VEON : reports 3Q20 results

Earnings Release

3Q20 results

2 9 O C T O B E R 2 0 2 0

V E O N R E P O R T S 3 Q 2 0 R E S U L T S

E N C O U R A G I N G S E Q U E N T I A L I M P R O V E M E N T I N R E V E N U E A N D E B I T D A

A C C E L E R A T I O N I N 4 G U S E R S D R I V I N G G R O W T H

1	Earnings Release
	3Q20 results

Amsterdam (29 October 2020) - VEON Ltd. (Ticker: VEON), announces results for the quarter ended 30 September 2020.

RESULTS HIGHLIGHTS

• All operations recorded improved YoY trends compared to the previous quarter as lockdown restrictions related to the COVID-19 pandemic eased. Reported revenue decreased by 10.4% YoY mainly due to currency headwinds, while the local currency decline in revenue was limited to 1.3% YoY
• The Group recorded a quarter-on-quarter increase in the total mobile customer base with net additions of 3 million in 3Q20 to 207 million following net decline of 6 million in customers in the second quarter period
• Strong growth in 4G users resumed: up by 20 million YoY and by 8 million QoQ, bringing total 4G users to 73 million, driving the long- term revenue expansion of the Group. Ongoing network investment saw 4G population coverage up 18p.p. YoY to 69%
• We recorded double-digit growth in mobile data revenue, up 13.1% YoY in local currency as customers switched back from fixed line as lockdowns restrictions eased and with 4G user ARPUs on average two times higher than the total customer base ARPU
• Across our digital businesses, we continue to make good progress. JazzCash closed the quarter with 9.7 million (MAU), while in the content area both Beeline TV in Russia and Toffee TV in Bangladesh recorded strong YoY trends
• Pakistan, Ukraine and Kazakhstan recorded double-digit EBITDA growth which was offset by operational challenges in Russia. Reported EBITDA decreased by 9% YoY due to currency headwinds; in local currency EBITDA increased by 0.1% YoY
• VEON recorded a non-cash impairment of USD 790 million, primarily against the carrying value of goodwill in Russia. 3Q20 net profit before impairments was USD 145 million
• FY2020 guidance confirmed, anticipating a steady recovery in operations, subject to the gradual lifting of lockdown measures, and a low to mid-single-digit local currency YoY decline in both Group revenue and EBITDA, with Capex Intensity of 22-24%

Kaan Terzioğlu and Sergi Herrero, co-Chief Executive Officers, commented on results:

"The third quarter saw strong sequential improvements in the financial performance of the majority of our operating companies, as lockdown restrictions eased in most of our markets. The Group remains focused on operational execution and improving commercial momentum while driving a number of initiatives across our markets to support the significant data & digital opportunities we enjoy.

We are pleased to see real progress on the execution of our strategy to grow our 4G user base across all our operations and, in doing so, support the expansion in our data and digital revenues which together represent a meaningful opportunity for the Group to expand revenue in the long-term.

At the end of September, we reported 4G users of 73 million, which collectively now account for 35% of our total customer base. But even more encouraging is that due to 4G segment growth, data revenues increased by 13% in local currency on a YoY basis - momentum we will strive to continue to deliver on in the coming months.

Looking forward, as a management team, we remain excited by the growth opportunities we enjoy as our 4G network deployment program drives greater levels of customer engagement and digital services adoption. In support of this, we have continued with our focused network rollout across the Group's markets, investing an additional $354 million in the quarter.

We remain committed to executing on our planned operational improvements, particularly in Russia, where we continue to invest in network quality and a growing range of digital services while focusing on strengthening our commercial propositions for all our customers. Elsewhere across the Group, the early-stage nature of our markets provides us with structural growth opportunities in digital adoption and we are well- placed to reap the benefit from these growth opportunities as was evident in the quarter where we saw a relatively quick recovery in the operating performance.

As a management team we have resolved to address a number of matters in the interest of our investors, including a zero-cost depository receipt program for NASDAQ investors and a structural reduction in our HQ costs as we take on a new operating model.''

For a discussion of how we define and calculate the non - IFRS financial measures used in this document, including EBITDA, EBITDA

margin, EBITDA Adjusted and EBITDA Adj usted margin, Net Debt, Equity Free Cash Flow (after licenses), Operational Capital

Expenditures ("Operational capex"), Capex Intensity, local currency [measures], ARPU, see Attachment A "Definitions" on page 18. For further discussion of adjustments made for one - off and non- recurring items, see "Non - recurring items that affect year - on- year comparisons" on page 3.

2	Earnings Release
	3Q20 results

KEY FIGURES

USD million	3Q20	3Q19	YoY	YoY	9M20	9M19	YoY	YoY
reported	local currency	reported	local currency
Total revenue, of which	1,993	2,223	(10.4%)	(1.3%)	5,981	6,609	(9.5%)	(2.7%)
mobile and fixed service revenue	1,856	2,076	(10.6%)	(1.6%)	5,629	6,161	(8.6%)	(2.4%)
mobile data revenue	645	626	3.1%	13.1%	1,927	1,783	8.1%	15.2%
EBITDA	898	987	(9.0%)	0.1%	2,627	3,280	(19.9%)	(14.6%)
EBITDA margin (EBITDA/total revenue)	45.1%	44.4%	0.7p.p.	0.6p.p.	43.9%	49.6%	(5.7p.p.)	(5.8p.p.)
EBITDA Adjusted	898	987	(9.0%)	0.1%	2,627	2,892	(9.2%)	(3.1%)
EBITDA margin Adjusted (EBITDA Adjusted/total revenue)	45.1%	44.4%	0.7p.p.	0.6p.p.	43.9%	44.0%	(0.1p.p.)	(0.2p.p.)
Profit for the period	(645)	30	n.m.		(350)	635	n.m.
Profit for the period attributable to VEON shareholders	(620)	35	n.m.		(357)	599	n.m.
Equity free cash flow after licenses	301	265	13.5%		365	852	(57.2%)
Operational capital expenditures	354	324	9.3%		1,214	1,163	4.5%
Capex intensity (LTM Operational capital expenditures/revenue)	21.8%	17.0%	4.7p.p.		21.8%	17.0%	4.7p.p.
Net debt (excl. lease liabilities)	5,901	6,275	(6.0%)		5,901	6,275	(6.0%)
Net debt/LTM EBITDA (excl. lease liabilities)	1.9	1.7	0.2		1.9	1.7	0.2
Total mobile subscribers (millions)	207	212	(2.0%)		207	212	(2.0%)
Total fixed-line broadband subscribers (millions)	4.4	4.0	9.4%		4.4	4.0	9.4%

Note: in the above table EBITDA Adjusted for 9M19 excludes special compensation of USD 38 million and other operating income of USD 350 million (for further discussion of adjustments made for one-off and non-recurring items, see "Non-recurring items that affect year-on-year comparisons." on page 3)

KEY RECENT DEVELOPMENTS

• In September, the Dhabi Group exercised its put option to sell VEON its 15% shareholding in Jazz Pakistan; the transaction is expected to close during the current financial year
• Second ruble-denominated bond issuance under the Group's Global Medium-Term Note (MTN) program closed in September, with proceeds of RUB 10 billion at 6.5% for unsecured notes due in 2025
• Beeline Kazakhstan signed its network sharing partnership in support of the rural broadband initiative which aims to bridge the digital divide across the country's rural initiatives
• VEON acquired strategic stake in ShopUp, Bangladesh's leading full-stack B2B commerce platform
• Shareholders trading on Nasdaq will no longer be subject to annual depository fee
• New governance model adopted, Chief Internal Audit & Compliance Officer appointed
• Concluded an agreement for the sale of Armenia operations
• Yaroslav Glazunov appointed to the Board of Directors as an alternate director for Alexander Pertsovsky

For a discussion of how we define and calculate the non - IFRS financial measures used in this document, including EBITDA, EBITDA

margin, EBITDA Adjusted and EBITDA Adjusted margin, Net Debt, Equity Free Cash Flow (after licenses), Operational Capital Expenditures ("Operational capex"), Capex Intensity, local currency [measures], ARPU, see Attachment A "Definitions" on page 18. For further discussion of adjustments made for one - off and non- recurring items, see "Non - recurring items that affect year - on- year comparisons" on page 3.

3	Earnings Release
	3Q20 results

CONTENTS

MAIN EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 GROUP PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 COUNTRY PERFORMANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 CONFERENCE CALL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 ATTACHMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7

PRESENTATION OF FINANCIAL RESULTS

VEON's results presented in this earnings release are based on IFRS unless otherwise stated and have not been audited.

Certain amounts and percentages that appear in this earnings release have been subject to rounding adjustments. As a result, certain numerical figures shown as totals, including those in tables, may not be an exact arithmetic aggregation of the figures that precede or follow them.

All comparisons are on a year on year (YoY) basis unless otherwise stated.

The non-IFRS measures disclosed in the document, i.e. EBITDA, EBITDA margin, EBITDA Adjusted and EBITDA Adjusted margin, Net Debt, Equity Free Cash Flow (after licenses), Operational Capital Expenditures, Capex Intensity, local currency measures, ARPU are reconciled to the comparable IFRS measures in Attachment C on page 20.

NON-RECURRING ITEMS THAT AFFECT YEAR-ON-YEAR COMPARISONS

1. In 1Q19, VEON recorded a one-off vendor payment to the Company of USD 350 million, which was accounted for as other income and is reflected in EBITDA.
2. 2Q19 revenue and EBITDA were positively impacted by USD 38 million received in relation to the termination of a network sharing agreement in Kazakhstan between our subsidiary KaR-Tel LLP and Kcell Joint Stock Company ("Kcell") following Kazakhtelecom JSC's acquisition of 75 percent of Kcell's shares.

3Q20 EBITDA was positively impacted by USD 52 million of a reversal of a provision in Pakistan. Please refer to Note 1 of our unaudited interim condensed consolidated financial statements for further details.

Local currency year-on-year trends for 9M20 disclosed in this earnings release exclude the impact of foreign currency movements (see full definition in Attachment A) and also exclude the impact of a USD 38 million positive one-off item recorded in 2Q19 in revenue. The first two one-off items listed above are excluded from the EBITDA Adjusted figure.

Pakistan revenue and EBITDA were impacted by changes in tax and service charges related to the Supreme Court's "suo moto order" in April 2019 and our subsequent discussions with the Pakistan Telecommunications Authority. As of 29 October, Jazz is currently awaiting the PTA's decision following a hearing on 25 June 2020 in which Jazz presented its case regarding Jazz's crediting of administration fees and withdrawal of the show cause notice issued to Jazz by the PTA. For further background, on the "suo moto order" and the subsequent discussions with the PTA, see our 2Q20 earnings release dated 6 August 2020.

The effect of these changes is not excluded from the local currency year-on-year trends (except for administration fees highlighted above), since it is wide-ranging in its impact and applicable for a number of reporting periods, but is detailed here for explanatory purposes.