncertainties. These statements relate in part to the company’s anticipated performance and guidance for 2021, future market developments and trends, operational network development and network investment, 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 our forward-looking statements, including the risks detailed in the company’s Annual Report on Form 20-F and other recent public filings made by the company with the SEC. The earnings release and the presentation, each of which include reconciliation of non-IFRS measures can be downloaded from our website. With that, let me hand over to Kaan.

Thank you, Nik. Hello to everyone and thank you for joining us. This year was marked by COVID-19 and the changes that it imposed on our lives. But since the very beginning, we took a proactive approach so that the year was not about what COVID did to our business, but more about what we did as a business in the existence of the new reality. Throughout the year, we kept on executing in delegating more authority to operating country teams, hiring top talent to drive our strategy forward, protecting our employees in all countries that where we operate, accelerating the momentum with 4G deployments, improving the quality of service to our customers, achieving stronger operational foundations, which will carry the VEON group further. I will elaborate further on all these points as we go through the presentation. Today, I am pleased to tell you that in quarter four, VEON Group is back to year-on-year growth, with 1.4% total revenue increase and 0.8% EBITDA growth in local currency. On a full year CapEx investment of $1.9 billion was a significant contributor to the improvement of network quality and capacity across all our markets. Driving the growth of our 4G base, a key foundation on today’s and future growth potential is based on. Next slide. I want to recap some of most significant achievements in 2020. Firstly, we enhanced our governance, implementing a lean headquarters, with local Board of Directors at each one of our operating companies. This new governance allows for greater efficiency and speed in reacting to market conditions. We have also made continuous improvements to our capital structure. I will leave later on for Serkan, our Chief Financial Officer, to update you further. Second, we have reached 80 million 4G subscribers and we are now serving 38% of…

Thanks, Kaan and hi, everyone on the line. Let me start with a few words about our group digital strategy before updating you on the progress we made in Russia and other markets. We see huge potential to deploy digital services across all of our markets and we are going about this in one of two ways, depending on our local competitive advantage and the digital maturity of the market. In countries like Russia and Kazakhstan, we decided to go deep in specific verticals like fin-tech and ad-tech, where we can establish a strong competitive advantage by leveraging our big data and AI capabilities. For countries like Pakistan and Bangladesh, we believe we can go one step further and establish a dominant ecosystem that provides a range of digital services built around our market leadership in fin-tech with JazzCash and entertainment with Toffee. Let’s now complete our Russian review. Slide 17 shows you the positive results delivered by our Russian B2B business during 2020. As shown on the left, this post mid-single-digit top line growth in the first three quarters accelerating to double-digit growth in Q4. This has been supported by valuable partnerships with companies in other industries, through which we help them increase customer reach, drawing on our expertise in big data and analytics. The cornerstone for these services is what we call analytics-in-a-box a toolkit that improves company’s targeting capabilities in video, audio and geo-analytics. This has driven large rises in our big data and ad-tech revenues, which grew by 44% and 14% respectively in Russia in Q4, helped by the growing number of corporate partnerships we now establish. Let’s now take a closer look to our digital opportunities in Russia. As shown on Slide 18, our goal here is to establish deep vertical partnerships in each of…

Thanks, Sergi and hello to all participants. In the coming slides, I will now elaborate on our financial results in more detail. Moving to Slide 25, after several challenging quarters, I am pleased to report that VEON Group returned to growth in the last quarter of the year, with almost all of our markets showing improved year-on-year trends compared with Q3. As Slide 25 sets out, revenues grew by 1.4% year-on-year during Q4 in local currency terms, led by steady improvement in Russia and double-digit growth in both Ukraine and Kazakhstan. On a reported basis, this corresponds to minus 11.3%, once currency movements of $269 million are accounted for. Group EBITDA followed revenues, rising by 0.8% in local currency terms or minus 11.6% on a reported basis. Once again, we continue to prioritize 4G network investments across our footprint. This was reflected in year-on-year rise in Group CapEx, up by 16.5%, with CapEx intensity at 23.7% for the full year. Our EBITDA margin for the full year was brought to flat at 41.4% and net profit for the quarter was at $35 million, mainly due to adverse currency effects. Group leverage in the meantime, which we now show on a post-IFRS 16 basis, was 2.3x. As Kaan has mentioned, that in line with our internal guidance of around 2.4x, which corresponds to 2x multiple we have communicated before as our comfort level on a pre-IFRS 16 basis. Looking at these numbers in greater detail, Slide 26 sets out our Q4 results alongside our full year numbers and the corresponding year-on-year growth rate for each. The left hand numbers illustrate our return to growth in local currency revenue and EBITDA in Q4, following the sequential improvement we saw during Q3. To help comparison with last year, this slide also sets out…

Many thanks, Serkan. Let me conclude our presentation with a summary of the group’s priorities in the year ahead, which are set out here on Slide 35. We are fully committed to maintaining the pace of our 4G network rollout and accelerating the growth of our 4G subscriber base. These are the fundamental drivers of our core business as well as the enabler of our digital ambitions. This is a key priority in Russia, whereas we saw in Q4, it is driving positive subscriber trends that will help revenue growth resume, which we remain on track to achieve during the first half of this year. It is also supporting the double-digit growth potential of Ukraine, Pakistan and Kazakhstan, which we are pleased to see recovering strongly from the lockdowns. We are 100% committed to build scale in our digital services in every market. This includes deepening the verticals I described in Russia and deploying ecosystems where we are establishing in the markets like Pakistan and Bangladesh elsewhere. Away from our operations, we continue to monitor market conditions for opportunities to further optimize our capital structure and our portfolio of markets remain under constant review to ensure that our capital is deployed in growth opportunities that we believe can maximize shareholder value over time. Our cost base is a priority for our leadership teams, and we will look to make sure further adjustments here to ensure our business operate as efficiently as possible. Finally, we are in the process of separating our towers from our operating business, as a first step towards ensuring their value is fully recognized by the market. More on this, once we determine our scope of opportunities here. With that, let me pause and hand the call over to the operator for your questions.

Thank you. [Operator Instructions] Thank you. And your first question comes from Ondrej Cabejsek from UBS. Please go ahead. Your line is open.

Hi, thank you and congratulations on the progress that you’re making. I have a couple of questions for the outlook mainly. First one in terms of CapEx, so you are now giving us a lot of KPIs for Russia, especially, but you’re also guiding for roughly similar CapEx intensity for 2021. Can you speak a bit about how much of that is still going towards improvements in Russia and how much of that will now be kind of reallocated to other markets or segments? Second question on your priorities for next year, you’re talking about potential streamlining of the portfolio. I know this is, I guess, down to various factors, but how are you today thinking about Algeria? I mean if there is a good price, is that something that you can now say that you will be looking to sell? And finally, on the towers, if I may. I mean, beyond, a history of trying to do JVs or sell towers in Pakistan, is there a way that you’re thinking about potentially monetizing towers and what you’re strictly not because, I guess, with your balance sheet kind of sale and leaseback would not probably be the best option, how you’re thinking about this? Are JVs, your primary concern or are you still looking at selling parts of the portfolio in some of these markets? Thank you.

Thank you for the question. Let me answer first the portfolio question, and then I’ll pass it to Kaan for the CapEx on the towers space. As you know, we are constantly reviewing our portfolio. We do that on a 6-monthly basis. We sell Armenia because we felt it was an operation where we were not positioned to extract the maximum value. And our local shareholders, there we’re in the best position. We think the same way for other markets. And our view is to focus on the markets where we can make a shift and increase our value for shareholders and move on on the others that perhaps are not important for us. When it comes to Algeria, you will see that in a country that has a lot of potential, that we’ve been pushing really hard on many aspects. When the put option arrive which is July 1, we will make a decision. At this point, there is nothing changing from our previous view, which is we are happy where we are. We are continuously focusing on rolling out 4G and improving the international connectivity. So when July comes, we will update you accordingly. Kaan, do you want to comment on CapEx and towers?

Sure. Sure. So Ondrej, thanks a lot for the question. On the CapEx side, our CapEx investments are focused on 3 important dimensions: capacity, coverage and quality. And as I mentioned, we have reached now with the addition of 20 million additional 4G customers, a 38% penetration of our subscriber base in LTE. We have to increase this penetration rate up to 70%, 75%. That will practically mean that you’re going to be seeing similar amount of investments as we have by this year in 2021 to continue. Approximately, half of this investment naturally goes to Russia, where half of our business is taking place. But as I mentioned to you, the 4G penetration rate in Russia is slightly higher towards more closer to the 50% range. So that can give you an indication about what that could mean for the market as a whole. Now with regard to the towers, the towers business, as we move from 4G to 5G type of platforms and higher densification as countries also prioritize rural area access on their digital and digitalization plans is becoming an area where we are going to be seeing more scalability requirements, more standardization requirements, which ultimately requires independent tower operators. What we will be doing this year to make sure that we simplify our business models and we crystallize the value of our tower assets so that we have closable options for the future. These options could be merger of our operations to create these scalable and standardized independent tower operation capabilities. Some of that could be monetization of these assets. Some of them will be actually getting focused and much more efficient operations of these entities and having shares of bigger JVs rather than our own tower infrastructure. So we will be keeping our options open as we make sure that country by country, we prepare our operations for all these closable cases.

Thank you. And if I may, a short follow-up on the CapEx, so you’re kind of indicating that half of the CapEx next year more or less should still go to Russia. What are the kind of KPIs that you are looking for, because you’re clearly presenting some very good progress there. So what else is in the pipeline? And then the second one, you are talking about reaching much higher penetration on basically doubling your penetration levels of 4G users. That is obviously enabled by 4G coverage and devices, etcetera. So is this an indication that elevated CapEx levels may stay with be on for more than just 2021?

First of all – and quick answer to your question. Yes, you should at least see our current level of CapEx for another 2 years to continue as we increase that 4G penetration. And we increased from 28% to 38% this year from ‘19 to ‘20. And you will see us probably reaching around 50% this year at the end of this year. So we will need to continue this trend until we reach 70%, 75% in order to sustain our growth and also customer satisfaction levels. Now when I talk about the Russian piece, I mean, 2019 was a period where we focused on three key markets in Russia, and they are Moscow, Oblast of Moscow, Greater Moscow, the metro of Moscow, St. Petersburg, metro of St. Petersburg and partially Krasnodar. And this was our first phase of making sure that we provided customers what they really demanded from us. And the results as you can see, is astounding success. Now this year, we’re going to be moving to the next stage on the next 16 priorities that we have. And I would like to invite Alexander Torbakhov, he is on the call with us. Just first of all, to introduce him to yourselves, but also to get this perspective about what we intend to do this year on the network rollout. Alexander, are you with us?

Yes, Kaan, I am here.

Yes. Go ahead.

Actually, you have said the main thing already. So we unfortunately Beeline underinvested previous years into its network and lost the positive attitude from many clients and that resulted in the loss of client base in 2019. And the work we performed in 2020, we actually reached the lowest point of our performance in May. And that was accumulated with quality problems. But since then, we are growing steadily our client base and our revenue top line. And definitely, as Kaan mentioned already, we will continue to do this year and next year because we have to invest more into the quality of our network. But in addition to that, I want to say that it’s not only about CapEx, actually, we made a lot of optimization exercises. And I can say that, for example, in Moscow, our network is one of the best in the city. So – and our clients start to feel that already.

Thank you, Alexander.

Thank you. Your next question comes from the line of Henrik Herbst from Morgan Stanley. Please go ahead. Your line is open.

Yes, hello. I’ve got two questions, please. I was just wondering, firstly, in terms of your guidance, you’re saying low to mid-single digits in local currency. I guess you exited 2020 as you were saying about 5% growth, if I got the chart right in local currency? And I guess Russia is just about sort of timing – your comps are getting quite a lot easier throughout the year. So I was just wondering the sort of low single digits. Well, what are you sort of, in particular, thinking about as the main risks that could make you end up at the sort of low end of that guidance? And then secondly, I guess, I just wanted to get your thoughts on dividends. Maybe it’s too early about dividends for 2021. I guess you haven’t said anything really on that yet. In terms of – I guess, if you do indeed end up sort of mid-single-digit local currency growth and currencies don’t really sort of move very much throughout the year, I mean what’s – how should we think about the potential for you to start to pay a dividend again or should we – do we have to wait until you are sort of through the CapEx, heavy CapEx investment cycle? Thanks very much.

Henrik, thank you very much. Let me give a flavor of the – where we stand in terms of the business outlook that we see. And then I will leave the word to Serkan to answer in further detail about the dividend question. I think you will not criticize us being a little bit prudent on the outlook as we just see the vaccination efforts throughout our operations. And we would like to keep an eye on that. And probably, we will give you the right and exact answer by the end of Q1 in terms of what those expectations will be. But from this perspective, I would like to keep our presence in terms of where we head in the momentum of the business. Serkan?

Thank you, Kaan. And thank you for asking this question because when we see the initial notes from the MS, we see that this question is coming in many reports. So if you let me, I want to spend a little bit more time to explain more detail about this question. First of all, some housekeeping matters. As you know, we have a dividend policy. We said that this 50% free cash flow after licenses subject to maintaining our leverage ratio around 2x pre-IFRS 16, which is equivalent to 2.4x post-IFRS 16. So this is our policy, dividend policy, and I can reconfirm that our dividend policy still in place. So there is no change in our dividend policy. Having said that, in 2020, as you saw in the numbers we generated $357 million equal to free cash flow. However, we are expecting to use some part of this cash generation for the ADG put option exercise in Pakistan when the transaction complete. So that’s why – that’s one of the reasons that we don’t pay dividend for 2020 because that put option is the current M&A transaction. So what’s going to happen in 2021? First of all, we started to see and report year-over-year growth in revenues and EBITDA as well in Q4. And we are hopeful and very bullish that during the year 2021, we will start to report higher year-over-year growth pace in all KPIs, including revenue, EBITDA, hopefully, in cash flow as well. So first of all, we want to deliver better results in 2021. Secondly, there are a couple of other things that we are focusing and continue to focus on the portfolio optimization in 2021. In the meantime, you will see that we will be very active in the DCM markets and banking markets, like we were in 2020. We are going to be in the market, hopefully, after each and every results announcements on a quarterly basis, and we will keep to focus on improving our capital structure, by doing what, by increasing our tenors from 3.5 years, reducing our cost of debt further. And in the meantime, this way, we want to focus on to improve our currency mix as well. So hopefully, by better results, better portfolio and better capital structure by the end of ‘21 and with the same dividend policy, we will be in a much better position in front of our Board for a dividend proposal for our shareholders. And of course, the final decision will be made by our Board. But from a management perspective, our homework is to deliver, as I said, better capital structure, better results, better portfolio, so that the dividend distribution decision by the end of ‘21 can be made easier than this year.

Alright. Thank you very much.

Thank you. Your next question comes from Ivan Kim from Xtellus Capital. Please go ahead. Your line is open.

Hi, yes, good afternoon. Two quick questions from me. First, can we use the $35 million cost as a run rate for ‘21? And then secondly, can you comment on directionally on directionally where NPS in Russia is going now in, let’s say, January? How it’s – how are you performing your peers? Thank you.

Thanks, Ivan. Let me start with the MPS question, and I will leave the other question to Serkan. When you do improvements on your network, there are two cycles of results that come up. The first one is quality improves, and you see a direct impact on the churn rate that goes down. And this is exactly what we are experiencing today. The NPS is a little bit more delayed response that will come from the market as people talk to each other about their experiences, improved experience. So you will need to give us a little bit more time for us to talk about NPS, but probably by the midyear this year, we will be getting more concrete answers to – also to the NPS issue. But we are very comfortable, and we see the momentum on the churn side in terms of our existing base, having better experiences and therefore, staying with us longer and providing less complaints in the system. These are already measurable and under record. Serkan?

Yes. For the run rate assumption for net profit, as you know, there was no one-off item impacting P&L in Q4. However, since they’re reporting in U.S. dollar while operating in non-U.S. dollar countries, so we are exposed to FX gain and losses, depending on the direction of the local currency movement. So for example, in Q4, we recorded $45 million loss. So – but the part from that, if you can make an assumption for the FX, you can use this as a run rate. But again, as I said, this is subject to FX dynamics during the respective quarters.

Yes, Serkan. Sorry, I was just asking about headquarter costs for...

Sorry. I took the question wrongly, sorry. For the headquarter cost, you can take this as a run-rate, but you will see gradual decrease during ‘21 as well. So it will be gradual decrease, but not as significant as we experienced this year.

Great. Thank you very much.

Thanks, Ivan.

Thank you. Your next question comes from Alastair Jones from New Street Research. Please go ahead. Your line is open.

Yes. Hi, thank you for the call. Just two quick questions. Just firstly on Russia, it would be great to get a perspective of the competitive environment that you’re seeing at the moments and in particular, around the strategy around tariffs. I know a year ago, there were some price increases in the market. There is sort of talk that maybe that can happen again potentially. If that was to happen, I mean, would you follow? Are you – do you feel like you’re in a position where you can charge a little bit more given the quality of the service and the metric investment you’ve done or do you sort of feel still having a slightly discounted price will help you in your sort of strategy to gain – potentially gain back some of the share that you’ve lost? And then secondly, just on Pakistan, you exited the year, I think Q4, you growth of around about 3% top line growth. And you are talking about double-digit growth for the foothold by 2021. So just get some understanding around what you think is going to be recovering or that growth? How that growth is going to come through? Is that purely just easier comps given the COVID impact or are there other sort of significant impacts or issues that could potentially help that growth rate? Thanks a lot.

Sure. First of all, with regard to the Russia, if you noticed, we started to give some flavors of our new customer value propositions, and this is only the beginning. You will not see us getting aggressive on the pricing. On the contrary, our strategy has been always been more for more, more quality, more services and in exchange for more relevance and, of course, more revenues. So you will see the trend over that direction. And I think, overall, the Russian competitive environment is rational in terms of market dynamics. On the tower side, Russia is one of the most advanced markets that we have. We do have a tower company, National Tower Company. And I think we will be focusing as a top priority. When it comes to crystallizing our values, Russia will be one of our top priorities.

Great, thanks. And just a follow-up, sorry, on Pakistan, just the growth was around about 3%. You are looking at double-digit growth.

Yes. I mean, Serkan, please correct me if I’m wrong, but Pakistan, the year 2020 was a very particular year. If you would normalize our Pakistan business with the motto of 2019 and all the changes in the regulatory environment, actually, we see Pakistan business mid-teens growth in terms of the potential. And I think that’s how we see the business, and I’m particularly happy with that. Sergi, anything to add?

Yes, sorry, I was on mute. You are right, Kaan. So the impact that you are seeing is because of these one-offs. But besides that, if you normalize it, we see a healthy growth. We believe that with the investment that we are making on the network and the continuous increase of 4G customers, we should see this momentum keeping up during 2021.

Thank you.

Thank you. We have no further questions at this time. I would now like to hand you back to Nik for closing remarks.

I would just like to thank everyone again for dialing in this afternoon. If you do have any more questions, please reach out to us. Take care and we will speak soon. Thank you very much. Bye-bye.

Thank you.

Thank you.

Thank you all.

That does conclude our conference for today. Thank you for participating. You may all disconnect.