Amsterdam, 15 September 2017 - VEON Ltd. (VEON) (NASDAQ: VEON, Euronext Amsterdam: VEON), a leading global provider of connectivity and internet services headquartered in Amsterdam and serving over 235 million customers, notes the recent announcements from the government of Uzbekistan, liberalizing the currency exchange rules and resetting the official exchange rate at 8,100 Uzbek som per U.S. dollar, a devaluation of approximately 92%.
Under these liberalized exchange rules, VEON may in the longer term be able to more effectively repatriate cash from Uzbekistan. The cash balances held by Unitel, VEON’s Uzbek subsidiary, are now valued at approximately USD 350 million.
The new official exchange rate will directly impact the reported results for the VEON group for two reasons. Firstly, the Uzbek som results of Unitel will now be translated into U.S. dollars at a higher exchange rate. Secondly, Unitel and all other telecommunications operators will experience an erosion of EBITDA resulting from the fixing of tariffs from U.S. dollars to Uzbek som at the prior official exchange rate. As a result, VEON expects annualized decreases in revenues of USD 300-350 million and in underlying EBITDA of USD 175-225 million. Based on 2016(1) total annual revenues of ~USD 9 billion and underlying EBITDA of ~USD 3.6 billion, the impact represents approximately 3.5% of revenues and approximately 5.5% of underlying EBITDA. The Group’s net debt / underlying EBITDA ratio is expected to immediately increase by 0.1x and net assets are expected to decrease by USD 485 million.
2017 guidance for low single digit organic revenue growth remains intact. However, as a direct consequence of this currency devaluation, the underlying EBITDA margin is now expected to show flat to low single digit organic growth(2), and we therefore anticipate that the Group will generate underlying equity free cash flow (3) (before license spectrum fees) of between USD 850 and 950 million in 2017, rather than the previously communicated 2017 target of USD 900-1,000 million.
(1) 2016 results including pro forma 12 months Warid.
(2) The previous guidance for underlying EBITDA margin was for low single digit organic growth
(3) Underlying equity free cash flow excluding licenses is defined as free cash flow from operating activities less free cash flow used in investing activities (excluding capex for licenses and withholding tax related to Pakistan spectrum of USD 29.5 million), excluding M&A transactions, transformation costs and other one-off items.