Business context and reporting period
VEON Ltd.’s Form 20-F reports audited IFRS results in U.S. dollars for the fiscal year ended December 31, 2022, with comparisons to 2021 and 2020. It is an annual report, not a standalone 2022 fourth-quarter filing; the supplied text does not provide clear Q4-only financial values. Continuing operations covered Pakistan, Ukraine, Kazakhstan, Bangladesh, Uzbekistan and Kyrgyzstan. Russia was classified as held for sale and discontinued operations in November 2022; Algeria was sold in August 2022 and Georgia in June 2022.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Total operating revenue | US$3.755bn | US$3.850bn |
| Operating profit | US$1.163bn | US$1.023bn |
| Profit before tax, continuing operations | US$802m | US$464m |
| Profit from continuing operations | US$733m | US$120m |
| Adjusted EBITDA, continuing operations | US$1.747bn | US$1.840bn |
| Net income (loss), including discontinued operations | (US$9m) | US$801m |
| Operating cash flow, continuing operations | US$933m | US$961m |
| Capital expenditure, excluding licenses and right-of-use assets | US$841m | US$806m |
Revenue fell 2.5% in U.S. dollars, primarily due to local-currency depreciation; management reported service-revenue growth at constant currency, supported by 4G adoption, data usage, content and customer growth in several markets. Adjusted EBITDA declined 5.1%, reflecting lower revenue and higher energy and technical-support costs. Segment revenue and EBITDA were mixed: Uzbekistan and Kazakhstan grew, while Ukraine’s Adjusted EBITDA fell 18.3% in U.S. dollars and Bangladesh’s fell 10.6%; Pakistan EBITDA rose 1.7% in U.S. dollars, despite revenue declining 8.7%.
Continuing-operations profit improved, aided by lower income tax expense (US$69m versus US$344m) and a US$181m foreign-exchange gain (versus a US$7m loss). The net loss included a US$742m loss from discontinued operations, including a US$722m loss on the Algeria disposal and a US$202m after-tax loss from Russia. The Group recorded US$446m of Russia goodwill impairment and US$36m of Ukraine impairment during 2022. Reported operating profit also included an US$88m gain on the Georgia disposal.
Cash and cash equivalents were US$3.107bn at year-end, up from US$2.252bn on the balance sheet at December 31, 2021. Continuing-operations investing cash outflow was US$1.057bn and financing cash inflow was US$456m. Working capital was negative US$664m, compared with negative US$830m a year earlier. External bank loans and bonds had US$6.670bn principal outstanding, excluding debt classified with Russia’s held-for-sale operations; lease liabilities were US$806m. The filing reports US$9.363bn of financial liabilities net of derivative assets on its contractual maturity schedule, including lease liabilities and purchase obligations.
Material changes, outlook and significant risks
- Russian divestment and debt: VEON agreed to sell its Russian operations for RUB130bn (approximately US$1.9bn), expected to be paid primarily through assumption or discharge of VEON debt. The sale remained subject to outstanding conditions at the filing date. Management expected completion in 2023; the transaction’s completion and deleveraging benefits were not assured.
- Liquidity and going concern: The auditor’s report highlights substantial doubt about VEON’s ability to continue as a going concern, and the financial statements were prepared on a going-concern basis. Management said liquidity was sufficient for obligations over at least the following 12 months, subject to assumptions including completion of the Russian sale and no early debt repayment. The revolving credit facility was fully drawn at year-end. Currency controls, sanctions, restricted cash upstreaming, refinancing access, debt covenants and potential accelerated repayments remain material uncertainties.
- Debt maturity actions: A creditor scheme extended the February and April 2023 note maturities to October and December 2023, respectively, with a 200-basis-point amendment fee and a put option at 102% of principal plus accrued interest. Holders exercised the put for US$165m and US$294m of the respective notes, which were repurchased and cancelled in April 2023. The filing reports subsequent RCF rollovers through October and November 2023.
- Ukraine exposure: The conflict damaged or disrupted network assets, increased repair, security and energy costs, displaced customers and restricted transfers from Ukraine. Ukraine generated approximately 26% of 2022 revenue. Management reported about 15% of the telecommunications network damaged or destroyed, with restoration and functionality constrained in occupied areas.
- Guidance and investment: VEON aspired to keep 2023 capital-expenditure intensity between 18% and 20%; this is an aspiration, not assured guidance. Management expected continued investment in high-speed data networks, while noting discretionary spending could be delayed to preserve liquidity. The filing does not provide a clear consolidated revenue or earnings forecast.
- Restatement and controls: The 20-F corrected an US$824m presentation error involving derecognition of Algerian non-controlling interests: the amount was moved out of other comprehensive income into other equity. The correction did not affect total equity, the income statement as a whole, cash flows, EPS, Adjusted EBITDA, debt covenants, capex or net debt. Management and the auditor identified a material weakness in controls over accounting and presentation of business disposals; disclosure controls were deemed ineffective at year-end. Remediation was ongoing and not yet complete.
- Other contingencies and reporting: Bangladesh’s regulator issued an audit claim of BDT8.231bn (approximately US$76m), including US$40m of interest; VEON was reviewing it and had accrued amounts considered probable. PwC stated it would not stand for re-election, and VEON had not appointed a 2023 auditor by the filing date. The company also cited sanctions, export restrictions, foreign-exchange volatility, cyber risk, regulatory and tax disputes, and emerging-market exposure.
Important facts for investors to verify
- Whether the Russian sale closed, the final consideration and debt assumed or discharged, and the resulting Group debt, cash and covenant position.
- Current available liquidity, location and accessibility of cash, maturity schedule, RCF status, and any restrictions on subsidiary cash transfers.
- Progress against the remediation plan for the material weakness, and appointment and readiness of a successor auditor.
- Developments in the Ukraine conflict, network restoration, subscriber retention, operating costs and ability to upstream cash.
- Resolution and final cash impact of the Bangladesh regulatory audit claim and other material tax, legal and bondholder contingencies.
- Actual 2023 capital spending and operating performance versus management’s stated capital-intensity aspiration.