Annual Report 2020
VEON Ltd.
Claude Debussylaan 88,
1082 MD Amsterdam
The Financial Statements are
approved by the Audit Committee
on behalf of the Board
on March 15, 2021
TABLE OF CONTENTS
Director's Report............................................................................................................................................
Information on the Company...........................................................................................................................................
Directors and Senior Management and Employees........................................................................................................
Major Shareholders and Related Party Transactions......................................................................................................
How We Manage Risks...................................................................................................................................................
Risk factors......................................................................................................................................................................
Operating and Financial Review and Prospects..............................................................................................................
Additional Information......................................................................................................................................................
Quantitative and Qualitative Disclosures about Market Risks.........................................................................................
Declarations.....................................................................................................................................................................
Consolidated Financial Statements..............................................................................................................
Company Financial Statements....................................................................................................................
Other Information...........................................................................................................................................
Independent Auditor’s Report.......................................................................................................................
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Directors’ Report
INFORMATION ON THE COMPANY
Overview
VEON is a leading global provider of connectivity and internet services. Present in some of the world’s most dynamic
markets, VEON provides more than 210 million customers with voice, fixed broadband, data and digital services. VEON currently
offers services to customers in 9 countries: Russia, Ukraine, Pakistan, Kazakhstan, Algeria, Uzbekistan, Bangladesh,
Kyrgyzstan and Georgia. VEON’s reportable segments currently consist of the following seven segments: Russia, Pakistan,
Algeria, Bangladesh, Ukraine, Uzbekistan and Kazakhstan. We provide services under the “Beeline,” “Kyivstar,” “banglalink,”
“Jazz” and “Djezzy” brands. As of December 31, 2020, we had 43,639 employees. For a breakdown of total revenue by category
of activity and geographic segments for each of the last three financial years, see — Operating and Financial Review and
Prospects.
In September 2019, we announced a new strategy framework at the Group level including a commitment to boost long-
term growth beyond traditional connectivity services. The strategy framework set out how VEON plans to drive value from three
business pillars: its fundamental mobile and fixed line connectivity services and the drive of 4G adoption; a portfolio of new
services built around digital technologies with the active involvement of big data and artificial intelligence; and future
assets which seeks to identify, acquire and develop ‘’know-how” and technologies that open up adjacent growth opportunities.
As part of our initiative to digitize our core telecommunications business, ensuring we address 4G penetration levels
across the group is vital as 4G services remain a core enabler of our digital strategy. We intend to continue focusing on
increasing our capital investment efficiency, including with respect to our IT, network, and distribution costs. We have secured
network sharing agreements and intend to maintain our focus on achieving an asset-light business model in certain markets,
where we own only the core assets needed to operate our business. For further information on our capital expenditures, see —
Operating and Financial Review and Prospects — Liquidity and Capital Resources — Future Liquidity and Capital Requirements.
We anticipate that we will finance the investments with operational cash flow, cash on our balance sheet and external financing.
For more information on our recent developments, see — Operating and Financial Review and Prospects — Key Developments
During 2020.
VEON Ltd. is an exempted company limited by shares registered under the Companies Act 1981 of Bermuda, as
amended (the “Companies Act”), on June 5, 2009, and our registered office is located at Victoria Place, 31 Victoria Street,
Hamilton HM 10, Bermuda. Our headquarters are located at Claude Debussylaan 88, 1082 MD, Amsterdam, the Netherlands.
Our telephone number is +31 20 797 7200. VEON Ltd. is registered with the Dutch Trade Register (registration number
34374835) as a company formally registered abroad (formeel buitenlandse kapitaalvennootschap), as this term is referred to in
the Dutch Companies Formally Registered Abroad Act (Wet op de formeel buitenlandse vennootschappen), which means that
we are deemed a Dutch resident company for tax purposes in accordance with applicable Dutch tax regulations. Our website is
www.veon.com. The information presented on our website is not part of this Annual Report.
Our legal representative in the United States is Puglisi & Associates, 850 Library Ave, Suite 204, Newark, DE 19711 (+1
(302) 738 6680). Our agent for service of process in the United States is CT Corporation, 11 Eighth Avenue, New York, NY 10011
(+1 (212) 894 8400). In addition, the SEC maintains a website that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, which can be accessed over the internet at http://www.sec.gov.
History
Our predecessor PJSC VimpelCom (formerly OJSC “VimpelCom”) was founded in 1992. In 1996, VimpelCom listed on
the New York Stock Exchange, where it remained listed until 2013 when VimpelCom moved its listing to the NASDAQ Global
Select Market. In March 2017, VimpelCom rebranded to VEON and on April 4, 2017, VEON began trading its ordinary shares on
Euronext Amsterdam.
In the early 2000s, we began an expansion into the Commonwealth of Independent States (CIS) by acquiring local
operators or entering into joint ventures with local partners, including, but not limited to, in Kazakhstan (2004), Ukraine (2005),
Uzbekistan (2006), Armenia (2006) and Georgia (2006). In 2009 and 2010, PJSC VimpelCom and Ukrainian mobile operator,
Kyivstar, combined, and we subsequently established our headquarters in Amsterdam. Our expansion efforts have included
transactions involving operations outside of CIS. In 2011, we completed the acquisition of Wind Telecom S.p.A., an international
provider of mobile and fixed-line telecommunications and internet services with operations in Italy, through Wind Telecom, and in
Algeria, Bangladesh and Pakistan, through GTH (previously known as Orascom Telecom Holding S.A.E.).
In November 2016, the group combined its Italian mobile telecommunications business with that of CK Hutchison
Holdings Ltd. in a joint venture company named Wind Tre. In July 2018, the group announced the sale of its 50% stake in Wind
Tre to CK Hutchison Holdings Ltd. which was completed in September 2018. In July 2019, VEON Holdings B.V. launched a
mandatory tender offer (“MTO”) to purchase the shares of GTH, a subsidiary of VEON which consolidates the group’s operations
in Algeria, Bangladesh and Pakistan. At the close of the MTO in August 2019, VEON held approximately 98.24% of GTH’s total
outstanding shares. VEON subsequently embarked on a comprehensive restructuring of GTH, including a successful offer to
acquire substantially all of GTH’s operating assets in Algeria, Pakistan and Bangladesh following the delisting of GTH from the
Egyptian Exchange in September 2019. In late 2020, we sold our operating subsidiary in Armenia.
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Recent Developments
COVID-19
The global outbreak of COVID-19 and associated containment and mitigation measures implemented worldwide have had a
sustained impact on our operations and financial performance.
The second quarter saw the full impact on our operations of the lockdowns imposed across our markets in response to
COVID-19. This resulted in material disruption to our retail operations following store closures, impacting gross connections and
airtime sales. Restrictions on travel resulted in a significant decline in roaming revenues and the loss of migrant customers from
our subscriber base, particularly in Russia.
Although VEON’s operations remained impacted by lockdown measures throughout the second half of the year, all operations
saw a recovery in the performance as our local businesses continue building resilience to the restrictions related to COVID-19.
Demand for our data services remains strong, enabling us to continue to grow our data revenues. We also experienced a shift in
data traffic from mobile to fixed networks as lockdowns encouraged remote working and home schooling alongside a greater use
of devices through our domestic broadband services.
An increase in demand for hard currencies, in part due to COVID-19, resulted in the devaluation of exchange rates in the
countries in which VEON operates. As such, during the year ended December 31, 2020, the book value of assets and liabilities
of our foreign operations, in U.S. dollar terms, decreased significantly, with a corresponding loss of US$623 million recorded
against the foreign currency translation reserve in Other Comprehensive Income.
Our management has taken appropriate measures to keep our personnel safe and secure. As of the date of these financial
statements, other than as described above, we have not observed any particular material adverse impacts to our business,
financial condition, and results of operations. The group liquidity is sufficient to fund the business operations for at least another
12 months.
Partnership with MasterCard
In May 2020, VEON announced a partnership between JazzCash and payment technology leader Mastercard that strengthens
the payments ecosystem for merchants and customers in Pakistan. More than 7 million customers and merchants use JazzCash
every month, making it Pakistan’s leading digital wallet. The partnership with Mastercard allows merchants to accept digital
payments from customers, digitize their supply chain, and move to cashless operations. In a first for Pakistan, merchants and
consumers who sign up for JazzCash wallet will be able to benefit from a wide range of Mastercard’s digital solutions and
capabilities to pay for orders and services via all digital channels as well as make online payments in a fast, safe and convenient
manner. JazzCash customers will also have access to Mastercard’s virtual and branded debit cards that can be used in 55,000
points of sale and ATMs in Pakistan, in addition to JazzCash merchants and e-commerce sites.
Exercise of put option for 15% stake in Pakistan Operations
In September 2020, the Dhabi Group exercised its put option to sell us its 15% shareholding in Pakistan Mobile Communications
Limited ("PMCL"), the operating company of Pakistan’s leading mobile operator, Jazz. VEON updated the fair value of its put
option liability following the completion of an independent valuation process which determined a fair value for the shareholding of
US$273 million. Completion of the transfer remains subject to the conclusion of the contractual transfer mechanics with the
Dhabi Group. Once completed, VEON will indirectly own 100% of PMCL.
Beeline Kazakhstan signed Network Sharing Partnership
In October 2020, VEON announced that its operating company in Kazakhstan, which provides services under the Beeline brand,
entered into a network sharing partnership that unites the nation’s three mobile telecom providers in the delivery of high-speed
internet to rural communities. The agreement brings Beeline together with Kcell and Tele2 in support of the nation’s 250+ project,
which aims to extend high-speed internet to all villages with a population of 250 or more. Once complete, the project will see
almost 1,000 rural settlements with a combined population of 600,000 offered 3G and 4G connections by all three operators.
The 250+ initiative, the infrastructure deployment for which started immediately, enables rural residents to receive mobile
services on competitive terms and select a service provider of their choice. In turn, each mobile operator will enjoy equal access
to the shared network.
VEON acquired strategic stake in ShopUp in Bangladesh
In October 2020, VEON joined Sequoia Capital India and Flourish Ventures as investors in ShopUp, Bangladesh’s leading full-
stack B2B commerce platform for small businesses, becoming ShopUp’s first strategic corporate investor.
The investment of approximately US$8 million, in exchange for a 13.5% stake, is expected to enable VEON to support ShopUp’s
fast-growing digital ecosystem for micro, small and medium-sized enterprises, which form a vital backbone of Bangladesh’s
economy, as well as provide opportunities for developing mobile financial services for ShopUp’s users.
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Agreement concluded for the sale of Armenian operations
In October 2020, VEON concluded an agreement for the sale of CJSC “VEON Armenia”, VEON’s operating subsidiary in
Armenia, to Team LLC for a consideration of US$51 million. Accordingly the net carrying value of assets amounting US$33
million were de-recognized along with reclassification of cumulative foreign currency translation reserve of US$96 million to
profit and loss, resulting in the net loss of US$78 million.
Beeline Russia completed coverage of all Moscow metro stations with 4G and expanded 4G coverage in Moscow
In December 2020, VEON announced that Beeline Russia achieved 100% 4G coverage and enabled its customers to access
high-speed internet at all stations of the Moscow metro, as well as in most of the adjacent tunnels. The milestone reflects
Beeline’s ongoing efforts to improve the quality of 4G connectivity and offers Beeline customers the ability to stay in touch, listen
to music and stream content in good quality whilst underground.
In January 2021, VEON announced that Beeline Russia completed a large-scale project to improve the quality and availability of
mobile internet in Moscow. The project included the redistribution of the 2100 frequency range from 3G to 4G and an expansion
in the frequency range used in the 4G network from 30 to 45 MHz. This has enabled an increase in the average speed of mobile
internet by up to 30%, with peak speeds now reaching up to 350 Mbit/sec.
Financing activities
In January 2020, VEON Holdings B.V. ("VEON Holdings") issued US$300 million in senior unsecured notes due in 2025, to be
consolidated and form a single series with the US$700 million 4.00% senior notes due in 2025 issued by VEON Holdings in
October 2019. VEON Holdings used the net proceeds of the tap issuance to refinance certain existing outstanding debt, address
upcoming debt maturities and for general corporate purposes.
In April 2020, VEON Holdings announced the establishment of a US$ 6.5 billion (or the equivalent thereof in other currencies)
Global Medium Term Note program for the issuance of bonds (the "MTN Program"). In connection with the establishment of the
MTN Program, VEON prepared a base offering memorandum, which was approved by the Luxembourg Stock Exchange, in
order to enable bonds issued under the MTN Program to be admitted to listing on the Official List of the Luxembourg Stock
Exchange and to trading on the Euro MTF market of the Luxembourg Stock Exchange. In June, September and November 2020,
VEON Holdings issued senior unsecured notes of RUB20 billion (US$288 million), RUB10 billion (US$135 million) and US$1.25
billion, respectively, under the MTN Program, maturing in June 2025, September 2025 and November 2027, respectively. The
use of proceeds of the Notes is being used to finance certain investments in subsidiaries, to refinance certain outstanding
indebtedness of the Issuer, and for general corporate purposes.
In April 2020, Banglalink extended the maturity of its US$300 million syndicated loan by an additional two years to 2022.
Following this extension, VEON, via a wholly-owned subsidiary, acquired the loan from the original lenders, leading to an
effective extinguishment of this debt for the VEON Group.
In June 2020, VEON entered into a new RUB 100 billion (approximately US$1.5 billion) bilateral term loan agreement with
Sberbank. The loan was used to refinance and extend the maturity of the existing loan between Sberbank and VEON Holdings,
as well as to provide additional funds for general corporate purposes.
In July 2020, VEON refinanced its existing RUB 30 billion (approximately US$422 million) bilateral term loan agreement with VTB
Bank. This refinancing extended the maturity and reduced the cost of the existing loan between VTB Bank and VEON.
In December 2020, VEON completed the optional early redemption of all of its outstanding US$600 million 3.95% Senior Notes
due June 2021 (the "2021 Notes") pursuant to Condition 5.3 of the 2021 Notes. The 2021 Notes were redeemed in full at a
redemption price equal to 101.00% of the principal amount thereof, plus accrued and unpaid interest and additional amounts due
thereon.
In December 2020, VEON’s operating company in Ukraine, Kyivstar, signed three bilateral unsecured loan agreements with
Raiffeisen Bank Aval Joint Stock Company ("Raiffeisen"), Joint Stock Company Alfa-Bank ("Alfa-Bank") and Joint Stock
Company OTP Bank ("OTP"), for an aggregate amount of UAH 4.1 billion (approximately US$146 million). The loan agreement
with Raiffeisen has a 5-year term, and the loan agreements with Alfa-Bank and OTP have a 3-year term.
Similarly, VEON’s subsidiary in Kazakhstan, KaR-Tel, has signed a bilateral unsecured loan agreement with Forte Bank JSC for
KZT 10 billion (approximately US$25 million), which has a 3-year term. Both Kyivstar and KaR-Tel will continue to monitor the
local debt markets for further borrowing opportunities, in line with VEON’s strategy to improve its capital structure via long-term
borrowings in local currencies.
Changes to Board of Directors and Senior Management
On February 13, 2020, VEON announced the appointment of Sergi Herrero and Kaan Terzioğlu as co-Chief Executive Officers,
effective from March 1, 2020. Ursula Burns, who was appointed as Chairman in July 2017 and CEO in December 2018,
remained as VEON’s Chairman before stepping down on June 1, 2020. Gennady Gazin was appointed as Chairman of VEON on
1 June 2020.
One of the co-CEOs chairs each VEON local board, with the exception of Algeria. The role of the boards is to foster growth,
monitor progress and oversee operations in each of VEON’s operating companies.
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On April 3, 2020, VEON announced the appointment of Alexander Torbakhov as Chief Executive Officer of Beeline Russia,
effective from April 6, following Vasyl Latsanych stepping down from the role earlier in the year.
On April 6, 2020, VEON announced the appointment of Serkan Okandan as Group Chief Financial Officer (CFO), effective from
May 1, 2020.
On April 28, 2020, VEON announced that Erwan Gelebart has been appointed as CEO for JazzCash effective May 18, 2020.
On June 1, 2020 VEON announced the results of the elections conducted at its Annual General Meeting of Shareholders.
Shareholders elected five new members to the company’s board of directors, Hans Holger Albrecht, Mariano De Beer, Peter
Derby, Amos Genish and Stephen Pusey, as well as seven previously serving directors: Osama Bedier, Mikhail M. Fridman,
Gennady Gazin, Andrei Gusev, Gunnar Holt, Robert Jan van de Kraats and Alexander Pertsovsky.
Following the election of the directors, Gennady Gazin was appointed as Chairman of VEON’s board of directors, effective June
1, 2020.
VEON appointed Yaroslav Glazunov and Leonid Boguslavsky on October 28, 2020 and January 15, 2021, respectively, to the
company’s board of directors. Mr. Glazunov is a managing partner at Spencer Stuart International based in Moscow and has
been in the global leadership advisory business for 20 years, focusing on CEO succession, efficiency and performance. Mr.
Boguslavsky is the founder of RTP Global, an early-stage venture capital firm with a strong track record of investing in
technology, and is considered a pioneer of IT and internet tech investment.
VEON Co-CEO Kaan Terzioğlu Elected to Serve on GSMA Board of Directors
On November 16, 2020, VEON announced that Kaan Terzioğlu was elected to the Board of Directors of the GSMA, the mobile
industry’s leading global organization that brings together more than 750 operators and nearly 400 ecosystem companies. Kaan
Terzioğlu’s appointment was confirmed among those of 26 industry leaders elected to the GSMA’s Board for a two-year term,
each of whom will serve the mobile industry’s leading global body from January 2021 to December 2022.
Appointment of Chief Internal Audit and Compliance Officer
In October 2020, Joop Brakenhoff was appointed to the position of Chief Internal Audit & Compliance Officer. He reports to the
co-CEOs and also has a reporting line to the Chairman of the Audit & Risk Committee.
VEON enters into a US$1,250 million multi-currency revolving credit facility agreement
In March 2021, VEON entered into a new multi-currency revolving credit facility agreement (the "RCF") of US$1,250 million. The
RCF replaces the revolving credit facility signed in February 2017, which is now cancelled. The RCF has an initial tenor of three
years, with the company having the right to request two one-year extensions, subject to lender consent. International banks from
Asia, Europe and the US have committed to the RCF. The new RCF caters for USD LIBOR cessation with the secured overnight
financing rate (SOFR) administered by the Federal Reserve Bank of New York agreed as the replacement risk free rate with
credit adjustment spreads agreed for interest periods with a one month, three month and six month tenor. SOFR will apply to
interest periods commencing on and from October 31, 2021 (or earlier if USD LIBOR is no longer published or ceases to be
representative prior to that date). The company will have the option to make each drawdown in either U.S. dollars or euro.
VEON subsidiary Banglalink successfully acquires 9.4MHz in spectrum auction
In March 2021, Banglalink, the Company's wholly-owned subsidiary in Bangladesh, acquired 4.4MHz spectrum in the 1800MHz
band and 5MHz spectrum in 2100MHz band following successful bids at an auction held by the BTRC. The newly acquired
spectrum will see Banglalink increase its total spectrum holding from 30.6MHz to 40MHz. Banglalink will invest approximately
BDT 10 billion (US$115) to purchase the spectrum.
Appointment of CEO of Beeline Uzbekistan
In March 2021, we announced the appointment of Andrzej Malinowski to the vacant position of CEO of Beeline Uzbekistan, with
effect from March 15, 2021. Mr. Malinowski joins from Beeline Georgia, where he has held the position of CEO. Lasha Tabidze
has been appointed as Mr. Malinowski’s successor at Beeline Georgia, who previously held the joint position of Chief Operating
Officer and Chief Commercial Officer of Beeline Georgia. A candidate for the Beeline Uzbekistan role had been previously
announced but Beeline Uzbekistan was unable to finalize the employment of this candidate.
Shareholders trading on NASDAQ no longer subject to annual depository fee
From January 1, 2021 holders of VEON American Depositary Shares ("ADSs") trading on NASDAQ will no longer be subject to
any cash dividend fee or depository service fee of any kind. ADS holders will continue to be subject to the normal issuance and
cancellation fees.
No final dividend declared by the VEON for FY2020
The VEON Group will not be paying a dividend for FY2020.
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Business overview
Business Units and Reportable Segments
VEON Ltd. is the holding company for a number of operating subsidiaries and holding companies in various
jurisdictions. We currently operate and manage VEON on a geographical basis. These segments are based on the different
economic environments and varied stages of development across the geographical markets we serve, each of which requires
different investment and marketing strategies.
Our reportable segments currently consist of the following seven segments: Russia, representing our “cornerstone”
market; Pakistan, Ukraine, Uzbekistan and Kazakhstan, representing our “growth engines”; and Algeria and Bangladesh,
representing our “frontier markets”. We also present our results of operations for “Other frontier markets” as well as “HQ and
eliminations” separately, although these are not reportable segments. “Other frontier markets” represents our operations in
Kyrgyzstan, Armenia and Georgia. “HQ and eliminations” represents transactions related to management activities within the
group in Amsterdam, London and Luxembourg and costs relating to centrally managed operations and reconciles the results of
our reportable segments and our total revenue and Adjusted EBITDA.
See — Operating and Financial Review and Prospects — Reportable Segments and Note 2 - Segment information to
our Audited Consolidated Financial Statements for further details.
Subsidiaries
The table below sets forth our significant subsidiaries as of December 31, 2020. The equity interest presented
represents our ownership interest, direct and indirect. Our percentage ownership interest is identical to our voting power for each
of the subsidiaries listed below.
Name of significant subsidiary
VEON Amsterdam B.V.
VEON Holdings B.V.
PJSC VimpelCom
JSC “Kyivstar”
LLP “KaR-Tel”
LLC “Unitel”
LLC “VEON Georgia”
LLC “Sky Mobile”
VEON Luxembourg Holdings S.à r.l.
VEON Luxembourg Finance Holdings S.à r.l.
VEON Luxembourg Finance S.A.
Global Telecom Holding S.A.E
Omnium Telecom Algérie S.p.A.*
Optimum Telecom Algeria S.p.A.*
Pakistan Mobile Communications Limited
Banglalink Digital Communications Limited
Country of
incorporation
Nature of
subsidiary
Percentage of
ownership
interest
Netherlands
Netherlands
Russia
Ukraine
Kazakhstan
Uzbekistan
Georgia
Kyrgyzstan
Luxembourg
Luxembourg
Luxembourg
Egypt
Algeria
Algeria
Pakistan
Bangladesh
Holding
Holding
Operating
Operating
Operating
Operating
Operating
Operating
Holding
Holding
Holding
Holding
Holding
Operating
Operating
Operating
100.0 %
100.0 %
100.0 %
100.0 %
75.0 %
100.0 %
80.0 %
50.1 %
100.0 %
100.0 %
100.0 %
99.6 %
45.4 %
45.4 %
85.0 %
100.0 %
* The Group has concluded that it controls Omnium Telecom Algérie S.p.A and Optimum Telecom Algeria S.p.A, See Significant Accounting Judgments in Note 13 of
the Audited Consolidated Financial Statements for further details.
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VEON, through its operating companies, provides customers with mobile and fixed-line telecommunications services in
certain markets, which are described more fully below.
Our mobile and fixed-line businesses are dependent on interconnection services. The table below presents certain of
the primary interconnection agreements that we have with mobile and fixed-line operators in Russia, Pakistan, Algeria,
Bangladesh, Ukraine, Uzbekistan and Kazakhstan:
Russia
Pakistan
Algeria
Bangladesh
Ukraine
Uzbekistan
We have interconnection agreements with mobile and fixed-line operators in Russia. During 2020, we had the following
MTRs in Russia: average cost per minute of national traffic at 0.9483 RUB (US$ 0.0131) and average price per minute
of national traffic at 0.9827 RUB (US$ 0.0136), which were broadly stable as compared to average cost per minute at
0.9480 RUB (US$ 0.0147) and average price per minute of national traffic at 0.9861 RUB (US$ 0.0152) in 2019 and
average cost per minute at 0.9258 RUB (US$ 0.0148) and average price per minute of national traffic at 0.9750 RUB
(US$ 0.0156) in 2018.
In the territories of Pakistan and Azad Jammu and Kashmir (“AJK”) and Gilgit-Baltistan, we have several
interconnection agreements with mobile and fixed-line operators. Our MTRs in 2018 and 2019, were at PKR 0.9
(US$0.00739) and PKR 0.8 (US$0.0053), respectively, and in 2020 it was PKR 0.70 (US$0.00452).
We have interconnection agreements with mobile, VoIP and fixed-line operators. For the 2016-2017 period, the
evolution of MTRs was favorable to our business despite an asymmetry with our competitors. For the 2017-2018
period, our MTR remained stable and the asymmetry was reduced both in scope (with one competitor instead of two
benefitting from the asymmetry) and in value (the gap between MTRs was reduced). In the reference interconnection
offer approved for the 2018-2019 period, Autorité de Régulation de la Poste et des Communications Electroniques the
(ARPCE) imposed symmetrical MTRs for all three operators for both voice and SMS (respectively DZD 0.95 for voice
and DZD 1.5 for SMS). In the previous reference interconnect offer (2019-2020), the ARPCE returned to asymmetry
for voice MTR (DZD 0.95, DZD 0.74, and DZD 0.67 for Ooredoo, Mobilis, and DJEZZY, respectively) while maintaining
symmetry for SMS (DZD 1.5 ). In the last reference interconnection offer (2020-2021), symmetry was again applied for
both voice (DZD 0.68 /min) and SMS (DZD 1.5).
We have interconnection agreements with interconnection exchange (ICX) operators, international gateway (IGW)
operators, mobile operators, internet protocol telephony service providers (IPTSPs) and fixed-line operators. The
international termination rate was changed with effect from February 14, 2020, following which the minimum
termination rates became US$ 0.006/min. Henceforth, IGW operators share 22.5% of international call termination
revenue with mobile operators based on the minimum international call termination rate. The domestic termination rate
was changed, with effect from August 14, 2018, to BDT 0.14/min or US$0.0017/min (terminating mobile operator gets
BDT 0.10 (US$0.0012) and ICX gets BDT 0.04 (US$0.0005).
We have interconnection agreements with various mobile and fixed-line operators. As of December 31, 2020, in
Ukraine, the effective MTR was UAH 0.12/min (US$0.0043) as well as effective IMTR equaled US$ 0.048/min.
We have interconnection agreements with various mobile and fixed-line operators. On September 5, 2017, the State
Committee of Uzbekistan on Privatization, Demonopolization and Development of Competition (“State Committee of
Uzbekistan”) issued an injunction requiring Unitel LLC to implement equal mobile termination rates for all national
operators. Unitel LLC unsuccessfully challenged this injunction in Uzbek Courts. Our MTR for 2020 was UZS 0.05/
minute as established by the court decision.
Kazakhstan
We have interconnection agreements with mobile and fixed operators. Our MTR for 2020 for local mobile operators
was 5.60 KZT/min.($0.0132, inclusive of VAT) and for fixed operators was 14.80 KZT/min ($0.0351, inclusive of VAT).
9
Description of Our Mobile Telecommunications Business
The table below presents the primary mobile telecommunications services we offer to our customers and a breakdown of prepaid
and postpaid subscriptions as of December 31, 2020.
Mobile Service Description
Russia
Pakistan
Algeria
Bangladesh
Ukraine
Uzbekistan Kazakhstan Others(3)
Value added and call completion
services (1)
National and international roaming
services(2)
Wireless Internet access
Mobile financial services
Mobile bundles
_______________
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes(4)
Yes(5)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No/Yes(7)
Yes(6)
(1)
content delivery channels.
Value added services include messaging services, content/infotainment services, data access services, location based services, media, and
(2)
Access to both national and international roaming services allows our customers and customers of other mobile operators to receive and make
international, local and long-distance calls while outside of their home network.
(3)
(4)
(5)
(6)
(7)
For a description of the mobile services we offer in Kyrgyzstan and Georgia, see “—Mobile Business in Others.”
Includes 4G
Includes Smart Money (payment method for services via mobile phone)
Reflects mobile bundles provided in Kyrgyzstan.
Reflects services offered in Kyrgyzstan.
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Mobile Business in Russia
In Russia, through our operating company PJSC VimpelCom and our “Beeline” brand, we primarily offer mobile
telecommunications services to our customers under two types of payment plans: postpaid plans and prepaid plans. As of
December 31, 2020, approximately 87.9% of our customers in Russia were on prepaid plans.
The table below presents a description of the primary mobile telecommunications services we offer in Russia.
• airtime charges from mobile postpaid and prepaid customers, including monthly contract fees for a predefined amount of
voice traffic and roaming fees for airtime charges when customers travel abroad
Voice
• GPRS/EDGE; 3G/HSPA; 4G/LTE; special wireless “Plug&Play” USB modems
Internet and Data Access
Roaming
• active roaming agreements with 706 GSM networks in 214 countries
• GPRS roaming with 606 networks in 189 countries
• 4G/LTE roaming with 325 networks in 133 countries
• roaming agreements generally state that the host operator bills PJSC VimpelCom for roaming services; PJSC VimpelCom
pays these charges and then bills the customer for these services on a monthly basis
VAS
• caller-ID; voicemail; call forwarding; conference calling; missed call notification (via text); call blocking and call waiting
Messaging
• SMS (consumer and corporate); MMS and voice messaging (allows customers to send pictures, audio and video to mobile
phones and to e-mails); mobile instant messaging
Content/infotainment
• voice services (including referral services); content downloadable to telephone (including music, pictures, games and video);
RBT; mobile cloud solutions; geo-positioning and compass service for fleet and assets management; and M2M control center
solution for all M2M/IoT verticals, Smart TV services, including Beeline TV
• Mobile payment; banking card; trusted payment; loans repayments; remittances; banks notification; and mobile insurance
The table below presents a description of business licenses relevant to our mobile business in Russia. Unless noted otherwise,
we plan to apply for renewal of these licenses prior to their expiration.
Mobile financial services
Services
License
Expiration
Super-regional GSM (GSM900, GSM1800,
GSM900/1800, UMTS 900 and 4G/LTE 1800
standards)
Moscow, Central and Central Black
Earth, North Caucasus, North-West,
Siberia, Ural and Volga
September 2022- April 2023 (various dates)
GSM(1) (GSM900, GSM1800, GSM900/1800 and 4G/
LTE 1800 standards)
Regions in the Far East super-region
of Russia
2021 - 2025 (various dates)
3G(2) (UMTS/LTE)
4G(3) (LTE)
4G/LTE 2600
Orenburg region
June 2025
Irkutsk region
Nationwide(4)
Nationwide(4)
32 districts of Russia
2021 (various dates)
May 2022
July 2022
April 2026
(1)
In total, our GSM licenses cover approximately 97% of Russia’s population.
(2) PJSC VimpelCom holds one of three 3G licenses in Russia.
(3)
In July 2012, PJSC VimpelCom was awarded a mobile license, a data transmission license, a voice transmission license and a telematic license for the
provision of 4G/LTE services in Russia. These licenses allow PJSC VimpelCom to provide services using radio-electronic devices in Russia via networks that
use 4G/LTE standard equipment within any of the following frequency bands: 735-742.5/776-783.5 MHz; 813.5-821/854.5-862 MHz; and 2550-2560/2670-2680
MHz. Certain channels allocated to us in accordance with the licenses have restrictions on their use. To remove restrictions, we have to perform organizational
technical measure field tests. The rollout of the 4G/LTE network is using a phased approach based on a pre-defined schedule pursuant to the requirements of
the license.
(4) This includes 83 regions of Russia, except for Republic of Crimea and Sevastopol.
11
PJSC VimpelCom must pay an annual fee for the use of radio frequency spectrum. These fees were RUB 3,952 million and RUB 3,946 million
for the years ended December 31, 2020 and 2019, respectively. Under Federal Law No. 126 FZ “On Communication” and license terms, PJSC
VimpelCom is required to make universal service fund contributions in the amount equal to 1.2% of corporate revenues from provided
communications services. Universal service fund contributions were RUB 2,152 million and RUB 2,345 million for the years ended December
31, 2020 and 2019, respectively. PJSC VimpelCom is also subject to certain other license fees on a case-by-case basis.
LICENSE FEES
Mobile bundles
In 2020, we have kept our focus on product lines from a customer needs perspective, simplifying offers and maintaining
competitive prices in combination with transparent conditions. In October 2020, a new product “Svyaz Z” was launched. There is
no similar product in the market and the offering is based on conscious consumption – packages of internet, minutes and SMS
are unlimited; there is no monthly subscription fee; and customers determine the level of internet, minutes and SMS service and
related options they will consume. The tariff plan is managed within the MyBeeline app. We also continued to attract customers
to our shared bundle product and сonvergence offers.
Distribution
In 2020, we sought to optimize the number of our stores by closing unprofitable locations. Compared to December 31,
2019, as of December 31, 2020 the number of owned retail monobrand stores was 2,284 compared to 2,849; the number of
franchise stores was 1,666 compared to 1,678; the number of “Know How” stores was 94 compared to 134; and the total number
of owned retail monobrand stores was 4,044 stores compared to 4,661. We continued on the same course as in 2019 to
increase the efficiency of retail stores and have closed a total of 872 stores over the last two years, which include own offices
and franchise. We have no immediate plans to close further retail stores and expect the rising trend of online sales to positively
affect the overall market and enable a more balanced and cost-efficient distribution footprint with fewer retail points in the future.
In 2020, we maintained high availability of live agents at call centers, simplified a number of service procedures and
business processes, and endeavored to improve overall customer care, operational efficiency and customer experience. In
addition, several initiatives have been launched to continue the transition of our customer care functions from traditional voice
channels to digitalized text and self-service channels. Notably, we have launched a project focused on dynamic Interactive Voice
Response (IVR) FTTB structures where these structures have been built according to the principles of simplifying communication
by text, rejecting unpopular and ineffective parts, checking customer data and offering only relevant services. We also launched
Digital Code, an identification method by which a client receives a one-time password to perform a service operation. More than
500 clients connected using Digital Code in December 2020 and January 2021. Furthermore, our mobile self-service application
for iOS and Android was downloaded approximately 16.2 million times in 2020, and the monthly active base of the MyBeeline
platform reached 11.5 million active customers per month as of December 2020. We continued to develop ChatBot, a software
robot that converses in natural language and provides necessary information and answers client questions as a call center
operator in our mobile application and website.
Competition
The following table shows our and our primary mobile competitors’ respective customer numbers in Russia as of
December 31, 2020:
Operator
MTS
MegaFon
PJSC VimpelCom
Tele2
Source: Omdia.
Customers in Russia
(in millions)
78.0
75.8
49.9
45.9
According to Omdia, there were approximately 249.6 million mobile customers in Russia as of December 31, 2020,
compared to 253.5 million mobile customers as of December 31, 2019, representing a mobile penetration rate of approximately
174.7%, compared to approximately 177.2% as of December 31, 2019.
12
Mobile Business in Pakistan
In Pakistan, customers continued to migrate to 4G/LTE following its launch in 2017. We operate in Pakistan through our
operating company, PMCL and our brand, “Jazz,” which is the historic Mobilink brand together with the merged Warid brand. In
2020, PMCL provided 3G services in over 300 towns and cities and 4G/LTE services in 243 cities.
In Pakistan, we offer our customers mobile telecommunications services under postpaid and prepaid plans. As of
December 31, 2020, approximately 97.1% of our customers in Pakistan were on prepaid plans.
The table below presents the primary mobile telecommunications services we offer in Pakistan.
Voice
• airtime charges from mobile postpaid and prepaid customers, including monthly contract fees for a predefined amount of voice traffic and
roaming fees for airtime charges when customers travel abroad
• GPRS, EDGE, 3G and 4G/LTE
Internet and data access
Roaming
• active roaming agreements with 319 GSM networks in 148 countries
• GPRS roaming with 246 networks in 116 countries
• LTE roaming through 55 networks in 40 countries
• CAMEL roaming through 125 networks in 70 countries
•
roaming agreements generally state that the host operator bills PMCL for the roaming services; PMCL pays these charges and then bills the
customer for these services on a monthly basis
• caller-ID; voicemail; call forwarding; missed call alert; credit balance; balance share; conference calling; call blocking and call waiting
Messaging
• SMS, MMS (which allows customers to send pictures, audio and video to mobile phones and to e-mail), and mobile instant messaging
VAS
• ecosystem of digital services: mobile TV, music and live audio streaming, video streaming, mobile magazine, sports (including cricket), mega
deals, games
Content/infotainment
• mobile payment; banking card; trusted payment; banks notification; and mobile insurance
Mobile financial services(1)
(1) Mobilink Microfinance Bank Limited (“Mobilink Bank”), our wholly owned subsidiary, carries on a microfinance banking business and provides certain MFS, DFS
and traditional banking services (including the granting of microfinance loans, provision of credit, payment and transfer services and a variety of other banking
services) in Pakistan under license granted by the State Bank of Pakistan and is subject to regulation by the State Bank of Pakistan. In partnership with Jazz,
Mobilink Bank offers mobile wallets and payment services under the brand “JazzCash”.
The table below presents a description of business licenses relevant to our mobile business in Pakistan. Unless noted
otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
License(1)(3)
Expiration
2G(4)
3G
4G/LTE (NGMS)
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
2022
2019 (2)
2029
2032
2019 (2)
(1) Warid (now merged with Jazz) acquired a 15-year technology neutral license in 2004 for US$291 million. US$145.5 million was paid upfront with the remainder
paid in ten equal annual installments starting with a four-year grace period, with the last payment made May 2018. The same 2G license was amended in
December 2014 by the Pakistan Telecommunication Authority (“PTA”) to allow Warid to provide 4G/LTE services in Pakistan. Additionally, the National
Accountability Bureau is currently conducting an investigation into certain former PTA and other officials, and has requested information from Jazz concerning
Warid’s 2014 license amendment while the investigation is ongoing.
(2) The ex-Warid license renewal was due in May 2019. Pursuant to directions from the Islamabad High Court, the PTA issued a license renewal decision on July
22, 2019 requiring payment of US$40 million per MHz for 900 MHz spectrum and US$29.5 million per MHz for 1800 MHz spectrum, equating to an aggregate
price of approximately US$450 million (excluding applicable taxes of approximately 13%). On August 17, 2019, Jazz appealed the PTA’s order to the Islamabad
High Court. On August 21, 2019, the Islamabad High Court suspended the PTA’s order pending the outcome of the appeal and subject to Jazz making
payment in the form of security (under protest) as per the options given in the PTA’s order. In September 2019 and May 2020, Jazz deposited approximately
US$225 million and US$58 million, respectively, in order to maintain its appeal in the Islamabad High Court regarding the PTA’s underlying decision on the
13
license renewal. There were no specific terms and conditions attached to the deposit. The most recent hearing on this matter was concluded before the
Islamabad High Court on March 1, 2021 and a judgment is now pending.
(3)
(4)
In addition, PMCL and its subsidiaries have other licenses, including LDI, WLL, TTP, local loop licenses, licenses to provide non-voice communication services,
and licenses to provide class VAS in Pakistan, AJK and Gilgit-Baltistan. The licensees must also pay annual fees (0.5%) to the PTA and make universal service
fund contributions (1.5%) and/or research and development fund contributions (0.5%), as applicable, in a total amount equal to a percentage of the licensees’
annual gross revenues (less certain allowed deductions) for such services.
In 2007, PMCL renewed its 2G license for a further term of 15 years. As of December 31, 2020, PMCL had paid its outstanding balance of US$14.5 million to
the PTA for the renewal of its 2G license (paid on December 5, 2019). This amount had been payable in yearly installments of US$14.5 million, payable in
December of each year, until December 2019. PMCL has two 15-year licenses for provision of cellular mobile 2G services in AJK and Gilgit-Baltistan.
LICENSE FEES
Under the terms of its 2G, 3G and 4G/LTE licenses, as well as its license for services in AJK and Gilgit-Baltistan, PMCL must pay annual fees
to the PTA and make universal service fund contributions and/or research and development fund contributions, as applicable (not all of the
foregoing are applicable to all licenses), in a total amount equal to 2.5% of PMCL’s annual gross revenues (less certain allowed deductions) for
such services, in addition to spectrum administrative fees.
PMCL’s total license fees (annual license fees plus revenue sharing) in Pakistan (excluding the yearly installments noted above) were US$23.7
million, US$24.7 million and US$26.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. PMCL’s total spectrum
administrative fee payments, including for Warid’s spectrum, were US$2.1 million, US$1.6 million and US$1.9 million for the years ended
December 31, 2020, 2019 and 2018, respectively.
Mobile bundles
We continue to focus on a technology agnostic mobile internet portfolio, meaning same pricing across 2G, 3G and 4G/
LTE technologies. n Pakistan, we offer a portfolio of tariffs and products designed to cater to the needs of specific market
segments, including mass-market customers, youth customers, personal contract customers, SOHOs (with one to three
employees), SMEs (with four to 249 employees) and enterprises (with more than 249 employees). We offer corporate customers
several postpaid plan bundles, which include on-net minutes, variable discounts for closed user groups and follow-up minutes
based on bundle commitment. We also offer dedicated account management to large corporates and 24x7 business helpline for
support.
Distribution
As of December 31, 2020, our sales channels in Pakistan included one company store, 21 business centers, a direct
sales force of 183 employees looking after indirect sales channels, 407 exclusive franchise stores currently active and over
200,000 non-exclusive third-party retailers. For top-up, we offer prepaid scratch cards and electronic recharge options, which are
distributed through the same channels. Jazz brand SIMs are sold through more than 43,101 retailers, supported by biometric
verification devices.
Competition
The following table shows our and our competitors’ respective customer numbers in Pakistan as of December 31, 2020:
Operator
PMCL (“Jazz”)
Telenor Pakistan
Zong
Ufone
Source: The Pakistan Telecommunications Authority.
Customers in
Pakistan
(in millions)
66.4
47.6
38.6
23.1
According to the PTA, there were approximately 175.6 million mobile customers in Pakistan as of December 31, 2020,
compared to 165.4 million mobile customers in Pakistan as of December 31, 2019, representing a mobile penetration rate of
approximately 82.3% compared to 78.2% as of December 31, 2019.
14
Mobile Business in Algeria
We operate in Algeria through our operating company, Optimum, and our brand, “Djezzy.” Optimum provides 4G/LTE
services in Algeria in 45 of 48 provinces across the country, including Algiers, and the largest provinces in terms of population. In
Algeria, we generally offer our customers mobile telecommunications services under prepaid and postpaid plans. As of
December 31, 2020, prepaid, postpaid and hybrid (a monthly fee with recharge possibility) represented approximately 86%, 3%
and 11%, respectively, of the revenue generated by all our customers in Algeria.
With respect to ownership of Omnium Telecom Algérie S.p.A. (“OTA”), GTH holds a controlling interest of 45.57%
directly and indirectly through Oratel International Inc. Limited and Moga Holding Limited. The Algerian National Investment Fund
holds 51% directly in OTA and a local minority shareholder, Cevital S.p.A., holds directly the remaining 3.43%. The establishment
of this partnership in January 2015 strengthened OTA’s position and prospects, with greater opportunities for our operations in
Algeria. VEON Ltd. exercises operational control over OTA and, as a result, fully consolidates OTA, which holds 99.99% of
Optimum. In 2015, the operating company in Algeria changed from OTA to Optimum. Historical references to our operating
company in Algeria have therefore been retained as OTA throughout this Annual Report.
The table below presents the primary mobile telecommunications services we offer in Algeria.
• airtime charges from mobile postpaid and prepaid customers, including monthly contract fees for a predefined amount of voice traffic and
roaming fees for airtime charges when customers travel abroad
Voice
Internet and data access
• GPRS, EDGE, 3G and 4G/LTE technology
• data services available via pay-per-use and via a bundle
• active roaming agreements with 466 GSM networks in 158 countries
Roaming
• GPRS roaming with 331 networks in 119 countries
• 3G roaming with 271 networks in 112 countries
• 4G/LTE roaming with 93 networks in 47 countries
• GPRS, EDGE, 3G and 4G/LTE technology
•
roaming agreements generally state that the host operator bills OTA for roaming services; OTA pays these charges and then bills the
customer for these services on a monthly basis
• caller-ID; call forwarding; conference calling; call blocking; call waiting; beep call; verso+; collect SMS; VMS vocal message service; A2P;
and short code third party services
• SMS, MMS (which allows customers to send pictures, audio and video to mobile phones and to e-mail), and mobile instant messaging
Messaging
VAS
• mobile message notification service offering packages with various types of content (sports, news, food, culture) (SMS SCOOP); ring back
tunes (RBT); co-branding with VTC service app (Yassir); game portal; QUIZ game (Instawin)
Content/infotainment
• peer-to-peer credit transfer and credit loan
Mobile financial services
15
The table below presents a description of business licenses relevant to our mobile business in Algeria. Unless noted otherwise,
we plan to apply for renewal of these licenses prior to their expiration.
Services
2G(1)
VSAT(2)
3G(3)
4G/LTE(4)
License
Nationwide
Nationwide
Nationwide
Nationwide
Expiration
2021
2024
2028
2031
(1)
(2)
(3)
In 2001, OTA was awarded a 15-year license to operate a 2G telecommunications network for an aggregate fee of approximately US$737 million. The license
expired in 2016 and was renewed for a five-year period at no additional cost (Decree 17-195 of June 11, 2017).
In 2003, OTA acquired a VSAT data-voice license for an aggregate fee of US$2.05 million and renewed the license in 2014 for an additional period of five years,
at no additional cost. This license expired in April 2019, and, a new license agreement was signed in September 2019 between Optimum, ARPCE and MPT,
with publication of the executive decree finalizing the renewal on March 31, 2020.
In 2013, OTA was awarded a 15-year license to operate a 3G telecommunications network for an aggregate fee of approximately US$38 million, which was paid
in full in 2013. Under the terms of its 3G license, OTA is required to pay an additional annual revenue sharing fee of 1% based on 3G revenues less
interconnection costs.
(4) Under the terms of its 4G/LTE license, Optimum is required to pay an additional annual revenue sharing fee of 1% based on 4G/LTE revenues less
interconnection costs.
LICENSE FEES
Under the terms of its 2G, 3G, 4G/LTE and VSAT licenses, OTA is required to pay contributions for the universal service and environmental
protection fund (3% of revenues); management of the numbering plan (0.2% of revenues less interconnection costs); research, training and
standardization (0.3% of revenues less interconnection costs); license fees for 3G and 4G licenses (1% of revenue less interconnection costs;
and a new tax (0.5% of revenues excluding VSAT) introduced in the 2018 Finance Law.
OTA’s total license fees in Algeria were US$59.9 million, US$65.1 million, and US$62.6 million for the years ended December 31, 2020, 2019
and 2018, respectively, of which US$28.0 million, US$27.8 million, and US$28.1 million, respectively, was related to spectrum charges, and
US$31.9 million, US$37.3 million(1), and US$34.5 million, respectively, was related mainly to contributions made to the Universal Services of
Telecommunications fund and to the number plan management over the same periods.
(1) Reflects a change of the universal services tax calculation rule, from a calculation base of 3% of total revenue less interconnection cost to a calculation base of
3% of total revenue, with retroactivity in 2018 (with an impact of US$2.2 million reported in 2019).
Distribution
As of December 31, 2020, we sell our mobile telecommunications services through our 87,429 shops, via both direct
and indirect channels, of which 111 were monobrand shops rented, equipped, staffed and managed by Optimum and equipped
with IT material and sales applications. Our seven exclusive national distributors cover all 48 wilayas (provinces) of Algeria and
are distributing our products through over 87,318 points of sale, of which all are authorized to sell airtime and 15,809 are
authorized to sell SIMs. As of December 31, 2020, we also had a pool of more than 87 agents in a call centers directly managed
by Optimum providing customer care services, including retention, troubleshooting and handling of complaints.
Competition
Growth in Algeria’s mobile market is expected to slow, and attention is expected to shift to maintaining or improving
ARPU, supported by data revenue growth after the commercial launch of 4G/LTE networks.
The following table shows our and our competitors’ respective customer numbers in Algeria as of December 31, 2020:
Operator
Mobilis
Optimum (“Djezzy”)
Ooredoo
Source: Omdia.
Customers in
Algeria
(in millions)
18.7
14.1
12.3
According to Omdia, there were approximately 45.2 million mobile customers in Algeria as of December 31, 2020,
compared to 45.7 million mobile customers as of December 31, 2019, representing a mobile penetration rate of approximately
105.1%, compared to 107.8% as of December 31, 2019.
16
Mobile Business in Bangladesh
We operate through our operating company, Banglalink Digital Communications Limited (“BDCL”) with our brand
“banglalink” in Bangladesh. On February 19, 2018, BDCL acquired a 4G/LTE license for US$1.2 million in order to launch a high-
speed data network. Following the rollout of 4G/LTE network, BDCL’s data customers as well as data usage have grown rapidly,
which contributed to an increase in BDCL’s data revenue and ARPU.
The telecommunications market in Bangladesh is largely comprised of prepaid customers. As of December 31, 2020,
approximately 94% of our customers were on prepaid plans.
The table below presents the primary mobile telecommunications services we offer in Bangladesh.
• voice telephony to postpaid and prepaid customers through voice packs and mixed bundles
Voice
• GPRS, EDGE, 3G and 4G/LTE technology
• data services provided via pay-per-use and via bundles
Internet and data access
Roaming
• active roaming agreements with 400 GSM networks in 145 countries
• GPRS roaming with 301 networks in 115 countries
• maritime roaming and in-flight roaming
•
roaming agreements generally state that the host operator bills BDCL for roaming services; BDCL pays these charges and subsequently bills
the customer for these services on a monthly basis
VAS
• call forwarding; conference calling; call blocking; call waiting; caller line identification presentation; call me back; and voicemail missed call
alert
• SMS, MMS (which allows customers to send pictures, audio and video to mobile phones and to e-mail) and mobile instant messaging
• news alert service; sports related content; job alerts; music streaming; mobile TV; content download; religious content; and RBT
Content/infotainment
Messaging
• SMS and data network is provided to Bangladesh Post Office for their Mobile Money Order service
Mobile financial services
The table below presents a description of business licenses relevant to our mobile business in Bangladesh. Unless
noted otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
2G(1)
3G(2)
4G/LTE(3)
License
Nationwide
Nationwide
Nationwide
Expiration
2026
2028
2033
(1)
(2)
In November 1996, BDCL was awarded a 15-year GSM license to establish, operate and maintain a digital mobile telephone network to provide 2G services
throughout Bangladesh. The license was renewed in November 2011 for a further 15-year term.
In September 19, 2013, following a competitive auction process, BDCL was awarded a 15-year license to use 5 MHz of technology neutral spectrum in
2100MHz band and was also awarded a 3G license, for which it paid a total cost of BDT 8,677.4 million (inclusive of 5% VAT), including both a license
acquisition fee and a spectrum assignment fee.
(3) On February 19, 2018, BDCL acquired a 4G/LTE license for US$1.2 million. BDCL also acquired the right to use 10.6 MHz technology neutral of spectrum in
1800 MHz (5.6) and 2100 MHz (5) for US$323 million including VAT (33.34% of the fee has been considered as tariff value for 15% VAT). Banglalink also
converted 15MHz of existing 2G spectrum for US$37.01 million.
17
LICENSE FEES
Under the terms of its 2G, 3G and 4G/LTE mobile licenses, BDCL is required to pay to the Bangladesh Telecommunication
Regulatory Commission (i) an annual license fee of BDT 50.0 million (US$0.6 million as of December 31, 2019) for each mobile
license; (ii) 5.5% of BDCL’s annual audited gross revenue, as adjusted pursuant to the applicable guidelines; and (iii) 1% of its
annual audited gross revenue (payable to Bangladesh’s social obligation fund), as adjusted pursuant to the applicable
guidelines. The annual license fees are payable in advance of each year, and the annual revenue sharing fees are each
payable on a quarterly basis and reconciled at the end of each year.
BDCL’s total license fees (annual license fees plus revenue sharing) in Bangladesh were equivalent to US$ 36.8 million,
US$36.9 million, and US$34.7 million for the years ended December 31, 2020, 2019, and 2018, respectively. In addition to
license fees, BDCL pays annual spectrum charges to the BTRC, calculated according to the size of BDCL’s network, its
frequencies, the number of its customers and its bandwidth. The annual spectrum charges are payable on a quarterly basis and
reconciled at the end of each year.
BDCL’s annual spectrum charges were equivalent to US$10.3 million, US$11.8 million, and US$11.8 million for the years
ended December 31, 2020, 2019, and 2018, respectively.
Distribution
As of December 31, 2020, our sales and distribution channels in Bangladesh included 85 monobrand stores, a direct
sales force of 58 enterprise sales managers and 165 zonal sales managers (for mass market retail sales), 54,026 retail SIM
outlets, 275,047 top-up selling outlets, online sales channels, and 4,340 key retail outlets. We provide a top-up service through
mobile financial services, ATMs, recharge kiosks, international top-up services, SMS top-up and the banglalink online recharge
system. We provide customer support through our contact center, which operates 24 hours a day and seven days a week. The
contact center caters to a number of after-sales services to all customer segments with a special focus on a “self-care” app to
empower customers and avoid customer reliance on call center agents. In order to stimulate data usage and smartphone
penetration, we offer banglalink branded internet through reverse-bundle model via device partners’ channels.
Competition
The mobile telecommunications market in Bangladesh is highly competitive. The following table shows our and our
competitors’ respective customer numbers in Bangladesh as of December 31, 2020.
Operator
Grameenphone
Robi Axiata
BDCL (“banglalink”)
Teletalk
Source: Bangladesh Telecommunication Regulatory Commission.
Customers in
Bangladesh
(in millions)
79.0
50.9
35.3
4.9
According to the Bangladesh Telecommunication Regulatory Commission, the top three mobile operators,
Grameenphone, Robi Axiata and Banglalink, collectively held approximately 97.1% of the mobile market which consisted of
approximately 170.1 million customers as of December 31, 2020, compared to 165.6 million customers as
of .December 31, 2019. According to Omdia, as of December 31, 2020, a mobile penetration rate comprised approximately
98.3% compared to 97.2% as of December 31, 2019
18
Mobile Business in Ukraine
We operate in Ukraine with our operating company “Kyivstar” JSC and our brand, “Kyivstar.” The Ukrainian mobile
market operates on a 2G, 3G and 4G/LTE basis. As of December 31, 2020, approximately 85% of our customers in Ukraine were
on prepaid plans. Kyivstar secured 4G/LTE licenses and spectrum in two separate transactions in 2018.
The table below presents the primary mobile telecommunications services we offer in Ukraine.
Voice
• airtime charges from mobile postpaid and prepaid customers, including monthly contract fees for a predefined amount of
voice traffic and roaming fees for airtime charges when customers travel abroad
• GPRS/EDGE, 3G and 4G/LTE
Internet and data access
Roaming
• active roaming agreements for 495 networks in 189 countries
• GPRS roaming on 432 networks in 167 countries
• 3G roaming on 319 networks in 133 countries
• 4G/LTE roaming on 100 networks in 67 countries
Messaging
• SMS;voice messaging and SMS services (including information services such as news, weather, entertainment chats and
friend finder)
Content/infotainment
• voice services (including referral services); content downloadable to telephone (including music, pictures, games and video);
mobile TV and RBT
Mobile financial services
• mobile payment; banking card; trusted payment; banks notification; mobile insurance; and Smart Money (payment method
for services via mobile phone)
The table below presents a description of business licenses relevant to our mobile business in Ukraine. Unless noted
otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
GSM900 and GSM1800(1)
3G(2)
4G/LTE(3)
4G/LTE(3)
4G/LTE(5)
License
Nationwide
Nationwide
Nationwide
Nationwide
Expiration
October 5, 2026(4)
April 1, 2030
July 1, 2033 (1800 MHz)
January 31, 2033 (2600 MHz)
25 Regions (excl. Crimea & Sevastopol)
July 1, 2040 (900 MHz)
(1) Licenses were received on October 5, 2011 for a term of 15 years each.
(2) The license was issued on April 1, 2015 for a term of 15 years. Services provided in the 2100 MHz band. We have also obtained a range of national and
regional radio frequency licenses for the use of radio frequency resources in the referred standards and in specified standards— radio-relay and WiMax. Our
network coverage is (except the Anti-Terrorist Operation zone where Kyivstar is not able to use and control its network): 91.46% of the 2G network; 18.7% of the
3G network; 9,864 localities covered by 2G network; and 25,484 localities covered by 3G network.
(3) Kyivstar secured 4G/LTE licenses and spectrum in two separate transactions in 2018. Following the auction held on January 31, 2018, Kyivstar acquired 15
MHz (paired) of contiguous frequency in the 2600 MHz band for UAH 0.9 billion (approximately US$32 million). In addition, on March 6, 2018, Kyivstar secured
the following spectrum through auction in the 1800MHz band: 25MHz (paired) for UAH 1.325 billion (approximately US$47 million) and two lots of 5MHz (paired)
for UAH 1.512 billion (approximately US$54 million).
(4)
The date is valid for licenses to provide telecommunications services. Due to the changes to legislation that came into force on December 24, 2019, extensions
and renewals of these licenses will not be required in future.
(5) The licenses for the radio frequency resource in 900 MHz re-issued (1 July 2020) as part of a government project on 900 MHz redistribution and refarming as a
way to introduce 4G (LTE) into 900 MHz. As a result of this project, Kyivstar returned 12.5 MHz and received back on average across the country 11.9 MHz, out
of which 6.2 MHz was provided with technological neutrality license conditions.
In 2020, Kyivstar PJSC made spectrum and license payments as follows: annual fee for the use of radio frequency spectrum - UAH 976
million (paid to the State Budget); EMC and monitoring - UAH 255.2 million (paid to Ukrainian State Center of Radio Frequencies); and an
extension of existing licenses and acquisition of new licenses including within the framework of refarming project for implementation of
LTE-900 (13 licenses in all) on use of radio frequency spectrum - UAH 350,5 million (paid to the State Budget).
LICENSE FEES
19
Mobile bundles
Kyivstar offers bundles including combinations of voice, SMS, mobile data and OTT services.
Distribution
Kyivstar’s strategy is to maintain a leadership position by using the following distribution channels: distributors (37% of
all connections), local chains (14%), national chains (8%), monobrand stores (23%), direct sales (12%) and active sales (7%).
Competition
The following table shows our and our primary mobile competitors’ respective customer numbers in Ukraine as of
December 31, 2020:
Operator
Kyivstar
“VF Ukraine” JSC
“lifecell” LLC
Source: Omdia
Customers
(in millions)
25.9
19.6
8.0
Kyivstar competes primarily with “VF Ukraine” JSC, operating under the Vodafone brand, which is 100% owned by
Bakcell LLC (NEQSOL Holding international group of companies) and operates a GSM900/1800 and an LTE 1800/2600/900
network in Ukraine. Kyivstar also competes with “lifecell” LLC, which is 100% owned by Turkcell, as well as with Trimob LLC, a
100% affiliate company of Ukrtelecom to provide services under a 3G license, and with other small CDMA operators.
According to Omdia, as of December 31, 2020, there were approximately 54.8 million customers in Ukraine,
representing a mobile penetration rate of approximately 125.4% compared to 55.0 million customers and a mobile penetration
rate of 125.3% as of December 31, 2019.
20
Mobile Business in Uzbekistan
In Uzbekistan, we operate through our operating company, LLC “Unitel,” and our brand, “Beeline.” We offer our
customers mobile telecommunications services under postpaid and prepaid plans. As of December 31, 2020, approximately
97.0% of our customers in Uzbekistan were on prepaid plans.
Our 3G/HSPA services were commercially launched in 2008, and the majority of the network was constructed in 2010.
Our 4G/LTE services were commercially launched in 2014. Unitel was the first mobile operator to provide 4G/LTE services.
The table below presents the primary mobile telecommunications services we offer in Uzbekistan.
• airtime charges from mobile postpaid and prepaid customers, including monthly contract fees for a predefined amount of
voice traffic and roaming fees for airtime charges when customers travel abroad
• GSM service is provided in 2G and 3G networks; call duration for one session is limited to 40 minutes
Voice
• GPRS/EDGE/3G/4G/LTE networks
Internet and data access
Roaming
• active roaming agreements with 492 GSM networks in 186 countries
• GPRS roaming with 399 networks in 163 countries
• CAMEL roaming through 302 networks in 125 countries
• roaming agreements generally state that the host operator bills us for roaming services; we pay these charges and then bill the customer
for these services on a monthly basis
• caller-ID; voicemail; call forwarding; conference calling; call blocking; and call waiting
• the process of implementation of two-step verification for VAS subscriptions (the “double yes” program) began in December 2020 and is
part of the transparency policy for all of Beeline users
VAS
• SMS and voice messaging
Messaging
Content/infotainment
• Beeline Games (more than 1000 mobile games), Beeline Press (more than 200 periodicals), and partnership project with Bookmate
(online service for books and audiobooks); Beeline Club 2.0 (loyalty program available via app, online, USSD. universal virtual discount
and cashback card); virtual cashback; and My Beeline app
• proprietary payment system “Beepul” (including card-to-card transfer); bank card payments; trusted payment; and M-
Mobile financial services
The table below presents a description of business licenses relevant to our mobile business in Uzbekistan. Unless
noted otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
GSM900/1800(1)
3G(1)
4G/LTE(1)
International Communication Services
License
Data Transfer
License
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Inter-city communication services license
Nationwide
Expiration
August 7, 2031
August 7, 2031
August 7, 2031
2026
Unlimited/Unlimited(2)
2026
TV broadcasting
Nationwide
2023
(1) Requires annual license fee payments.
(2) License for exploitation of the data transfer network does not have a fixed term, and the license for design, construction and service provision of data transfer
network was renewed in June 2020 with an unlimited term.
In 2020, Unitel LLC made payments for spectrum and licenses with the following split: the annual fee for use of radio frequency spectrum
in the total amount of US$6,062,848 and renewal of existing licenses (7 licenses in total) in the total amount of US$2,992,720 paid to the
state budget of Ministry for Development of Information Technologies and Communications.
LICENSE FEES
21
Mobile bundles
We offer bundled tariff plans, which may differ by types or volume of traffic, duration (daily, weekly, fortnightly, and
monthly), and region or charge type. Currently, we provide data only bundles consisting of different types of traffic volume,
charge and duration and integrated bundles consisting of traditional voice with SMS and data traffic, including digital services.
Distribution
In Uzbekistan, we offer a portfolio of tariffs and products for the prepaid system designed to cater to the needs of
specific market segments, including mass-market customers, youth customers and high value contract customers. Further, we
have the following four segments in our postpaid system: large accounts, business to government, SME and SOHO. As of
December 31, 2020, our sales channels in Uzbekistan include 28 owned offices, 562 exclusive stores and 1,934 multibrand
stores.
Competition
The following table shows our and our primary mobile competitors’ respective customers in Uzbekistan as of
December 31, 2020:
Operator
LLC “Unitel”
Ucell
UzMobile (Uzbektelecom)
UMS
Perfectum
Source: Omdia
Customers
(in millions)
6.8
5.0
4.2
2.8
0.4
According to Omdia, as of December 31, 2020, there were approximately 19.2 million mobile customers in Uzbekistan,
representing a mobile penetration rate of approximately 60.4% compared to 22.6 million customers and a mobile penetration rate
of 72.0% as of December 31, 2019.
22
Mobile Business in Kazakhstan
In Kazakhstan, we operate as Beeline Kazakhstan, the country’s largest independent mobile operator. As of December
31, 2020, approximately 93.6% of our customers in Kazakhstan were on prepaid plans.
The table below presents the primary mobile telecommunications services we offer in Kazakhstan.
• Standard voice services
• Prepaid and postpaid airtime charges from customers, including weekly and monthly contract fees for a predefined amount
of voice traffic and roaming fees for airtime usage when customers travel abroad
Voice
• 3G and 4G/LTE service
• technology neutral licenses
Internet and data access
Roaming
• Voice roaming with 571 networks in 195 countries
• 4G/LTE roaming with 251 networks in 94 countries
• GPRS roaming with 486 networks in 156 countries
• CAMEL roaming through 423 networks in 167 countries
• roaming agreements generally state that the host operator bills us for roaming services; we pay these charges and then
bill the customer for these services on a monthly basis
• caller-ID; voicemail; call forwarding; call blocking; trusted payment; mobile transfer (transferring funds from the balance of
VAS
one subscriber to the balance of another)
• SMS; display of Beeline account balance information
Messaging
Content/infotainment
• Brand Content (including Yandex, ZVOOQ, Book.beeline.kz, Viktorina, RingBack Tone (RBT), Press, SeZim, Beeline.Music,
NoStress, MySafety, Traditional, Engster, Fitness)
• SMS inform, free phone (Voice CPA)
Mobile financial services
• mobile payments (including Kazeuromobile and Woopay payment organizations
• mobile transfers (including Sim2Sim, Sim2Card, Sim2IBAN, Sim2ATM, Sim2post)
• bank card payments
• trusted payment
• Google DCB
The table below presents a description of business licenses relevant to our mobile business in Kazakhstan.
Licenses (as of December 31, 2020)
Expiration
Mobile services (GSM900/1800, UMTS/WCDMA2100, 4G/
LTE800/1800)
Unlimited term
•
•
•
License received on August 24, 1998.
KaR-Tel has permission to use of spectrum in 800 MHz, 900 MHz, 1800 MHz and 2100 MHz for mobile services and in 2.5-2.6 GHz, 3.3-3.5 GHz, and
5,5 GHz for wireless access to internet (WLL).
Upfront payments in US$ are: 800 MHz (US$62,691,378) in 2016, 900 MHz (US$67,500,000) in 1998, 1800 MHz (US$10,958,904) for 4G in 2016, 2G
(US$20,783,107) in 2008, and 2100 MHz (US$34,106,412) in 2010.
LICENSE FEES
Under the Kazakhstan tax code, in 2020 KaR-Tel was required to pay: (i) an annual fee for the use of radio frequency spectrum
amounting to KZT 5,948,967,486 for mobile and KZT 193,909,866 for a wireless local loop (WLL); and (ii) a mobile services
provision payment amounting to 1.3992% of corporate revenues from provided communications services, which totaled KZT
1,998,605,531.
23
Mobile bundles
Our suite of integrated bundles is designed for active internet-users. We focus on data services, such as unlimited
access to popular resources: social networks, instant messaging and video hosting. Our tariffs include many useful functions for
free: exchange of minutes to GB and vice versa, the ability to share the rest of the packages with friends and family. We have
added free access to mobile TV with popular movies and TV series to all tariffs. Our family option allows customers to join
groups of up to 5 people and economize. In 2021, we will continue to develop internet services and mobile gaming. We will
release a tariff constructor, where customers can customize a tariff according to their needs. All bundles work with a mixed
payment system: they automatically switch to daily payment if the current balance is insufficient for full payment. The
penetration of bundles into the active base is 87.5%.
Distribution
We distribute our products in the countries in Kazakhstan through owned monobranded stores, franchises and other
distribution channels. As of December 31, 2020, we had 69 total stores in Kazakhstan (including 9,000 other points of sale and
466 electronics stores).
Competition
The following table shows our and our primary mobile competitors’ respective customers in Kazakhstan as of December
31, 2020:
Operator
Beeline Kazakhstan
Kcell
Tele2/Altel
Customers
(in millions)
9.54
8.01
6.7
Source: Ministry of National Economy of the Republic of Kazakhstan, Statistics Committee, Agency for strategic planning and reforms of the Republic of
Kazakhstan, Beeline Kazakhstan data and Kcell Q4 2020 public disclosure.
According to Ministry of National Economy of the Republic of Kazakhstan, Statistics Committee and other data sources noted
above, as of December 31, 2020, there were approximately 24.3 million mobile customers in Kazakhstan, representing a mobile
penetration rate of approximately 129.0% compared to 25.7 million customers and a mobile penetration rate of 138% in 2019.
24
Mobile Business in Others
In the countries in our “Others” category, we generally offer our customers mobile telecommunications services under
prepaid and postpaid plans.
The “Others” category represents our operations in Kyrgyzstan and Georgia. For information on reportable segments,
see — Operating and Financial Review and Prospects — Reportable Segments.
As of December 31, 2020, we had the following percentages of prepaid and postpaid customers:
Payment Plan
Kyrgyzstan
Prepaid
Postpaid
Standard voice services
94.9%
5.1%
Voice
Georgia
100%
—
Prepaid and postpaid airtime charges from customers, including weekly and monthly contract fees for a predefined amount
of voice traffic and roaming fees for airtime usage when customers travel abroad.
3G and 4G/LTE services in each of Kyrgyzstan and Georgia
technology neutral licenses in each of Kyrgyzstan and Georgia
Roaming
Internet and Data Access
•
•
•
•
Kyrgyzstan
Georgia
Voice: 434 networks in 130 countries
GPRS: 279 networks in 102 countries
4G/LTE:108 networks in 58 countries
CAMEL: 210 networks in 88 countries
Voice: 242 networks in 93 countries
GPRS: 218 networks in 83 countries
CAMEL: 171 networks in 67 countries
•
roaming agreements generally state that the host operator bills for roaming services; we pay these charges and then bill
the customer for these services (in some cases on a monthly basis)
caller-ID; voicemail; call forwarding; conference calling; call blocking and call waiting
SMS, MMS, voice messaging and mobile instant messaging
Messaging
Content/infotainment
VAS
SMS CPA, Voice CPA, RBT, voice services (including referral services), content downloadable to telephone (including
music, pictures, games and video); access to radio or television broadcasting online or via mobile app
balance transfer, trusted payment, mobile wallet
Mobile financial services
•
•
•
•
25
The table below presents a description of business licenses relevant to our mobile business in Others. Unless noted
otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Country
Licenses (as of December 31, 2020)
Expiration
Kyrgyzstan Radio spectrum of 2600 MHz for the certain territory of Kyrgyzstan
(technology neutral) 2530-2550MHz/2650-2670MHz
February 2030
Radio spectrum of 800 MHz for the entire territory of Kyrgyzstan
(technology neutral) 796-801MHz/837-842MHz
September 2025
Radio spectrum of 800 MHz for the entire territory of Kyrgyzstan
(technology neutral) 791-796MHz/832-837MHz
Radio spectrum of 900 MHz, 1800 MHz and 2100 MHz for the entire
territory of Kyrgyzstan (technology neutral)
National license for electric communication service activity
National license for base station transmission
National license for services on data traffic
Radio spectrum for one site (transmission)
Georgia
GSM1800 10 MHz frequency
GSM900 5.49 MHz frequency
LTE 800 10 MHz frequency
10 MHz 3G frequency
Wireless internet services
December 2026
October 2024
Unlimited term
December 2024
Unlimited term
May 2023
February 2030
February 2030
February 2030
December 2031
We have promotional zero-zones for major local and international social networks in each of these countries to lower
the entry barrier for new data users and stimulate consumption for existing ones. We also focus on smartphone penetration
growth in each of these countries as the major source of effective demand for our mobile internet services.
Distribution
We distribute our products in the countries in our “Others” category through owned monobranded stores, franchises and
other distribution channels. As of December 31, 2020, we had 76 stores in Kyrgyzstan (including 5969 other points of sale) and
28 stores in Georgia.
Mobile customers and mobile penetration rate
The table below presents our total number of customers and the total mobile penetration rate for all operators in each of
the countries in our “Others” category as of December 31, 2020 and December 31, 2019.
Kyrgyzstan
Georgia
2020
(millions of customers)
2.5
1.3
Mobile Penetration
123.6%
116%
2019
(millions of customers)
2.6
1.3
Mobile Penetration
124.7%
134.8%
Source: Omdia; and the Georgian National Communications Commission.
26
Description of Our Fixed-line Telecommunications
In Russia, Ukraine and Uzbekistan, we offer voice, data and internet services to corporations, operators and consumers
using a metropolitan overlay network in major cities and fixed-line telecommunications using inter-city fiber optic and satellite-
based networks. In Kazakhstan, we offer a range of fixed-line business services for B2O, B2B and B2C segments. In Pakistan,
we offer internet and value-added services over a wide range of access media, covering major cities of Pakistan. We do not offer
fixed-line telecommunications services in Algeria, Bangladesh, Kyrgyzstan or Georgia.
Fixed-line Business in Russia
The table below presents a description of the fixed-line telecommunications services we offer in Russia.
Services
• network access and hardware and software solutions, including configuration and maintenance, SaaS and an integrated
managed service
• local access services by connecting the customers’ premises to our own fiber network, international and domestic long-
distance services and VSAT services to customers located in remote areas
• internet access to both corporate and consumer customers through backbone networks and private line channels
• IP address services, the ability to rent leased channels with different high-speed capacities and remote access to corporate
information, databases and applications.
• managed Wi-Fi networks based on IEEE 802.11b/g/n/ac wireless technology
• virtual PSTN number, xDSL services, session initiation protocol (SIP) connection, financial information services, data center
services, such as co-location, web hosting, audio conference and domain registration services
• IPTV services (1.88 million customers), virtual PBX, certain Microsoft Office packages (including SaaS), web-
videoconferencing services and sale, rental and technical support for telecommunications equipment
• Pay TV (cable TV) (21,842 customers)
• OTT TV (TVE)
• FMC product services (1,534,131 customers)
• carrier and operator services, including voice, internet and data transmission over our own networks and roaming services
• MPLS-based IP VPN, local, domestic and international private lines, equipment and equipment maintenance (under
interconnection agreements with international global data network operators
• high-speed domestic and international channels to international and Russian operators to sell excess backbone network
capacity
• all major population centers
Coverage
40 regions of Russia (189 cities covered by FTTB network), including FVNO projects (10 cities)
Operations
• operate a number of competitive local exchange carriers that operate fully digital overlay networks in a number of major
Russian cities
• FTTB and FMC
• large multinational corporate groups
• government clients
• SMEs
• high-end residential buildings in major cities
Customers
27
Distribution
We utilize a direct sales force in Moscow, operating both with fixed-line and mobile corporate customers and supported
by specialists in technical sales support, marketing, customer service and end-user training. In addition, we employ a team of
regional sales managers and a dedicated sales force in each of our regional branch offices, as well as having sales incentive
plans with our regional partners.
Competition
Our fixed-line telecommunications business marketed as “Beeline Business” faces significant competition from other
service providers and competes principally on the basis of convergent services and bundles, installation time, network quality,
geographical network reach, customer service, range of services offered and price. The table below presents our competitors in
the voice services, data services and fixed-line broadband markets in Russia.
• Rostelecom
• Rostelecom
Voice Services
• TransTelecom
Data Services
• TransTelecom
Fixed-line Broadband
• Rostelecom
• MTS and its subsidiaries
• Akado
• ER-Telecom
• OJSC “Multiregional TransitTelecom”
• MegaFon
• NetbyNet
In terms of end-user internet penetration, the consumer internet access business in Russia is saturated and end-user
internet penetration is high. Competition for customers in Russia is intense, with internet providers utilizing new marketing efforts
(for example, aggressive price promotions) in order to retain existing customers and attract new ones. We expect competition to
increase in the future due to wider market penetration, consolidation of the industry, the growth of current operators and the
appearance of new technologies, products and services.
28
Licenses
The table below presents a description of business licenses relevant to our fixed-line business in Russia and which
expire in 2021. Unless noted otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
Local Communications Services
Leased
Services
Communications
Circuits
Local Communication Services
Intra-zone Communication Services
Telematic Services
License
Moscow
Yekaterinburg
Khabarovsk
Krasnodar
St. Petersburg
Moscow
Nizhny Novgorod
Khabarovsk
Novosibirsk
Rostov
Krasnodar
Moscow
St. Petersburg
Krasnodar
Moscow
St. Petersburg
Yekaterinburg
Nizhny Novgorod
Khabarovsk
Novosibirsk
Rostov
Krasnodar
Yekaterinburg
Nizhny Novgorod
Khabarovsk
Novosibirsk
Rostov
Moscow
Expiration
August 30, 2021
February 16, 2026
October 31, 2021
October 1, 2021
June 8, 2021; July 5, 2021; October 4, 2021
July 5, 2021; November 9, 2021
July 5, 2021
July 5, 2021
July 5, 2021
July 5, 2021
July 5, 2021
September 21, 2021
September 21, 2021
February 16, 2026, December 12, 2021
October 24, 2021
October 24, 2021
February 16, 2026
February 16, 2026
February 16, 2026
February 16, 2026
February 16, 2026
May 06, 2021; September 14, 2021; November 17, 2021
May 6, 2021
May 6, 2021
May 6, 2021
May 6, 2021
May 6, 2021
April 26, 2021; May 06, 2021; November 21, 2021
Data Transmission Services License
St. Petersburg
May 06, 2021; November 21, 2021
Krasnodar
Moscow
September 14, 2021
March 15 2026; April 26, 2026
Communications Services for the Purposes Krasnodar
August 27, 2021
29
Fixed-line Business in Pakistan
The table below presents a description of the fixed-line telecommunications services we offer in Pakistan.
Services
• data, voice and VAS services over a wide range of access media, covering more than 225 locations, including all the major
• data services being provided to the enterprise customers include: dedicated internet access, VPN (virtual private networking),
cities
leased lines & fixed telephony
• domestic and international leased lines, domestic and international MPLS, and IP transit services through our access
network1
• high-speed internet access (including fiber optic lines)
• telephony
• telephone communication services, based on modern digital fiber optic network
• dedicated lines of data transmission
• dedicated line access and fixed-line mobile convergence
Coverage
• wired and wireless access services include FTTx, PMP (point to multipoint), point-to-point radios, VSAT and Microwave links
connecting more than 225 locations across Pakistan
• long-haul fiber optic network covers more than 10,000 kilometers and, supplemented by wired and wireless networks
Customers
Operations
• enterprise customers
• domestic and international carriers
• corporate and individual business customers
Distribution
We utilize a direct sales force in Pakistan for enterprise customers. This dedicated sales force has three channels
dedicated to SMEs, large/key accounts and business-to-government. These channels are led by individual channel heads who
further employ a team of regional sales managers in different regions, which are further supported by a sales force, including
team leads and key account managers. There is also a centralized telesales executive team led by a manager who upsells through targeted
campaigns.
Competition
In Pakistan, our fixed-line business faces significant competition from other providers of fixed-line corporate services,
carrier and operator services and consumer internet services. The table below presents our competitors in the internet services,
carrier and operator services and fixed-line broadband markets in Pakistan.
• PTCL
• Wateen
• PTCL
• Wateen
Internet Services
• Transworld
• Cybernet
Carrier and Operator Services
• Transworld
• Telenor Pakistan
Fixed-line Broadband
• Pakistan Telecommunication Company
Limited, or “PTCL”
• Multinet
• Wateen
• Cybernet
• Nexlinx
• Nayatel
• World Call
• Multinet
• World Call
• Supernet
30
Licenses
The table below presents a description of business licenses relevant to our fixed-line business in Pakistan. Unless
noted otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
License
Expiration
Long Distance & International (“LDI”)
Nationwide and International
Local Loop (“LL”) (fixed line and/or
wireless local loop with limited mobility)
Regional
Telecom Tower Provider (“TTP”)
Nationwide
2024
2024
2032
Fixed-line Business in Ukraine
The table below presents a description of the fixed-line telecommunications services we offer in Ukraine.
Services
• data
• broadband services
• corporate internet access
• Fixed-line: VPN services, data center, contact center, voice, fixed-line telephony and a number of VAS
• Internet access services: ADSL, symmetrical and Ethernet interfaces at speeds ranging from 256 kilobytes per second to 10
gigabytes per second
• FMC
• FTTB services tariffs for fixed-line broadband internet access targeted at different customer segments
Coverage
• provided services in 125 cities in Ukraine (excluding cities in Crimea and the ATO zone)
• engaged in a project to install FTTB for fixed-line broadband services in approximately 42,779 residential buildings in 125
cities, providing over 59,288 access points
Our joint carrier and operator services division in Ukraine provides local, international and intercity long- distance voice
traffic transmission services to Ukrainian fixed-line and mobile operators on the basis of our proprietary domestic long-distance/
ILD network, as well as IP transit and data transmission services through our own domestic and international fiber optic
backbone and IP/MPLS data transmission network. We derive most of our carrier and operator services revenue in Ukraine from
voice call termination services to our own mobile network and voice transit to other local and international destinations.
Distribution
Our company emphasizes high customer service quality and reliability for its corporate large accounts while at the same
time focusing on the development of its SME offerings. We sell to corporate customers through a direct sales force and various
alternative distribution channels such as IT servicing organizations and business center owners, and to SME customers through
dealerships, direct sales, own retail and agent networks. We use a customized pricing model for large accounts which includes
service or tariff discounts, volume discounts, progressive discount schemes and volume lock pricing. We use standardized and
campaign-based pricing for SME customers. Our residential marketing strategy is focused on attracting new customers. We offer
several tariff plans, each one targeted at a different type of customer.
Competition
There is a high level of competition with more than 2000 internet service providers in Ukraine. According to NCCIR, the
National Regulatory Authority, as of September 30, 2020, Kyivstar leads the fixed broadband market with 1.1 million customers,
which corresponds to 15.3% market share.
31
• Ukrtelecom
• Data Group
• Farlep-Invest (Vega)
Voice Services(1), Data Services(2) and Voice Services
• Ukrtelecom
• Volia
Top 5 ISPs (market share)(3)
Retail Internet Services
•
•
Kyivstar (15.3%)
Freenet (2.1%)
•
•
Ukrtelecom (14.8%)
Data Group (2.1%)
(1) Voice services market for business customers only.
(2) Data services for corporate market only.
(3) Source: National Regulatory Authority - NCCIR
Licenses
•
Volia (9.4%)
Following recent legislative changes, including the changes to the Law “On Telecommunications” made in 2019 by the
Ukrainian Parliament, state licensing of fixed-line telecommunications services is now abolished. Accordingly, our fixed-line
business in Ukraine no longer requires licensing in order to operate. Licensing of radio frequency resource (RFR) use remains
unchanged.
Fixed-line Business in Uzbekistan
The table below presents a description of the fixed-line telecommunications services we offer in Uzbekistan.
Services(1)
• fixed-line services, such as network access
• internet and hardware and software solutions, including configuration and maintenance
• high-speed internet access (including fiber optic lines and xDSL)
• telephony
• long distance and international long-distance telephony on prepaid cards
• telephone communication services, through our copper cable network and our modern digital fiber optic network
• dedicated lines of data transmission
• dedicated line access and fixed-line mobile convergence
Distribution
One of our priorities in Uzbekistan is the development of information and communications technology, which supports
economic development in Uzbekistan. Our strategy includes maintaining our current market position by retaining our large
corporate client customer base.
Competition
There is a high level of competition in the capital city of Tashkent, but the fixed-line internet market in most of the other
regions remains undeveloped. The table below presents our competitors in the fixed-line services market in Uzbekistan.
Fixed-line Services
• Uztelecom
• East Telecom
• Sarkor Telecom
Licenses
• Sharq Telecom
• TPS
• EVO
The table below presents a description of business licenses relevant to our fixed-line business in Uzbekistan. Unless
noted otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
Fixed-line
Data
Long-distance
International
Expiration
2021
2021
2029
2029
License
Nationwide
Nationwide
Nationwide
Nationwide
32
Fixed-line Business in Kazakhstan
The table below presents a description of the fixed-line telecommunications services we offer in Kazakhstan.
Services
• high-speed internet access
• local, long distance and international voice services over IP
• local, intercity and international leased channels and IP VPN services
• cloud services, BeeTV, Internet of things (IoT)
• integrated corporate networks (including integrated network voice, data and other services)
• FMC product, including mobile bundles and video content from Amediateka and IVI, and additional sim-cards for family
• ADSL, FTTB, Wi-Fi, WiMax, VSAT, GPON, WTTX
Distribution
We are focusing on customer base and revenue growth, which we aim to promote by expanding our transport
infrastructure, developing unique products, strengthening our position in the market and enhancing our sales efforts and data
services, and Fixed Virtual Network Operator (FVNO) activity.
Competition
The table below presents our competitors in the fixed-line telecommunications services market in Kazakhstan.
Internet, Data Transmission and Traffic Termination Services
• Kazakhtelecom
• KazTransCom
• Alma TV
Licenses
• TransTelecom (owned by Kazakhstan Temir Zholy, the
national railway company)
• Astel (a leader in the provision of satellite services)
The table below presents a description of business licenses relevant to our fixed-line business in Kazakhstan. Unless
noted otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
Long-distance and International Nationwide
License
Expiration
Unlimited
33
Regulatory
The voice, data and connectivity services we provide may also expose us to sanctions and embargo laws and
regulations of the United States, the United Nations, the European Union, the United Kingdom and the jurisdictions in which we
operate. In addition, as a global telecommunications company, we have roaming and interconnect arrangements with mobile
and fixed-line operators located in the majority of countries throughout the world, including in countries that are the target of
certain sanctions restrictions. For a discussion of the sanctions regimes we are subject to, including the risks related to such
exposure, see Item 3.D. Risk Factors - Geopolitical Risks - " Violations of and changes to applicable sanctions and embargo
laws may harm our business”.
Seasonality
Our mobile telecommunications business is subject to certain seasonal effects. Generally, revenue from our contract
and prepaid tariff plans tends to increase during the December holiday season, and then decrease in January and February.
Mobile revenue is also higher in the summer months, when roaming revenue increases significantly as customers tend to travel
more during these months. Guest roaming revenue on our networks also tends to increase in the summer period.
Our fixed-line telecommunications business is also subject to certain seasonal effects. Among the influencing factors is
the number of working days in a given period, as well as periods of vacations. Generally, our revenue from our fixed-line
telecommunications business is lower when there are fewer working days in a period or a greater number of customers are on
vacation, such as during the December holiday season and in the summer months.
In 2020, these trends were less pronounced due to the outbreak of COVID-19 and the associated lockdown restrictions
imposed by governments across the world. Roaming revenues were significantly lower as compared to normal years, while we
saw a pick-up in usage of our fixed-line services due to work-from-home conditions and travel restrictions. However, going
forward we expect the seasonal trends described above to continue.
Information Technology
We devote considerable resources to the maintenance, development and improvement of our IT systems. As part of our
continuous IT innovation process, we engage with third parties in order to develop and implement IT technologies across our
infrastructure. In June 2016 in partnership with Ericsson, we entered into a technology infrastructure agreement which was
subsequently amended in July 2017 and February 2019. Under the current agreement, which reflects a reduction in scope from
the prior agreements, Ericsson will upgrade our core IT systems with new digital business support systems (DBSS) using
software from Ericsson and will manage the new systems under the managed services agreement. The new Ericsson DBSS
system has already been launched in four of our operations: Georgia, Algeria, Kyrgyzstan and Bangladesh.
We are also in the process of implementing our cyber security strategy, which we believe will enable us to better identify
potential threats that may impact our business and, consequently, may aid us in the implementation of the required security
measures to address such threats.
Intellectual Property
We rely on a combination of trademarks, service marks and domain name registrations, copyright protection and
contractual restrictions to establish and protect our technologies, brand name, logos, marketing designs and internet domain
names. We have registered and applied to register certain trademarks and service marks in connection with our
telecommunications and digital businesses in accordance with the laws of our operating companies. Our registered trademarks
and service marks include our brand name, logos and certain advertising features. Our copyrights and know-how are principally
in the area of computer software for service applications developed in connection with our mobile and fixed-line network platform,
our internet platforms and non-connectivity service offerings and for the language and designs we use in marketing and
advertising our communication services. For a discussion of the risks associated with new technology, see Risk Factors —
Operational Risks — “Our intellectual property rights are costly and difficult to protect, and we cannot guarantee that the steps
we have taken to protect our intellectual property rights will be adequate” and — Regulatory, Compliance and Legal Risks —
“New intellectual property laws or regulations may require us to invest substantial resources in compliance or may be unclear.”
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Property, Plants and Equipment
Buildings
The buildings housing our offices in Amsterdam and London are leased. Our global headquarters activities are hosted in
Amsterdam, and we have subleased a portion of our Amsterdam office as of February 2020. Our London office at 15 Bonhill
Street has been fully subleased since January 2019, and our London-based staff now utilize a space located at 13 Hannover
Square, London W1S 1HN. Our subsidiaries, including those in Russia, Pakistan, and Ukraine, both own and lease property
used for a variety of functions, including administrative offices, technical centers, data centers, warehouses, operating facilities,
main switches for our networks and IT centers. We also own office buildings in some of our regional license areas and lease
space on an as-needed basis.
Telecommunications Equipment and Operations
The primary elements of our material tangible fixed assets are our networks.
Mobile network infrastructure
Our mobile networks, which use mainly Ericsson, ZTE, Huawei, Nokia, and Cisco equipment, are integrated wireless
networks of radio base station equipment, circuit and packet core equipment and digital wireless switches connected by fixed
microwave transmission links, fiber optic cable links and leased lines. We select suppliers based mainly on compliance with
technical and functional requirements and total cost.
We enter into agreements for the location of base stations in the form of either leases or cooperation agreements that
provide us with the use of certain spaces for our base stations and equipment. Under these leases or cooperation agreements,
we typically have the right to use such property to place our towers and equipment shelters. We are also party to certain network
managed services agreements to maintain our networks and infrastructure.
We also enter into agreements with other operators for radio network sharing, where we either share the passive
equipment, physical site and towers or combine the operation of the radio equipment with other operators. Network sharing
brings not only substantial savings on site rentals and maintenance costs but also on investments in equipment for the rollout of
new base stations. In Russia, we have agreements with MTS and MegaFon in different regions and for different technology
combinations, respectively.
Fixed-lined infrastructure
Our infrastructure in Russia, Pakistan, Ukraine, Uzbekistan and Kazakhstan, where we provide fixed-line services,
supports our mobile businesses as well as our fixed-line businesses. Our infrastructure in these markets include: a transport
network designed and continually developed to carry voice, data and internet traffic of mobile network, FTTB and our fixed-line
customers using fiber optics and microwave links; and a transport network based on our optical cable network utilizing DWDM,
SDH and IP/MPLS equipment with all DWDM and SDH optical networks being fully ring-protected (except for secondary towns).
For more information on our property, plants and equipment, see Note 11 — Property and Equipment to our Audited
Consolidated Financial Statements.
35
Corporate Social Responsibility
The Group Chief Strategy Officer oversees the corporate responsibility program and function, and the corporate
responsibility team confers with our management in connection with executing its duties.
We have a long-term corporate responsibility strategy, consisting of two main elements: maintaining the trust of our
stakeholders by behaving in a responsible and sustainable manner, reflected in our “license to operate” initiatives, and by
creating shared value in our communities through our products and services, reflected in our “license to grow” initiatives. We are
committed to investing in the markets in which we operate and continue to seek opportunities to leverage our technology,
commercial expertise and the commitment of our employees for the betterment of our communities.
Our group Sustainability Report and group Integrated Annual Report meet Global Reporting Initiative standards at the
“core” level, follow the guidance in the AA1000 Accountability Principles Standard and are influenced by International Integrated
Reporting Council guidance.
The group Sustainability Report and the group Integrated Annual Report have obtained a “limited” level of assurance in various
“subject matters” to meet the requirements of the International Standard on Assurance Engagements (ISAE) 3000 (revised). For
the AA1000 Principles, our assurance engagement was planned and performed to meet the requirements of a Type 1 “moderate
level” of assurance as defined by AA1000 Assurance Standard (AA1000AS) 2008.
As part of our reporting cycle, we assess the effectiveness of our corporate responsibility strategy and revise it when
needed.
Our approach to the identification, management and evaluation of corporate responsibility is guided by three main
principles:
•
Stakeholders: By engaging with our stakeholders, we understand their concerns and expectations, and we follow a
number of stakeholder-defined standards and guidelines;
• Materiality: Using pre-defined criteria, we prioritize by assessing individual opportunities against our strategy and their
importance to our stakeholders; and
•
Accountability: We are accountable to our stakeholders through the publication of our Integrated Annual Report. We
also share periodic updates with internal stakeholders, including members of management, to inform them about key
corporate responsibility-related developments and our corporate responsibility performance.
In November 2019, we were recognized as among the most transparent companies in the Netherlands by the Dutch
Transparency Benchmark (Transparantiebenchmark). More than 480 of the largest companies in the Netherlands were assessed
for the Dutch Transparency Benchmark by the Dutch Ministry of Economic Affairs and Climate Policy, and VEON improved its
ranking from 449 in 2011 to 32 in 2019. Furthermore, among technology-focused companies in the Netherlands, VEON ranked
fourth.
We are committed to mitigating the Group’s carbon footprint and the rollout network energy-efficiency measures, which
will contribute to a low-carbon economy, as well as offer us the potential to reduce our operating costs over time. We continue to
upgrade existing diesel- and petrol-powered units with more energy-efficient, hybrid and renewable-energy-powered network
equipment and, where practical, increase the number of Base Transceiver Stations (BTS) situated outside to reduce the energy
use involved in keeping them cool. In some markets we share tower capacity with other operators, which has had a direct
positive impact on our energy consumption and our environmental footprint. We keep abreast of local environmental legislation
and strive to reduce the environmental impact of our operations through responsible use of natural resources and by reducing
waste and emissions.
VEON’s carbon dioxide (CO2) emissions decreased from 0.24 tonnes per terabyte in 2019 to 0.1 tonnes in 2020, a 58%
decrease. The decrease was largely a result of a significant increase in data traffic carried across our networks during 2020 due
to COVID-19 lockdowns, with the increased data load requiring a lesser increase in energy.
Our operating companies continued to developing innovative solutions to reduce energy intensity, such as powering
telephone exchange stations on solar energy, installing state-of the-art on-grid photovoltaic systems and carrying out trainings on
renewable energy solutions to ensure stakeholders are aware of its carbon- and cost-saving benefits. Across our organization,
we continued working on reducing the carbon footprint of our offices, with initiatives ranging from switching to LED lighting.
36
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
As of March 1, 2021, our directors, their respective ages, positions, dates of appointment and assessment of
independence were as follows:
Name
Age
Position
First Appointed
Independent
Gennady Gazin
Hans Holger Albrecht
Osama Bedier
Leonid Boguslavsky
Peter Derby
Mikhail M. Fridman
Amos Genish
Yaroslav Glazunov
Andrei Gusev
Gunnar Holt
Robert Jan van de Kraats
Alexander Pertsovsky
Steve Pusey
56
57
45
69
60
56
60
41
48
66
60
52
59
Chairman of Board of Directors
2020 (as Chairman);
2015 (as member)
Director
Director
Director
Director
Director
Director
Alternate Director (Alexander Pertsovsky)
Director
Director
Director
Director
Director
2020
2018
2021
2020
2010
2020
2020
2014
2015
2018
2018
2020
x
x
x
x
x
x
x
x
x
The board of directors consists of twelve members, nine of whom we deem to be independent. In analyzing
the independence of the members of the board of directors for this purpose, we are guided by the NASDAQ listing rules, the
rules promulgated by the SEC and the Dutch Corporate Governance Code, as if those rules applied to us.
All members of the board of directors are elected by our shareholders through a cumulative voting process.
Nominations to the board of directors are managed by its nominating and corporate governance committee, which is led by Peter
Derby, whom we deem to be an independent member of the board of directors. The nominating and corporate governance
committee looks to ensure that the membership of the board of directors consists of individuals with sufficiently diverse and
independent backgrounds. All members of the board of directors possess relevant industry experience and have additionally
been selected to provide the requisite experience required of the committees of our board of directors.
The members of our current board of directors, with the exception of Mr. Glazunov and Mr. Boguslavsky, were elected
at the June 1, 2020 annual general meeting of shareholders in accordance with our bye-laws. Mr. Glazunov was appointed as
an alternate director for Alexander Pertsovsky on October 27, 2020. Mr. Boguslavsky was appointed as a director on January 15,
2021 to fill the casual vacancy created when Mariano de Beer stepped down in December 2020. All members of our board of
directors, including Mr. Glazunov and Mr. Boguslavsky, will serve until the next annual general meeting, unless any members are
removed from office or their offices are vacated in accordance with our bye-laws. Alternate directors will be summoned to act as
regular directors in a temporary or permanent manner in case of absence, vacancy or demise.
On July 30, 2018, we amended and restated our bye-laws to, among other things, eliminate our two-tier board structure.
As a result, we have a board of directors and a management advisory committee known as the group executive committee.
Our bye-laws empower the board of directors to direct the management of the business and affairs of the group, and
require that the board of directors approves important matters including, among others, the annual budget and audited accounts,
organizational or reporting changes to the management structure, significant transactions and changes to share capital or other
significant actions. Additionally, under Bermuda law, the board of directors has the right to require that any matter come to the
board of directors for approval and any member of the board of directors may bring forward an item for the agenda of the board
of directors, which helps to ensure that the board of directors provides appropriate oversight over group matters.
The group executive committee is currently comprised of VEON Ltd.’s co-Chief Executive Officers, Group Chief
Financial Officer, Group General Counsel, Group Chief Internal Audit & Compliance Officer, and the Chief Strategy Officer. The
group executive committee is focused on the management of the business affairs of VEON Ltd. and its subsidiaries as a whole,
including execution of the group’s competitive strategy, driving financial performance and overseeing and coordinating group-
wide initiatives. On an annual basis, our group executive committee, audit and risk committee and board of directors define our
risk profile for the categories of risk we encounter in operating our business, which are then integrated into our business through
global policies and procedures.
37
As of March 1, 2021, the members of our group executive committee, their respective ages, positions and dates of
appointment were as follows:
Name
Kaan Terzioğlu
Sergi Herrero
Serkan Okandan
Scott Dresser
Alex Kazbegi(1)
Joop Brakenhoff
Age
52
38
50
53
58
55
Position
First Appointed
Group Chief Executive Officer
March 2020 (as co-CEO)
Group Chief Executive Officer
March 2020 (as co-CEO)
Group Chief Financial Officer
May 2020
Group General Counsel
Group Chief Strategy Officer
Group Chief Internal Audit &
Compliance Officer
September 2014
February 2019
July 2020
(1) Alex Kazbegi will be stepping down from his role as Group Chief Strategy Officer effective March 31, 2021. His replacement
will be announced in due course.
Board of Directors
Gennady Gazin (Chairman of Board of Directors) has served as the Chairman of the VEON Ltd. Board of directors
since June 2020 and a director of the company since June 2015 and we deem Mr. Gazin to be an independent director. Mr.
Gazin is a member of VEON Ltd.’s nominating and corporate governance committee and its finance committee. Mr. Gazin has
served as an Affiliate Partner at Lindsay Goldberg, a New York based private equity firm, since 2015; Chairman of the Board at
Genesis Philanthropy Group since 2014; and a member of the advisory board of LetterOne Technology LLP since 2015 and DVO
Private Equity since 2018. From 2007 to 2012, Mr. Gazin served as CEO of EastOne, an international investment advisory
group. Prior to EastOne, Mr. Gazin worked at McKinsey & Company’s New York and Moscow offices for 14 years, during which
time he was an active member of the Telecommunications practice and also served as the Senior Partner responsible for
McKinsey’s CIS practice. Mr. Gazin started his professional career as a systems and telecommunications engineer at Bell
Communications Research/Tellcordia and General Dynamics in the USA. Mr. Gazin received a bachelor’s degree in Electrical
Engineering from Cornell University in 1987, a master’s degree in Electrical Engineering from Stanford University in 1988 and an
M.B.A. from the Wharton School of Business at the University of Pennsylvania in 1993.
Hans Holger Albrecht (Director) has been a director of VEON Ltd. since June 2020 and we deem Mr. Albrecht to be an
independent director. Mr. Albrecht is a member of VEON Ltd.’s compensation and talent committee and digital committee. He
has served as the Chairman of the supervisory board of Scout24 AG, a publicly listed operator of online marketplaces in several
industries, since 2018. In addition, Mr. Albrecht has served as a member of the boards of directors of Norwegian mobile network
operator Ice Group AS since 2015 and German cable provider Tele Columbus AG since 2019. Mr. Albrecht has also served as a
member of the digital advisory board of German retail bank Deutsche Postbank since 2016. Mr. Albrecht has been the Chief
Executive Officer of Deezer Group since 2015, a French online music streaming service. Mr. Albrecht was the President and
Chief Executive Officer of Millicom International Cellular S.A., a telecom and media group offering digital services to over 50
million customers in Africa and Latin America, from 2012-2015, and Modern Times Group MTG AB, a publicly traded Swedish
digital entertainment company, from 1998 to 2012. Mr. Albrecht holds a doctorate from Ruhr-Universitat Bochum in Germany and
a master of law from the University of Freiburg.
Osama Bedier (Director) has been a director of VEON Ltd. since July 2018 and we deem Mr. Bedier to be an
independent director. Mr. Bedier is a member of VEON Ltd.’s digital committee. Mr. Bedier is the founder of Poynt, a credit card
processing terminal developed and marketed for small businesses, which was acquired by GoDaddy in February 2021. Mr.
Bedier now leads the Commerce Division of GoDaddy. Mr. Bedier also serves on the Board of RS2. Prior to founding Poynt, Mr.
Bedier served as the Vice President of Payments at Google from 2011 to 2013, where he created Google Wallet. Prior to
Google, Mr. Bedier spent nine years running product and engineering at PayPal. He has also held engineering leadership roles
at eBay, Gateway Computers and AT&T Wireless.
Leonid Boguslavsky (Director) has been a director of VEON Ltd. since January 2021 and we deem Mr. Boguslavsky
to be an independent director. Mr. Boguslavsky is a member of VEON Ltd.’s digital committee. Mr. Boguslavsky is an
entrepreneur, scientist and venture capitalist and founder of RTP Global (formerly known as ru-Net), which since 2000 has
focused on investments in early-stage start-ups across the globe. He was a managing partner at PricewaterhouseCoopers
(PwC) from 1997 to 2001. Mr. Boguslavsky has served as a Member of the Board of Directors of JSC “AC Rus Media” since
2019; Member of the Board of Directors of Sberbank PJSC since 2017; Member of the Board of Directors of Super League
Holdings Pte. LTD (Singapore) since 2016; and Chairman of the Board of Ivi.ru LLC since 2012. Mr. Boguslavsky graduated
from the Moscow Institute of Transport Engineering (MIIT) in 1973, majoring in Computer Science and Applied Mathematics.
Peter Derby (Director) has been a director of VEON Ltd. since June 2020 and we deem Mr. Derby to be an
independent director. Mr. Derby is serving as the chairman of VEON Ltd.’s nominating and corporate governance committee and
as a member of the audit and risk committee. He currently serves as Managing Partner of investment management company,
Concinnity Advisors LP, which he founded in 2007. From 2018 to 2011, Mr. Derby was a portfolio manager at Diamondback
Advisors NY, LLC. From 2003 to 2005, Mr. Derby served as the Managing Executive for Operations and Management for the
U.S. SEC. In 1989, he participated in the founding of DialogBank, the first private Russian bank to receive an international
banking license, where he served as Chairman of the Board from 1997 to 1998 and as President and CEO from 1991 to 1997.
38
Mr. Derby also founded the first Russian investment firm in 1991, Troika Dialog. He began his career in banking and finance with
roles at Chase Manhattan Bank and later at National Westminster Bank. Mr. Derby received a bachelor’s degree in accounting,
finance and international finance from New York University in 1983.
Mikhail M. Fridman (Director) has been a director of VEON Ltd. since April 2010 and we deem Mr. Fridman to be a
non-independent director. Mr. Fridman was a member of the board of directors of OJSC VimpelCom from July 2001 until April
2010. He currently serves as the Chairman of the Supervisory Board of the Alfa Group Consortium and a member of the board of
directors of JSC Alfa-Bank since 1994, ABH Holdings S.A. since 2015, LetterOne Holdings SA since 2013, LetterOne Investment
Holdings SA since 2015 and LetterOne Core Investments SARL since 2019. Mr. Fridman also has served as a member of the
Supervisory Board of X5 RETAIL GROUP N.V. since 2006. He is a member of the Public Chamber of the Russian Federation.
From 1986 until 1988, Mr. Fridman served as an engineer at Elektrostal Metallurgical Works. Mr. Fridman graduated with honors
from the Faculty of Non-Ferrous Metals of the Moscow Institute of Steel and Alloys in 1986 and in 1989, together with his
partners, founded the Alfa Group Consortium.
Amos Genish (Director) has served as a director of VEON Ltd. since June 2020 and we deem Mr. Genish to be an
independent director. Mr. Genish is serving as chairman of VEON Ltd.’s telecommunications committee and is a member of its
digital committee. currently serves on the board of representatives of music video and entertainment services distributor VEVO
LLC, and has served as Chairman of the Board of Israeli on-demand mobility company Gett since 2019. He has also served as
the Senior Partner and the Head of Digital Retail at Brazilian investment bank BTG Pactual since 2019. Previously, Mr. Genish
served on the board of directors of the Brazilian publicly listed bank Itau Unibanco Holding S.A. from 2017 to 2019. Mr. Genish
also served as the Chief Executive Officer of Telecom Italia from 2017 to 2018, the Chief Convergence Officer of French mass
media conglomerate Vivendi in 2017, and the Chief Executive Officer of the Vivo division of telecommunications group Telefonica
Brasil from 2015 to 2016. Mr. Genish co-founded and served as the Chief Executive Officer of Brazilian telecommunications
company Global Village Telecom from 1999 to 2015. He started his career at KPMG in Israel. Mr. Genish received a bachelor’s
degree in accounting and economics from Tel Aviv University in 1986.
Yaroslav Glazunov (Alternate Director for Alexander Pertsovsky) has been a director of VEON Ltd. since October 2020
and we deem Mr. Glazunov to be a non-independent director. Mr. Glazunov is serving as chairman of VEON Ltd.’s
compensation and talent committee and is a member of its nominating and corporate governance committee. Mr. Glazunov
joined Korn Ferry in January 2021 as a senior client partner. Prior to joining Korn Ferry, Mr. Glazunov was a managing partner at
Spencer Stuart International and a partner at Heidrick & Struggles in Moscow. Mr. Glazunov has been in the leadership advisory
global business for 20 years focusing on CEO succession, efficiency and performance and has worked with corporate boards
and founders of companies in Europe, India and Russia. He holds a master's degree in management from Plekhanov University.
He previously completed a leadership program at INSEAD in Fontainebleau, France, and an executive program at Singularity
University in Silicon Valley, California.
Andrei Gusev (Director) has been a director of VEON Ltd. since April 2014 and we deem Mr. Gusev to be a non-
independent director. Mr. Gusev is serving as chairman of VEON Ltd.’s finance committee and as a member of its nominating
and corporate governance committee. Mr. Gusev is a senior partner at LetterOne Technology (UK) LLP, joining in 2014, and was
a managing director at Altimo from 2013 to 2014. Mr. Gusev was Chief Executive Officer of X5 Retail Group N.V. from 2011 to
2012 and prior to that, from 2006 to 2010, served as its Director of Business Development and M&A. From 2001 to 2005, Mr.
Gusev served as Managing Director of the Alfa Group with overall responsibility for investment planning. Prior to that, Mr. Gusev
worked at Bain & Company and Deloitte Consulting. Mr. Gusev received an M.B.A. from the Wharton School at the University of
Pennsylvania in 2000 and a diploma with honors from the Department of Applied Mathematics and Computer Science at
Lomonosov Moscow State University in 1994.
Gunnar Holt (Director) has been a director of VEON Ltd. since June 2015 and we deem Mr. Holt to be an independent
director. Mr. Holt is serving as a member of VEON Ltd.’s audit and risk committee, finance committee and compensation and
talent committee. Mr. Holt was a Senior Advisor at Telenor ASA from 2006 to 2017 and previously served as Group Finance
Director. From 1995 to 1999, he worked at Aker ASA and Aker RGI ASA, serving as Executive Vice President and CFO. From
1986 to 1995, he held various leadership positions in the Aker Group, including Deputy President of Norwegian Contractors AS,
Executive Vice President and Chief Financial Officer of Aker Oil and Gas Technology AS, President of Aker Eiendom AS, and
Finance and Accounting Director of Aker Norcem AS. From 1978 to 1986, he served as Executive Officer and Special Advisor in
the Norwegian Ministry of Petroleum and Energy. Mr. Holt holds a Doctor of Business Administration degree and Advanced
Postgraduate Diploma in Management Consultancy from Henley Management College, Brunel University, in the United Kingdom;
an M.B.A. from the University of Queensland in Australia, and an M.B.A. in finance from the University of Wisconsin. He also
received a Diplomøkonom from The Norwegian School of Management. Mr. Holt has served on a number of corporate boards.
39
Mr. Robert Jan van de Kraats (Director) RA (Chartered Accountant) has been a director of VEON Ltd. since July 2018
and we deem Mr. Jan van de Kraats to be an independent director. On February 16, 2021, Mr. Jan van de Kraats was appointed
as director liaison for matters related to investor relations. He serves as the chairman of VEON Ltd.’s audit and risk committee.
He was appointed as Chairman of the Board of TMF Group, a global provider of payroll, accounting, corporate secretarial and
alternative investment services earlier this year. He has served as a non-executive director / supervisory board director with
Royal Schiphol NV, an aviation company majority held by the Dutch state, since 2015 and OCI NV, a fertilizer and chemicals
company, since 2014. In addition, he has served as an advisor to the Dutch Authority for the Financial Markets (AFM) and
privately held retailer SuitSupply. He previously served as the Chief Financial Officer and a member of the Executive Board of
Randstad Holding NV from 2001 to 2018, serving as the Vice Chairman of the Executive Board from 2006 to 2018, and was
responsible for finance, information technology, shared service centers, merger and investor relations business functions. During
his tenure at Randstad he also served as COO and was operationally responsible for businesses located in Japan, India, China,
Nordics, Argentina and Chile. He also previously served as a member of the Commission on Dutch Corporate Governance from
2013 to 2017, which designed a new corporate governance code for the Netherlands. He was a member of the supervisory
boards of bank and insurance provider SNS Reaal from 2006 to 2013, financial services provider SRLEV NV, and information
and telecommunication services provider Ordina NV from 2004 to 2012. In addition, he served on the management board of
Dutch credit insurance company NCM Holding NV (now Atradius) from 1999 to 2001 as Chief Financial Officer and Chief
Operating Officer for a business line. He began his career in 1979 with Deloitte Dijker van Dien (now part of PwC). In 2007, he
founded the Barcode for Life Foundation, an organization that supports research into DNA analysis in order to improve the
treatment of cancer.
Mr. Alexander Pertsovsky (Director) has been a director of VEON Ltd. since July 2018 and we deem Mr. Pertsovsky
to be a non-independent director. Mr. Pertsovsky is serving as a member of VEON Ltd.’s compensation and talent committee. Mr.
Pertsovsky joined LetterOne Technology in London on January 1, 2018 from Bank of America Merrill Lynch, where he serves as
Vice Chairman since November 2020 and served as Managing Partner until October 2020. At Bank of America Merrill Lynch, Mr.
Pertsovsky served as the Country Executive for Russia & CIS since February 2013. Prior to that, Mr. Pertsovsky was at
Renaissance Capital, which he joined in 2002 and oversaw the institutional securities business and our activities in Russia. He
became Chief Executive Officer of Renaissance Capital in 2007. Mr. Pertsovsky holds an MS degree in Applied Mathematics
from the Moscow Institute of Radio, Engineering and Automation. He also received an M.B.A. from Columbia University in 2002.
Steve Pusey (Director) has been a director of VEON Ltd. since June 2020 and we deem Mr. Pusey to be an
independent director. He serves as a member of VEON Ltd.’s telecommunications committee. Mr. Pusey has served on the
boards of directors of publicly listed British multinational energy and services company Centrica PLC and publicly listed US
cybersecurity company FireEye, Inc. since 2015. In addition, Mr. Pusey has also served on the board of directors of digital
product engineering services provider GlobalLogic, Inc, since 2016, Accedian Networks, Inc., a US developer of network
communication and application monitoring software and hardware, since 2017 and Canadian middleware manufacturer Solace
Systems, Inc. since 2018. Mr. Pusey has served as a senior adviser to Bridge Growth Partners, an American private equity fund
that invests in technology and financial services companies, since 2017. Mr. Pusey previously served on the board of directors of
British global semiconductor and software design company ARM Holdings PLC from 2015 to 2016. In addition, Mr. Pusey served
as the Group Chief Technology Officer of Vodafone Group PLC from 2006 to 2015. Mr. Pusey held positions of increasing
seniority at Nortel Networks from 1982 to 2006, culminating in his appointment as President, Europe of Nortel Networks UK Ltd.
in 2005. Mr. Pusey began his career as an apprentice at British Telecom Plc in 1977.
Group executive committee
Kaan Terzioğlu has served as Group co-Chief Executive Officer since March 2020. Previously, he served as a joint
Chief Operating Officer of VEON Ltd. since November 2019, and as a member of the VEON Ltd. Board of Directors from June
2019 until November 2019. Mr. Terzioğlu was Turkcell’s Chief Executive Officer from April 2015 until March 2019. Mr. Terzioğlu
is the recipient of the global 2019 Outstanding Contribution Award to Mobile Industry from the GSMA. He has served as a
member of the Board of Directors of Digicel since July 2019, a Caribbean and Pacific telecommunications operator, since July
2019, and is currently on the board of the GSMA Foundation focusing on “Mobile Communications for Development” as well as
several international institutions and organizations. He served on the GMSA board, the leading international mobile
communication organization, for three consecutive terms and on the advisory board of the World Economic Forum Center for
Fourth Industrial Revolution. Mr. Terzioğlu also served as a board member for “Turkey’s Car” Initiative and was the chairman of
the Mobile Telecommunications Operators Association (m-TOD). From 2012 to 2015, Mr. Terzioğlu served as a member of the
board of directors at Akbank, Aksigorta A.Ş., Teknosa Iç ve Diş Ticaret A.Ş. and Carrefoura A.Ş. From 1999 to 2012, he held
global managerial roles at Cisco offices located in Brussels, London and San Jose. Mr. Terzioğlu began his professional life at
Arthur Andersen Turkey, and later undertook several roles on information technologies at Arthur Andersen from 1990 to 1998 in
the United States, Belgium and Turkey. Mr. Terzioğlu graduated from the Department of Business Administration at Boğaziçi
University.
40
Sergi Herrero has served as Group co-Chief Executive Officer since March 2020. Previously he served as Chief
Operating Officer of VEON Ventures since September 2019. Prior to joining VEON, Mr. Herrero was Facebook’s Global Director
of Payments and Commerce Partnerships where he has overseen the launch and growth of payment and commerce capabilities
for Messenger, WhatsApp and Instagram. He also led the deployment of Charitable Giving, the scaling and optimization of the
Facebook Ads payments business and drove the expansion of the platform's global marketplace. Before joining Facebook in
2014, he held several senior roles in technology, banking and consulting. Mr. Herrero was awarded an MSc in
Telecommunications Management from Spain's Ramon Llull University, in addition to an earlier undergraduate degree in
Electrical Engineering.
Serkan Okandan has served as VEON’s Group Chief Financial Officer since May 2020. Prior to joining VEON, Mr.
Okandan had been Group CFO at the Etisalat Group since 2012, and prior to joining Etisalat Group, was Group CFO at Turkcell.
During his twenty years at the Etisalat Group and Turkcell, telecommunications providers in the Middle East, Eastern Europe,
Asia and Africa, he held senior management and board positions of subsidiaries in Ukraine and Pakistan. Mr. Okandan is a
graduate of the Faculty of Economics and Administrative Sciences at Bosphorus University in Istanbul, Turkey.
Scott Dresser has served as VEON’s General Counsel since September 2014. Prior to joining VEON, Mr. Dresser was
most recently Vice President of Global Strategic Initiatives at BirdLife International, a global conservation organization. Between
2006 and 2012, Mr. Dresser was with Virgin Media in the UK, including serving as General Counsel, where he led its legal
department and acted as principal liaison with Virgin Media’s Board of Directors, as well as being a member of its Executive
Management Team. He also previously held positions in the United States at White Mountains RE Group (which is the operating
company of White Mountains Insurance Group Ltd), in the role of Senior Vice President and Associate General Counsel from
2005 to 2006. From 2002 to 2005, he served as Senior Advisor for Legal and Financial Affairs for the International Global
Conservation Fund (an international environmental conservation organization), and prior to that, he was an attorney at Morgan,
Lewis & Bockius LLP and at Lord Day & Lord, Barrett Smith. Mr. Dresser studied at Vanderbilt University School of Law and
University of New Hampshire. He is currently a member of the Bar in New York and Connecticut where he was admitted in 1993.
Mr. Dresser is on the advisory board of BirdLife International.
Alex Kazbegi has served as VEON’s Chief Strategy Officer of VEON since February 2019. He will be stepping down
from this role effective March 31, 2021. Prior to joining VEON, Mr. Kazbegi was Head of Research and was an equity analyst for
Renaissance Capital since 2002. From 1995 to 2002, Mr. Kazbegi was an equity research analyst for Salomon Brothers (now
Citi). Mr. Kazbegi received an MA from Tbilisi State University, Physics Faculty in 1984, and a PhD in Physics from Tbilisi State
University (in a joint degree program with Moscow State University) in 1993. Mr. Kazbegi obtained an MBA from Tulane
University in 1995.
Joop Brakenhoff Joop Brakenhoff has served as VEON’s Group Chief Internal Audit & Compliance Officer since July
2020. Mr. Brakenhoff joined VEON in January 2019 and, until assuming his current role, served as VEON’s Head of Internal
Audit. Prior to joining VEON, he was head of Global Audit at Heineken International from 2010 to 2018. From 2002 to 2010, Mr.
Brakenhoff held senior audit roles at Royal Ahold, prior to which he was Chief Financial Officer of Burg Industries B.V. Mr.
Brakenhoff started his career at KPMG in 1985 where he worked for nine years in a variety of audit roles. Mr. Brakenhoff is a
graduate of NIVRA Amsterdam and is a certified public accountant (CPA).
41
Compensation
In order to ensure alignment with the long-term interests of the company’s shareholders, the compensation and talent
committee periodically evaluates the compensation of the company’s board of directors directors taking into account the
competitive landscape, the compensation of directors at other comparable companies and recommendations regarding best
practices. Following review by the nominating and corporate governance committee, both the compensation and talent
committee and the nominating and corporate governance committee make recommendations to the board of directors on
compensation of the board of directors.
We incurred remuneration expense in respect of our directors and senior managers in an aggregate amount of
approximately US$40 million for services provided during 2020. For more information regarding our director and senior
management compensation, see Note 21 — Related Parties to our Audited Consolidated Financial Statements.
To stimulate and reward leadership efforts that result in sustainable success, value growth cash-based multi-year
incentive plan (“Incentive Plans”) were designed for members of our recognized leadership community. The participants in the
Incentive Plans may receive cash payouts after the end of each relevant award performance period.
Vesting is based on the attainment of certain Key Performance Indicators (“KPIs”), such as absolute share price, total return per
share or value growth of certain VEON businesses. Options may be exercised by the participant at any time during a defined
exercise period, subject to the Company’s insider trading policy.
The Company’s Short Term Incentive (“STI”) Scheme provides cash pay-outs to participating employees based on the
achievement of established KPIs over the period of one calendar year. KPIs are set every year at the beginning of the year and
evaluated in the first quarter of the next year. The KPIs are partially based on the financial and operational results (such as total
operating revenue, EBITDA and equity free cash flow) of the Company, or the affiliated entity employing the employee, and
partially based on individual targets that are agreed upon with the participant at the start of the performance period based on his
or her specific role and activities. The weight of each KPI is decided on an individual basis.
Pay-out of the STI award is scheduled in March of the year following the assessment year and is subject to continued
active employment during the year of assessment (except in limited “good leaver” circumstances in which case there is a pro-
rata reduction) and is also subject to a pro-rata reduction if the participant commenced employment after the start of the year of
assessment. Pay-out of the STI award is dependent upon final approval by the compensation and talent committee.
Pursuant to our bye-laws, we indemnify and hold harmless our directors and senior managers from and against all
actions, costs, charges, liabilities, losses, damages and expenses in connection with any act done, concurred in or omitted in the
execution of our business, or their duty, or supposed duty, or in their respective offices or trusts, to the extent authorized by law.
We may also advance moneys to our directors and officers for costs, charges and expenses incurred by any of them in
defending any civil or criminal proceedings. The foregoing indemnity will not apply (and any funds advanced will be required to
be repaid) with respect to a director or officer if any allegation of fraud or dishonesty is proved against such director or officer. We
have also entered into separate indemnification agreements with our directors and senior managers pursuant to which we have
agreed to indemnify each of them within substantially the same scope as provided in the bye-laws.
We have obtained insurance on behalf of our senior managers and directors for liability arising out of their actions in
their capacity as a senior manager or director.
We do not have any pension, retirement or similar benefit plans available to our directors or senior managers.
42
Board Practices
VEON Ltd. is governed by our board of directors, currently consisting of twelve directors. Our bye-laws provide that our
board of directors consists of at least seven and no more than thirteen directors, as determined by the board of directors and
subject to approval by a majority of the shareholders voting in person or by proxy at a general meeting. We have not entered into
any service contracts with any of our current directors providing for benefits upon termination of service.
The board of directors has delegated to the co-CEOs the power to manage the business and affairs of the company,
subject to certain material business decisions reserved for the board of directors or shareholders, within the framework of our
new governance model announced in the third quarter of 2020. The co-CEOs and their leadership team manage and operate
the company on a day-to-day basis. The board of directors may appoint such other senior executives as the board may
determine.
Under the new governance model, our board of directors and the co-CEOs have delegated to each VEON operating
company considerable authority to operate their businesses. A Group Authority Matrix and updated policy framework has also
been implemented, establishing clear decision making parameters and other requirements. Specifically, each operating
company is accountable for operating its own business subject to oversight by their respective operating company boards and
our board of directors; and they are also obligated to operate in accordance with Group policy and controls framework. The new
governance model forms the cornerstone of governance and delegation of authority across the Group.
The board of directors has established a number of committees to support it in fulfilling its oversight and governance
duties. These charters set out the purpose, membership, meeting requirement, authorities and responsibilities of the committees.
On an annual basis, our group executive committee, audit and risk committee and board of directors define our risk
profile for the categories of risk we encounter in operating our business, which are then integrated into our business through
global policies and procedures.
In the composition of our board of directors and senior executives, we are committed to diversity of nationality, age,
education, gender and professional background. In March 2021, we implemented a diversity and inclusion policy to formalize
our commitment to diversity and inclusion at the board of directors’ level and throughout the organization.
Committees of the Board of Directors
The committees of our board of directors consist of: an audit and risk committee, a compensation and talent committee,
a finance committee, a nominating and corporate governance committee, a telecommunications committee and a digital
committee. Our board of directors and committees meet at least quarterly. In 2020, our board of directors met 11 times, the audit
and risk committee met 8 times, the compensation and talent committee met 11 times, the finance committee met 14 times, the
nominating and corporate governance committee met 6 times, and telecommunications committee met 7 times, and the digital
committee met 3 times. Each director who served on our board of directors during 2020 attended at least 94% of the meetings of
the board of directors and committees on which he or she served that were held during his or her tenure on our board.
Audit and risk committee
The charter of our audit and risk committee provides that each committee member is required to satisfy the
requirements of Rule 10A-3 under the Exchange Act and the rules and regulations thereunder as in effect from time to time. The
audit and risk committee is primarily responsible for the following: the integrity of the company’s financial statements and its
financial reporting to any governmental or regulatory body and the public; the company’s audit process; the qualifications,
engagement, compensation, independence and performance of the company’s independent auditors, their conduct of the annual
audit of the company’s financial statements and their engagement to provide any other services; VEON Ltd.’s process for
monitoring compliance with legal and regulatory requirements as well as the company’s corporate compliance codes and related
guidelines, including the Code of Conduct; the company’s systems of enterprise risk management and internal controls; and the
company’s compliance program. The current members of our audit and risk committee, Robert Jan van de Kraats (chairman),
Gunnar Holt and Peter Derby, are expected to serve until our next annual general meeting.
Compensation and talent committee
Our compensation and talent committee is responsible for assisting and advising the board of directors in discharging
its responsibilities with respect to overseeing the performance, selection and compensation of the CEO and all other individuals
whose appointment, reappointment or early termination of employment require Board approval under the company’s bye-laws
(including the members of the company’s group executive committee and the chief executive officers of the company’s operating
subsidiaries). Our compensation and talent committee also has overall responsibility for approving and evaluating company’s
director, executive and employee compensation and benefit plans. The committee advises the board of directors in relation to the
company’s overall culture and values program, including by periodically assessing the substance and effectiveness of the
program and considering overall employee feedback and other measurements of effectiveness. In addition, the committee
periodically evaluates the compensation of directors of the company (including the annual board retainer fee, any equity-related
compensation or incentive plan participation and fees for service on the committees of the board of directors), taking into account
the competitive landscape, the compensation of directors at other comparable companies and recommendations regarding best
43
practices. The committee formulates recommendations to the board of directors regarding such director compensation and any
adjustments in compensation and/or incentives that the committee considers appropriate. Such recommendations are reviewed
by the nominating and corporate governance committee of the board of directors, and both committees jointly deliver to the
board such recommendations for consideration and approval. Finally, the compensation and talent committee evaluates the
company’s programs, priorities, and progress for recruiting, staffing, developing talent, motivating and retaining competent CEO
and senior executives (and potential successors) for present and future company needs, including succession planning. The
current members of our compensation and talent committee, Yaroslav Glazunov (chairman), Gunnar Holt and Hans Holger
Albrecht, are expected to serve until our next annual general meeting.
Finance committee
Our finance committee is responsible for assisting and advising the board of directors in discharging its responsibilities
with respect to its oversight of the business plan of the company, management of the capital structure of the company and its
subsidiaries and the execution of certain material transactions. In doing so, the committee reviews with company management
and gives advice or makes recommendations to the board of directors in relation to mergers and acquisitions transactions and
divestitures, financing transactions, the incurrence of indebtedness, finance policies, dividends, material litigation, arbitration or
other proceedings, and certain material and outside of the ordinary course business contracts. The current members of our
finance committee, Andrei Gusev (chairman), Gennady Gazin and Gunnar Holt, are expected to serve until our next annual
general meeting.
Nominating and corporate governance committee
Our nominating and corporate governance committee is responsible for identifying and recommending to the board
individuals qualified to serve as members of the board of directors, making recommendations to the board of directors
concerning committee structure, membership and operations, developing, advising the board of directors on the adoption of and
periodically reviewing a set of corporate governance practices applicable to the conduct of the company’s business, and
periodically conducting an evaluation of the board of directors and its committees. In addition, the committee reviews
recommendations of the compensation and talent committee of the board of directors regarding adjustments in director
compensation, and both committees jointly deliver to the board of directors such recommendations for consideration and
approval. The current members of our nominating and corporate governance committee, Peter Derby (chairman), Gennady
Gazin and Yaroslav Glazunov, are expected to serve until our next annual general meeting.
Telecommunications committee
Our telecommunications committee is responsible for oversight of the operations and business strategy of the
company’s telecommunications business, including the operational and technological capabilities associated with that strategy.
The current members of our telecommunications committee, Amos Genish (chairman), Andrei Gusev and Steve Pusey, are
expected to serve until our next annual general meeting.
Digital committee
Our digital committee is responsible for advising on, and overseeing, the development of the company’s digital strategy
and digital initiatives. The current members of our digital committee, Hans Holger Albrecht (chairman), Osama Bedier, Leonid
Boguslavsky and Amos Genish, are expected to serve until our next annual general meeting.
44
Employees
The following chart sets forth the number of our employees as of December 31, 2020, 2019 and 2018, respectively:
As of December 31,
Russia
Pakistan
Algeria
Bangladesh
Ukraine
Uzbekistan
Kazakhstan(1)
HQ
Others
Total
2020
26,453
4,539
2,747
1,137
3,628
1,604
2,521
187
824
2019
28,003
4,325
2,781
1,200
3,527
1,594
2,142
286
2,634
43,639
46,492
2018
28,570
4,424
2,866
1,120
2,754
1,563
—
507
4,328
46,132
(1) The number of employees in Kazakhstan for the year ended December 31, 2018 was included in “Others.”
Subsequently, Kazakhstan became a reportable segment and so for the years ended December 31, 2020 and 2019, the total
number of employees in Kazakhstan is reported separately..
From time to time, we also employ external staff, who fulfill a position at the company for a temporary period. We do not
consider these employees to constitute a significant percentage of our employee totals and have not included them above.
The following chart sets forth the number of our employees as of December 31, 2020, according to geographic location
and our estimates of main categories of activities:
Category of activity(1)
Executive and senior management
Engineering, construction and
information technology
Sales, marketing and other
commercial operations
Finance, administration and legal
Customer service
Procurement and logistics
Other support functions
Russia
Pakistan
Algeria Bangladesh Ukraine Uzbekistan Kazakhstan
As of December 31, 2020
20
21
12
8
15
2,393
785
764
352
1,354
15,131
2,734
1,182
1,961
5,253
660
1,035
514
253
70
162
356
335
67
31
552
124
35
25
41
902
430
760
65
102
21
420
383
132
367
32
249
12
1,161
935
218
83
46
66
Total
26,453
4,539
2,747
1,137
3,628
1,604
2,521
(1) A breakdown of employees by category of activity is not available for our HQ segment and our “Others” category.
A joint works council has been established at our Amsterdam headquarters, and it has consultation or approval rights in
relation to a limited number of decisions affecting our employees working at this location. For VEON Wholesale Services BV
(“VWS”), a separate works council was established and addresses management decisions that may affect the VWS workforce.
The works councils may utilize legal remedies that can impact the timing of implementation of decisions at our Amsterdam
headquarters or within VWS that are subject to consultation or approval by the works councils.
Our employees are represented by unions or operate collective bargaining arrangements in Algeria, Kyrgyzstan and
Ukraine. We consider relations with our employees to be generally good. In February 2016, BDCL experienced labor disruptions
in connection with the implementation of our announced performance transformation program. Such disruptions have not had a
significant impact on our operations. An application for the registration of a union within BDCL was rejected by the government
authorities and subsequent litigation is ongoing. A consequent notification was made by UNI Global Union to the Dutch NCP and
the NCP has issued a final statement. For a discussion of risks related to labor matters, see — Other Risks — “Our business
may be adversely impacted by work stoppages and other labor matters.”
45
Share Ownership
To our knowledge, as of March 1, 2021 other than Mikhail Fridman, none of our directors or senior managers
beneficially owned more than 1.0% of any class of our capital stock. To our knowledge, Mr. Fridman has an indirect economic
benefit in our shares held for the account of L1T VIP Holdings S.à r.l. (“L1T VIP Holdings”) and, thus, may be considered under
the definition of “beneficial owner” for purposes of this Annual Report only, as a beneficial owner of the shares held for the
account of L1T VIP Holdings. See — Major Shareholders And Related Party Transactions — Major Shareholders.
To our knowledge, as of March 1, 2021, Kaan Terzioğlu owned 600,000 of our ADSs.
To our knowledge, as of March 1, 2021, none of the other board of director members held any Common Shares or
ADSs. To our knowledge, as of March 1, 2021, none of our directors or senior managers held any options to acquire the
company’s common shares.
For more information regarding share ownership, including a description of applicable stock-based plans and options,
see Note 21 — Related Parties to our Audited Consolidated Financial Statements.
46
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
The following table sets forth information with respect to the beneficial ownership of VEON Ltd. as of March 1, 2021, by
each person who is known by us to beneficially own 5.0% or more of our issued and outstanding shares. As of March 1, 2021,
we had 1,756,731,135 issued and outstanding common shares. None of our shareholders has different voting rights. For a
discussion of certain risks associated with our major shareholders, see — Risk Factors — Other Risks — “A disposition by our
largest shareholder of its stake in VEON Ltd. or a change in control of VEON Ltd. could harm our business.”
Name
L1T VIP Holdings S.à r.l.(1)
Stichting Administratiekantoor Mobile Telecommunications
Investor (2)
Number of VEON Ltd.
Common Shares
840,625,001
Percent of VEON Ltd.
Issued and Outstanding
Shares
47.85
145,947,562
8.31
(1)
(2)
As reported on Schedule 13D, Amendment No. 20, filed on September 13, 2019, by L1T VIP Holdings S.à r.l. (“L1T”),
Letterone Core Investments S.à r.l. (“LCIS”) and Letterone Investment Holdings S.A. (“LetterOne”) with the SEC, L1T is
the direct beneficial owner of 840,625,001 common shares. LCIS is the sole shareholder of L1T, and LetterOne is the
sole shareholder of LCIS and, in such capacity, each of L1T, LCIS and LetterOne may be deemed to be the beneficial
owner of the 840,625,001 common shares held for the account of L1T. Each of L1T, LCIS and LetterOne is a
Luxembourg company, with its principal business to function as a holding company.
As reported on Schedule 13G, filed on April 1, 2016, by Stichting with the SEC, Stichting is the direct beneficial owner of
145,947,562 of VEON Ltd.’s common shares. LetterOne is the holder of the depositary receipts issued by Stichting and
is therefore entitled to the economic benefits (dividend payments, other distributions and sale proceeds) of such
depositary receipts and, indirectly, of the 145,947,562 common shares represented by the depositary receipts.
According to the conditions of administration entered into between Stichting and LetterOne (“Conditions of
Administration”) in connection with the transfer of 145,947,562 ADSs from LetterOne to Stichting on March 29, 2016,
Stichting has the power to vote and direct the voting of, and the power to dispose and direct the disposition of, the
ADSs, in its sole discretion, in accordance with the Conditions of Administration and Stichting’s articles of association.
Stichting is a foundation incorporated under the laws of the Netherlands. The common shares held by Stichting
represent approximately 8.31% of VEON Ltd.’s issued and outstanding shares.
Based on a review of our register of members maintained in Bermuda, as of March 1, 2021, a total of 1,228,276,403
common shares representing approximately 69.92% of VEON Ltd.’s issued and outstanding shares were held of record by BNY
(Nominees) Limited in the United Kingdom as custodian of The Bank of New York Mellon for the purposes of our ADS program
and a total of 515,226,176 common shares representing approximately 29.33% of VEON Ltd.’s issued and outstanding shares
were held of record by Nederlands Centraal Instituut Voor Giraal Effectenverkeer B.V. and where ING Bank N.V. is acting as
custodian of The Bank of New York Mellon, for the purposes of our ADS program, and a total of 13,228,556 common shares
representing approximately 0.75% of VEON Ltd.’s issued and outstanding shares were held of record by Nederlands Centraal
Instituut Voor Giraal Effectenverkeer B.V., for the purposes of our common shares listed and tradable on Euronext Amsterdam.
As of March 1, 2021, 21 record holders of VEON Ltd.’s ADRs, holding an aggregate of 758,028,329 common shares
(representing approximately 43.15% of VEON Ltd.’s issued and outstanding shares), were listed as having addresses in the
United States.
Changes in Percentage Ownership by Major Shareholders
As reported on Schedule 13D, Amendment 43, filed on November 25, 2019 by Telenor East Holding II AS, Telenor
Mobile Holding AS and Telenor ASA with the SEC, on November 22, 2019, Telenor East Holding sold 156,703,840 of VEON Ltd.
common stock, in the form of ADSs, at a price per share of US$2.31, representing all of Telenor East Holding’s remaining interest
in VEON Ltd. The sale resulted in net proceeds to Telenor East Holding of approximately US$362 million. This transaction
represented approximately 8.9% of the total outstanding common stock and Telenor East Holding’s final exit from VEON Ltd.
Please also see Schedule 13D, Amendment 38, filed on April 12, 2017 by Telenor East Holding II AS, Telenor Mobile Holding AS
and Telenor ASA with the SEC, reporting a sale by Telenor East Holding II AS of 70,000,000 of ADSs in VEON Ltd. pursuant to
an underwritten offering and Schedule 13D, Amendment 40, filed on September 25, 2017 by Telenor East Holding II AS, Telenor
Mobile Holding AS, and Telenor ASA with the SEC, reporting a sale by Telenor East Holding II AS of 90,000,000 ADSs in VEON
Ltd. pursuant to an underwritten offering.
47
Related Party Transactions
In addition to the transactions described below, VEON Ltd. has also entered into transactions with related parties as part of its
day to day operations. These mainly relate to ordinary course telecommunications operations, such as interconnection, roaming,
retail and management advisory services, as well as development of new products and services. Their terms vary according to
the nature of the services provided thereunder. VEON Ltd. and certain of its subsidiaries may, from time to time, also enter into
general services agreements relating to the conduct of business and financing transactions within the VEON group.
For more information on our related party transactions, see Note 21 — Related Parties to our Audited Consolidated
Financial Statements.
Registration Rights Agreements
The Registration Rights Agreement, as amended, between VEON Ltd., Telenor East and certain of its affiliates, Altimo
Holdings & Investments Ltd. and Altimo Coöperatief U.A. requires us to use our best efforts to effect a registration under the
Securities Act, if requested by one of the shareholders party to the Registration Rights Agreement, of our securities held by such
party in order to facilitate the sale and distribution of such securities. Pursuant to the Registration Rights Agreement, we have
filed a registration statement on Form F-3 with the SEC using a “shelf” registration process.
Separately, in connection with the issuance of US$1,000,000,000 in aggregate principal amount of 0.25% exchangeable
bonds due 2019, exchangeable for VEON Ltd. ADSs (the “Telenor Exchangeable Bond”) by Telenor East Holding II AS, VEON
Ltd. entered into a registration rights agreement, dated September 21, 2016 (the “New Registration Rights Agreement”) for the
benefit of holders of the Telenor Exchangeable Bonds. Following Telenor’s divestment of its interest in VEON Ltd. ADSs in
November 2019, the New Registration Rights Agreement is no longer effective.
Major Shareholders and their Affiliates
LetterOne
From December 2010 until March 2018, VEON Ltd. was a party to a General Services Agreement with L1HS Corporate
Advisor Limited, part of the LetterOne Group, under which L1HS Corporate Advisor Limited rendered to VEON Ltd. and its
affiliates services related to telecommunications operations, including management advisory services, training, technical
assistance and network maintenance, industry information research and consulting, implementation support for special projects
and other services as mutually agreed by L1HS Corporate Advisor Limited and VEON Ltd. VEON Ltd. paid L1HS Corporate
Advisor Limited annually US$1.5 million for the services. The agreement was terminated on December 12, 2017 with effect from
March 12, 2018.
From August 2013 until March 2018, VEON was also party to a Consultancy Deed with L1HS Corporate Advisor
Limited, under which L1HS Corporate Advisor Limited provided additional consultancy services to VEON Ltd. for which VEON
Ltd. paid US$3.5 million annually. The agreement was terminated on December 12, 2017 with effect from March 12, 2018.
Board of Directors
Compensation paid to the board of directors is disclosed in — Directors and Senior Management — Compensation.
Mikhail M. Fridman, a director of VEON Ltd., serves as Chairman of the Supervisory Board of the Alfa Group
Consortium and has been a member of the board of directors of JSC Alfa-Bank since 1994. In March 2020, VEON Holdings
B.V., an indirect wholly-owned subsidiary of VEON Ltd., increased the size of its existing facility with JSC Alfa-Bank to RUB 30
billion (US$406 million as of December 31, 2020). The outstanding amount under the facility, originally entered into in 2017, was
RUB 17.5 billion (US$304 million) as of December 31, 2017, RUB 17.5 billion (US$252 million) as of December 31, 2018, and
RUB 17.5 billion (US$283 million) as of December 31, 2019.
In June, September and November 2020, VEON Holdings B.V. issued senior unsecured notes of RUB20 billion (US$288 million),
RUB10 billion (US$135 million) and US$1.25 billion, respectively, under the MTN Program, maturing in June 2025, September
2025 and November 2027, respectively. The Alfa Group participated in the aforementioned June issuance as an underwriter.
In December 2020, VEON’s operating company in Ukraine, Kyivstar, signed a bilateral unsecured 3-year term loan
agreement with Joint Stock Company Alfa-Bank for UAH 1,700 million, of which UAH 1,480 million (US$52 million) was
outstanding at December 31, 2020.
The Alfa Group also participates in our US$1.25 billion RCF, which we entered into on March 9, 2021, following their
purchase of a 10% interest in the syndication.
In January 2021, the company entered into an agreement with Alexander Pertsovsky, former member of the board of
directors, under which he will provide certain consulting and advisory services relating to strategic transactions in Russia. Under
the agreement, Mr. Pertsovsky receives a fixed annual fee of €240,000 in compensation for his services, as well as the potential
for a discretionary success fee (subject to approval by our board of directors). The initial term of the agreement is one year,
though either party may terminate the agreement for any reason upon 30 days written notice.
Except as specified above, during 2020 and through the date of this Annual Report, none of our board of directors have
been involved in any material related party transactions with us.
48
HOW WE MANAGE RISKS
VEON has adopted the relevant criteria from the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
and Enterprise Risk Management (ERM) – Integrated Framework (2017) as the foundation of our enterprise risk management
approach. Through VEON’s ERM framework, our management aims to identify, assess, adequately manage, monitor and report
risks that could jeopardize the achievement of our strategic objectives. A unified and consistent ERM framework is used
throughout the organization.
Strengthening our risk culture: three lines of defense
The ‘three lines of defense’ approach provides a simple and effective way to enhance communications around risk management,
governance and control by clarifying roles and responsibilities. VEON has adopted this model to provide reasonable assurance
that risks to achieving important objectives are identified and mitigated.
First line of defense
VEON recognizes that the first line of defense consists of the business who own and are responsible and accountable
for directly assessing, controlling and mitigating risks. Since 2016, targeted communication campaigns have been launched
globally to foster risk and control awareness across the Group.
To embed a culture aligned to our risk appetite and individual responsibilities in relation to risk management we
embarked on a programme in 2019 which continued throughout 2020. This programme involved, an awareness campaign using
sport, games and the idea of teamwork to highlight the importance of every individual’s contribution to effective risk management
and a strong control environment was launched to reinforce accountability and ownership for risk management and the internal
control environment.
Second line of defense
The second line of defense monitors and facilitates the implementation of effective risk management practices and
internal controls by the first line. The second line comprises Group Internal Control, Group Enterprise Risk Management, Group
Ethics and Compliance and Group Legal, amongst other Group functions. The second line supports the business functions in
identifying what could go wrong and provides the methods, tools and guidance necessary to support the first line in managing
their risks.
Third line of defense
The Group Internal Audit team comprises the third line of defense and is responsible for providing independent
assurance to senior management on the effectiveness of the first and second lines of defense. The function conducts ad hoc
financial, information technology, strategic and operational audits and special investigations. Throughout, Internal Audit conducts
its activities in a manner based on a continuous evaluation of perceived business risks.
To ensure strong oversight of and alignment between the three lines of defense, we established our each OpCo has
established a Business Risk Committee and an OpCo Board. Each OpCos BRC, is chaired by the Group Chief Financial Officer,
his nominee or the Group Chief Internal Audit & Compliance Officer. The purpose of each OpCo Business Risk Committee is to
consider the overall risk profile of the Group and ensure risk informed decision making. The BRC oversees and aligns the
activities of the Group’s various risk and assurance functions to coordinate and manage actions efficiently across the Group.
Each of the OpCos are managed by way of OpCo Boards which comprises of the respective OpCo CEO and management team
with the oversight by their respective Board of Directors. Each OpCo’s overall risk profile is presented to its OpCo Board
regularly and at least once per quarter (accompanied by recommendations of its OpCo Business Risk Committee). This program
is continuously monitored by OpCo management and the OpCo Boards, and tested by both OpCo and Group Internal Audit, with
the Group Audit & Risk Committee providing ultimate oversight, with each OpCo Business Risk Committee providing active
monitoring and engagement with the OpCos on all enterprise risks, control, compliance and assurance matters.
49
Defining our risk appetite
Defining our risk appetite in line with the COSO Framework, the VEON Enterprise Risk Management (ERM) Framework
categorises risk into four risk categories: Strategic, Operational, Financial and Compliance.
Our risk appetite is defined for each of the four risk categories by considering our business objectives, as well as potential threats
to achieving these. On an annual basis, the VEON appetite statements for each category of risk are revised and approved by the
VEON Executive Committee and presented to the Audit and Risk Committee. These statements, are then integrated into the
business through our global policies and procedures and our risk management cycle.
Risk Appetite Table
Risk Management in Execution
Effective risk management requires a continuous and iterative process and involves the following five steps:
1. Clarify objectives and identify risks:
VEON’s strategy is developed with a comprehensive understanding of the strategic and inherent risks involved in doing
business. We consider the potential effects of the business context on risk profile as well as possible ways of mitigating the risks
we are exposed to.
2. Assess and prioritize risks:
Risks identified as relevant for VEON are assessed in order to understand the severity of each risk to the ability to
execute on VEON’s strategy and business objectives. The severity of risk is assessed at multiple levels of the business as it may
not be the same across divisions, functions, and operating companies.
3. Respond to risk:
The assessed severity of the risk is utilized by management to determine an appropriate risk response (Take, Treat,
Transfer or Terminate) which may include implementing mitigations, taking into account the risk appetite.
50
4. Monitor, report and escalate:
VEON’s Group Co-CEOs and Senior Management review significant risks assessed and prioritized based on the
Group’s ERM framework. The Top Group risks are also reported to VEON’s Board of Directors, in particular with the Audit and
Risk Committee (at least on a quarterly basis), to evaluate material Group risks.
VEON’s management also monitors and evaluates risk through our Group Risk Ethics and Assurance Committee
(REAC), which is chaired by the Group Chief Financial Officer and includes the Group Directors of each of the assurance
departments. Group REAC oversees and aligns the activities of the Group’s various risk and assurance functions to coordinate
and manage actions efficiently across the Group, which include:
a. Advising senior management on matters concerning the risk, ethics and compliance, including an overall risk and
assurance vision and strategy.
b. Overseeing activities to develop and maintain a fit-for-purpose risk and assurance programme.
c. Engaging with VEON’s senior management on important developments in the context of risk, ethics and compliance..
The Board of Directors maintains a number of committees, including the Audit and Risk Committee, which expressly
refers to its role in overseeing VEON’s ERM framework in its charter.
5. Assure:
On a quarterly basis, through the management certification process, local CEO and CFOs certify significant risks have
been considered and appropriate measures have been taken to manage the identified risks in accordance with the Group’s ERM
policies and procedures.
Control framework
VEON is publicly traded on a U.S. stock exchange and registered with the U.S. Securities and Exchange Commission. Thus, it
must comply with Sarbanes Oxley Act (“SOX”). SOX Section 404 requires that management perform an assessment of the
Internal Controls over Financial Reporting (“ICFR”) to confirm both the design and operational effectiveness of the controls.
Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation and fair presentation of VEON Ltd.’s published consolidated financial statements under generally accepted
accounting principles. The VEON ICFR Framework incorporates risk assessment as part of our scoping process, an assessment
of the design effectiveness of the required controls, testing of the operating effectiveness of the key control activities and
monitoring of our financial reporting at entity-wide and functional levels. VEON has established uniform governance, policies and
control standards that apply to controlled subsidiaries. Our ICFR testing results are reported into our Board of Management,
Group Risk, Ethics, and Assurance Committee (REAC), local Business & Risk Committee (BRC), local VEON Boards and our
Audit and Risk Committee at least on a quarterly basis as part of our assurance model. For a more detailed overview of the
Governance changes in 2020 see Director's Report section in these Financial statements.
Local management is responsible for business operations of our subsidiaries, including risk mitigation and compliance
with laws, regulations and internal requirements. We have created uniform governance and control standards for all our levels of
operations. The standards apply to all our subsidiaries with the same expectation: that they conduct business in accordance with
ethical principles, internal policies and procedures, and applicable laws and regulations. The standards are intended to define
and guide conduct with respect to relevant compliance and ethics principles and rules, and to create awareness about when and
where to ask for advice or report a compliance or ethics concern, which includes the use of VEON’s SpeakUp channels. The
principles apply to all VEON employees in all operating businesses and headquarters. Employees receive annual Code of
Conduct ("Code") training, which includes certification to comply with the Code. Our group-wide Code applies to all VEON
employees, officers and directors, including its principal executive officer, principal financial officer, and principal accounting
officer or controller. Our Code is available on our website at http://www.veon.com (information appearing on the website is not
incorporated by reference into this Annual Report.
A Group Authority Matrix has been established and was updated in 2020, to ensure that all expenditures and decisions are
approved by the appropriate levels of management, with more significant decisions requiring approval from senior management
at the Group level.
We have a Group-wide, quarterly management certification process in place, which requires the CEO and CFO at each of our
reporting entities to certify compliance with the uniform governance and control standards established in VEON, including:
•
•
•
•
•
Compliance with our Code of Conduct and related Group policies and procedure
Compliance with local laws and regulations
Compliance with the VEON Accounting Manual
Compliance with VEON’s principles, procedures and policies on ethics and compliance, fraud prevention and detection,
accounting and internal control standards, and disclosure requirements
Internal disclosure obligations
• Material weaknesses and/or deficiencies, if applicable, in design and operation of internal controls over financial
reporting have been reported
51
Key risks table for VEON and example of mitigation and 2020 developments
Below is a summary of the key risks we face in operating our business and a discussion of certain mitigation efforts associated
with these risks. For a more detailed discussion of the risks and uncertainties relating to our business, see the Risk Factors
Section of this Annual Report. The risks listed may not be exhaustive, and additional risks and uncertainties not presently known
to VEON or that it currently deems immaterial, may also have or develop a material adverse effect on its business, operations,
financial condition or performance, or other interests.
Prioritization of Strategic, Operational and Financial risks are is based on EBITDA business impact’s thresholds and
likelihood scales from 1 to 5. Once the identified risks are assessed and prioritized based on the above scales, the risk response
strategy (take, treat, terminate, transfer) is decided and mitigating action plans are defined and/or updated, the outcome of the
risk assessment information is captured in our Global GRC Tool. The risk response strategy is determined based on the business
context, risk appetite, severity and prioritization. Further the risk response must also consider the anticipated costs and benefits
commensurate with the severity and prioritization of the risk and address any obligations and expectations (e.g. industry
standards, shareholder expectations, etc.).
Prioritization of some compliance risks such as Non-compliance to Anti-bribery and corruption laws, and Non-
compliance to International Sanction and export laws and regulations is performed qualitatively, due to their nature, based
on external factors sourced from independent non-governmental reports (where possible) and Internal factors sourced from
VEON’s business processes by the Local Ethics and Compliance and Legal teams.
The sequence in which the risks and mitigating actions are presented below are not intended to be in any order of severity,
chance or materiality. Legend (qualitatively assessed of net risk i.e. considering mitigating actions):
Risk increased: é Risk decreased: ê Risk stable: =
52
Risk
1. Market
Our business is subject to a variety of
market-related risks across our
geographies. These include:
ê Foreign exchange-related risks since
a significant proportion of our costs and
liabilities are in US dollars and Russian
rubles whereas our revenues are in a
variety of local currencies.
ê Competition since we operate in
highly competitive markets which may
impact our ability to attract and retain
customers and achieve our financial
targets.
ê Keeping pace with technology since
our future success will depend on our
ability to keep pace with investments in
current technologies and technological
changes in our industry and deploying
networks and services that these
enable.
'= Macroeconomic developments given
that we operate in a variety of markets
that may be subject to adverse
economic, political and regulatory
factors which may impact the operating
environment for our services.
é Implications of the COVID-19
pandemic, or those relating to similar
public health developments, which may
impact our operations and those of our
customers and suppliers, as well as the
economies in which we operate.
Examples of how we mitigate
Some examples of 2020 developments
During 2020 the Company used
foreign exchange forwards to mitigate
foreign currency translation risk
related to the Company’s net
investment in its Russian operating
company.
In April 2020, the Company
established a USD 6.5 billion
Medium-Term Note (MTN)
programme that has since allowed us
to increase the proportion of our
Russian ruble-denominated
borrowings to better match the ruble
contribution to our revenues.
• We continued to adapt our marketing
strategies to local market conditions,
notably in Russia where we simplified
our product offers and maintained
competitive prices in combination with
increasing the transparency of our
content policies conditions.
• We continued to attract customers to
our shared bundle product and
convergence offers while deploying
high-speed 4G networks across our
markets to enhance the experience of
our customers,
•
• We now have the capacity to launch
4G services in each of our operating
markets. We have also acquired new
spectrum to boost our network
capacity, enhance spectral efficiency
and enable the launch of new Radio
Access Networks Technologies.
The second quarter 2020 saw the full
impact on our operations of the
lockdowns imposed across our
markets in response to COVID-19.
Throughout the second half of the
year, all operations saw a recovery in
the performance as our local
businesses continue building
resilience to the restrictions related to
COVID-19. Our management has
taken appropriate measures to keep
our personnel safe and secure. We
have not observed any particular
material adverse impacts to our
business, financial condition, and
results of operations, other than as
described elsewhere in this report,
and Group liquidity is sufficient to
fund the business operations for at
least another 12 months.
•
The Company hedges part of its
exposure to fluctuations on the
translation into US dollars of the
revenues of its foreign operations by
holding borrowings in foreign
currencies and by the use of foreign
exchange swaps and forwards.
• We are monitoring and responding
•
•
to technology developments and
competitor activity that could have
an impact on us achieving our goals.
• We continue to engage in dialogue
with local industry regulators to
ensure we understand the
requirements and challenges of local
markets and adapt our services
accordingly.
• We are continuing to assess and
take what we believe are the
necessary steps to ensure the
continuity of our operations and the
safety of our employees during the
COVID-19 pandemic
53
Examples of how we mitigate
Some examples of 2020 developments
•
•
•
•
The Company assessed the
concentration of risk with respect to
refinancing its debt and concluded it
to be low based on liquidity in the
markets the Company has access to,
and its recent history of refinancing.
Under its MTN programme, the
Company took advantage of
favorable capital market conditions
three times during 2020 to refinance
over USD 1.6 billion worth of debt at
lower coupons and longer maturities.
loan
agreements
The Company signed three bilateral
in
unsecured
Ukraine for an aggregate amount of
around USD 146 million.
It also
signed a bilateral unsecured loan
agreement worth approximately USD
25 million in Kazakhstan.
The Company additionally entered
into entered into new bilateral loan
agreements in Russia worth around
USD 1.9 billion, which
together
extend the maturity and reduced the
borrowing costs of
local
facilities.
these
Risk
2. Liquidity & Capital
Our business requires considerable
financial capital in order to invest in the
growth opportunities we identify. This
requires us to manage a number of
risks relating to capital and liquidity.
These include:
= Liquidity risk since as a holding
company, VEON Ltd. depends on the
performance of its subsidiaries and
their ability to pay dividends, and may
therefore be affected by changes in
exchange controls and currency
restrictions in the countries in which its
subsidiaries operate
= Banking and Financial Counterparty
risk given that the Banking systems in
many countries in which we operate
remain underdeveloped and there are a
limited number of creditworthy banks in
these countries with which we can
conduct business, and currency control
requirements restrict activities in certain
markets in which we have operations.
= Debt service risks given that
substantial amounts of indebtedness
and higher Debt service obligations
could materially impact our cash flow
and affect our ability to raise additional
capital.
•
= Access to capital since a significant
rise in our indebtedness would imply
higher Debt service obligations, which
may not be fully covered by our cash
flow and could hinder our ability to
Access capital markets on acceptable
terms.
• We have a centralized treasury
function whose job is to manage
liquidity and funding requirements as
well as our exposure to financial and
market risks
•
•
The Company monitors its risk to a
shortage of funds using a recurring
liquidity planning tool. The Company’s
objective is to maintain a balance
between continuity of funding and
flexibility through the use of bonds,
bank overdrafts, bank loans and
lease contracts.
The Company’s policy is to create a
balanced debt maturity profile and to
use market opportunities to extend
the maturity and reduce the cost of its
borrowings as they arise.
• We adopt a prudent approach to
managing our balance sheet leverage
increasing the level of our local
currency borrowing and maintain
borrowing headroom in our revolving
credit facilities
The primary objective of the
Company’s capital management is to
ensure that it maintains healthy
capital ratios, so as to secure access
to debt and capital markets at all
times and maximize shareholder
value. The Company manages its
capital structure and makes
adjustments to it in light of changes in
economic conditions.
54
Risk
Examples of how we mitigate
Some examples of 2020 developments
· We remain committed to simplifying
our business structure, which extends to
our local partnerships.
· We monitor and log our network
and systems, and keep raising our
employees’ security awareness through
training, and
operate a structured vulnerability scanning
process within our security operations
centers.
· We maintain good bilateral
relationships with the regulatory
authorities in our operating markets in
order to help us understand and adapt to
their concerns and needs with respect to
local regulation.
· We conduct risk-based due
diligence on our business partners and
mitigate apparent risks through
contractual requirements, representations,
indemnities, warranties, etc.
· We regularly monitor the media
presence and reputations or our partners
and respond accordingly
· We reduce our reliance on single
vendors to the extent possible.
· Our new Governance, Risk and
Compliance (“GRC”) framework sets out
polices for key operational activities,
detailing the minimum standards to which
each OpCo must comply in areas such as
employee behavior, financial conduct,
procedures for Group contracting,
cybersecurity and data privacy. These
policies form part of the charter of our
various Business Risk committees, People
Committees and our OpCo Boards, setting
common boundaries for behavior whilst
encouraging freedom to operate within
these to maximize business opportunity.
· In May 2020, VEON announced a
partnership between JazzCash and
payment technology leader Mastercard
that strengthens the payments ecosystem
for merchants and customers in Pakistan.
The partnership with Mastercard allows
merchants to accept digital payments from
customers, digitize their supply chain, and
move to cashless operations. JazzCash
customers will also have access to
Mastercard’s virtual and branded debit
cards that can be used in 55,000 points of
sale and ATMs in Pakistan, in addition to
JazzCash merchants and e-commerce
sites.
· In September 2020 the Dhabi
Group exercised its put option to sell
VEON its 15% shareholding in Pakistan
Mobile Communications Limited
("PMCL"), the operating company of
Pakistan’s leading mobile operator, Jazz.
Once completed, VEON will own 100% of
PMCL.
· We are enhancing our cyber
security strategy,with a greater emphasis
on local identification and response to
cyber threats, which we believe will
enable us to better identify potential
threats that may impact our business and,
consequently, aid us in the implementation
of the required security measures to
address such threats.
· As part of our initiative to digitize
our core telecommunications business, we
intend to continue focusing on increasing
our capital investment efficiency, including
with respect to our IT, network, and
distribution costs. We have secured
network sharing agreements and intend to
maintain our focus on achieving an asset-
light business model in certain markets,
where we own only the core assets
needed to operate our business.
3. Operational
Ours is a complex business operating
across ten markets at various levels of
development and each with a variety of
opportunities and challenges. These
give rise to operational risks, which
include:
= Challenges in local implementation of
our strategic initiatives, which could be
affected by a variety of unforeseen
issues, including (but not limited to)
technological limitations, regulatory
constraints and insufficient customer
engagement.
= Partnership risks given that we
participate in strategic partnerships and
joint ventures in a number of our
markets, agreements around which
may affect our ability to execute on our
strategy and, where the consent of our
partners is required, to withdraw funds
and dividends from these entities.
Partnerships could also give rise to
reputational and indirect regulatory
risks with respect to the behaviors and
actions of our partners, as well as risks
surrounding losing a partner with
important insights in the local market.
é Cyber-attacks and denials of service,
to which telecoms providers are
vulnerable given the open nature of
their networks and services, which
could result in financial, reputational
and legal harm to our business should
these succeed in disrupting our
services and result in the leakage of
customer data or of our intellectual
property.
= Supply chain risks since we depend
on third parties for certain services and
products important to our business and
there may be unexpected disruptions to
Supply chains due to a variety of
factors, including regulatory (e.g. trade
restrictions), natural disasters, war,
pandemics and similar unforeseen
events.
= Spectrum and license rights given
that the success of our operations
depends on acquiring and maintaining
Spectrum and licenses in each of our
markets, most of which are granted for
specified terms with no assurance that
they will be renewed once expired, or
at what price.
= Interconnection agreements with
other operators upon which the
economic viability of our operations
depend. a significant rise in these
costs, or a decrease in the
Interconnection rates we earn, could
impact the Financial performance of
our business, as could adverse local
regulation of Mobile Termination rates
(MTRs), which govern the rates at
which carriers compensate each other
for carrying calls that originate on one
another’s networks.
55
Examples of how we mitigate
Some examples of 2020 developments
· Our Ethics & Compliance and Legal
teams maintain oversight and expertise
from HQ and rely on dedicated local
teams with knowledge of the legal and
regulatory requirements of each of our
operating markets and supplement with
external counsel when required.
· We maintain a privacy program that
includes data privacy controls such as
privacy assessments, data breach
response processes and individual rights
processes, to ensure we comply with EU
and local data privacy laws for the
collection and processing of personal data
for our services, human resource
management and compliance processes.
· We maintain appropriate know-
your-customer (KYC) and anti-money
laundering (AML) controls across our DFS
products and services as required by local
rules and international best practices.
· We operate a policy of diverse
sourcing with respect to equipment
suppliers to ensure that we are not overly
reliant on any single vendor should a
supply disruption arise, including as a
consequence of the imposition of
sanctions and export controls laws.
· A new governance model was
introduced in the third-quarter of 2020, at
the Group level,which sets the functional
requirements, reporting standards and
expected behaviors for OpCo
Management. This defines clear
objectives, roles and responsibilities,
maintain minimum requirements in
accordance with our GRC framework, and
promotes transparent discussions about
strategy, operations and business
dilemmas.
· Alongside our OpCo Business Risk
Committees (BRCs), we believe these
new arrangements ensure Group
management is now much closer to our
OpCo managers and key risks they face,
and reinforces effective, informed decision
making by the local OpCo Boards and
VEON’s Board where appropriate.
· With respect to sanctions and
export controls, in May and August 2019,
and August 2020, the U.S. Department of
Commerce, Bureau of Industry and
Security (“BIS”) added Huawei
Technologies Company Ltd. and 152 of its
affiliates (collectively, “Huawei”) to its
“Entity List”, which prohibits companies
globally from directly or indirectly
exporting, reexporting or in-country
transferring goods, software, and
technology that is subject to the EAR to
Huawei and from procuring such items
from Huawei when they have reason to
know of any underlying U.S. export control
violations in connection with those items.
Risk
4. Legal
Our business is subject to a variety of
laws and regulations, including:
= Unethical or inappropriate behavior,
which could result in fraud or a breach
of regulation or legislation and could, in
turn, expose VEON to significant
penalties, criminal prosecution and
damage to our brand and reputation.
= regulation & compliance risks given
that we operate in a highly regulated
industry, operate in uncertain regulatory
environments and are subject to a large
number of laws and regulations, which
change from time to time, vary between
jurisdictions and can attract
considerable costs with respect to
regulatory compliance.
= Unpredictable tax claims, decisions,
audits & systems which could give rise
to significant uncertainties and risks
that could complicate our tax planning
and business decisions.
= Data privacy since we collect and
process customer personal Data , we
are subject to an increasing amount of
Data privacy laws and regulations. in
some cases these laws and regulations
also bring restrictions on cross border
transfers of personal Data and
surveillance related requirements to
store Data and contents of
communication for minimum periods.
the costs and operating consequences
of these laws and regulations may
affect the performance of our business.
= Money Laundering rules which
require anti-Money Laundering (AML)
and counter-terrorism financing (CTF)
systems and controls due to our
expansion of digital Financial services
(DFS) offerings beyond our core
telecommunications services.
ê Sanctions and export controls risks
since we may be subject to, depending
on the transaction or business dealing,
laws and regulations prescribed by
various jurisdictions, including the
United States, the United Kingdom and
the European Union. Applicable
requirements remain subject to change
and may impact our ability to conduct
business in certain countries and with
certain parties with which we have
services, supply or other business
arrangements.
56
Risk
Examples of how we mitigate
Some examples of 2020 developments
· We operate a policy of diverse
sourcing with respect to equipment
suppliers to ensure that we are not overly
reliant on any single vendor should a
supply disruption arise, including as a
consequence of the imposition of
sanctions and export controls laws.
· We manage a diverse portfolio of
emerging markets businesses, which
helps ensure that in the event of a market
underperforming for whatever reason its
impact on the financial and operating
performance of the Group as a whole is
limited.
· We act as long-term investors in the
network infrastructure of our operating
markets and ensure that our networks are
adequately served, including through the
provision of off-grid power where
necessary. By helping to generate
economic activity and prosperity within the
communities we serve, we believe our
operations can act as a positive catalyst
for the broader development of the nations
that host us.
· In October 2020, VEON concluded
an agreement for the sale of VEON’s
operating subsidiary in Armenia. The sale
of the Armenian operations is in line with
VEON’s ambition to simplify the Group’s
structure and enhance its operational
focus on markets with attractive long-term
growth opportunities.
· With respect to infrastructure risks,
on December 30, 2020, the Russian
government decree “On licensing of
activities in the field of communication
services” introduced a new license
requirements to ensure the
implementation of requirements related to
the stability, security and integrity of the
internet. The new provisions came into
force on January 1, 2021. The
implementation and support of measures
to comply with the legislation may lead to
substantial investments in the future.
5. Geographical and Political
Our geographic footprint subjects us to
a variety of political factors and
uncertainties which could have a
bearing on our business operations.
These include:
ê Sanction and export controls risks
since we may be subject to, depending
on the transaction or business dealing,
laws and regulations prescribed by
various jurisdictions, including the
United States, the United Kingdom and
the European Union. Applicable
requirements remain subject to change
and may impact our ability to conduct
business in certain countries and with
certain parties with which we have
services, supply or other business
arrangements.
= Emerging markets-related risks given
that nine of our nine operating markets
are in the developing world and are
subject to a varying degree of political,
economic and legal variability around
issues such as foreign exchange policy,
capital controls and rules on foreign
investment.
= Infrastructure risks given that the
physical Infrastructure in some of our
markets is in poor condition and may
require significant investment by local
governments or additional expenditures
by us in order to sustain our operations
and services.
57
Risk Factors
The risks and uncertainties described below are not the only ones we face. Any of the following risks could materially
and adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently
known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial
condition or results of operations. In addition, you should consider the interrelationship and compounding effects of two or more
risks occurring simultaneously.
The following summarizes the principal risks that could adversely affect our business, operations and financial results.
Before purchasing our American Depositary Shares (“ADSs”), you should carefully consider all of the information set forth in this
Annual Report including, but not limited to, these risks. In addition to those risk factors, there may be additional risks and
uncertainties of which management is not aware or focused on or that management currently deems immaterial. Our business,
financial condition or results of operations or prospects could be materially adversely affected by any of these risks, causing the
trading price of our securities to decline and you to lose all or part of your investment.
•
•
•
•
•
•
•
•
•
•
risks relating to changes in political, economic and social conditions in each of the countries in which we operate and
where laws are applicable to us (including as a result of armed conflict) such as any harm, reputational or otherwise,
that may arise due to changing social norms, our business involvement in a particular jurisdiction or an otherwise
unforeseen development in science or technology;
in each of the countries in which we operate and where laws are applicable to us, risks relating to legislation, regulation,
taxation and currency, including costs of compliance, currency and exchange controls, currency fluctuations, and abrupt
changes to laws, regulations, decrees and decisions governing the telecommunications industry and taxation, laws on
foreign investment, anti-corruption and anti-terror laws, economic sanctions, data privacy, anti-money laundering,
antitrust, national security and lawful interception and their official interpretation by governmental and other regulatory
bodies and courts;
risks related to the impact of export controls, sanctions, international trade regulation, customs and technology
regulation, on our ability, and the ability of important third-party suppliers to procure goods, software or technology
necessary to provide services to our customers, particularly services related to the production and delivery of supplies,
support services, software, and equipment sourced from these suppliers – for example, between April and July 2018,
the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) imposed a Denial Order against ZTE
Corporation (“ZTE”) under the Export Administration Regulations (“EAR”) which prohibited transactions with ZTE during
this time that involved goods, software or technology subject to the EAR and could have led to service degradation and
disruption in certain markets, and in May and August 2019, and August 2020, BIS added Huawei Technologies
Company Ltd. and 152 of its affiliates (collectively, “Huawei”) to its “Entity List”, which prohibits companies globally from
directly or indirectly exporting, reexporting or in-country transferring goods, software, and technology that is subject to
the EAR to Huawei and from procuring such items from Huawei when they have reason to know of any underlying U.S.
export control violations in connection with those items;
risks related to the ongoing COVID-19 pandemic, such as adverse impacts on our financial performance resulting from
lockdown restrictions, changes in customer trends and the broader macroeconomic impact of the pandemic on our
countries of operation;
risks relating to a failure to meet expectations regarding various strategic initiatives, including, but not limited to,
changes to our portfolio of operating companies, product and technology offerings, development of networks and
customer services;
risks related to solvency and other cash flow issues, including our ability to raise the necessary additional capital and
incur additional indebtedness, the ability of our subsidiaries to make dividend payments, our ability to develop additional
sources of revenue and unforeseen disruptions in our revenue streams;
risks that the adjudications by the various regulatory agencies or other parties with whom we are involved in legal
challenges, license and regulatory disputes, tax disputes or appeals may not result in a final resolution in our favor or
that we are unsuccessful in our defense of material litigation claims or are unable to settle such claims;
risks relating to our company and its operations in each of the countries in which we operate and where laws are
applicable to us, including demand for and market acceptance of our products and services, regulatory uncertainty
regarding our licenses, frequency allocations and numbering capacity, constraints on our spectrum capacity, access to
additional bands of spectrum required to meet demand for existing products and service offerings or additional
spectrum required from new products and services and new technologies, availability of line capacity, fiber capacity,
international gateway access, intellectual property rights protection, labor issues, interconnection agreements,
equipment failures and competitive product and pricing pressures;
risks related to developments from competition, unforeseen or otherwise, in each of the countries in which we operate
and where laws are applicable to us, including our ability to keep pace with technological changes and evolving industry
standards;
risks related to the activities of our strategic shareholders, lenders, employees, joint venture partners, representatives,
agents, suppliers, customers and other third parties;
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risks associated with our existing and future transactions, including with respect to realizing the expected synergies of
closed transactions, satisfying closing conditions for new transactions, obtaining regulatory approvals, implementing
remedies, and assuming related liabilities;
risks associated with data protection, data breaches, cyber-attacks or systems and network disruptions, or the
perception of such attacks or failures in each of the countries in which we operate, including the costs associated with
such events and the reputational harm that could arise therefrom;
risks related to the ownership of our ADSs, including those associated with VEON Ltd.’s status as a Bermuda company
and a foreign private issuer; and
other risks and uncertainties as set forth in Item 3D. Risk Factors.
For a more complete discussion of the material risks facing our business, see below.
Market Risks
We are exposed to foreign currency exchange loss and currency fluctuation and translation risks.
A significant amount of our costs, expenditures and liabilities, including capital expenditures and borrowings, is
denominated in U.S. dollars and Russian rubles, while a proportion of our revenue is denominated in currencies other than U.S.
dollars and Russian rubles. Thus, declining values of local currencies against the U.S. dollar could make it more difficult for us to
repay or refinance our debt, make dividend payments, comply with covenants under our debt agreements or purchase
equipment or services denominated in U.S. dollars, and may also impact our ability to support one jurisdiction with reserves from
another jurisdiction. For example, the values of the Russian, Algerian, Ukrainian, Uzbek, Pakistani, Bangladeshi and Kazakh
currencies have experienced significant volatility in recent years in response to certain political and economic issues, and may
continue to decline.
Our existing and future hedging strategies may not adequately protect us from exchange rate risks. Our operating
metrics, debt coverage metrics, as well as the value of our investments in U.S. dollar terms have been negatively impacted in
recent years by foreign currency transactions and translations. Such future currency fluctuations and volatility may result in
additional losses or otherwise negatively impact our results of operations despite our ongoing efforts to better match the currency
mix of our debt and derivatives with the currencies of our operations.
Our hedging strategies may further prove ineffective if, for example, exchange rates fluctuate in response to legislative
or regulatory action by a government with respect to its currency, which could lead to adverse developments that harm our
business, financial condition, results of operations or prospects. In addition, the countries in which we operate have historically
experienced periods of high levels of inflation, including certain cases of hyperinflation. Our profit margins could be harmed if we
are unable to sufficiently increase our prices to offset any significant future increase in the inflation rate, which may be difficult
with our mass market and price-sensitive customer base. For more information about foreign currency translation and associated
risks, see — Operating and Financial Review and Prospects, — Quantitative and Qualitative Disclosures About Market Risk
and Note 17 — Financial Risk Management to our Audited Consolidated Financial Statements.
We may be unable to develop additional revenue market share in markets where the potential for additional growth of
our customer base is limited and customers may demand new services, technologies and increased access, which may
require significant capital expenditures.
Increasing competition, market saturation and technological development have led to the increased importance of data
services and access to next generation technologies such as 4G/LTE in the markets in which we operate, including Russia,
Commonwealth of Independent States (“CIS”) countries, Pakistan and Bangladesh and the provision of such technologies and
services requires significant capital investment in spectrum and network presenting a risk that we cannot keep up with the
demands of our customers. The mobile markets in Russia, Algeria, Ukraine, Kazakhstan, Kyrgyzstan and Georgia have each
reached mobile penetration rates exceeding 100%, according to Omdia and publicly available government sources. As a result,
we have become increasingly focused on revenue market share growth in each of these markets. The key components of this
strategy are to increase data usage and improve customer loyalty. However, we cannot guarantee that these initiatives will be
successful, particularly in markets where the potential for additional growth of our customer base is limited. Failure to develop
additional revenue market share could materially harm our business, financial condition, results of operations, cash flows or
prospects. For more information on the competition we face in our markets, see “— We operate in highly competitive markets,
which we expect to only become more competitive, and as a result may have difficulty expanding our customer base or retaining
existing customers.” For more information on our growth strategy, see — Information on the Company.
Our revenue is often unpredictable, and our revenue sources are short-term in nature.
Our primary source of revenue comes from prepaid mobile customers whom we do not require to enter into long-term
contracts. Therefore, we cannot be certain these customers will continue to use our services in the future. Revenue from
postpaid mobile customers represents a small percentage of our total operating revenue and the contracts that are required to be
signed by such customers can be canceled with limited advance notice and without significant penalty. Because we incur costs
based on our expectations of future revenue, the sudden loss of a large number of customers or a failure to accurately predict
revenue could harm our business, financial condition, results of operations, cash flows or prospects. For example, following the
outbreak of COVID-19 and lockdown restrictions imposed across our countries of operations, our revenue projections were
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frustrated as material disruption to our retail operations resulted in store closures, impacting gross connections and airtime sales.
Restrictions on travel resulted in a significant decline in roaming revenues and the loss of migrant customers from our subscriber
base, particularly in Russia. The impact of such was only partially offset by increases in fixed line revenue, as lockdowns
encouraged home working and schooling. For a description of the key trends and developments with respect to our business,
including further discussion of the impact of COVID-19 on our operations and financial performance, see — Operating and
Financial Review and Prospects — Key Developments During 2020.
We operate in highly competitive markets, which we expect only to become more competitive, and as a result may have
difficulty expanding our customer base or retaining existing customers.
The markets in which we operate are highly competitive in nature, and we expect that competition will continue to
increase. Our financial performance has been and will continue to be significantly determined by our success in adding, retaining
and engaging our customers. As penetration rates increase in the markets in which we operate, we may have difficulty
expanding our customer base. If customers find our connectivity and internet services not to be valuable, reliable or trustworthy
or otherwise believe competitors in our markets can offer better services, we may have difficulty retaining customers. In addition,
as new players enter our markets or existing competitors combine operations, maintaining our market positions will become even
more difficult. For more information on the competition in our markets, see — Business Overview.
Each of the items discussed immediately below regarding increased competition could materially harm our business,
financial condition, results of operations, cash flows or prospects:
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we cannot assure you that our revenue will grow in the future, as competition puts pressure on prices;
with the increasing pace of technological developments, including new digital technologies and regulatory changes
impacting our industry, we cannot predict with certainty future business drivers and we cannot assure you that we will
adapt to these changes at a competitive pace;
we may be forced to utilize more aggressive marketing schemes to retain existing customers and attract new ones that
may include lower tariffs, handset subsidies or increased dealer commissions;
in more mature or saturated markets, there are limits on the extent to which we can continue to grow our customer
base, and the continued growth of our business and results of operations will depend, in part, on our ability to extract
greater revenue from our existing customers, including through the expansion of data services and the introduction of
next generation technologies, which may prove difficult to accomplish;
we may be unable to deliver better customer experience relative to our competitors or our competitors may reach
customers more effectively through better use of digital and physical distribution channels, which may negatively impact
our revenue and market share;
as we expand the scope of our services, such as new networks, fixed-line residential and commercial broadband,
Mobile Financial Services ("MFS") and Digital Financial Services ("DFS") offerings, streaming content and other
services, we may encounter a greater number of competitors that provide similar services;
the liberalization of the regulations in certain markets in which we operate could greatly increase competition;
competitors may operate more cost-effectively or have other competitive advantages such as greater financial
resources, market presence and network coverage, stronger brand name recognition, higher customer loyalty and
goodwill, and more control over domestic transmission lines;
competitors, particularly current and former state-controlled telecommunications service providers, may receive
preferential treatment from the regulatory authorities and benefit from the resources of their shareholders;
current or future relationships among our competitors and third parties may restrict our access to critical systems and
resources;
new competitors or alliances among competitors could rapidly acquire significant market share, and we may not be able
to form similar relationships to capitalize on such opportunities;
reduced demand for our core services of voice, messaging and data and the development of services by application
developers (commonly referred to as OTT players) could significantly impact our future profitability;
competition from OTT players offering similar functionality to us may increase, including digital providers offering VOIP
calling, internet messaging and other digital services which compete with our telecommunications services; further our
competitors may partner with such OTT players to provide integrated customer experiences, and we may be unable to
implement offers, products and technology to compete with the offerings of our telecommunications competitors or to
support our commercial partnerships; and
our existing service offerings could become disadvantaged as compared to those offered by competitors who can offer
bundled combinations of fixed-line, broadband, public Wi-Fi, TV and mobile.
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We may be unable to keep pace with technological changes and evolving industry standards, which could harm our
competitive position and, in turn, materially harm our business.
The telecommunications industry is characterized by rapidly evolving technology, industry standards and service
demands, which may vary by country or geographic region. Accordingly, our future success will depend on our ability to adapt to
the changing technological landscape and the regulation of standards utilizing these technologies. It is possible that the
technologies or equipment we utilize today will become obsolete or subject to competition from new technologies in the future for
which we may be unable to obtain the appropriate license in a timely manner or at all. We may not be able to meet all of these
challenges in a timely and cost-effective manner.
For example, with respect to our mobile services, while we continue deploying mobile networks such as 4G/LTE, in
some markets the industry is already well advanced in planning for the future deployment of 5G, which is expected to drive
continued demand for data in the future. If our licenses and spectrum are not appropriate or sufficient to address changing
technology, we may require additional or supplemental licenses and spectrum to implement 5G technology or to upgrade our
existing 2G, 3G and 4G/LTE networks to remain competitive, and we may be unable to acquire such licenses and spectrum on
reasonable terms or at all. We may need to incur significant capital expenditures to acquire licenses, spectrum or infrastructure
to offer new services to our customers or improve our current services. In particular, the introduction of 5G services into our
markets may draw additional entrants and require infrastructure capital expenditures for providers seeking to gain or maintain a
competitive advantage. As new technologies are developed or upgraded, such as advanced 5G systems and next generation
technologies, our equipment may need to be replaced or upgraded or we may need to rebuild our mobile network, in whole or in
part. Technological change is also impacting the capabilities of the equipment our customers use, such as mobile handsets, and
potential changes in this area may impact demand for our services in the future. Implementing new technologies requires
substantial investment. However, there can be no guarantee that we will generate our expected return on any such investments.
If we experience substantial problems keeping pace with technological changes and evolving industry standards, it may
impair our success with the provision of related services, increase our costs or delay or decrease revenue and profits and
therefore hinder recovery of any significant capital investments in such services, as well as our growth.
The international economic environment could cause our business to decline.
Our operations are subject to macro-economic and political risks that are outside of our control. The current macro-
economic environment is volatile, and recent levels of instability in global markets has contributed to the challenging global
economic environment in which we operate. As future developments are dependent upon a number of political and economic
factors, we cannot accurately predict how long challenging conditions will exist or the extent to which the markets in which we
operate may deteriorate. Unfavorable economic conditions may impact a significant number of our current and potential
customers’ spending patterns, in terms of both the products they subscribe for and usage levels. As a result, it may be more
difficult for us to attract new customers, more likely that customers will downgrade or disconnect their services and more difficult
for us to maintain ARPUs at existing levels. A difficult international economic environment and any future downturns in the
economies of markets in which we operate or may operate in the future, or such downturns in the international economic
environment in general could also increase our costs (for example, by precipitating higher levels of taxation), prevent us from
executing our strategies, hurt our liquidity, or impair our ability to take advantage of future opportunities, to respond to
competitive pressures, to refinance existing indebtedness or to meet unexpected financial requirements, all of which could harm
our business, financial condition, results of operations, cash flows or prospects.
Our financial performance may be affected by ongoing issues in the European Union relating to risks of deflation,
sovereign debt levels, the suitability and stability of the euro, including the withdrawal of the United Kingdom from the European
Union. Our financial performance may be affected by ongoing issues in the European Union relating to risks of deflation,
sovereign debt levels, the suitability and stability of the euro, including the withdrawal of the United Kingdom from the European
Union following the expiry of the transition period on December 31, 2020.
As a result of the coronavirus or other similar outbreaks or adverse public health developments, our operations, and
those of our customers and suppliers, may experience delays or disruptions, such as difficulty obtaining components and
temporary suspension of operations. In addition, our financial condition and results of operations could be adversely affected to
the extent that coronavirus or any other epidemic or outbreak harms the economies in which we operate. Any of the foregoing
could materially and adversely affect our business, financial condition, results of operations, share price and cost of capital.
Our financial performance has also been affected since the COVID-19 outbreak and the restrictions imposed by
governments across our countries of operation. Following the introduction of lockdown measures, we saw a significant impact
on roaming revenues which largely disappeared in the second quarter of 2020, while the travel restrictions further saw a market
reduction in the migrant workforce which is traditionally a source of a large subscriber base in Russia. Network traffic patterns
were also impacted as people worked from home, and this required some adjustments to our network deployment plans. As a
result of the continued outbreak of COVID-19 and restrictions imposed in our countries of operation, or other similar outbreaks or
adverse public health developments, our operations, and those of our customers and suppliers, may experience delays or
disruptions, such as difficulty obtaining components and temporary suspension of operations, and our financial condition and
results of operations could be adversely affected.
International economic sanctions and export controls may also adversely affect our ability to operate. In anticipation of
the United Kingdom leaving the European Union, the United Kingdom created a new sanctions enforcement agency, the Office of
Financial Sanctions Implementation (“OFSI”). In October 2019, OFSI announced a fine against a telecommunications carrier for
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violations of U.K. sanctions. Also, in the U.S., Congress enacted the Export Controls Act of 2018 (“ECA”) which aims to enhance
protection of U.S. technology resources by imposing greater restrictions on the transfer to non-U.S. individuals and companies,
particularly through exports to China, of certain key foundational and emerging technologies and cyber-security considered
critical to U.S. national security. In recent months, the Department of Commerce has also broadened the scope of U.S. export
controls measures to protect a wider range of national security interests, including telecommunications technology, against
perceived challenges presented by China.
In Russia, the impact of economic sanctions and the significant devaluation of the Russian ruble have negatively
impacted the Russian economy and economic outlook, and may also negatively impact our ability to raise external financing. Our
operations may also be adversely affected by potential future sanctions by the United States targeting Russia, fueled by broader
foreign policy considerations. Throughout 2020, the United States launched stronger sanctions against Russia designed to
address increased tensions in foreign conflicts (e.g., in Syria and Venezuela), proliferation of chemical and biological weapons,
tensions related to alleged election interference and Russia’s impact on European energy security. The United States included
sanctions from the Protecting Europe’s Energy Security Act of 2019 in the 2020 National Defense Authorization Act (“NDAA”),
which threatens asset freezes against companies involved in building the Russian natural gas pipelines to Europe: North Stream
2 and TurkStream. In addition, the U.S. Congress has considered passing new laws that would impose sanctions on a range of
Russian persons and entities, including banks, energy companies, defense companies and entities in the intelligence sector,
state-owned enterprises, Russian energy projects and sovereign debt, oligarchs, and senior government officials. We could be
materially adversely impacted by the imposition of further sanctions. Further confrontation in Ukraine and any escalation of
tensions between Russia and the United States and/or the European Union related to the imposition of further sanctions, or
continued uncertainty regarding the scope thereof, could have a prolonged adverse impact on the Russian economy. These
impacts could be more severe than those experienced to date. In particular, should either the United States or the European
Union expand their respective sanctions to include our suppliers or other counterparties, such an expansion could result in
substantial legal and other compliance costs and risks on our business operations and could have a material adverse impact on
our business, financial condition, results of operations or prospects. If further restrictions are levied on Russian banks, our
existing and future Russian ruble loans could be blocked both in relation to our ability to draw them and our ability to service
them and may require a change in our repayment terms. The sanctions imposed by the United States and the European Union in
connection with the Ukraine crisis so far have had an adverse effect on the Russian economy. Tensions between Russia, the
European Union and the United States have further increased recently, and there can be no assurance that the governments of
the European Union and United States or other countries will not impose further sanctions on Russia. For more on sanctions
affecting Russia and how they may affect our operations, see Geopolitical Risks - “Our operations may be adversely affected by
ongoing developments in Russia and Ukraine” and Exhibit 99.2 - Regulation of Telecommunications - Sanctions Regimes.
Deterioration of macro-economic conditions in the countries in which we operate may also have certain accounting
ramifications. A significant difference between the actual performance of our operating companies and the forecasted projections
for revenue, Adjusted EBITDA or CAPEX could require us to write down the value of the goodwill, particularly in Russia and
Algeria which have significant goodwill balances. In addition, the possible consequences of a financial and economic crisis
related to, in particular, customer behavior, the reactions of our competitors in terms of offers and pricing or their responses to
new entrants, regulatory adjustments in relation to reductions in consumer prices and our ability to adjust costs and investments
in keeping with possible changes in revenue, may also adversely affect our forecasts and lead to a write-down of tangible and
intangible assets, including goodwill. Also, significant adverse developments in our share price, and the resulting decrease in our
market capitalization may also adversely impact our accounting presentation and lead to a write-down to our goodwill balances.
A write-down recorded for tangible and intangible assets resulting in a lowering of their book values could impact certain
covenants and provisions under our debt agreements, which could result in a deterioration of our financial condition, results of
operations or cash flows.
For further information on the impairment of tangible and intangible assets and recoverable amounts (particularly key
assumptions and sensitivities), see Note 10 - Impairment of Assets to our Audited Consolidated Financial Statements. For a
discussion of the risks associated with the markets where we operate, see Geopolitical Risks - “Investors in emerging markets,
where our operations are located, are subject to greater risks than investors in more developed markets, including significant
political, legal and economic risks as well as risks related to fluctuations in the global economy.”
Liquidity and Capital Risks
Substantial amounts of indebtedness and debt service obligations could materially decrease our cash flow, adversely
affect our business and financial condition and prevent us from raising additional capital.
We have substantial amounts of indebtedness and debt service obligations. As of December 31, 2020, the outstanding
principal amount of our external debt for bonds, bank loans, and other borrowings amounted to approximately US$7.7 billion. In
addition to these borrowings, we also have lease liabilities amounting to US$1.9 billion. For more information regarding our
outstanding indebtedness and debt agreements, see — Operating and Financial Review and Prospects — Liquidity and Capital
Resources — Indebtedness.
Agreements under which we borrow funds contain obligations, which include covenants or provisions that impose on us
certain operating and financial restrictions. Some of these covenants relate to our financial performance or financial condition,
including balance sheet solvency, such as levels or ratios of earnings, debt, equity and assets and may prevent us or our
subsidiaries from incurring additional debt. Failure to comply with these covenants or provisions may result in a default, which
could increase the cost of securing additional capital, lead to accelerated repayment of our indebtedness or result in the loss of
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any assets that secure the defaulted indebtedness or to which our creditors otherwise have recourse. Such a default or
acceleration of the obligations under one or more of these agreements (including as a result of cross-default or cross-
acceleration) could have a material adverse effect on our business, financial condition, results of operations or prospects, and in
particular on our liquidity and our shareholders’ equity. In addition, covenants in our debt agreements could restrict our liquidity
and our ability to expand or finance our future operations. For a discussion of agreements under which we borrow funds, see
Note 15 — Investments, Debt and Derivatives to our Audited Consolidated Financial Statements.
Aside from the risk of default, given our substantial amounts of indebtedness and the limits imposed by our debt
obligations, our business could suffer significant negative consequences such as the need to dedicate a substantial portion of
our cash flows from operations to repayment of our debt, thereby reducing funds available for paying dividends, working capital,
capital expenditures, acquisitions, joint ventures and other purposes necessary for us to maintain our competitive position,
flexibility and resiliency in the face of general adverse economic or industry conditions.
We may not be able to raise additional capital, or we may only be able to raise additional capital at significantly
increased costs.
We may need to raise additional capital in the future, including through debt financing. If we incur additional
indebtedness, the risks that we now face related to our indebtedness and debt service obligations could increase. Specifically,
we may not be able to generate enough cash to pay the principal, interest and other amounts due under our indebtedness or we
may not be able to borrow money within local or international markets on acceptable terms, or at all. We may also be impacted
by conditions or local legal requirements in local or international markets that make it difficult to raise capital, refinance existing
debt or to service existing indebtedness. As more of our debt is denominated in local currencies, it may become more difficult to
support one jurisdiction with reserves from another jurisdiction.
Our ability to raise additional capital, and the cost of raising additional capital, may also be affected by any downgrade
of our credit ratings, which may happen for reasons outside our control and could materially harm our business, financial
condition, results of operations and prospects. In addition, economic sanctions which may be imposed in the future by the United
States, the United Nations, the European Union, or other countries or organizations, including in connection with developments
in Russia and Ukraine, may also negatively affect our existing financing and our ability to service it and our ability to secure
future external financing, particularly if the sanctions are broadened. Furthermore, the announced restrictions on use of and
future elimination of the LIBOR benchmark, expected from June 2023 for U.S. dollar LIBOR and December 2021 for other
currencies, or any other benchmark, changes in the manner of administration of any benchmark, or actions by regulators or law
enforcement agencies could result in changes to the manner in which EURIBOR or LIBOR is determined, which could require an
adjustment to the terms and conditions, or result in other consequences, in respect of any of our current or future debt linked to
such benchmark.
If we are unable to raise additional capital in the market in which we want to raise it, or at all, or if the cost of raising
additional capital significantly increases, we may be unable to make necessary or desired capital expenditures, take advantage
of investment opportunities, refinance existing indebtedness or meet unexpected financial requirements, and our growth strategy
and liquidity may be negatively affected. This could cause us to be unable to repay indebtedness as it comes due, to delay or
abandon anticipated expenditures and investments or otherwise limit operations, which could materially harm our business,
financial condition, results of operations or prospects.
A change in control of VEON Ltd. could harm our financial condition and business.
Our financing agreements across the VEON group generally have “change of control” provisions that may require us to
make a prepayment if a person or group of persons (with limited exclusions) directly or indirectly acquire beneficial or legal
ownership of or control over more than 50.0% of our share capital or the ability to appoint a majority of directors to our board. If
such a change of control provision is triggered and we fail to agree necessary amendments to our bond or loan documentation
and then fail to make any required prepayment, it could trigger cross-default or cross-acceleration provisions of our other
financing agreements, which could lead to our obligations being declared immediately due and payable. A change of control
could also impact other contracts and relationships with third parties and may require a renegotiation or reorganization of certain
contracts or undertakings. This could harm our business, financial condition, results of operations, cash flows or prospects.
Operational Risks
Our strategic initiatives may not be successfully implemented and the benefits we expect to achieve may not be
realized.
We continue to transform our business with the aim of improving our operations across all markets in which we operate.
This transformation is working to expand our growth opportunities beyond traditional voice and access data provision into new
digitally-enabled services. We are also developing new IT capabilities, including local platforms that enable our customers to
manage their accounts and services independently (“self-care”), digital applications (e.g. TV, music, financial services), billing
systems, customer relationship management systems, enterprise resource management systems, human capital management
systems and enterprise performance management systems; and reducing and simplifying our IT cost base. There can be no
assurance that this strategy will generate the results we expect. We may experience implementation issues due to a lack of
coordination or cooperation with our operating companies or third parties, significant change in key personnel or otherwise
encounter unforeseen issues, such as technological limitations, regulatory constraints or lack of customer engagement, which
could frustrate our expectations regarding cost-optimization and process redesign or otherwise delay or hinder execution of
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these initiatives. As a result, these directional improvements may not be successful, which could adversely affect our business,
financial condition, results of operations, cash flows or prospects.
As a holding company, VEON Ltd. depends on the performance of its subsidiaries and their ability to pay dividends or
make other transfers to VEON Ltd. and may therefore be affected by a variety of local legal or regulatory changes,
including changes in exchange controls and currency restrictions in the countries in which its subsidiaries operate.
VEON Ltd. is a holding company and does not conduct any revenue-generating business operations of its own. Its
principal assets are the direct and indirect equity interests it owns in its operating subsidiaries, and thus VEON Ltd. depends on
cash dividends, distributions, loans or other transfers received from its subsidiaries to make dividend payments to its
shareholders and service interest and principal payments in respect of its indebtedness, including holders of ADSs and ordinary
shares, and to meet other obligations. The ability of its subsidiaries to pay dividends and make other transfers to VEON Ltd.
depends on the success of their businesses and is not guaranteed.
VEON Ltd.’s subsidiaries are separate and distinct legal entities. Any right that VEON Ltd. has to receive any assets of,
or distributions from, any subsidiary upon its bankruptcy, dissolution, liquidation or reorganization, or to realize proceeds from the
sale of the assets of any subsidiary, may be junior to the claims of that subsidiary’s creditors, including trade creditors.
Furthermore, our ability to withdraw funds and dividends from our subsidiaries and operating companies may depend on the
consent of our strategic partners where applicable.
The ability of VEON Ltd.’s subsidiaries to pay dividends and make payments or loans to VEON Ltd., and to guarantee
the VEON group’s debt, will depend on their operating results and may be restricted by applicable corporate, tax and other laws
and regulations, including restrictions on dividends, limitations on repatriation of cash and earnings and on the making of loans
and repayment of debts, monetary transfer restrictions, covenants in debt agreements, and foreign currency exchange and
related restrictions in certain agreements or certain jurisdictions in which VEON Ltd.’s subsidiaries operate or both. For more
information on the legal and regulatory risks associated with our markets, see Regulatory, Compliance and Legal Risks — “We
operate in uncertain judicial and regulatory environments.”
For more information on the restrictions on dividend payments, see Geopolitical Risks — “The banking systems in many
countries in which we operate remain underdeveloped, there are a limited number of creditworthy banks in these countries with
which we can conduct business and currency control requirements restrict activities in certain markets in which we have
operations.”
Initiatives to merge with or acquire other companies or businesses, divest our companies, businesses or assets or to
otherwise invest in or form strategic partnerships with third parties may divert management attention and resources
away from our underlying business operations, and such efforts may not yield the benefits that were expected, or
subject us to additional liabilities and higher costs from integration efforts or otherwise.
We seek from time to time to merge with or acquire other companies or businesses, divest our companies or
businesses or form strategic partnerships through investments, the formation of joint ventures or otherwise, for various strategic
reasons, including to: simplify our corporate structure; pursue optimal competitive positions in markets in which we have
operations; divest certain operations, business lines or assets, including infrastructure assets; acquire more frequency spectrum;
acquire new technologies and service capabilities; share our networks or infrastructure; add new customers; increase market
penetration; expand into new or enhance “non-telecommunications” services such as digital financial services, banking or digital
content; and expand into new markets.
Our ability to implement successful mergers, acquisitions, strategic partnerships or investments depends upon our
ability to identify, evaluate, negotiate the terms of, complete and integrate suitable businesses and to obtain any necessary
financing and the prior approval of any relevant regulatory bodies. These efforts could divert the attention of our management
and key personnel from our underlying business operations. Following any such merger, acquisition, strategic partnerships or
investment or failure of any such transaction to materialize (including any such failure caused by regulatory or third-party
challenges), we may experience:
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difficulties in realizing expected synergies and investment returns from acquired companies, joint ventures, investments
or other forms of strategic partnerships;
unsuccessful integration of personnel, products, property and technologies into our existing business;
higher or unforeseen costs of integration or capital expenditures (including the time and resources of our personnel
required to successfully integrate any combined businesses);
difficulties relating to the acquired or formed companies’ or our partnerships’ compliance with telecommunications or
other regulatory licenses and permissions, compliance with laws, regulations and contractual obligations, ability to
obtain and maintain favorable interconnect terms, frequencies and numbering capacity and ability to protect our
intellectual property;
adverse market reactions stemming from competitive and other pressures;
difficulties in retaining key employees of the merged or acquired business or strategic partnerships who are necessary
to manage the relevant businesses;
difficulties in maintaining uniform standards, controls, procedures and policies throughout our businesses;
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risks related to loss of full control of a merged business, or not having the ability to adequately control and manage an
acquired business, strategic partnership or investment;
risks that different geographic regions present, such as currency exchange risks, competition, regulatory, political,
economic and social developments, which may, among other things, restrict our ability to successfully capitalize on our
acquisition, merger, joint venture or investment;
adverse customer reaction to the business acquisition or combination; and
increased liability and exposure to contingencies that we did not contemplate at the time of the merger, acquisition,
strategic partnership or investment, including tax liabilities.
In addition, a merger, acquisition, strategic partnership or investment could materially impair our operating results by
causing us to incur debt or requiring us to amortize merger or acquisition expenses and merged or acquired assets. We may not
be able to assess ongoing profitability and identify all actual or potential liabilities or issues of a business prior to a merger,
acquisition, strategic partnership or investment. If we merge with, acquire, form strategic partnerships with, or invest in
businesses or assets and it results in assuming unforeseen liabilities or we have not obtained contractual protections or such
protection is not available, our business, financial condition, results of operations, cash flows or prospects could be adversely
affected. As we investigate industry consolidation, our risks may increase. Our integration and consolidation of such businesses
may also lead to changes in our operational efficiencies or structure. For more information about our recent transactions, see
Note 9 - Significant Transactions to our Audited Consolidated Financial Statements.
From time to time, we may seek to divest some of our businesses, including divestitures of operations in certain
markets, infrastructure or business lines, but such divestitures may take longer than anticipated or may not happen at all. If
these or other divestitures do not occur, close later than expected or do not deliver expected benefits, this may result in
decreased cash proceeds to the group and continued operations of non-core businesses that divert the attention of our
management. Our success with any divestiture is dependent on effectively and efficiently separating the divested asset or
business and reducing or eliminating associated overhead costs which may prove difficult or costly for us. There could also be
transitional or business continuity risks or both associated with these divestitures that may impact our service levels and
business targets. Further, in some cases, we may agree to indemnify acquiring parties for certain liabilities arising from our
former businesses. Failure to successfully implement or complete a divestiture could materially harm our business, financial
condition, results of operations, cash flows or prospects.
Our strategic partnerships and relationships carry inherent business risks.
We participate in strategic partnerships and joint ventures in a number of countries, including in Pakistan (Pakistan
Mobile Communications Limited, "PMCL"), Kazakhstan (KaR-Tel LLP and TNS-Plus LLP), Algeria (Omnium Telecom Algérie
S.p.A., "OTA"), Uzbekistan (Joint Venture Buzton LLC), Kyrgyzstan (“Sky Mobile” LLC and Terra LLC), Georgia (“VEON
Georgia” LLC) and Singapore (a minority holding in Shopup Pte. Ltd.). In addition, in Algeria, our local partner is a government
institution, which could increase our exposure to the risks discussed in — Geopolitical Risks.
We do not always have a controlling stake in our affiliated companies and even when we do, our actions with respect to
these affiliated companies may be restricted to some degree by shareholders’ agreements entered into with our strategic
partners. In addition, our ability to withdraw funds and dividends from these entities may depend on the consent of partners. If
disagreements develop with our partners, or any existing disagreements are exacerbated, our business, financial condition,
results of operations, cash flows or prospects may be harmed.
For example, in Algeria, our partner can acquire the shares held by GTH at fair market value in various circumstances
(including, generally, change in VEON’s indirect control of OTA, insolvency of GTH or VEON or material breach of the
shareholders’ agreement by GTH), as well as under call option arrangements exercisable solely at its discretion between
October 1, 2021 and December 31, 2021. Concurrently, GTH has a right to require our partner in Algeria to acquire its shares in
various circumstances (including, generally, change of control of the Algerian National Investment Fund, material breach of the
shareholders’ agreement by the Algerian National Investment Fund, loss of VEON’s ability to consolidate OTA, the taking of
certain actions in Algeria against GTH or OTA, failure by OTA to pay a minimum dividend or imposition of certain tax
assessments), as well as under put option arrangements exercisable solely at its discretion between July 1, 2021 and
September 30, 2021. In September 2020, in Pakistan, our partner the Dhabi Group, exercised its put option to sell us, at fair
value (based on a mechanism established under the applicable shareholders’ agreement), its 15% shareholding in PMCL, the
operating company of our subsidiary Jazz. Completion of the transfer remains subject to the conclusion of the contractual
transfer mechanics with the Dhabi Group, and once completed, VEON will indirectly own 100% of PMCL.
If one of our strategic partners becomes subject to investigation, sanctions or liability, or does not act in accordance with
our standards, we might be adversely affected. Furthermore, strategic partnerships in emerging markets are accompanied by
risks inherent to those markets, such as an increased possibility of a partner defaulting on obligations or losing a partner with
important insights in that region.
If any of the above circumstances occur, or we otherwise determine that a partnership or joint venture is no longer
yielding the benefits we expect to achieve, we may decide to unwind such initiative, which may result in significant transaction
costs or an inferior outcome than was expected when we entered into such partnership or joint venture.
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We depend on third parties for certain services and equipment, infrastructure and other products important to our
business.
We rely on third parties to provide services and products important for our operations. We currently purchase the
majority of our network-related equipment from a core number of suppliers, principally Ericsson, Huawei, Nokia, Cisco and ZTE.
The successful build-out and operation of our networks depends heavily on obtaining adequate supplies of core and
transmission telecommunications equipment, fiber, switching equipment, radio access network solutions, base stations and other
services and products on a timely basis. From time to time, we have experienced delays in receiving equipment, installation of
equipment, and maintenance services. Delivery of equipment can be delayed by new and existing telecommunications
regulations, customs regulations and governmental investigations or enforcement actions. Our vendors’ ability to deliver on key
network and IT projects can be affected by global events such as pandemics, as we saw in the recent COVID-19 pandemic, by
trade tensions and new regulations.
Our business could be materially impacted by disruptions to our core suppliers’ businesses or supply chains, due to
developments such as significant geopolitical events, changes in law or regulation, public health issues (such as the
coronavirus), and export and re-export restrictions that affect our and our suppliers’ ability to procure goods, software or
technology necessary for the service, production and satisfactory delivery of the supplies, support services, and equipment that
we source from them. For example, in May and August 2019, the U.S. Department of Commerce added Huawei and 114 of its
affiliates to its “Entity List”, prohibiting companies globally from directly or indirectly exporting, re-exporting or transferring (in-
country) all items subject to the EAR to Huawei and procuring items from Huawei when they know or have reason to know that
the items were originally procured by Huawei in violation of the EAR. Further restrictions adopted by the United States, or any
other applicable jurisdiction, on Huawei could potentially have a material adverse impact on our operations in certain markets
where we are reliant on Huawei equipment or services. Specifically, any restriction on Huawei’s ability to deliver equipment or
services, or on our ability to receive such equipment or services, could adversely impact our business, the operation of our
networks and our ability to comply with the terms of our operating licenses and local laws and regulations.
We have and may continue to outsource all or a portion of construction, maintenance services, IT infrastructure hosting
and network capabilities in certain markets in which we operate. For example, our digital stacks and data management platforms
are dependent on third parties. We have also partially implemented outsourcing initiatives in a number of markets including
Russia and Kazakhstan. For more information on such initiatives, see - Property, Plants and Equipment. Our business could be
materially harmed if our agreements with third parties were to terminate, if our partners experience certain negative
developments (financial, legal, regulatory or otherwise), or a dispute between us and such parties occurs, causing the parties to
no longer be able to deliver the required services on a timely basis or at all or otherwise fulfill their obligations under our
agreements with them. If such events occur, we may attempt to renegotiate the terms of such agreements with the third parties.
For example, in February 2019, we entered into a revised agreement with Ericsson to upgrade core IT systems in several
countries with new digital business support systems (DBSS). For more information on this revised agreement, see - Business
Overview - Information Technology. There can be no assurance that the terms of such amended agreements will be more
favorable to us than those of the original agreements. For more information, see — Property, Plants and Equipment. As a result,
the implementation of such initiatives, including our digital stacks and data management platforms, is dependent on third parties.
We also depend on third parties, including software providers and service providers, for our day-to-day business
operations. For example, we rely on roaming partners to provide services to our customers while they are outside the countries
in which we operate and on interconnect providers to complete calls that originate on our networks but terminate outside our
networks, or that originate outside our networks and terminate on our networks. Certain roaming partners have been targeted by
sanctions restrictions which has led us to change or terminate certain roaming relationships. We also rely on handset providers
to provide the equipment used on our networks. Many of our mobile products and services are sold to customers through third
party channels. These third-party retailers, agents and dealers that we use to distribute and sell products are not under our
control and may stop distributing or selling our products at any time or may more actively promote the products and services of
our competitors. Should this occur with particularly important retailers, agents or dealers, we may face difficulty in finding new
retailers, sales agents or dealers that can generate the same level of revenue. Any negative developments regarding the third
parties on which we depend could materially harm our business, financial condition, results of operations, cash flows or
prospects.
The telecommunications industry is highly capital intensive and requires substantial and ongoing expenditures of
capital.
The telecommunications industry is highly capital intensive. Our success depends to a significant degree on our ability
to keep pace with new developments in technology, to develop and market innovative products and to update our facilities and
process technology, which will require additional capital expenditures in the future. The amount and timing of our capital
requirements will depend on many factors, including acceptance of and demand for our products and services, the extent to
which we invest in new technology and research and development projects, the status and timing of competitive developments,
and certain regulatory requirements.
Although we regularly consider and take measures to improve our capital efficiency, including selling capital intensive
segments of our business and entering into managed services and network sharing agreements with respect to towers and other
assets, our levels of capital expenditure will remain significant. If we do not have sufficient resources from our operations to
finance necessary capital expenditures, we may be required to raise additional debt or equity financing, which may not be
available when needed or on terms favorable to us or at all. If we are unable to obtain adequate funds on acceptable terms, or at
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all, we may be unable to develop or enhance our products, take advantage of future opportunities or respond to competitive
pressures, which could harm our business, financial condition, results of operations, cash flows or prospects. For more
information on our future liquidity needs, see — Operating and Financial Review and Prospects — Liquidity and Capital
Resources — Future Liquidity and Capital Requirements.
Cyber-attacks and other cybersecurity threats may lead to compromised or inaccessible telecommunications, digital
and financial services and/or leaks or unauthorized processing of confidential information, and perceptions of such
threats may cause customers to lose confidence in our services.
Each of our subsidiaries is responsible for managing cybersecurity risks locally, including all operational preventive,
detective and response capabilities, and as a group our operations and business continuity depend on how well these
subsidiaries collectively protect and maintain our network equipment, information technology (“IT”) systems and other assets.
Due to the nature of the services we offer across our geographical footprint, we are exposed to cybersecurity threats that could
negatively impact our business activities through service degradation, alteration or disruption, including a risk of unauthorized
access to our systems, networks and data by third parties, whether private or state-sponsored, utilizing unidentified existing or
new weaknesses, flaws or backdoors into network or IT systems. Cybersecurity threats could also lead to the compromise of our
physical assets dedicated to processing or storing customer and employee information, financial data and strategic business
information, exposing this information to possible leakage, unauthorized dissemination and loss of confidentiality. These events
could result in reputational harm, lawsuits against us by customers, employees or other third parties, violations of data protection
and telecommunications laws, adverse actions by telecommunications regulators and other authorities, an inability to operate our
digital services or our wireless or fixed-line networks, loss of revenue from business interruption, loss of market share or
significant additional costs. In addition, the potential liabilities associated with these events could exceed the cyber insurance
coverage we maintain and certain violations of data protection and telecommunications laws (including as a result of data
leakage) are administrative or criminal offenses in some countries, and can result in suspension of operating licenses,
imprisonment or fines for the entity and/or the individuals involved.
Although we devote significant resources to the development and improvement of our IT and security systems, we are
and will continue to remain vulnerable to cyber-attacks and other cybersecurity threats that could lead to compromised or
inaccessible telecommunications, digital and financial services and/or leaks or unauthorized processing of confidential
information, including customer information. Our systems are vulnerable to harmful viruses and the spread of malicious software
that could compromise the confidentiality, integrity or availability of technology assets. In addition, unauthorized users or hackers
may access and process the customer and business information we hold, or authorized users may improperly process such
data. Such risks are inherent in our business operations and we will never be able to fully insulate ourselves from these risks.
Our systems will remain vulnerable to attacks by third parties who are able to thwart the safeguards we have in place with tactics
that are unforeseen or prove to be too sophisticated. Moreover, we may experience cyber-attacks and IT and network failures
and outrages due to factors under our control, such as malfunction of technology assets or services caused by obsolescence,
wear or defects in design or manufacturing, faults during standard or extraordinary maintenance procedures, unforeseen
absence of key personnel, and the inability to protect our systems from phishing attacks.
From time to time, we have experienced cyber-attacks of varying degrees to gain access to our computer systems and
networks. As of the date of this Annual Report on Form 20-F, we have suffered various cybersecurity incidents, which targeted
our internal infrastructure but were contained by our response teams and generated limited or negligible impacts. In addition, we
have identified unauthorized access to some of our network systems, possibly with the intention to capture information or
manipulate the communications. Although we found no evidence that any such capture or manipulation was performed, we
cannot guarantee that they did not take place, that all such attempts will be successfully thwarted in the future or that the impact
of such attempts, if successful, would not be material to our business. There is also a possibility that we are not currently aware
of certain undisclosed vulnerabilities in our IT systems and other assets. In such an event, hackers or other cybercrime groups
(whether private or state-sponsored) may exploit such vulnerabilities, weaknesses or unidentified backdoors (including previously
unidentified designed weaknesses embedded into network or IT equipment allowing access by private or government actors) or
may be able to cause harm more quickly than we are able to mitigate (zero-day exploits).
Our business is also subject to disruption by computer malware or other technical or operational issues. Although our
subsidiaries have implemented cyber-security strategies for mitigating these risks, we cannot be sure that our network and
information technology systems will not be subject to such issues, or, if they are, that we will be able to maintain the integrity of
our customers’ and employees’ data or that malware or other technical or operational issues will not disrupt our network or
systems and cause significant harm to our operations. For example, in recent years, we have experienced infections by malware,
advanced persistent threats, and network service interruptions during installations of new software. In some regions, our
equipment for the provision of mobile services resides in a limited number of locations or buildings. Disruption to the security or
operation of these locations or buildings could result in disruption of our mobile services in those regions. Moreover, the
implementation of our transformation strategies may result in under-investments or failures in internal business processes, which
may in turn result in greater vulnerability to technical or operational issues, including harm from failure to detect malware.
If our services are affected by such attacks and malware and this degrades our services, our products and services may
be perceived as being vulnerable to cyber risk and the integrity of our data protection systems may be questioned. As a result,
users and customers may curtail or stop using our products and services, and we may incur litigation exposure, regulatory fines,
penalties, reimbursement or other compensatory costs.
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Our equipment and systems are subject to disruption and failure for various reasons which could cause us to lose
customers, limit our growth, violate our licenses or reduce the confidence of our customers in our ability to securely
hold their personal data.
Our business depends on providing customers with reliability, capacity and security. Our technological infrastructure is
vulnerable to damage or disruptions from other events, including natural disasters, military conflicts, power outages, terrorist
acts, riots, government shutdown orders, changes in government regulation, equipment or system failures or an inability to
access or operate such equipment or systems, human error or intentional wrongdoings, such as breaches of our network, cyber-
attacks or any other types of information technology security threats. For example, we may experience network or technology
failures or a leak or unauthorized processing of confidential customer data if our technology assets are altered, damaged,
destroyed or misused, by employees, third parties or users, either intentionally or due to human error. In addition, as we operate
in countries which may have an increased threat of terrorism and military conflict, incidents on or near our premises, equipment
or points of sale could result in causalities, property damage, business interruption, legal liability and damage to our brand or
reputation.
Interruptions of services could harm our reputation and reduce the confidence of our customers to hold their personal
data, and consequently impair our ability to obtain and retain customers and could lead to a violation of the terms of our licenses,
each of which could materially harm our business. In addition, the potential liabilities associated with these events could exceed
the business interruption insurance we maintain.
Our ability to profitably provide telecommunications services depends in part on the terms of our interconnection
agreements and access to third-party owned infrastructure and networks.
Our ability to secure and maintain interconnection agreements with other wireless and local, domestic and international
fixed-line operators and, upon access to infrastructure, networks and connections that are owned or controlled by third parties
and governments, on cost-effective terms is critical to the economic viability of our operations. The countries in which we operate
have a limited number of international cable connections providing access to internet, data service and call interconnection and
such international connections may be controlled by national governments that may seek to control or restrict access from time
to time or impose conditions on pricing and availability which may impact our access and the competitiveness of our pricing.
Outages, disconnections or restrictions, including governmental, to access affecting these international connections can have a
significant impact on our ability to offer services and data connectivity to our customers. Interconnection is required to complete
calls that originate on our respective networks but terminate outside our respective networks, or that originate from outside our
respective networks and terminate on our respective networks. In certain jurisdictions in which we operate, the relevant regulator
sets mobile termination rates (“MTRs”). If any such regulator sets MTRs that are lower for us than the MTRs of our competitors,
our interconnection costs may be higher and our interconnection revenues may be lower, relative to our competitors. Moreover,
even in cases of equal MTRs on the market for all players, the lowered MTR significantly impacts our revenues on a particular
market. A significant increase in our interconnection costs, or decrease in our interconnection rates, as a result of new
regulations, commercial decisions by other fixed-line operators, increased inflation rates in the countries in which we operate or a
lack of available line capacity for interconnection could harm our ability to provide services, which could in turn harm our
business, financial condition, results of operations, cash flows or prospects. For more information on our interconnection
agreements, see — Business Overview.
Our intellectual property rights are costly and difficult to protect, and we cannot guarantee that the steps we have taken
to protect our intellectual property rights will be adequate.
We regard our copyrights, service marks, trademarks, trade names, trade secrets, know-how and similar intellectual
property, including our rights to certain domain names, as important to our continued success. For example, our widely
recognized logos, such as “VEON”, “Beeline” (Russia, Kazakhstan, Uzbekistan, Georgia and Kyrgyzstan), “Kyivstar” (Ukraine),
“Jazz” (Pakistan), “Djezzy” (Algeria) and “banglalink” (Bangladesh), have played an important role in building brand awareness
for our services and products. We rely upon trademark and copyright law, trade secret protection and confidentiality or license
agreements with our employees, customers, partners and others to protect our proprietary rights. However, intellectual property
rights are especially difficult to protect in many of the markets in which we operate. In these markets, the regulatory agencies
charged to protect intellectual property rights are inadequately funded, legislation is underdeveloped, piracy is commonplace and
enforcement of court decisions is difficult.
We are in the process of registering, and maintaining and defending the registration of, the VEON name and logo as
trademarks in the jurisdictions in which we operate and other key territories, along with our other key trademarks and
tradenames, logos and designs. As of the date of this Annual Report, we have achieved registration of the VEON name in
thirteen of the seventeen jurisdictions sought (although in only certain classes in the European Union), with the remaining four
pending. With respect to the logo, we have achieved registration in thirteen of the seventeen jurisdictions sought (although in
only certain classes in the European Union and Bermuda), with the remaining four pending. The timeline and process required to
obtain trademark registration can vary widely between jurisdictions.
As we continue our investment into a growing ecosystem of local digital services, we will need to ensure that we have
adequate legal rights to the ownership or use of necessary source code, content, and other intellectual property rights associated
with our systems, products and services. For example, a number of platforms and non-connectivity services offered by VEON
and its operating companies are developed using source code created in conjunction with third parties. We rely on a combination
of contractual provisions and intellectual property law to protect our proprietary technology and software, access to and use of
source code and other necessary intellectual property. Third parties may infringe or misappropriate our intellectual property. As
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the number of convergent product offerings, such as JazzCash or Beeline TV, and overlapping product functions increase, the
possibility of intellectual property infringement claims against us may increase. Any such litigation may result in substantial costs
and diversion of resources, and adverse litigation outcomes could harm our business, financial condition, results of operations,
cash flows or prospects. We may have to litigate to enforce and protect our copyrights, trademarks, trade names, trade secrets
and know-how or to determine their scope, validity or enforceability. In that event, we may be required to incur significant costs,
and our efforts may not prove successful. The inability to secure or protect our intellectual property assets could have a material
adverse effect on our business and our ability to compete.
In addition, new intellectual property laws or regulations may require us to invest substantial resources or may be
unclear. Current and new intellectual property laws may affect the ability of companies, including us, to protect their innovations
and defend against claims of intellectual property rights infringement. The costs of compliance with these laws and regulations
are high and are likely to increase in the future. Claims have been, or may be threatened and/or filed against us for intellectual
property infringement based on the nature and content in our products and services, or content generated by our users.
Current and new intellectual property laws may affect the ability of companies, including us, to effectively protect their
innovations and defend against claims of intellectual property rights infringement. The costs of compliance with these laws and
regulations are high and are likely to increase in the future. Claims have been, or may be threatened and/or filed against us for
intellectual property infringement based on the nature and content in our products and services, or content generated by our
users.
We depend on our senior management and highly skilled personnel, and, if we are unable to retain or motivate key
personnel, hire qualified personnel, or implement our strategic goals or corporate culture through our personnel, we
may not be able to maintain our competitive position or to implement our business strategy.
Our performance and ability to maintain our competitive position and to implement our business strategy is dependent
in certain important respects on our global senior management team, highly skilled personnel and their level of continuity. In the
markets in which we operate, competition for qualified personnel with relevant expertise is intense. There is sometimes limited
availability of individuals with the requisite knowledge of the telecommunications and the digital services industries, the relevant
experience and, in the case of expatriates, the ability or willingness to accept work assignments in certain of the jurisdictions in
which we operate. We have experienced in recent years, and may continue to experience, certain changes in key management.
The loss of any key personnel or an inability to attract, train, retain and motivate qualified members of senior
management or highly skilled personnel could have an adverse impact on our ability to compete and to implement new business
models and could harm our business, financial condition, results of operations, cash flows or prospects. In addition, we may not
succeed in instilling our corporate culture and values in new or existing employees, which could delay or hamper the
implementation of our strategic priorities, or our compensation schemes may not always be successful in attracting new qualified
employees and retaining and motivating our existing employees.
Our success is also dependent on our personnel’s ability to adapt to rapidly changing environments and to perform in
pace with continuous innovations and industry developments. We also may, from time to time, make adjustments or changes to
our operating and governance model and there is a risk in such instances that our personnel and the overall organization may
not effectively adapt. Although we devote significant attention to recruiting and training, there can be no assurance that our
existing personnel will successfully be able to adapt to and support our strategic priorities. There is also a possibility that we are
unable to attract qualified individuals with the requisite skills to implement our digital initiatives or other business strategies.
We face uncertainty regarding our frequency allocations and may experience limited spectrum capacity for providing
wireless services, and are subject to risk that government action results in requiring us to transfer our existing
spectrum allocations.
To establish and commercially launch mobile and fixed wireless telecommunications networks, we need to receive
frequency allocations for bandwidths within the frequency bands in the regions in which we operate. The availability of spectrum
is limited, closely regulated and can be expensive, and we may not be able to obtain it from the regulator or third parties at all or
at a price that we deem to be commercially acceptable given competitive conditions or without the imposition of certain service
obligations, which could be burdensome. There are a limited number of frequencies available for mobile operators in each of the
regions in which we operate or hold licenses to operate. We are dependent on access to adequate frequency allocation in each
such market in order to maintain and expand our customer base. In the past, we have experienced difficulties in obtaining
adequate frequency allocation in some of the markets in which we operate. For instance, in Russia, we have previously been
unable to obtain frequency allocations in an assigned frequency band for LTE network development and, in Bangladesh, while
we are currently one of the largest operators, we until recently held a disproportionately small amount of the frequency spectrum.
In addition, frequency allocations may be issued for periods that are shorter than the terms of our licenses, and such allocations
may not be renewed in a timely manner, or at all.
We are also subject to the risk that government action impairs our frequency allocations or spectrum capacity. For
example, in 2017, the government of Uzbekistan published a decision ordering the equitable reallocation amongst all
telecommunications providers in the market, which has affected approximately half of the 900 MHz and 1800 MHz radio
frequencies of our Uzbek subsidiary, Unitel LLC. The decision, which also granted tech neutrality in the 900 MHz and 1800 MHz
bands, came into force on March 31, 2018. In addition, the Ministry of Digital Development, Communications and Mass Media of
the Russian Federation (formerly, the Ministry of Telecom and Mass Communications of the Russian Federation) has published a
number of regulations regarding frequency allocation, consolidation and conversation, and increase of spectrum fees.
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We may also be subject to increases in fee payments for frequency allocations under the terms of some of our licenses
or to obtain new licenses.
Legislation in many countries in which we operate, including Russia and Pakistan, requires that we make payments for
frequency spectrum usage. As a whole, the fees for all available frequency assignments, as well as allotted frequency bands for
different mobile communications technologies, have been significant. For example, in Pakistan, the PTA issued a license
renewal decision on July 22, 2019 requiring payment of an aggregate price of approximately US$450 million, a price which we
are currently disputing in the Islamabad High Court, where the most recent hearing on this matter was concluded on March 1,
2021 and a judgment is now pending. Any significant increase in the fees payable for the frequencies that we use or for
additional frequencies that we need could have a negative effect on our financial results. We expect that the fees we pay for
radio-frequency spectrum, including radio-frequency spectrum renewals, could substantially increase in some or all of the
countries in which we operate, and any such increase could harm our business, financial condition, results of operations, cash
flows or prospects.
If our frequency allocations are limited, we are unable to renew our frequency allocations or obtain new frequencies to
allow us to provide mobile or fixed wireless services on a commercially feasible basis, our network capacity and our ability to
provide these services would be constrained and our ability to expand would be limited, which could harm our business, financial
condition, results of operations, cash flows or prospects.
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Regulatory, Compliance and Legal Risks
We operate in uncertain judicial and regulatory environments, which may result in unanticipated outcomes that harm
our business.
In many of the emerging market countries where we operate, the application of the laws and regulations of any
particular country is frequently unclear and may result in unpredictable outcomes, including:
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restrictions or delays in obtaining additional numbering capacity, receiving new licenses and frequencies, receiving
regulatory approvals for rolling out our networks in the regions for which we have licenses, receiving regulatory
approvals for the use of changes to our frequency, receiving regulatory approvals of our tariffs plans and importing and
certifying our equipment;
significant additional costs, including fines and penalties, operational burdens and other difficulties associated with not
complying in a timely manner, or at all, with new or existing legislation or the terms of any notices or warnings received
from the telecommunications and other regulatory authorities; and
adverse rulings or audit findings by courts or government authorities resulting from a change in interpretation or
inconsistent application of existing law,
each of which may cause delays in implementing our strategies and business plans and create a more challenging operating
environment. If we are found to be involved in practices that do not comply with applicable laws or regulations, we may be
exposed to significant fines, the risk of prosecution or the suspension or loss of our licenses, frequency allocations,
authorizations or various permissions, any of which could harm our business, financial condition, results of operations, cash
flows or prospects.
New or proposed changes to laws or new interpretations of existing laws in the markets in which we operate may harm
our business.
We are subject to a variety of national and local laws and regulations in the countries in which we do business. These
laws and regulations apply to many aspects of our business. Violations of applicable laws or regulations could damage our
reputation or result in regulatory or private actions with substantial penalties or damages, including the revocation of our
licenses. In addition, any significant changes in such laws or regulations or their interpretation, or the introduction of higher
standards, additional obligations or more stringent laws or regulations, including revision in regulations for license and frequency
allocation and changes in foreign policy or trade restrictions and regulations (such as those resulting from recent tariff disputes
between the United States and China) could have an adverse impact on our business, financial condition, results of operations
and prospects.
For example, in some of the markets in which we operate, SIM verification and re-verification initiatives have been
implemented. In Pakistan, our subsidiary was required to re-verify more than 38 million SIM cards in 2016, with operators
blocking all SIM cards that could not be verified. This resulted in a loss of approximately 13% of its customer base. In addition,
the Pakistan Prevention of Electronic Crimes Act of 2016 introduced sentencing and heavy fines for certain traditional marketing
activities, thus directly impacting how we conduct our business. Similar actions may be contemplated or introduced in other
markets in which we operate. In addition to customer losses, such requirements can result in claims from legitimate customers
who are incorrectly blocked, fines, license suspensions and other liabilities for failure to comply with the requirements. To the
extent re-verification and/or new verification requirements are imposed in the jurisdictions in which we operate, it could have an
adverse impact on our business, financial condition, results of operations and prospects.
Many jurisdictions in which we operate have seen the adoption of data localization and protection laws that prohibit the
collection of certain personal data through servers located outside of the respective jurisdictions. For example, in Russia,
telecommunications operators are required to provide information to Russian investigative authorities and gradually install pre-
approved equipment to ensure storage of metadata for three years and contents of communications for six months pursuant to
Federal Law No 374-FZ (commonly referred to as the Yarovaya laws). Violation of these laws by an operator may result in fines,
suspension of activities or license revocation. For more information on the Yarovaya laws, see “Anti-terror legislation passed in
Russia and other jurisdictions could result in additional operating costs and capital expenditures and may harm our business.”
In some jurisdictions in which we operate legislation is being implemented to establish a legal framework for preventing
cyber-attacks and protecting critical information infrastructure. For example, Russian telecommunications operators are obliged
to take various measures to protect their information infrastructure, provide reliable data transmission channels and inform
government agencies and partners about incidents on critical information infrastructure. In addition, Federal Law No. 90-FZ “On
certain amendments to the Federal Law ‘On communications’ and Federal Law ‘On information, information technologies and
information protection’” (commonly referred to as the RuNet law) was adopted in Russia in 2019. The RuNet law is aimed at the
development of an autonomous system that can support the operation of the internet in Russia in the event of disconnection from
the global network and allow the Russian government to centralize, control and restrict data traffic in case of certain emergencies
as may be determined by the Russian authorities. The provisions of the RuNet law impose a number of obligations that aim to
ensure the centralization and control over data traffic on a broad range of persons. Telecommunications operators, including us,
are required to, among other things, install counter-threat equipment to be provided by the Russian authorities, participate in
trainings and file certain notifications to the Russian authorities. We are in the process of ensuring compliance with these
requirements. However, the application of the RuNet law may, among other things, reduce the data transfer speed significantly,
adversely affect the functioning of our infrastructure and business operations, restrict the use of or result in interruption of certain
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services, and trigger material costs. Most of the provisions of the RuNet law and subordinate legislation entered into force
between November 1, 2019 and May 11, 2020. On December 30, 2020, the Russian government decree “On licensing of
activities in the field of communication services” introduced a new license requirement: ensuring the implementation of
requirements related to the stability, security and integrity of the internet. The new provisions came into force on January 1, 2021.
The implementation and support of measures to comply with the legislation may lead to substantial investments.
We are, and may in the future be, involved in, associated with, or otherwise subject to legal liability in connection with
disputes and litigation with regulators, competitors and third parties.
We are party to a number of lawsuits and other legal, regulatory or antitrust proceedings and commercial disputes, the
final outcome of which is uncertain. Litigation and regulatory proceedings are inherently unpredictable. An adverse outcome in, or
any disposition of, these or other proceedings, including any that may be asserted in the future, could harm our reputation and
have an adverse impact on our business, financial condition, results of operations, cash flows or prospects. For more information
on these disputes, see Note 7 - Provisions and Contingent Liabilities to our Audited Consolidated Financial Statements.
In addition, we currently host and provide a wide variety of services and products that enable users to engage in various
online activities. The law relating to the liability of providers of these online services and products for the activities of their users is
still unsettled in some jurisdictions. Claims may be threatened or brought against us for defamation, negligence, breaches of
contract, copyright or trademark infringement, unfair competition, tort, including personal injury, fraud, or other grounds based on
the nature and content of information that we use and store. In addition, we may be subject to domestic or international actions
alleging that certain content we have generated, user-generated content or third-party content that we have made available
within our services violates applicable law.
We may also be subject to claims concerning certain third-party products, services or content we provide by virtue of
our involvement in marketing, branding, broadcasting, or providing access to them, even if we do not ourselves host, operate,
provide, or provide access to, these products, services or content. Defense of any such actions could be costly and involve
significant time and attention of our management and other resources, may result in monetary liabilities or penalties, and may
require us to change our business in an adverse manner.
We may not be able to detect and prevent fraud or other misconduct by our employees, joint venture partners, non-
controlled subsidiaries, representatives, agents, suppliers, customers or other third parties.
We may be exposed to fraud or other misconduct committed by our employees, joint venture partners, representatives,
agents, suppliers, customers or other third parties undertaking actions on our behalf that could subject us to litigation, financial
losses and fines or penalties imposed by governmental authorities, and affect our reputation. Such misconduct could include, but
is not limited to, misappropriating funds, conducting transactions that are outside of authorized limits, engaging in
misrepresentation or fraudulent, deceptive or otherwise improper activities, including activities in exchange for personal benefit or
gain or activities that otherwise do not complying with applicable laws or our internal policies and procedures. The risk of fraud or
other misconduct could increase as we expand certain areas of our business.
We regularly review and update our policies and procedures and internal controls, which are designed to provide
reasonable assurance that we and our employees comply with applicable laws and our internal policies. VEON Ltd. issued a
Business Partner Code of Conduct that we expect our representatives, agents, suppliers and other third parties to follow. In
addition, we conduct risk-based training for our employees. However, are no guarantees that such policies, procedures, internal
controls and training will, at all times, prevent or detect misconduct and protect us from liability arising from actions of our
employees, representatives, agents, suppliers, customers or other third parties.
In addition to legal and financial liability, our reputation may be adversely impacted by association, action or inaction
that is perceived by stakeholders or customers to be inappropriate or unethical and not in keeping with the group’s stated
purposes and values. Reputational risk may arise in many different ways, including, but not limited to any real or perceived:
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failure to act in good faith and in accordance with the group’s values, Code of Conduct, other policies, procedures, and
internal standards;
failure to comply with applicable laws or regulations or association, real or perceived, with illegal activity;
failure in corporate governance, management or systems;
association with controversial practices, customers, transactions, projects, countries or governments;
association with controversial business decisions, including but not limited to, those relating to existing or new products,
delivery channels, promotions/advertising, acquisitions, representation, sourcing/supply chain relationships, locations,
or treatment of financial transactions; or
association with poor employment or human rights practices.
Our Mobile Financial Services (“MFS”) and Digital Financial Services (“DFS”) offerings are complex and increase our
exposure to fraud, money laundering, reputational and regulatory risk.
MFS and DFS offerings are complex and subject to regulatory requirements which can be different from regulatory
requirements of a telecommunications business. They may involve cash handling or other value transfers, exposing us to risk
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that our customers or business partners engage in fraudulent activities, money laundering or terrorism financing. Violations of
anti-money laundering and counter-terrorist financing laws, know-your-customer rules, and customer name screening and
monitoring requirements or other regulations applicable to our MFS/DFS offerings could have material adverse effects on our
financial condition and results of operations and result in legal and financial liability or reputational damage. The regulations
governing these services are evolving and, as they develop, regulations could become more onerous, impose additional controls,
reporting or disclosure obligations, or limit our flexibility to rapidly deploy new products, which may limit our ability to provide our
services efficiently or in the way originally envisioned.
In addition, because our MFS and DFS offerings require us to process personal data (such as, consumer names,
addresses, credit and debit card numbers and bank account details), we must comply with strict data privacy and consumer
protection laws. For more information on risks associated with possible unauthorized disclosure of such personal data, see - “We
collect and process sensitive customer data, and are therefore subject to an increasing amount of data privacy laws and
regulations that may require us to incur substantial costs and implement certain changes to our business practices that may
adversely affect our results of operations.”
Our MFS and DFS businesses also require us to maintain availability of our systems and platforms, and failure to
maintain agreed levels of service availability or to reliably process our customers’ transactions due to performance,
administrative or technical issues, system interruptions or other failures could result in a loss of revenue, violation of certain local
banking regulations, payment of contractual or consequential damages, reputational harm, additional operating expenses to
remediate any failures, or exposure to other losses and liabilities.
Mobilink Microfinance Bank Limited, a wholly owned subsidiary of the company, carries on a microfinance banking
business and provides certain MFS, DFS and traditional banking services in Pakistan under license granted by the State Bank of
Pakistan and is subject to regulation by the State Bank of Pakistan. State Bank regulations and banking laws are subject to
change from time to time, including with respect to capitalization requirements and we may be required to increase the
capitalization of Mobilink Bank from time to time and may be required to inject funds to cover any losses that the bank suffers.
Mobilink Bank’s activities may expose it or the group to a risk of liability under banking and financial services compliance laws,
including, for example, anti-money laundering and counter-terrorist financing regulations.
Our majority stake in an Egyptian company may expose us to legal and political risk and reputational harm.
Our subsidiary in Egypt, Global Telecom Holding S.A.E. (“GTH”), is an Egyptian private company and is therefore
subject to corresponding laws and regulations.
GTH is the holding company for our assets in Algeria. We have experienced and expect to continue to experience the
risk of unpredictable and adverse government action stemming from the political and economic conditions in Egypt and the
inconsistent and unpredictable application of laws and regulations. Furthermore, although GTH entered into a tax settlement
agreement with the Egyptian tax authorities for certain historic periods, GTH may in the future be subject to significant unfounded
or unfair tax claims for other tax periods, or under existing or new Egyptian tax law. For more information on tax claims of the
Egyptian authorities, see Note 7 — Provisions and Contingent Liabilities to our Audited Consolidated Financial Statements.
We operate in a highly regulated industry and are subject to a large variety of laws and extensive regulatory
requirements.
As a global telecommunications company, we are subject to different and occasionally conflicting laws and regulations
in each of and between the jurisdictions in which we operate. Mobile, internet, fixed-line, voice, content and data markets
generally are subject to extensive regulatory requirements, including strict licensing regimes, as well as antitrust and consumer
protection regulations. Regulations may be especially strict in those countries in which we are considered to hold a significant
market position (Ukraine, Pakistan and Uzbekistan), a dominant market position (Russia and Kazakhstan) or are considered a
dominant company (Kyrgyzstan). The applicable rules are generally subject to different interpretations and the relevant
authorities may challenge the positions that we take. As we expand certain areas of our business and provide new services, such
as MFS, DFS, banking, digital content, other non-connectivity services, or value-added and internet-based services, we may be
subject to additional laws and regulations. For more on risks related to MFS and DFS, see - "Our Mobile Financial Services
("MFS") and Digital Financial Services ("DFS") offerings are complex and increase our exposure to fraud, money laundering and
reputational risk." Regulatory compliance may be costly and involve a significant expenditure of resources, thus negatively
affecting our financial condition and results of operations.
Certain regulations may require us to reduce retail prices, roaming prices or mobile and/or fixed-line termination rates,
require us to offer access to our network to other operators, or result in the imposition of fines if we fail to fulfill our service
commitments. In some countries, we are required to obtain approval for offers and advertising campaigns, which can delay our
marketing campaigns and require restructuring of business initiatives. We may also be required to obtain approvals for certain
acquisitions, reorganizations or other transactions, and failure to obtain such approvals may impede or harm our business and
our ability to adjust our operations or acquire or divest of businesses or assets. Laws and regulations in some jurisdictions oblige
us to install surveillance, interception and data retention equipment to ensure that our networks are capable of allowing the
government to monitor data and voice traffic on our networks. The nature of our business also subjects us to certain regulations
regarding open internet access or net neutrality.
Regulatory requirements impact our business operations and may affect our financial performance. We face regulatory
risks and costs in each of the markets in which we operate and may be subject to additional regulations in future. Any failure on
our part to comply with these laws and regulations can result in negative publicity, diversion of management time and effort,
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increased competitive and pricing pressure on our operations, significant liabilities, third party civil claims and other penalties or
otherwise harm our business, financial condition, results of operations, cash flows or prospects.
We are subject to anti-corruption laws in multiple jurisdictions.
We operate in countries which pose elevated risks of corruption and are subject to a number of anti-corruption laws,
including the US Foreign Corrupt Practices Act (“FCPA”), the UK Bribery Act, the anti-corruption provisions of the Dutch Criminal
Code in the Netherlands and local laws in the jurisdictions in which we operate. An investigation into allegations of non-
compliance or a finding of non-compliance with anti-corruption laws or other laws governing the conduct of business may subject
us to administrative and other financial costs, reputational damage, criminal or civil penalties or other remedial measures, which
could harm our business, financial condition, results of operations, cash flows or prospects. Anti-corruption laws generally
prohibit companies and their intermediaries from promising, offering or giving a financial or other things of value or advantage to
someone for the purpose of improperly influencing a matter or obtaining or retaining business or rewarding improper conduct.
The FCPA further requires US issuers to maintain accurate books and records and a system of sufficient internal controls. We
regularly review and update our policies and procedures and internal controls to provide reasonable assurance that we and our
personnel comply with the anti-corruption laws to which we are subject, although we cannot guarantee that these efforts will be
successful.
We maintain a Business Partner Code of Conduct and attempt to obtain assurances from distributors and other
intermediaries, through contractual and other legal obligations, that they also will comply with anti-corruption laws applicable to
them and to us. However, these efforts to secure legal commitments are not always successful. There are inherent limitations to
the effectiveness of any policies, procedures and internal controls, including the possibility of human error and the circumvention
or overriding of the policies, procedures and internal controls. There can be no assurance that such policies or procedures or
internal controls will work effectively at all times or protect us against liability under anti-corruption or other laws for actions taken
by our personnel, distributors and other intermediaries with respect to our business or any businesses that we may acquire. Our
Business Partner Code of Conduct is available on our website at http://www.veon.com (information appearing on the website is
not incorporated by reference into this Annual Report
In addition, as previously disclosed, the Deferred Prosecution Agreement (“DPA”) that VEON entered into with the U.S.
Department of Justice (“DOJ”) on February 18, 2016 has concluded and the criminal charges that had been deferred by the DPA
have been dismissed. Since concluding the DPA, we have provided, and may in the future provide, updates on certain internal
investigations related to potential misconduct to the U.S. authorities. In the event that any of these matters lead to governmental
investigations or proceedings, it could have a material adverse impact on our business and results of operations.
Anti-terror legislation passed in Russia and other jurisdictions could result in additional operating costs and capital
expenditures.
Federal Law No 374-FZ (the “Yarovaya law”) amended anti-terrorism legislation and imposed certain obligations on
communication providers, including a requirement to store information evidencing receipt, transmission, delivery and/or
processing of voice data, text messages, pictures, sounds, videos or meta-data reflecting these communications for a period of
three years and a requirement to store the contents of such communications for a period of up to six months. This requirement
came into force on July 1, 2018 for voice traffic and on October 1, 2018 for data traffic. In addition, the Yarovaya law requires
communication providers to supply information to investigation and prosecution authorities about users and any other information
“which is necessary for these authorities to achieve their statutory goals” including any information and codes necessary to
decode the information. Furthermore, under other local Russian law, operators are required to block services for users whose
personal data does not correspond to the data registered and stored by the operator. Failure to comply with this law may lead to
administrative fines and could impact the effectiveness of our licenses. The implementation and support of measures to comply
with the legislation led to substantial investments for the design of our IT systems in Russia and the purchase of specialized
equipment and tools. The Russian authorities require, among other things, the use of specific storage equipment (such as data
storage, interception devices, fiberoptic cables and technical platforms). We estimate that total Yarovaya law-related
expenditures will be RUB 45 billion (US$609 million) over five years starting from 2018. Although the Yarovaya-law-related
investment plans are progressing in alignment with legal requirements, it is possible that in the future the Russian Government
will adopt additional requirements in this area which will lead to additional expenditures or otherwise necessitate additional
investments to be compliant.
Similar legislation has been implemented, or is being contemplated, in other markets in which we operate. Compliance
with such measures may require substantial costs and management resources and conflict with our legal obligations in other
countries. Failure to comply may lead to administrative fines, impair our ability to operate or cause reputational damage. In
addition, compliance with any such obligations may prompt allegations related to data privacy or human rights concerns, which
could in turn result in reputational harm or otherwise impact our ability to operate or our results of operations.
Laws restricting foreign investment could materially harm our business.
We could be materially harmed by new or existing laws restricting foreign investment. For example, in Russia, there are
a number of laws regulating foreign investment. Federal Law No. 57-FZ “On the Procedure for Foreign Investments in Business
Entities of Strategic Importance for National Defense and State Security” (the “Russian Foreign Investment Law”) limits foreign
investment in companies that are deemed to be strategic. Our Russian subsidiary, PJSC VimpelCom, is deemed to be a strategic
enterprise under the Russian Foreign Investment Law. As a result, any acquisition by a foreign investor of direct or indirect
control over more than 50% of its voting shares, or 25% in the case of a company controlled by a foreign government, requires
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the prior approval of the Government Commission on Control of Foreign Investment in the Russian Federation. The Federal
Antimonopoly Service of the Russian Federation (the “FAS”) which administers the application of the Russian Foreign Investment
Law, has in the past challenged acquisitions of our shares by foreign investors. In addition, Federal Law dated July 27, 2006 No.
149-FZ “On the Information, Information Technology and Protection of Information” affects the provision of audio-visual services
by foreign entities and local companies with more than 20% of foreign investments or shares. Furthermore, implementing
regulation for Federal Law 187-FZ “On the security of Russia’s critical information infrastructure” contains provisions requiring
that the subjects of critical information infrastructure make the transition to the preferential use of Russian software by January 1,
2024 and make the transition to the preferential use of Russian telecommunications equipment and radio-electronic products by
January 1, 2025, both of which may require substantial investments or materially harm our business.
In Kazakhstan, according to the national security law, a foreign company or individual cannot directly or indirectly own
more than a 49% stake in an entity that carries out telecommunications activities as an operator of long-distance or international
communications or owns fixed communication lines without the consent of the Kazakhstan government.
Such laws may hinder potential business combinations or transactions resulting in a change of control or our ability to
obtain financing from foreign investors should prior approval be refused, delayed or require foreign investors to comply with
certain conditions, which could materially harm our business, financial condition, results of operations, cash flows or prospects.
Our licenses are granted for specific periods and may be suspended, revoked or not extended or replaced upon
expiration and we may be fined or penalized for alleged violations of law, regulations or license terms.
The success of our operations is dependent on the maintenance of our licenses to provide telecommunications services
in the jurisdictions in which we operate. Most of our licenses are granted for specified terms, and there can be no assurance that
any license will be renewed upon expiration. Some of our licenses will expire in the near term. For more information about our
licenses, including their expiration dates, see — Business Overview. These licenses and the frameworks governing their
renewals are subject to ongoing review by the relevant regulatory authorities. If renewed, our licenses may contain additional
obligations, including payment obligations (which may involve a substantial renewal or extension fee), or may cover reduced
service areas or scope of service. Furthermore, the governments in certain jurisdictions in which we operate may hold auctions
(including auctions of spectrum for the 4G/LTE or more advanced services such as 5G) in the future. If we are unable to maintain
or obtain licenses for the provision of telecommunications services or more advanced services or if our licenses are not renewed
or are renewed on less favorable terms, our business and results of operations could be materially harmed.
We are required to meet certain terms and conditions under our licenses (such as nationwide coverage, quality of
service parameters and capital expenditure, including network build-out requirements), including meeting certain conditions
established by the legislation regulating the communications industry. From time to time, we may be in breach of such terms and
conditions. If we fail to comply with the conditions of our licenses or with the requirements established by the legislation
regulating the communications industry, or if we do not obtain or comply with permits for the operation of our equipment, use of
frequencies or additional licenses for broadcasting directly or through agreements with broadcasting companies, the applicable
regulator could decide to levy fines, suspend, terminate or refuse to renew the license or permit. Such regulatory actions could
adversely impact our ability to carry on our business in the current or planned manner or to carry out divestitures in the relevant
jurisdictions.
The occurrence of any of these events could materially harm our ability to build out our networks in accordance with our
plans, our ability to retain and attract customers, our reputation and our business, financial condition, results of operations, cash
flows or prospects. For more information on our licenses and their related requirements, see - Business Overview.
It may not be possible for us to procure in a timely manner, or at all, the permissions and registrations required for our
base stations.
The laws of the countries in which we operate generally prohibit the operation of telecommunications equipment without
a relevant permit from the appropriate regulatory body. Due to complex regulatory procedures, it is frequently not possible for us
to procure in a timely manner, or at all, the permissions and registrations required for our base stations, including construction
permits and registration of our title to land plots underlying our base stations, or to amend or maintain the permissions in a timely
manner when it is necessary to change the location or technical specifications of our base stations. At times, there can be a
number of base stations or other communications facilities and other aspects of our networks for which we are awaiting final
permission to operate for indeterminate periods. This problem may be exacerbated if there are delays in issuing necessary
permits.
We also regularly receive notices from regulatory authorities in countries in which we operate warning us that we are
not in compliance with aspects of our licenses and permits and requiring us to cure the violations within a certain time period. We
have closed base stations on several occasions in order to comply with regulations and notices from regulatory authorities. Any
failure by our company to cure such violations could result in the applicable license being suspended and subsequently revoked
through court action. Although we look to take all necessary steps to comply with any license violations within the stated time
periods, including by switching off base stations that do not have all necessary permits until such permits are obtained, we
cannot assure you that our licenses or permits will not be suspended or revoked in the future. If we are found to operate
telecommunications equipment without an applicable license or permit, we could experience a significant disruption in our
service or network operation, which could harm our business, financial condition, results of operations, cash flows or prospects.
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We collect and process personal data, and are therefore subject to an increasing number of data privacy laws and
regulations that may require us to incur substantial costs and implement certain changes to our business practices that
may adversely affect our results of operations.
We are subject to various, and at times conflicting, data privacy laws and regulations that apply to the collection, use,
storage, disclosure and security of personal data that identifies or may be used to identify an individual, such as names and
contact information, IP addresses, (e-mail) correspondence, call detail records and browsing history. Many countries have
additional laws that regulate the processing, retention and use of communications data, including metadata. These laws and
regulations are subject to frequent revisions and differing interpretations and are becoming more stringent over time.
In general, mobile operators are directly liable for actions of third parties to whom they forward personal data for
processing. If severe personal data security breaches are detected, regulatory authorities could sanction our company, including
suspending our operations for some time and levying fines and penalties. Violation of these laws by an operator may lead to a
seizure of the operator’s database and equipment, imposition of administrative sanctions (including in the form of fines,
suspension of activities or revocation of license) or result in a ban on the processing of personal data by such operator, which, in
turn, could lead to the inability to provide services to our customers. The occurrence of any of the aforementioned events,
individually or in the aggregate, could harm our brand, business, financial condition, results of operations or prospects.
Many of the jurisdictions in which we operate have laws that restrict cross border data transfers unless certain criteria
are met and/or are developing or implementing laws on data localization requiring data to be stored locally. These laws may
restrict our flexibility to leverage our data and build new, or consolidate existing, technologies, databases and IT systems, limit
our ability to use and share personal data, cause us to incur costs, require us to change our business practices in a manner
adverse to our business or conflict with other laws we are subject to, exposing us to regulatory risk. The stringent cross-border
transfer rules in certain jurisdictions may also prohibit us from disclosing data to foreign authorities upon their request, which may
generate a scenario where it is not possible for us to comply with both laws. If so, in addition to the possibility of fines, this could
result in an order requiring that we change our data practices, which could have an adverse effect on our business and results of
operations. We are subject to a variety of data protection regulations. For example, the European Union introduced a data
protection framework, the General Data Protection Regulation (GDPR), which came into effect on May 25, 2018. The GDPR
implements more stringent operational requirements for processors and controllers of personal data. The GDPR is applicable to
companies that are established in the European Union, or companies that offer goods and services to, or monitor the behavior
of, individuals within the European Union. The GDPR is also still applicable for the United Kingdom following its withdrawal from
the European Union December 31, 2020. While we believe that the processing of personal data by only a limited number of
entities, including our Amsterdam and London offices and central operating entities within the European Union and the United
Kingdom, are subject to GDPR, our operations in other markets may also become subject to this regulation, under certain
circumstances, e.g. if such operations involve the offering of goods or services to, or monitoring the behavior of, individuals in the
European Union and the United Kingdom. In addition, in Russia and certain other jurisdictions in our footprint, we are subject to
certain data protection and other laws and regulations that establish different categories of information with different
corresponding levels of protection, permitted registration, disclosure and required safeguards. These categories include state
secret information and other data, including personal data of our customers and of other persons (such as our employees and
third-party supplies and other counter-parties), privacy of communications and information on rendered telecommunications
services. In each case, the operators must implement the required level of data protection and cooperate with government
authorities on law enforcement disclosures for state secrets and personal data of customers. The ability to disclose certain types
of data to affiliates or governmental authorities may be substantially restricted.
The laws and regulations regarding data privacy may become more stringent over time. For example, the European
Commission has also proposed a draft of the new ePrivacy Regulation on January 10, 2017. The current draft of the ePrivacy
Regulation is going through the EU legislative process and is intended to replace the 2002/58 e-Privacy Directive. When it comes
into effect, it is expected to regulate the processing of electronic communications data carried out in connection with the
provision and the use of publicly available electronic communications services to users in the European Union, regardless of
whether the processing itself takes place in the European Union. Unlike the current ePrivacy Directive, the draft ePrivacy
Regulation will likely apply to over-the-top service providers as well as traditional telecommunications service providers (including
the requirements on data retention and interception and changes to restrictions on the use of traffic and location data). VEON
entities established in the European Union which process such electronic communications data are likely to be subject to this
regime. The current draft of the ePrivacy Regulation also regulates the retention and interception of communications data as well
as the use of location and traffic data for value added services, imposes stricter requirements on electronic marketing, and
changes to the requirements for use of tracking technologies like cookies. This could broaden the exposure of our business lines
based in the European Union to data protection liability, restrict our ability to leverage our data and increase the costs of running
those businesses. The draft also significantly increases penalties.
Any failure or perceived failure by us to comply with privacy or security laws, policies, legal obligations or industry
standards may result in governmental enforcement actions and investigations, blockage or limitation of our services, fines and
penalties. If the third parties we work with violate applicable laws, contractual obligations or suffer a security breach, such
violations may also put us in breach of our obligations under privacy laws and regulations and/or could in turn have a material
adverse effect on our business. In addition, concerns regarding our practices with regard to the collection, use, disclosure or
security of personal information or other privacy-related matters could result in negative publicity and have an adverse effect on
our reputation and business.
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We could be subject to tax claims and repeated tax audits that could harm our business.
Tax declarations together with related documentation are subject to review and investigation by a number of authorities
in many of the jurisdictions in which we operate, which are empowered to impose fines and penalties on taxpayers. Tax audits
may result in additional costs to our group if the relevant tax authorities conclude that entities of the group did not satisfy their tax
obligations in any given year. Such audits may also impose additional burdens on our group by diverting the attention of
management resources.
Tax audits in the countries in which we operate are conducted regularly, but their outcomes may not be fair or
predictable. We have been subject to substantial claims by tax authorities in Russia, Algeria, Egypt, Pakistan, Bangladesh,
Ukraine, Kazakhstan, Georgia, Uzbekistan, and Kyrgyzstan. These claims have resulted, and future claims may result, in
additional payments, including interest, fines and other penalties, to the tax authorities.
There can be no assurance that we will prevail in litigation with tax authorities and that the tax authorities will not claim
that additional taxes, interest, fines and other penalties are owed by us for prior or future tax years, or that the relevant
governmental authorities will not decide to initiate a criminal investigation or prosecution, or expand existing criminal
investigations or prosecutions, in connection with claims by tax inspectorates, including those relating to individual employees
and for prior tax years. In Russia, for example, tax returns remain open and subject to inspection by tax or customs authorities
for three calendar years immediately preceding the year in which the decision to conduct an audit is taken. Laws enacted in
Russia in recent years increase the likelihood that our tax returns that were reviewed by the Russian tax authorities could be
subject to further review or audit during or beyond the eligible three-year limitation period by a superior Russian tax authority. We
have also been the subject of repeat complex and thematic tax audits in Kyrgyzstan, Russia and Pakistan, which, in some
instances, have resulted in payments made under protest pending legal challenges and/or to avoid the initiation or continuation
of associated criminal proceedings. The outcome of these audits, including where the relevant tax authorities may conclude that
we had significantly underpaid taxes relating to earlier periods, could harm our business, financial condition, results of
operations, cash flows or prospects.
The adverse or delayed resolution of tax matters could harm our business, financial condition and results of operations.
For more information regarding tax claims and tax provisions and liabilities and their effects on our financial statements, see
Note 7 - Provisions and Contingent Liabilities to our Audited Consolidated Financial Statements.
Changes in tax treaties, laws, rules or interpretations could have a material adverse effect on our business, and the
unpredictable tax systems in the markets in which we operate give rise to significant uncertainties and risks that could
complicate our tax planning and business decisions.
The introduction of new tax laws or the amendment of existing tax laws could have a material adverse impact on our
business, financial performance and results of operations. Our business decision take into account certain taxation scenarios,
which could be proven to be untrue in the event of an adverse decisions by tax authorities or changes in tax treaties, laws, rules
or interpretations. For example, we are vulnerable to changes in tax laws, regulations and interpretations in the Netherlands, our
current resident state for tax purposes, including the enforcement of tax law. Additionally, as European and other tax laws and
regulations are complex and subject to varying interpretations, we cannot be sure that our interpretations are accurate or that the
responsible tax authority agrees with our views. If our tax positions are challenged by the tax authorities, we could incur
additional tax liabilities, which could increase our costs of operations and have a material adverse effect on our business,
financial condition or results of operations. The introduction of new tax laws or the amendment of existing tax laws, such as those
relating to transfer pricing rules or the deduction of interest expenses in the markets in which we operate, may also increase the
risk of adjustments being made by the tax authorities and, as a result, could have a material adverse impact on our business,
financial performance and results of operations. For example, within the Organisation for Economic Co-operation and
Development (“OECD”) there is an initiative aimed at avoiding base erosion and profit shifting (“BEPS”) for tax purposes. This
OECD BEPS project has resulted in further developments in other countries and in particular in the European Union. One of the
developments is the agreement on the EU Anti-Tax Avoidance Directive (“ATAD”). All EU Member States must implement the
minimum standards as set out in the ATAD. The implementation of these measures against tax avoidance in the legislation of the
jurisdictions in which we do business could have a material adverse effect on us.
These considerations are compounded by the fact that the interpretation and enforcement of tax laws in the emerging
markets in which we operate tend to be unpredictable and give rise to significant uncertainties, which could complicate our tax
planning and business decisions. Any additional tax liability imposed on us by tax authorities in this manner, as well as any
unforeseen changes in applicable tax laws or changes in the tax authorities’ interpretations of the respective double tax treaties
in effect, could harm our future results of operations, cash flows or the amounts of dividends available for distribution to
shareholders in a particular period. For example, Russia has recently initiated renegotiation of certain tax treaties, including the
treaties with Luxembourg and the Netherlands, the latter of which is still under negotiation. In addition, in recent years, the
Russian tax authorities have aggressively brought tax evasion claims relating to Russian companies’ use of tax-optimization
schemes, and press reports have speculated that these enforcement actions have been selective and politically motivated.
Furthermore, we may be required to accrue substantial amounts for contingent tax liabilities and the amounts accrued for tax
contingencies may not be sufficient to meet any liability we may ultimately face. From time to time, we may also identify tax
contingencies for which we have not recorded an accrual. Such unaccrued tax contingencies could materialize and require us to
pay additional amounts of tax.
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Geopolitical Risks
Investors in emerging markets, where our operations are located, are subject to greater risks than investors in more
developed markets, including significant political, legal and economic risks, as well as risks related to fluctuations in
the global economy.
Most of our operations are in emerging markets. Investors should fully appreciate the significance of the risks involved
in investing in an emerging markets company and are urged to consult with their own legal, financial and tax advisors. Emerging
market governments and judiciaries often exercise broad, unchecked discretion and are susceptible to abuse and corruption and
rapid reversal of political and economic policies on which we depend. Political and economic relations among the countries in
which we operate are often complex and have resulted, and may in the future result, in conflicts, which could materially harm our
business, financial condition, results of operations, cash flows or prospects. The economies of emerging markets are also
vulnerable to market downturns and economic slowdowns elsewhere in the world. As has happened in the past, financial
problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign
investment in these markets and materially adversely affect their economies. Turnover of political leaders or parties in emerging
markets as a result of a scheduled election upon the end of a term of service or in other circumstances may also affect the legal
and regulatory regime in those markets to a greater extent than turnover in established countries. Any of these developments
could severely limit our access to capital and could materially harm the purchasing power of our customers and, consequently,
our business.
Such events may create uncertain regulatory environments, which in turn could impact our compliance with license
obligations and other regulatory approvals. The nature of much of the legislation in emerging markets, the lack of consensus
about the scope, content and pace of economic and political reform and the rapid evolution of the legal and regulatory systems in
emerging markets place the enforceability and, possibly, the constitutionality of laws and regulations in doubt and result in
ambiguities, inconsistencies and anomalies. The legislation often contemplates implementing regulations that have not yet been
promulgated, leaving substantial gaps in the regulatory infrastructure. Any of these factors could affect our ability to enforce our
rights under our licenses or our contracts, or to defend our company against claims by other parties.
Many of the emerging markets in which we operate are susceptible to significant social unrest or military conflicts. The
local authorities may order our subsidiaries to temporarily shut down their entire network or part or all of our networks may be
shut down due to actions relating to military conflicts or nationwide strikes. For example, our subsidiary in Pakistan is ordered to
shut down parts of its mobile network and services from time to time due to the security situation in the country. Governments or
other factions, including those asserting authority over specific territories in areas of conflict, could make inappropriate use of the
network, attempt to compel us to operate our network in conflict zones or disputed territories and/or force us to broadcast
propaganda or illegal instructions to our customers or others (and threaten consequences for failure to do so). Forced
shutdowns, inappropriate use of our network or being compelled to operate our network in conflict zones or broadcast
propaganda/illegal instructions could materially harm our business, financial condition, results of operations, cash flows or
prospects.
Social instability in the countries in which we operate, coupled with difficult economic conditions, could lead to increased
support for centralized authority and a rise in nationalism. These sentiments could lead to restrictions on foreign ownership of
companies in the telecommunications industry or nationalization, expropriation or other seizure of certain assets or businesses.
In most of the countries in which we operate, there is relatively little experience in enforcing legislation enacted to protect private
property against nationalization or expropriation. As a result, we may not be able to obtain proper redress in the courts, and we
may not receive adequate compensation if in the future the governments decide to nationalize or expropriate some or all of our
assets. In addition, ethnic, religious, historical and other divisions have, on occasion, given rise to tensions and, in certain cases,
military conflict. The spread of violence, or its intensification, could have significant political consequences, including the
imposition of a state of emergency, which could materially adversely affect the investment environment in the countries in which
we operate.
Violations of and changes to applicable sanctions and embargo laws may harm our business.
Authorities have imposed significant penalties on companies that fail to comply with the requirements of applicable
sanctions and embargo laws and regulations. We are subject to certain sanctions and embargo laws and regulations of the
United States, the United Nations, the European Union, the United Kingdom and the jurisdictions in which we operate. Sanctions
and embargo laws and regulations generally establish the scope of their own application, which arise for different reasons and
can vary greatly by jurisdiction. The scope of such laws and regulations may be expanded, sometimes without notice, in a
manner that could materially adversely affect our business, financial condition, results of operations, cash flows or prospects.
Additionally, countries (such as China) have also adopted sanctions countermeasures that may impact our future ability to
ensure our suppliers’ compliance with these laws. Notwithstanding our policies and compliance controls, we may be found in the
future to be in violation of applicable sanctions and embargo laws, particularly as the scope of such laws may be unclear and
subject to discretionary interpretations by regulators, which may change over time. If we fail to comply with applicable sanctions
or embargo laws and regulations, we could suffer severe operational, financial or reputational consequences. Moreover, certain
of our financing arrangements include representations and covenants requiring compliance with or limitation of activities under
sanctions and embargo laws and regulations of certain additional jurisdictions, the breach of which may trigger defaults or cross-
defaults of mandatory prepayment requirements in the event of a breach thereof. For a discussion of risks related to export and
re-export restrictions, see Operational Risks - “We depend on third parties for certain services and products important to our
business.”
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Our operations may be adversely affected by ongoing developments in Russia and Ukraine.
The current situation in Russia and Ukraine, and the related responses of the United States, member states of the
European Union, the European Union itself, the United Kingdom and certain other nations, have the potential to materially
adversely affect our business in Russia and Ukraine where we have significant operations.
Since 2014, in connection with the situation in Russia and Ukraine, the United States, the European Union, and a
number of other countries have imposed sanctions that block the property of certain designated businesses, organizations and
individuals, prohibit certain types of transactions with designated businesses operating in certain sectors of the Russian economy
and restrict investment in and trade with Crimea. Under the U.S. sanctions regime, even non-U.S. persons who engage in certain
prohibited transactions may be exposed to sanctions, such as the denial of certain privileges, including those relating to financing
and contracting with U.S. persons or within the United States. In addition, the United States and the European Union have
implemented certain export control restrictions related to Russia’s energy sector and military capabilities. Ukraine has also
enacted sanctions with respect to certain Russian entities and individuals. Russia has responded to these sanctions with
countermeasures, including sanctions with respect to certain Ukrainian individuals and entities, restricting imports of certain
goods from the United States, the European Union, Ukraine and other countries, imposing visa bans on certain individuals and
restricting Russian companies from complying with sanctions imposed by other countries.
Such sanctions, export controls and/or other measures, including sanctions on additional persons or businesses
(including vendors, joint venture and business partners, affiliates and financial institutions), could materially adversely affect our
business, financial condition, results of operations, cash flows or prospects. Increased tensions between Russia and Ukraine and
the continued imposition of sanctions and export controls, including prohibitions and restrictions on conducting business with
certain individuals and entities, could have a material adverse effect on our businesses in Ukraine and Russia, which in turn
could harm our business, financial condition, results of operations, cash flows or prospects.
Our business operations in Ukraine have been affected by the dispute. Ukraine assigned a “temporary occupied
territories” status to Crimea and a “united forces operation” zone status to certain eastern Ukraine regions which are currently not
under the Ukrainian government’s full control, and imposed certain restrictions and prohibitions on trade in goods and services in
such territories. Our Ukrainian subsidiary, Kyivstar JSC (“Kyivstar”), shut down its network in Crimea in 2014 as well as its
network in certain parts of Eastern Ukraine in 2015 and, in each case, has written off the relevant assets. Under the terms of its
telecommunications licenses, Kyivstar is obliged to provide services throughout Ukraine. Kyivstar has notified the regulatory
authorities that Kyivstar has stopped providing services in Crimea and certain parts of Eastern Ukraine and has requested
clarification from such authorities regarding telecommunications operations in such areas. Since September 2014, legislation has
been in effect in Ukraine that authorizes the cancellation of telecommunications licenses for sanctioned parties. There can be no
assurance that the escalation of the current situation will not lead to the cancellation or suspension of, or other actions under,
certain or all of our Ukrainian telecommunications licenses, or other sanctions.
Recently, Russia and Ukraine have signaled a mutual interest in peace in eastern Ukraine. In December 2019, the
Russian and Ukrainian presidents met in Paris for face-to-face peace talks and committed to a comprehensive cease-fire and a
release of conflict-related detainees. Although recent peace talks aim to reduce the conflict between Russia and Ukraine, the
situation in eastern Ukraine and Crimea remains fragile, and may in the future result in damage or loss of assets, disruption of
services and regulatory issues which has, and may in the future, adversely impact our group. We are not able to predict further
developments on this issue, including when these measures will cease to be in effect. There also may be additions to the
designated persons or business lists or other expansions of sanctions by the United States, the European Union, and/or other
countries that target Russia and restrict dealings related to Crimea in the future. The U.S. government stated in early 2020 that
Crimea-related sanctions will remain in place until military aggression leading to the loss of civilian lives fully stops in the region.
It is possible that these sanctions will be in effect for the foreseeable future. The European Union also extended certain sanctions
related to Russia and Crimea in March 2019, June 2019 and December 2019. If there were an extended continuation or further
increase in conflict in Crimea or in eastern Ukraine, it could result in further instability and/or worsening of the overall political and
economic situation in Ukraine, Russia, Europe and/or in the global economy and capital markets generally. This instability could
harm our business, financial condition, results of operations, cash flows or prospects. We could also be materially adversely
impacted by a decline of the Russian ruble against the U.S. dollar or the euro and the general economic performance of Russia,
by, for example, the decline of the Russian ruble against the U.S. dollar and euro, investment in Russia or trade with Russian
companies decreasing substantially and the Russian government experiencing difficulty raising money through the issuance of
debt in the global capital markets. For a discussion of our foreign currency risk, see Market Risks - “We are exposed to foreign
currency exchange loss and currency fluctuation and translation risks.” As we derive a significant portion of our revenue from our
Russian and Ukrainian operations, such developments and measures could have a material adverse impact on our group.
The physical infrastructure in many countries in which we operate is in poor condition and further deterioration in the
physical infrastructure could harm our business.
In many countries in which we operate, the physical infrastructure, including transportation networks, power generation
and transmission and communications systems, is in poor condition. In some of the countries in which we operate, such as
Russia, the public switched telephone networks have reached capacity limits and need modernization, which may create
inconvenience for our customers and will require us to make additional capital expenditures. In addition, some of the markets in
which we operate are vulnerable to extreme weather, the occurrence of which could result in disruptions or damage to our
networks, or to military conflict which could result in damage our physical infrastructure.
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Continued growth in local, long distance and international traffic, including that generated by our customers, and
development in the types of services provided may require substantial investment in public switched telephone networks. Any
efforts to modernize infrastructure may result in increased charges and tariffs, potentially adding costs to our business. The
deterioration of the physical infrastructure harms the economies of these countries, disrupts the transportation of goods and
supplies, adds costs to doing business and can interrupt business operations. Further deterioration in the physical infrastructure
in many of the countries in which we operate could harm our business, financial condition, results of operations, cash flows or
prospects.
The banking systems in many countries in which we operate remain underdeveloped, there are a limited number of
creditworthy banks in certain of these countries with which we can conduct business, and currency control
requirements restrict activities in certain markets in which we have operations.
The banking and other financial systems in many countries in which we operate are less developed or regulated, and
laws relating to banks and bank accounts are subject to varying interpretations and inconsistent applications. Such banking risk
cannot be completely eliminated by diversified borrowing and conducting credit analyses. Uncertain banking laws may also limit
our ability to attract future investment. A banking crisis in any of these countries affecting the capacity for financial institutions to
lend or fulfill their existing obligations or the bankruptcy or insolvency of the banks from which we receive, or with which we hold,
our funds could result in the loss of our deposits, the inability to borrow or refinance existing borrowings or otherwise negatively
affect our ability to complete banking transactions in these countries, which could harm our business, financial condition and
results of operations.
In addition, central banks and governments in the markets in which we operate may restrict or prevent international
transfers or impose foreign exchange controls or other currency restrictions, which could prevent us from making payments,
including the repatriation of dividends and payments to third party suppliers. For more information on currency restrictions, see
Note 17 — Financial Risk Management — Liquidity Risks — Currency Control Risks. Furthermore, banks have limitations on the
amounts of loans that they can provide to single borrowers, which could limit the availability of functional currency financing and
refinancing of existing borrowings in these countries. There can be no assurance that we will be able to obtain approvals under
the foregoing restrictions or limitations, each of which could harm our business, financial condition, cash flows, results of
operations or prospects.
General Risk Factors
A disposition by our largest shareholder of its stake in VEON Ltd. could harm our business.
We derive benefits and resources from the participation of our largest shareholder, L1T VIP Holdings S.à r.l.
(“LetterOne”), in our company such as industry expertise, management oversight and business acumen. Historically, we derived
the same benefits from Telenor ASA (“Telenor”), until it fully divested its interest in VEON Ltd. ADSs in November 2019. For
additional information on Telenor’s divestment, see - Major Shareholders. Should LetterOne undertake a divestment of its stake,
we would be deprived of those benefits, which could harm our business, financial condition, results of operations, cash flows or
prospects.
Our largest shareholder may pursue diverse development strategies, which may hinder our ability to expand or
compete in certain regions.
LetterOne is VEON Ltd.’s largest shareholder, beneficially owning approximately 47.85% of our issued and outstanding
shares as of March 1, 2021. In addition, LetterOne is the holder of the depositary receipts issued by Stichting
Administratiekantoor Mobile Telecommunications Investor (“Stichting”), which represents an additional 8.31% of VEON Ltd.’s
issued and outstanding shares as of March 1, 2021, and is therefore entitled to the economic benefits (dividend payments, other
distributions and sale proceeds) of such depositary receipts and, indirectly, of the common shares represented by the depositary
receipts. Stichting, however, has the power to vote and direct the voting of, and the power to dispose and direct the disposition
of, the ADSs, in its sole discretion, in accordance with the Conditions of Administration and Stichting’s articles of association. For
more information, see — Major Shareholders.
As a result, LetterOne has some ability to influence the outcome of matters submitted to our shareholders for approval
and, through our cumulative voting procedures, the election of members to our board or, alternatively, could enter into a
shareholders’ or similar agreement impacting the composition of our board. A new board could take corporate actions or block
corporate decisions by VEON Ltd. with respect to capital structure, financings, dispositions, acquisitions and commercial
transactions that might not be in the best interest of the minority shareholders or other security holders.
At various times our shareholders, including LetterOne, have had different strategies from us and from one another and
have engaged in litigation against our company with respect to disagreements over strategy. In addition, we understand that
LetterOne has a minority interest in companies that compete with our subsidiary in Ukraine.
Our business may be adversely impacted by work stoppages and other labor matters.
Although we consider our relations with our employees to be generally good, there can be no assurance that our
operations will not be impacted by unionization efforts, strikes or other types of labor disputes or disruptions. For instance,
employee dissatisfaction or labor disputes could result from the implementation of internal operational and team adjustments
(which have recently included redundancies in our Amsterdam and London offices) necessary to implement our new operating
model as part of our continued strategy and efforts to further reduce corporate costs. We may also experience strikes or other
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labor disputes or disruptions in connection with social unrest or political events. For a discussion of our employees represented
by works councils, unions or collective bargaining agreements, see — Directors, Senior Management and Employees —
Employees. The ability to work can also be impacted due to natural disasters, civil unrest or security breaches/threats, making
access to work places and management of systems difficult. Furthermore, work stoppages or slow-downs experienced by our
customers or suppliers could result in lower demand for our services and products. In the event that we, or one or more of our
customers or suppliers, experience a labor dispute or disruption, it could result in increased costs, negative media attention and
political controversy, and harm our business, financial condition, results of operations, cash flows or prospects.
Adoption of new accounting standards and regulatory reviews could affect reported results and financial position.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of
operations. Accounting standard-setting bodies, including the International Accounting Standards Board, the U.S. Securities and
Exchange Commission (the "SEC") and the Dutch Authority for the Financial Markets (the "AFM"), may change accounting
regulations that govern the preparation and presentation of our financial statements, and those who interpret the accounting
standards, including the SEC, the AFM and our independent registered public accounting firm, may amend or even reverse their
previous interpretations or positions on how various standards should be applied. Those changes may be difficult to predict and
could have a significant impact on the way we account for certain operations and present our financial position and operating
income. In some instances, a modified standard, an outcome from a regulatory review or new requirement may have to be
implemented with retrospective effect, which requires us to restate previous financial statements, or may otherwise impact how
we prepare and report our financial statements, and may impact our future financial covenants in our debt documents.
For more information on the impact of IFRS on our Audited Consolidated Financial Statements and on the
implementation of new standards and interpretations issued, see — Operating and Financial Review and Prospects — Key
Developments During 2020 and Note 24 — Significant Accounting Policies to our Audited Consolidated Financial Statements.
Risks Related to the Ownership of our ADSs
Our ADS price may be volatile, and purchasers of ADSs could incur substantial losses.
Our ADS price may be volatile. The stock market in general has experienced extreme volatility that has often been
unrelated to the operating performance of particular companies. As a result of this volatility, holders of our ADSs may not be able
to sell their ADSs at or above the price at which they purchase our ADSs. The market price for our ADSs may be influenced by
many factors, including:
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•
the success of competitive products or technologies;
the issuance of new shares or sales of shares by major shareholders or the perception that such issuances or sales
could occur;
regulatory developments in the foreign countries in which we operate;
developments or disputes concerning licenses or other proprietary rights;
the recruitment or departure of key personnel;
quarterly or annual variations in our financial results or those of companies that are perceived to be similar to us;
• market conditions in the industries in which we compete and issuance of new or changed securities analysts’ reports or
recommendations;
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the failure of securities analysts to cover our shares or changes in financial estimates by analysts;
investor perception of our company and of the industry in which we compete; and
general economic, political and market conditions.
Various factors may hinder the declaration and payment of dividends.
The payment of dividends is subject to the discretion of VEON Ltd.’s board and VEON Ltd.’s assets consist primarily of
investments in its operating subsidiaries. For the financial year ended December 31, 2020, we paid no dividend. Various factors
may cause the board to determine not to pay dividends or not to increase dividends. Such factors include VEON Ltd.’s financial
condition, its earnings and equity free cash flow, the movement of the U.S. dollar against VEON’s local currencies, its leverage,
its capital requirements, contractual restrictions, legal proceedings and other such factors as VEON Ltd.’s board may consider
relevant. For more information on our policy regarding dividends, see — Consolidated Statements and Other Financial
Information — Policy on Dividend Distributions and Operational Risks — “As a holding company, VEON Ltd. depends on the
performance of its subsidiaries and their ability to pay dividends, and may therefore be affected by changes in exchange controls
and currency restrictions in the countries in which its subsidiaries operate.”
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Holders of our ADSs may not receive distributions on our common shares or any value for them if it is illegal or
impractical to make them available to them.
The depositary of our ADSs has agreed to pay holders of our ADSs the cash dividends or other distributions it or the
custodian for our ADSs receives on our common shares or other deposited securities after deducting its fees and expenses.
Holders of our ADSs will receive these distributions in proportion to the number of our common shares that their ADSs represent.
However, the depositary is not responsible for making such payments or distributions if it is unlawful or impractical to make a
distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if such
distribution consists of securities that require registration under the Securities Act but that are not properly registered or
distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution
available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained
after reasonable efforts made by the depositary. We have no obligation to take any other action to permit the distribution of our
ADSs, common shares, rights or anything else to holders of our ADSs. This means that holders of our ADSs may not receive the
distributions we make on our common shares or any value for them if it is illegal or impractical for us to make them available.
These restrictions may materially reduce the value of the ADSs.
VEON Ltd. is a Bermuda company governed by Bermuda law, which may affect your rights as a shareholder or holder
of ADSs, including your ability to enforce civil liabilities under U.S. securities laws.
VEON Ltd. is a Bermuda exempted company. As a result, the rights of VEON Ltd.’s shareholders are governed by
Bermuda law and by VEON Ltd.’s bye-laws. The rights of shareholders under Bermuda law may differ from the rights of
shareholders of companies incorporated in other jurisdictions. In addition, holders of ADSs do not have the same rights under
Bermuda law and VEON Ltd.’s bye-laws as registered holders of VEON Ltd.’s common shares. As substantially all of our assets
are located outside the United States, it may be difficult for investors to enforce in the United States judgments obtained in U.S.
courts against VEON or its directors and executive officers based on civil liability provisions of the U.S. securities laws.
Uncertainty exists as to whether courts in Bermuda will enforce judgments obtained in other jurisdictions, such as the United
States and the Netherlands, under the securities laws of those jurisdictions, or entertain actions in Bermuda under the securities
laws of other jurisdictions.
As a foreign private issuer within the meaning of the Exchange Act and the rules of NASDAQ, we are subject to
different U.S. securities laws and NASDAQ governance standards than domestic U.S. issuers. This may afford less
protection to holders of our securities, and such holders may not receive corporate and company information and
disclosure that they are accustomed to receiving or in a manner in which they are accustomed to receiving it.
As a foreign private issuer, the rules governing the information that we disclose differ from those governing U.S.
corporations pursuant to the Exchange Act. Although we currently report periodic financial results and certain material events, we
are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within
four business days of their occurrence. In addition, we are exempt from the SEC’s proxy rules, and proxy statements that we
distribute will not be subject to review by the SEC. Our exemption from Section 16 rules regarding sales of our shares by insiders
means that holders of our securities will have less data in this regard than shareholders of U.S. companies that are subject to
this part of the Exchange Act. As a result, holders of our securities may not have all the data that they are accustomed to having
when making investment decisions with respect to domestic U.S. public companies.
While our ADSs are listed on the NASDAQ Global Select Market, as a Bermuda company, we are permitted to follow
“home country practice” in lieu of certain corporate governance provisions under the NASDAQ listing rules that are applicable to
a U.S. company. Accordingly, VEON’s shareholders do not have the same protections as are afforded to shareholders of
companies that are subject to all of NASDAQ’s corporate governance requirements. The primary difference between our
corporate governance practices and the NASDAQ rules relates to NASDAQ listing rule 5605(b)(1), which provides that each U.S.
company listed on Nasdaq must have a majority of independent directors, as defined in the NASDAQ rules. Bermuda law does
not require that we have a majority of independent directors and, as a foreign private issuer, we are exempt from complying with
this NASDAQ requirement.
Holders of ADSs may be restricted in their ability to exercise voting rights and the information provided with respect to
shareholder meetings.
Holders of ADSs generally have the right under the deposit agreement to instruct the depositary to exercise the voting
rights for the equity shares represented by such holders’ ADSs. At our request, the depositary will mail to holders any notice of
shareholders’ meeting received from us together with information explaining how to instruct the depositary to exercise the voting
rights of the common shares represented by ADSs. If the depositary timely receives voting instructions from a holder of ADSs, it
will endeavor to vote the securities represented by the holder’s ADSs in accordance with such voting instructions. However, the
ability of the depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the
common shares on deposit. We cannot assure you that you will receive voting materials in time to enable you to return voting
instructions to the depositary in a timely manner.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and
expenses.
We could cease to be considered a foreign private issuer if a majority of our outstanding voting securities are directly or
indirectly held of record by U.S. residents and we fail to meet additional requirements necessary to avoid loss of foreign private
issuer status. Based on a review of our register of members maintained in Bermuda, as of March 1, 2021, a total of
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1,228,276,403 common shares representing approximately 69.92% of VEON Ltd.’s issued and outstanding common shares
were held of record by BNY (Nominees) Limited in the United Kingdom as custodian of The Bank of New York Mellon for the
purposes of our ADS program and a total of 515,226,176 common shares representing approximately 29.33% of VEON Ltd.’s
issued and outstanding common shares were held of record by by Nederlands Centraal Instituut Voor Giraal Effectenverkeer B.V.
in the Netherlands. As of March 1, 2021, 21 record holders of VEON Ltd.’s ADRs, holding an aggregate of 758,028,329 common
shares (representing approximately 43.15% of VEON Ltd.’s issued and outstanding shares), were listed as having addresses in
the United States. In the event that we lose our foreign private issuer status, the regulatory and compliance costs to us under
U.S. securities laws may be significantly higher than costs we incur as a foreign private issuer, which could have a material
adverse effect on our business and financial results.
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
For discussion related to our financial condition, changes in financial condition, and the results of operations for 2019
compared to 2018, refer to Operating and Financial Review and Prospects in our Annual Report for the fiscal year ended
December 31, 2019, which was filed on March 13, 2020.
The following discussion and analysis should be read in conjunction with our Audited Consolidated Financial
Statements and the related Notes included in this Annual Report. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements
as a result of numerous factors, including the risks discussed in — How We Manage Risks — Risk Factors.
OVERVIEW
VEON is a leading global provider of connectivity and internet services, headquartered in Amsterdam. Present in some
of the world’s most dynamic markets, VEON provides more than 210 million customers with voice, fixed broadband, data and
digital services. VEON, through its operating companies, offers services to customers in several countries: Russia, Pakistan,
Ukraine, Kazakhstan, Uzbekistan, Algeria, Bangladesh, Kyrgyzstan and Georgia. We provide services under the “Beeline,”
“Jazz,” “Kyivstar,” “banglalink” and “Djezzy” brands.
VEON generates revenue from the provision of voice, data and other telecommunication services through a range of
wireless, fixed and broadband Internet services, as well as selling equipment and accessories.
REPORTABLE SEGMENTS
We present our reportable segments based on economic environments and stages of development in different
geographical areas, requiring different investment and marketing strategies.
As of December 31, 2020, our reportable segments consist of the following segments: Russia, representing our
“cornerstone” market; Pakistan, Ukraine, Kazakhstan and Uzbekistan, representing our “growth engines”; and Algeria and
Bangladesh, representing our “frontier markets”.
We also present our results of operations for “Other frontier markets” as well as “HQ and eliminations” separately,
although these are not reportable segments. “Other frontier markets” represents our operations in Kyrgyzstan, Armenia and
Georgia. In October 2020, VEON concluded an agreement for the sale of its operating subsidiary in Armenia; refer to Note 9 —
Significant transactions in our Audited Consolidated Financial Statements attached hereto for further details.
“HQ and eliminations” represents transactions related to management activities within the group in Amsterdam, London and
Luxembourg and costs relating to centrally managed operations and reconciles the results of our reportable segments and our
total revenue and Adjusted EBITDA.
BASIS OF PRESENTATION OF FINANCIAL RESULTS
Our Audited Consolidated Financial Statements attached hereto have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and adopted by European
Union, effective at the time of preparing the consolidated financial statements and applied by VEON.
RECENT ACCOUNTING PRONOUNCEMENTS
For the description of the recent accounting pronouncements and a discussion of our accounting policies please refer to
Note 24 — Significant Accounting Policies of our Audited Consolidated Financial Statements attached hereto.
84
KEY DEVELOPMENTS DURING 2020
COVID-19
The global outbreak of COVID-19 and associated containment and mitigation measures implemented worldwide have had a
sustained impact on our operations and financial performance.
The second quarter saw the full impact on our operations of the lockdowns imposed across our markets in response to
COVID-19. This resulted in material disruption to our retail operations following store closures, impacting gross connections and
airtime sales. Restrictions on travel resulted in a significant decline in roaming revenues and the loss of migrant customers from
our subscriber base, particularly in Russia.
Although VEON’s operations remained impacted by lockdown measures throughout the second half of the year, all operations
saw a recovery in the performance as our local businesses continue building resilience to the restrictions related to COVID-19.
Demand for our data services remains strong, enabling us to continue to grow our data revenues. We also experienced a shift in
data traffic from mobile to fixed networks as lockdowns encouraged remote working and home schooling alongside a greater use
of devices through our domestic broadband services.
An increase in demand for hard currencies, in part due to COVID-19, resulted in the devaluation of exchange rates in the
countries in which VEON operates. As such, during the year ended December 31, 2020, the book value of assets and liabilities
of our foreign operations, in U.S. dollar terms, decreased significantly, with a corresponding loss of US$623 million recorded
against the foreign currency translation reserve in Other Comprehensive Income.
Our management has taken appropriate measures to keep our personnel safe and secure. As of the date of these financial
statements, other than as described above, we have not observed any particular material adverse impacts to our business,
financial condition, and results of operations. The group liquidity is sufficient to fund the business operations for at least another
12 months.
Partnership with MasterCard
In May 2020, VEON announced a partnership between JazzCash and payment technology leader Mastercard that strengthens
the payments ecosystem for merchants and customers in Pakistan. More than 7 million customers and merchants use JazzCash
every month, making it Pakistan’s leading digital wallet. The partnership with Mastercard allows merchants to accept digital
payments from customers, digitize their supply chain, and move to cashless operations. In a first for Pakistan, merchants and
consumers who sign up for JazzCash wallet will be able to benefit from a wide range of Mastercard’s digital solutions and
capabilities to pay for orders and services via all digital channels as well as make online payments in a fast, safe and convenient
manner. JazzCash customers will also have access to Mastercard’s virtual and branded debit cards that can be used in 55,000
points of sale and ATMs in Pakistan, in addition to JazzCash merchants and e-commerce sites.
Exercise of put option for 15% stake in Pakistan Operations
In September 2020, the Dhabi Group exercised its put option to sell us its 15% shareholding in Pakistan Mobile Communications
Limited ("PMCL"), the operating company of Pakistan’s leading mobile operator, Jazz. VEON updated the fair value of its put
option liability following the completion of an independent valuation process which determined a fair value for the shareholding of
US$273 million. Completion of the transfer remains subject to the conclusion of the contractual transfer mechanics with the
Dhabi Group. Once completed, VEON will indirectly own 100% of PMCL.
Beeline Kazakhstan signed Network Sharing Partnership
In October 2020, VEON announced that its operating company in Kazakhstan, which provides services under the Beeline brand,
entered into a network sharing partnership that unites the nation’s three mobile telecom providers in the delivery of high-speed
internet to rural communities. The agreement brings Beeline together with Kcell and Tele2 in support of the nation’s 250+ project,
which aims to extend high-speed internet to all villages with a population of 250 or more. Once complete, the project will see
almost 1,000 rural settlements with a combined population of 600,000 offered 3G and 4G connections by all three operators.
The 250+ initiative, the infrastructure deployment for which started immediately, enables rural residents to receive mobile
services on competitive terms and select a service provider of their choice. In turn, each mobile operator will enjoy equal access
to the shared network.
VEON acquired strategic stake in ShopUp in Bangladesh
In October 2020, VEON joined Sequoia Capital India and Flourish Ventures as investors in ShopUp, Bangladesh’s leading full-
stack B2B commerce platform for small businesses, becoming ShopUp’s first strategic corporate investor.
The investment of approximately US$8 million, in exchange for a 13.5% stake, is expected to enable VEON to support ShopUp’s
fast-growing digital ecosystem for micro, small and medium-sized enterprises, which form a vital backbone of Bangladesh’s
economy, as well as provide opportunities for developing mobile financial services for ShopUp’s users.
85
Agreement concluded for the sale of Armenian operations
In October 2020, VEON concluded an agreement for the sale of CJSC “VEON Armenia”, VEON’s operating subsidiary in
Armenia, to Team LLC for a consideration of US$51 million. Accordingly the net carrying value of assets amounting US$33
million were de-recognized along with reclassification of cumulative foreign currency translation reserve of US$96 million to
profit and loss, resulting in the net loss of US$78 million.
Beeline Russia completed coverage of all Moscow metro stations with 4G and expanded 4G coverage in Moscow
In December 2020, VEON announced that Beeline Russia achieved 100% 4G coverage and enabled its customers to access
high-speed internet at all stations of the Moscow metro, as well as in most of the adjacent tunnels. The milestone reflects
Beeline’s ongoing efforts to improve the quality of 4G connectivity and offers Beeline customers the ability to stay in touch, listen
to music and stream content in good quality whilst underground.
In January 2021, VEON announced that Beeline Russia completed a large-scale project to improve the quality and availability of
mobile internet in Moscow. The project included the redistribution of the 2100 frequency range from 3G to 4G and an expansion
in the frequency range used in the 4G network from 30 to 45 MHz. This has enabled an increase in the average speed of mobile
internet by up to 30%, with peak speeds now reaching up to 350 Mbit/sec.
Financing activities
In January 2020, VEON Holdings B.V. ("VEON Holdings") issued US$300 million in senior unsecured notes due in 2025, to be
consolidated and form a single series with the US$700 million 4.00% senior notes due in 2025 issued by VEON Holdings in
October 2019. VEON Holdings used the net proceeds of the tap issuance to refinance certain existing outstanding debt, address
upcoming debt maturities and for general corporate purposes.
In April 2020, VEON Holdings announced the establishment of a US$ 6.5 billion (or the equivalent thereof in other currencies)
Global Medium Term Note program for the issuance of bonds (the "MTN Program"). In connection with the establishment of the
MTN Program, VEON prepared a base offering memorandum, which was approved by the Luxembourg Stock Exchange, in
order to enable bonds issued under the MTN Program to be admitted to listing on the Official List of the Luxembourg Stock
Exchange and to trading on the Euro MTF market of the Luxembourg Stock Exchange. In June, September and November 2020,
VEON Holdings issued senior unsecured notes of RUB20 billion (US$288 million), RUB10 billion (US$135 million) and US$1.25
billion, respectively, under the MTN Program, maturing in June 2025, September 2025 and November 2027, respectively. The
use of proceeds of the Notes is being used to finance certain investments in subsidiaries, to refinance certain outstanding
indebtedness of the Issuer, and for general corporate purposes.
In April 2020, Banglalink extended the maturity of its US$300 million syndicated loan by an additional two years to 2022.
Following this extension, VEON, via a wholly-owned subsidiary, acquired the loan from the original lenders, leading to an
effective extinguishment of this debt for the VEON Group.
In June 2020, VEON entered into a new RUB 100 billion (approximately US$1.5 billion) bilateral term loan agreement with
Sberbank. The loan was used to refinance and extend the maturity of the existing loan between Sberbank and VEON Holdings,
as well as to provide additional funds for general corporate purposes.
In July 2020, VEON refinanced its existing RUB 30 billion (approximately US$422 million) bilateral term loan agreement with VTB
Bank. This refinancing extended the maturity and reduced the cost of the existing loan between VTB Bank and VEON.
In December 2020, VEON completed the optional early redemption of all of its outstanding US$600 million 3.95% Senior Notes
due June 2021 (the "2021 Notes") pursuant to Condition 5.3 of the 2021 Notes. The 2021 Notes were redeemed in full at a
redemption price equal to 101.00% of the principal amount thereof, plus accrued and unpaid interest and additional amounts due
thereon.
In December 2020, VEON’s operating company in Ukraine, Kyivstar, signed three bilateral unsecured loan agreements with
Raiffeisen Bank Aval Joint Stock Company ("Raiffeisen"), Joint Stock Company Alfa-Bank ("Alfa-Bank") and Joint Stock
Company OTP Bank ("OTP"), for an aggregate amount of UAH 4.1 billion (approximately US$146 million). The loan agreement
with Raiffeisen has a 5-year term, and the loan agreements with Alfa-Bank and OTP have a 3-year term.
Similarly, VEON’s subsidiary in Kazakhstan, KaR-Tel, has signed a bilateral unsecured loan agreement with Forte Bank JSC for
KZT 10 billion (approximately US$25 million), which has a 3-year term. Both Kyivstar and KaR-Tel will continue to monitor the
local debt markets for further borrowing opportunities, in line with VEON’s strategy to improve its capital structure via long-term
borrowings in local currencies.
Changes to Board of Directors and Senior Management
On February 13, 2020, VEON announced the appointment of Sergi Herrero and Kaan Terzioğlu as co-Chief Executive Officers,
effective from March 1, 2020. Ursula Burns, who was appointed as Chairman in July 2017 and CEO in December 2018,
remained as VEON’s Chairman before stepping down on June 1, 2020. Gennady Gazin was appointed as Chairman of VEON on
1 June 2020.
One of the co-CEOs chairs each VEON local board, with the exception of Algeria. The role of the boards is to foster growth,
monitor progress and oversee operations in each of VEON’s operating companies.
86
On April 3, 2020, VEON announced the appointment of Alexander Torbakhov as Chief Executive Officer of Beeline Russia,
effective from April 6, following Vasyl Latsanych stepping down from the role earlier in the year.
On April 6, 2020, VEON announced the appointment of Serkan Okandan as Group Chief Financial Officer (CFO), effective from
May 1, 2020.
On April 28, 2020, VEON announced that Erwan Gelebart has been appointed as CEO for JazzCash effective May 18, 2020.
On June 1, 2020 VEON announced the results of the elections conducted at its Annual General Meeting of Shareholders.
Shareholders elected five new members to the company’s board of directors, Hans Holger Albrecht, Mariano De Beer, Peter
Derby, Amos Genish and Stephen Pusey, as well as seven previously serving directors: Osama Bedier, Mikhail M. Fridman,
Gennady Gazin, Andrei Gusev, Gunnar Holt, Robert Jan van de Kraats and Alexander Pertsovsky.
Following the election of the directors, Gennady Gazin was appointed as Chairman of VEON’s board of directors, effective June
1, 2020.
VEON appointed Yaroslav Glazunov and Leonid Boguslavsky on October 28, 2020 and January 15, 2021, respectively, to the
company’s board of directors. Mr. Glazunov is a managing partner at Spencer Stuart International based in Moscow and has
been in the global leadership advisory business for 20 years, focusing on CEO succession, efficiency and performance. Mr.
Boguslavsky is the founder of RTP Global, an early-stage venture capital firm with a strong track record of investing in
technology, and is considered a pioneer of IT and internet tech investment.
VEON Co-CEO Kaan Terzioğlu Elected to Serve on GSMA Board of Directors
On November 16, 2020, VEON announced that Kaan Terzioğlu was elected to the Board of Directors of the GSMA, the mobile
industry’s leading global organization that brings together more than 750 operators and nearly 400 ecosystem companies. Kaan
Terzioğlu’s appointment was confirmed among those of 26 industry leaders elected to the GSMA’s Board for a two-year term,
each of whom will serve the mobile industry’s leading global body from January 2021 to December 2022.
Appointment of Chief Internal Audit and Compliance Officer
In October 2020, Joop Brakenhoff was appointed to the position of Chief Internal Audit & Compliance Officer. He reports to the
co-CEOs and also has a reporting line to the Chairman of the Audit & Risk Committee.
RECENT DEVELOPMENTS
VEON enters into a US$1,250 million multi-currency revolving credit facility agreement
In March 2021, VEON entered into a new multi-currency revolving credit facility agreement (the "RCF") of US$1,250 million. The
RCF replaces the revolving credit facility signed in February 2017, which is now cancelled. The RCF has an initial tenor of three
years, with the company having the right to request two one-year extensions, subject to lender consent. International banks from
Asia, Europe and the US have committed to the RCF. The new RCF caters for USD LIBOR cessation with the secured overnight
financing rate (SOFR) administered by the Federal Reserve Bank of New York agreed as the replacement risk free rate with
credit adjustment spreads agreed for interest periods with a one month, three month and six month tenor. SOFR will apply to
interest periods commencing on and from October 31, 2021 (or earlier if USD LIBOR is no longer published or ceases to be
representative prior to that date). The company will have the option to make each drawdown in either U.S. dollars or euro.
VEON subsidiary Banglalink successfully acquires 9.4MHz in spectrum auction
In March 2021, Banglalink, the Company's wholly-owned subsidiary in Bangladesh, acquired 4.4MHz spectrum in the 1800MHz
band and 5MHz spectrum in 2100MHz band following successful bids at an auction held by the BTRC. The newly acquired
spectrum will see Banglalink increase its total spectrum holding from 30.6MHz to 40MHz. Banglalink will invest approximately
BDT 10 billion (US$115) to purchase the spectrum.
Appointment of CEO of Beeline Uzbekistan
In March 2021, we announced the appointment of Andrzej Malinowski to the vacant position of CEO of Beeline Uzbekistan, with
effect from March 15, 2021. Mr. Malinowski joins from Beeline Georgia, where he has held the position of CEO. Lasha Tabidze
has been appointed as Mr. Malinowski’s successor at Beeline Georgia, who previously held the joint position of Chief Operating
Officer and Chief Commercial Officer of Beeline Georgia. A candidate for the Beeline Uzbekistan role had been previously
announced but Beeline Uzbekistan was unable to finalize the employment of this candidate.
Shareholders trading on NASDAQ no longer subject to annual depository fee
From January 1, 2021 holders of VEON American Depositary Shares ("ADSs") trading on NASDAQ will no longer be subject to
any cash dividend fee or depository service fee of any kind. ADS holders will continue to be subject to the normal issuance and
cancellation fees.
No final dividend declared by the VEON for FY2020
The VEON Group will not be paying a dividend for FY2020.
87
FACTORS AFFECTING COMPARABILITY AND RESULTS OF OPERATIONS
Economic Trends
As a global telecommunications company with operations in a number of markets, we are affected by a broad range of
international economic developments. Unfavorable economic conditions may impact a significant number of our customers,
including their spending patterns, both in terms of the products they subscribe for and usage levels. As a result, it may be more
difficult for us to attract new customers, more likely that customers will downgrade or disconnect their services and more difficult
for us to maintain mobile ARPUs at existing levels. The current difficult economic environment and any future downturns in the
economies of markets in which we operate or may operate in the future could also, among other things, increase our costs,
prevent us from executing our strategies, hurt our liquidity or prevent us to meet unexpected financial requirements. For more
information regarding economic trends and how they affect our operations, see - Risk Factors — Market Risks —“The
international economic environment could cause our business to decline.”
Inflation
Inflation affects the purchasing power of our customers (both retail and corporate). The Russian, Ukrainian and
Uzbekistani currencies, for example, have experienced significant inflation levels in recent years, which has caused the relative
values of those currencies to decline. Although the inflation rates have broadly stabilized, economic and political developments
may cause inflation rates to rise once again.
Foreign Currency Translation
Our audited consolidated financial statements are presented in U.S. dollars. Amounts included in these financial
statements were presented in accordance with IAS 21, using the current rate method of currency translation with the U.S. dollar
as the reporting currency. Our results of operations are affected by increases or decreases in the value of the U.S. dollar or our
functional currencies. A higher average exchange rate correlates to a weaker functional currency. The functional currencies of
our group are the Russian ruble in Russia, the Pakistani rupee in Pakistan, the Algerian dinar in Algeria, the Bangladeshi taka in
Bangladesh, the Ukrainian hryvnia in Ukraine, the Uzbekistani som in Uzbekistan, the Kazakhstani tenge in Kazakhstan.
CERTAIN PERFORMANCE INDICATORS
The following discussion provides a description of certain operating data that is not included in our financial statements.
We provide this operating data because it is regularly reviewed by our management and our management believes it is useful in
evaluating our performance from period to period as set out below. Our management believes that presenting information about
Adjusted EBITDA, Adjusted EBITDA Margin, mobile customers, mobile ARPU, mobile data customers, capital expenditures
(excluding licenses and right-of-use assets) and local currency financial measures is useful in assessing the usage and
acceptance of our mobile and broadband products and services. This operating data is unaudited.
For an explanation of how we calculate Adjusted EBITDA, Adjusted EBITDA Margin, capital expenditures (excluding
licenses and right-of-use assets) and local currency financial measures, please see Explanatory Note — Non-IFRS Financial
Measures. For a description of how we define mobile customers, mobile data customers and mobile ARPU, please see the
discussion below.
Mobile customers
Mobile customers are generally customers in the registered customer base as of a given measurement date who
engaged in a revenue generating activity at any time during the three months prior to such measurement date. Such activity
includes any outgoing calls, customer fee accruals, debits related to service, outgoing SMS and MMS, data transmission and
receipt sessions, but does not include incoming calls, SMS and MMS or abandoned calls. Our total number of mobile customers
also includes customers using mobile internet service via USB modems.
Mobile data customers
Mobile data customers are mobile customers who have engaged in revenue generating activity during the three months
prior to the measurement date as a result of activities including USB modem Internet access using 2.5G/3G/4G/LTE/HSPA+
technologies. For Algeria, mobile data customers are 3G customers who have performed at least one mobile data event on the
3G network during the previous four months.
Mobile ARPU
Mobile ARPU measures the monthly average revenue per mobile user. We generally calculate mobile ARPU by dividing
our mobile service revenue during the relevant period, including data revenue, roaming revenue and interconnect revenue, but
excluding revenue from connection fees, sales of handsets and accessories and other non-service revenue, by the average
number of our mobile customers during the period and dividing by the number of months in that period.
88
RESULTS OF OPERATIONS
In millions of U.S. dollars
Consolidated income statement data:
Service revenues
Sale of equipment and accessories
Other revenues / other income
Total operating revenues
Other operating income
Service costs
Cost of equipment and accessories
Selling, general and administrative expenses
Depreciation
Amortization
Impairment (loss) / reversal
Gain / (loss) on disposal of non-current assets
Gain / (loss) on disposal of subsidiaries
Operating profit
Finance costs
Finance income
Other non-operating gain / (loss)
Net foreign exchange gain / (loss)
Profit / (loss) before tax from continuing operations
Income tax expense
Profit / (loss) from continuing operations
Profit / (loss) after tax from discontinued operations
Gain / (loss) on disposal of discontinued operations
Profit / (loss) for the period
Attributable to:
The owners of the parent (continuing operations)
The owners of the parent (discontinued operations)
Non-controlling interest
Year ended
December 31,
2020
2019
2018
7,471
392
117
7,980
5
(1,508)
(382)
(2,641)
(1,576)
(343)
(785)
(37)
(78)
635
(683)
23
111
(60)
26
(342)
(316)
—
—
(316)
(349)
—
33
(316)
8,240
465
158
8,863
350
(1,554)
(479)
(2,965)
(1,652)
(394)
(108)
(43)
1
2,019
(892)
53
21
(20)
1,181
(498)
683
—
—
683
621
—
62
683
8,526
427
133
9,086
—
(1,701)
(415)
(3,697)
(1,339)
(495)
(858)
(57)
30
554
(816)
67
(68)
15
(248)
(369)
(617)
(300)
1,279
362
(397)
979
(220)
362
The tables below show for the periods indicated selected information about the results of operations in each of our
reportable segments. For more information regarding our segments, see Note 2 — Segment Information to our Audited
Consolidated Financial Statements attached hereto.
89
Total Operating Revenue
In millions of U.S. dollars, includes intersegment revenue
2020
2019
2018
Year ended December 31,
Our cornerstone
Russia
Our growth engines
Pakistan
Ukraine
Kazakhstan
Uzbekistan
Our frontier markets
Algeria
Bangladesh
Other frontier markets
Other
HQ and eliminations
Total segments
3,819
4,481
4,654
1,233
933
479
198
689
537
125
(33)
7,980
1,321
870
486
258
775
537
172
(37)
8,863
1,494
688
441
315
813
521
201
(41)
9,086
In 2020, our consolidated total operating revenue decreased by 10.0% year-on-year primarily due to the devaluation of
currencies across all the countries in which we operate. Revenue fell on the back of significant disruption of retail operations
faced by our operating companies, following store closures, which resulted in lower gross connections, device sales and airtime
sales and a decline in roaming revenues. In particular, Russia and Pakistan revenues decreased compared to the prior year in
local currency terms. These declines were partially offset by strong performance in Ukraine and Kazakhstan. For further details,
please refer to “Reports of our reportable segments” below.
Operating Profit
In 2020, our consolidated operating profit decreased to US$635 million compared to US$2,019 million in 2019 primarily
due to an impairment loss of US$785 million in respect of our operations in Russia and Kyrgyzstan, refer to Note 10 —
Impairment Losses of our audited consolidated financial statements attached hereto). Furthermore, reduced revenue as
described above also contributed to year-on-year reduction in operating profit.
90
Non-Operating Profits And Losses
Finance Costs
In 2020, our consolidated finance costs decreased by 23.4% year-on-year primarily due to an updated fair valuation of
the put option liability on completion of the independent valuation process triggered by the exercise of put option by the Dhabi
Group and lower interest charges on loans driven by a combination of lower average cost of debt across most countries and by a
depreciation of the Russian ruble.
Finance Income
In 2020, our consolidated finance income decreased by 56.6% to US$23 million primarily due to lower cash and deposit
balances and partially due to currency devaluation on cash and deposits in the local currencies of our operating companies.
Other Non-Operating Gain / (Loss)
In 2020, we recorded an other non-operating gain of US$111 million, as compared to a non-operating gain of US$21
million in 2019. The driver for this increase related to one-off non-operating gains in 2020 as follows: (1) a revaluation of
contingent consideration liability; and (2) a gain upon reaching a settlement in connection with the dispute concerning the sale of
Telecel Globe Limited. For more information on these items please refer to Note 15 and Note 7 respectively of our Audited
Consolidated Financial Statements attached hereto.
Net Foreign Exchange Gain / (Loss)
In 2020, we recorded a loss of US$60 million from the net foreign exchange result for the year ended 2020. The year-
on-year change was primarily due to depreciation of the currencies of countries in which VEON operates compared to the US
dollar, which had a negative impact on profit or loss upon translation of US dollar-denominated monetary liabilities, such as trade
payables and debt.
Income Tax Expense
In 2020, our consolidated income tax expense decreased by 31.3% to US$342 million compared to US$498 million in
2019.
For more information regarding the factors affecting our total income tax expenses, please refer to Note 8 — Income
Taxes of our Audited Consolidated Financial Statements attached hereto.
Profit / (Loss) For The Period Attributable To The Owners Of The Parent From Continuing Operations
In 2020, the year-on-year change of our profit / (loss) for the period attributable to the owners of the parent from
continuing operations was mainly due to a decrease in operating profit as discussed above.
Profit / (Loss) For The Period Attributable To Non-Controlling Interest
In 2020, the year-on-year decrease in profit / (loss) for the period attributable to non-controlling interest was mainly
driven by a decrease in operating profit for our operations in Algeria.
91
Adjusted EBITDA
In millions of U.S. dollars
Our cornerstone
Russia
Our growth engines
Pakistan
Ukraine
Kazakhstan
Uzbekistan
Our frontier markets
Algeria
Bangladesh
Other frontier markets
Other
HQ and eliminations
Total segments
Year ended December 31,
2020
2019
2018
1,504
1,957
1,677
612
630
265
68
302
228
22
669
572
270
136
354
222
63
714
387
206
136
363
183
54
(177)
3,454
(28)
4,215
(447)
3,273
In 2020, our total Adjusted EBITDA decreased by 18.1% year-on-year mainly due to lower revenues as discussed
above as well as the recognition of a one-off gain of US$350 million in 2019 relating to a revised agreement with Ericsson to
upgrade the IT systems of VEON’s operating companies. The decrease was partially offset by lower general and administrative
costs.
For more information on how we calculate Adjusted EBITDA and for the reconciliation of consolidated profit / (loss) before tax
from continuing operations, the most directly comparable IFRS financial measure, to Adjusted EBITDA, for the years ended
December 31, 2020, 2019 and 2018 please refer to table below.
In millions of U.S. dollars
Profit / (loss) before tax from continuing operations
Depreciation
Amortization
Impairment loss / (reversal)
(Gain) / loss on disposal of non-current assets
(Gain) / loss on disposal of subsidiaries
Finance costs
Finance income
Other non-operating (gain) / loss
Net foreign exchange (gain) / loss
Total Segments Adjusted EBITDA
2020
26
1,576
343
785
37
78
683
(23)
(111)
60
2019
1,181
1,652
394
108
43
(1)
892
(53)
(21)
20
2018
(248)
1,339
495
858
57
(30)
816
(67)
68
(15)
3,454
4,215
3,273
92
RESULTS OF OUR REPORTABLE SEGMENTS
RUSSIA
RESULTS OF OPERATIONS IN US$
In millions of U.S. dollars (except as indicated)
Total operating revenue
Mobile service revenue
- of which fixed-mobile convergence (“FMC”)
- of which mobile data
Fixed-line service revenue
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
RESULTS OF OPERATIONS IN RUB
Total operating revenue
Mobile service revenue
- of which FMC
- of which mobile data
Fixed-line service revenue
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
SELECTED PERFORMANCE INDICATORS
Mobile
Customers in millions
Mobile data customers in millions
ARPU in US$
ARPU in RUB
TOTAL OPERATING REVENUE
Year ended December 31,
2020
3,819
2,917
164
919
523
379
2,319
1,504
2019
4,481
3,485
151
972
539
457
2,523
1,957
2018
4,654
3,679
126
996
566
409
2,977
1,677
39.4 %
43.7 %
36.0 %
Year ended December 31,
‘19-20
% change
-14.8 %
-16.3 %
8.6 %
-5.5 %
-3.0 %
-17.1 %
-8.1 %
-23.1 %
-4.3 pp
‘19-20
% change
274,480
209,527
11,796
66,071
37,657
27,296
167,009
107,775
289,875
225,555
9,788
62,894
34,850
29,470
163,177
126,698
291,539
230,123
7,942
62,259
35,295
26,121
186,822
104,717
39.3 %
43.7 %
35.9 %
-5.3 %
-7.1 %
20.5 %
5.1 %
8.1 %
-7.4 %
2.3 %
-14.9 %
-4.4 pp
Year ended December 31,
2020
2019
2018
‘19-20
% change
‘18-19
% change
-3.7 %
-5.3 %
19.8 %
-2.4 %
-4.8 %
11.7 %
-15.3 %
16.7 %
7.7 pp
‘18-19
% change
-0.6 %
-2.0 %
23.2 %
1.0 %
-1.3 %
12.8 %
-12.7 %
21.0 %
7.8 pp
‘18-19
% change
49.9
32.9
4.6
333.0
54.6
35.5
5.3
340.0
55.3
36.8
5.4
336.0
-8.6 %
-7.3 %
-13.2 %
-2.1 %
-1.3 %
-3.5 %
-1.9 %
1.2 %
In millions of RUB (except as indicated)
2020
2019
2018
In 2020 our total operating revenue in Russia decreased by 14.8% (in USD terms) and by 5.3% (in local currency terms)
year-on-year. Mobile service revenue was negatively impacted by a lower customer base as well as reduced roaming revenues
due to travel restrictions. Meanwhile, fixed-service revenue showed strong positive performance as customers relied more
heavily on fixed-line data at home due to lockdown restrictions.
ADJUSTED EBITDA
In 2020, our Russia Adjusted EBITDA decreased by 23.1% (in USD terms) and by 14.9% (in local currency terms) year-
on-year , primarily due to lower revenues as stated above, as well as an increase in structural operating expenses related to
increased network investments and higher interconnection costs due to the increased ratio of off-net traffic.
NUMBER OF CUSTOMERS
As of December 31, 2020, we had 49.9 million mobile customers in Russia representing a decrease of 8.6% year-on-
year, the decrease which was primarily due to customer perceptions on network quality, as well as a reduction in sales through
alternate distribution channels and loss of migrant customers from our subscriber base due to travel and lockdown restrictions.
Mobile data customers also observed a decrease of 7.3% year-on-year.
ARPU
Our mobile ARPU in Russia decreased by 13.2% (in USD terms) and by 2.1% (in local currency terms) year-on-year,
mainly driven by lower revenues stemming from reduced activity.
93
PAKISTAN
RESULTS OF OPERATIONS IN US$
In millions of U.S. dollars (except as indicated)
Total operating revenue
Mobile service revenue
- of which mobile data
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
RESULTS OF OPERATIONS IN PKR
Year ended December 31,
2020
1,233
1,134
426
99
620
612
2019
1,321
1,229
370
92
652
669
2018
1,494
1,391
311
103
780
714
49.6 %
50.6 %
47.8 %
‘19-20
% change
‘18-19
% change
-6.7 %
-7.7 %
15.1 %
7.6 %
-4.9 %
-8.5 %
-1.0 pp
-11.6 %
-11.6 %
19.0 %
-10.7 %
-16.4 %
-6.3 %
2.8 pp
Year ended December 31,
In millions of PKR (except as indicated)
2020
2019
2018
Total operating revenue
Mobile service revenue
- of which mobile data
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
SELECTED PERFORMANCE INDICATORS
199,280
183,367
68,965
15,913
100,092
99,188
49.8 %
197,604
183,760
55,517
13,844
97,531
100,074
50.6 %
181,722
169,277
38,230
12,445
94,911
86,811
47.8 %
‘19-20
% change
‘18-19
% change
0.8 %
-0.2 %
24.2 %
14.9 %
2.6 %
-0.9 %
-0.8 pp
8.7 %
8.6 %
45.2 %
11.2 %
2.8 %
15.3 %
2.8 pp
Mobile
Customers in millions
Mobile data customers in millions
ARPU in US$
ARPU in PKR
TOTAL OPERATING REVENUE
Year ended December 31,
2020
2019
2018
‘19-20
% change
‘18-19
% change
66.4
44.0
1.5
239.0
60.5
38.8
1.7
261.0
56.2
33.0
2.1
254.0
9.8 %
13.4 %
-11.8 %
-8.4 %
7.7 %
17.6 %
-19.0 %
2.8 %
In 2020, our Pakistan total operating revenue decreased by 6.7% (in USD terms) mainly due to the devaluation of the
local currency. In local currency terms, revenue increased by 0.8% as a result of strong mobile data revenue supported by an
expansion of the 4G network in 2020, which also led to overall customer base expansion by 9.8% in 2020.
ADJUSTED EBITDA
In 2020 our Pakistan Adjusted EBITDA decreased by 8.5% (in USD terms) and by 0.9% (in local currency terms) when
compared with 2019, which was primarily attributable to the classification of certain costs for the ex-Warid license paid in the
form of security (under protest) as service costs in 2020, compared to prior year amortization of licenses below EBITDA. This
impact was offset by the reversal of a provision, with an impact on Adjusted EBITDA of PKR 8.6 billion (USD 52 million) in the
third quarter of 2020.
NUMBER OF CUSTOMERS
In 2020, we had 66.4 million mobile customers in Pakistan, representing an increase of 9.8% year-on-year driven
primarily by growth in mobile data customers, which increased by 13.4% year-on-year. The increase arose on the back of our
continued expansion of our data network in Pakistan.
ARPU
In 2020, our mobile ARPU in Pakistan decreased by 11.8% (in USD terms) and by 8.4% (in local currency terms),
mainly driven by reduced activity from the lockdown measures implemented in Pakistan, as described above.
94
UKRAINE
RESULTS OF OPERATIONS IN US$
Year ended December 31,
In millions of U.S. dollars (except as indicated)
2020
2019
2018
Total operating revenue
Mobile service revenue
- of which mobile data
Fixed-line service revenue
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
RESULTS OF OPERATIONS IN UAH
In millions of UAH (except as indicated)
Total operating revenue
Mobile service revenue
- of which mobile data
Fixed-line service revenue
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
SELECTED PERFORMANCE INDICATORS
Mobile
Customers in millions
Mobile data customers in millions
ARPU in US$
ARPU in UAH
TOTAL OPERATING REVENUE
933
869
489
59
5
303
630
870
812
421
52
6
298
572
688
641
263
44
3
301
387
67.5 %
65.7 %
56.3 %
‘19-20
% change
‘18-19
% change
7.2 %
7.0 %
16.2 %
13.5 %
-16.7 %
1.7 %
10.1 %
1.8 pp
26.5 %
26.7 %
60.1 %
18.2 %
100.0 %
-1.0 %
47.8 %
9.4 pp
Year ended December 31,
2020
25,158
23,418
13,191
1,602
138
8,181
16,979
67.5 %
2019
22,392
20,903
10,847
1,350
139
7,709
14,683
65.6 %
2018
18,720
17,421
7,177
1,206
93
8,190
10,529
56.2 %
‘19-20
% change
‘18-19
% change
12.4 %
12.0 %
21.6 %
18.7 %
-0.7 %
6.1 %
15.6 %
1.9 pp
19.6 %
20.0 %
51.1 %
11.9 %
49.5 %
-5.9 %
39.5 %
9.4 pp
Year ended December 31,
2020
2019
2018
‘19-20
% change
‘18-19
% change
25.9
17.1
2.8
75.0
26.2
16.9
2.6
66.0
26.4
14.8
2.0
54.0
-1.1 %
1.2 %
7.7 %
13.6 %
-0.8 %
14.2 %
30.0 %
22.2 %
In 2020, our Ukraine total operating revenue increased by 7.2% (in USD terms) and by 12.4% (in local currency terms)
year-on-year. The change was primarily due to strong growth in mobile data consumption owing to strong 4G adoption on the
back of our continued focus on 4G connectivity and digitalizing solutions for customers. Fixed-line revenue also grew year on
year as customers continued to draw on fixed-line data at home as described above.
ADJUSTED EBITDA
In 2020, our Ukraine Adjusted EBITDA increased by 10.1% (in USD terms) and by 15.6% (in local currency terms) year-
on-year, primarily due to solid revenue performance and lower service costs and commercial costs. This was offset partially by
the increase in structural operating expenses when compared with the previous year.
NUMBER OF CUSTOMERS
As of December 31, 2020, we had 25.9 million mobile customers in Ukraine representing a decrease of 1.1% year-on-
year. The decrease was a result of increased churn rate and lower gross additions owing to the closure of stores as a result of
lockdown measures, as well as a reduction in multi-SIM users in the market and demographic trends in Ukraine. Our mobile data
customers observed an increase of 1.2% year-on-year.
ARPU
In 2020, our mobile ARPU in Ukraine increased by 7.7% (in USD terms) and by 13.6% (in local currency terms) year on
year, primarily due to usage growth during the year as described above.
95
KAZAKHSTAN
RESULTS OF OPERATIONS IN US$
Year ended December 31,
In millions of U.S. dollars (except as indicated)
2020
2019
2018
Total operating revenue
Mobile service revenue
- of which mobile data
Fixed-line service revenue
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
RESULTS OF OPERATIONS IN KZT
479
392
199
78
9
214
265
486
379
157
66
41
216
270
441
363
115
73
5
234
206
55.3 %
55.6 %
46.7 %
‘19-20
% change
‘18-19
% change
-1.4 %
3.4 %
26.8 %
18.2 %
10.2 %
4.4 %
36.5 %
-9.6 %
-78.0 %
720.0 %
-0.9 %
-1.9 %
-0.3 pp
-7.7 %
31.1 %
8.9 pp
Year ended December 31,
In millions of KZT (except as indicated)
2020
2019
2018
Total operating revenue
Mobile service revenue
- of which mobile data
Fixed-line service revenue
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
SELECTED PERFORMANCE INDICATORS
Mobile
Customers in millions
Mobile data customers in millions
ARPU in US$
ARPU in KZT
TOTAL OPERATING REVENUE
197,775
161,873
82,383
32,198
3,704
88,403
186,039
144,925
59,986
25,423
15,691
82,586
109,373
103,454
55.3 %
55.6 %
151,799
125,125
39,789
25,228
1,446
80,679
71,119
46.9 %
‘19-20
% change
‘18-19
% change
6.3 %
11.7 %
37.3 %
26.6 %
22.6 %
15.8 %
50.8 %
0.8 %
-76.4 %
985.1 %
7.0 %
5.7 %
-0.3 pp
2.4 %
45.5 %
8.7 pp
Year ended December 31,
2020
2019
2018
‘19-20
% change
‘18-19
% change
9.5
7.2
3.3
10.2
6.9
3.1
9.9
6.3
3.0
1,364.0
1,192.0
1,051.0
-6.9 %
4.3 %
6.5 %
14.4 %
3.0 %
9.5 %
3.3 %
13.4 %
In 2020, our Kazakhstan total operating revenue decreased by 1.4% (in USD terms) and increased by 6.3% (in local
currency terms) year-on-year. The increase in local currency terms was primarily due to strong demand for our data services
(specifically, growth of our 4G user base facilitated through an expansion of our 4G network). Revenue from fixed-line services
was also strong, as the popularity of our convergent products contributed to a larger customer base. These increases were
partially offset by the impact of higher revenues in 2019 stemming from compensation received in relation to termination of a
network sharing agreement with Kcell.
ADJUSTED EBITDA
In 2020, our Kazakhstan Adjusted EBITDA decreased by 1.9% in (USD terms) and increased by 5.7% (in local currency
terms) year-on-year, primarily due to higher revenues as described above that was offset partially by the increased personnel
costs, certain non-income taxes and technology expenses.
NUMBER OF CUSTOMERS
As of December 31, 2020, we had 9.5 million mobile customers in Kazakhstan representing an decrease of 6.9% year-
on-year. The decrease was mainly due to post IMEI registration barriers resulting in lower gross additions. The number of mobile
data customers increased by 4.3% mainly due to improved bundle offers and data services.
ARPU
In 2020, our mobile ARPU in Kazakhstan increased by 6.5% (in USD terms) and by 14.4% (in local currency terms) year on year,
primarily due to data usage growth.
96
UZBEKISTAN
RESULTS OF OPERATIONS IN US$
Year ended December 31,
In millions of U.S. dollars (except as indicated)
2020
2019
2018
Total operating revenue
Mobile service revenue
- of which mobile data
Fixed-line service revenue
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
RESULTS OF OPERATIONS IN UZS
198
196
111
1
1
130
68
258
255
120
2
1
122
136
315
312
108
2
1
178
136
34.3 %
52.7 %
43.2 %
‘19-20
% change
‘18-19
% change
-23.3 %
-23.1 %
-7.5 %
-50.0 %
0.0 %
6.6 %
-50.0 %
-18.4 pp
-18.1 %
-18.3 %
11.1 %
0.0 %
0.0 %
-31.5 %
0.0 %
9.5 pp
Year ended December 31,
In millions of UZS (except as indicated)
2020
2019
2018
Total operating revenue
Mobile service revenue
- of which mobile data
Fixed-line service revenue
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
SELECTED PERFORMANCE INDICATORS
Mobile
Customers in millions
Mobile data customers in millions
ARPU in US$
ARPU in UZS
TOTAL OPERATING REVENUE
1,985,465
1,966,778
1,114,049
11,489
7,198
1,307,334
679,613
2,275,256
2,251,950
1,059,616
13,229
10,077
1,071,233
1,204,023
2,537,768
2,516,756
871,670
17,390
3,622
1,439,916
1,097,852
34.2 %
52.9 %
43.3 %
‘19-20
% change
‘18-19
% change
-12.7 %
-12.7 %
5.1 %
-13.2 %
-28.6 %
22.0 %
-43.6 %
-18.7 pp
-10.3 %
-10.5 %
21.6 %
-23.9 %
178.2 %
-25.6 %
9.7 %
9.6 pp
Year ended December 31,
2020
2019
2018
‘19-20
% change
‘18-19
% change
6.8
4.8
2.2
8.1
5.2
2.4
9.1
5.5
2.8
21,758
21,390
22,177
-16.0 %
-7.7 %
-8.3 %
1.7 %
-11.0 %
-5.5 %
-14.3 %
-3.5 %
In 2020, our Uzbekistan total operating revenue decreased by 23.3% (in USD terms) and by 12.7% (in local currency
terms) year-on-year, primarily due to lower subscriber base impacted by a new excise duty and IMEI registration implementation
as well as weaker business activity due to COVID-19 restrictions.
ADJUSTED EBITDA
In 2020, our Adjusted EBITDA in Uzbekistan decreased by 50.0% (in USD terms) and by 43.6% (in local currency
terms) year on year, primarily due to reduced revenues as described above as well as increased structural operating expenses.
NUMBER OF CUSTOMERS
As of end of 2020, the number of mobile customers in our Uzbekistan segment decreased by 16.0% to 6.8 million. The
decrease was the result of a strategic focus on high value customers resulting in higher churn rate. The number of our mobile
data customers also decreased by 7.7% year-on-year.
ARPU
In 2020, our mobile ARPU in Uzbekistan decreased by 8.3% (in USD terms) and increased by 1.7% (in local currency
terms) year on year, primarily due to the strategic focus on high value customers as described above.
97
ALGERIA
RESULTS OF OPERATIONS IN US$
Year ended December 31,
In millions of U.S. dollars (except as indicated)
2020
2019
2018
Total operating revenue
Mobile service revenue
- of which mobile data
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
RESULTS OF OPERATIONS IN DZD
In millions of DZD (except as indicated)
Total operating revenue
Mobile service revenue
- of which mobile data
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
SELECTED PERFORMANCE INDICATORS
Mobile
Customers in millions
Mobile data customers in millions
ARPU in US$
ARPU in DZD
TOTAL OPERATING REVENUE
689
685
260
4
387
302
775
771
232
4
421
354
813
801
188
12
449
363
43.8 %
45.7 %
44.6 %
‘19-20
% change
‘18-19
% change
-11.1 %
-11.2 %
12.1 %
0.0 %
-8.1 %
-14.7 %
-1.9 pp
-4.7 %
-3.7 %
23.4 %
-66.7 %
-6.2 %
-2.5 %
1.1 pp
Year ended December 31,
2020
87,201
86,661
32,890
540
48,954
38,282
43.9 %
2019
92,513
91,870
27,665
643
50,241
42,272
45.7 %
2018
94,773
93,409
21,978
1,364
52,376
42,398
44.7 %
‘19-20
% change
‘18-19
% change
-5.7 %
-5.7 %
18.9 %
-16.0 %
-2.6 %
-9.4 %
-1.8 pp
-2.4 %
-1.6 %
25.9 %
-52.9 %
-4.1 %
-0.3 %
1.0 pp
Year ended December 31,
2020
2019
2018
‘19-20
% change
‘18-19
% change
14.1
9.2
4.0
502.0
14.6
8.8
4.2
501.0
15.8
9.2
4.3
504.0
-3.4 %
4.5 %
-4.8 %
0.2 %
-7.6 %
-4.3 %
-2.3 %
-0.6 %
In 2020, our Algeria total operating revenue decreased by 11.1% (in USD terms) and by 5.7% (in local currency terms)
year-on-year, primarily due to lower subscriber base in an aggressively competitive market and the negative impact of a change
in the Mobile Termination Rate (MTR), as well as the economic slowdown due to the COVID-19 pandemic. Data revenue growth
remained strong due to higher usage as a result of 4G rollout.
ADJUSTED EBITDA
In 2020, our Algeria Adjusted EBITDA decreased by 14.7% (in USD terms) and by 9.4% (in local currency terms) year-
on-year primarily due to the decrease in total revenue as described above, with operating expenses remaining relatively stable.
NUMBER OF CUSTOMERS
As of December 31, 2020, our customer base in Algeria segment decreased by 3.4% to 14.1 million year-on-year driven
by the overall economic slowdown as a result of the pandemic. Mobile data customers showed a growth of 4.5% year on year
mainly due to 4G roll out and increased demand for data.
ARPU
In 2020, our mobile ARPU in Algeria decreased by 4.8% (in USD terms) and increased by 0.2% (in local currency
terms) year-on-year. The stable performance in local currency terms resulted from growth due to pricing and a more high-value
customer base, offset by lower consumption due to a general economic slowdown as described above.
98
BANGLADESH
RESULTS OF OPERATIONS IN US$
Year ended December 31,
In millions of U.S. dollars (except as indicated)
2020
2019
2018
Total operating revenue
Mobile service revenue
- of which mobile data
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
RESULTS OF OPERATIONS IN BDT
In millions of BDT (except as indicated)
Total operating revenue
Mobile service revenue
- of which mobile data
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
SELECTED PERFORMANCE INDICATORS
Mobile
Customers in millions
Mobile data customers in millions
ARPU in US$
ARPU in BDT
TOTAL OPERATING REVENUE
537
527
133
10
310
228
537
525
109
12
314
222
521
504
87
17
338
183
42.5 %
41.3 %
35.1 %
‘19-20
% change
‘18-19
% change
0.0 %
0.4 %
22.0 %
-16.7 %
-1.3 %
2.7 %
1.2 pp
3.1 %
4.2 %
25.3 %
-29.4 %
-7.1 %
21.3 %
6.2 pp
Year ended December 31,
2020
45,601
44,726
11,286
875
26,286
19,315
42.4 %
2019
45,284
44,332
9,194
952
26,522
18,762
41.4 %
2018
43,653
42,211
7,250
1,442
28,306
15,347
35.2 %
‘19-20
% change
‘18-19
% change
0.7 %
0.9 %
22.8 %
-8.1 %
-0.9 %
2.9 %
1.0 pp
3.7 %
5.0 %
26.8 %
-34.0 %
-6.3 %
22.3 %
6.2 pp
Year ended December 31,
2020
2019
2018
‘19-20
% change
‘18-19
% change
33.2
19.9
1.3
111.0
33.6
18.9
1.3
112.0
32.3
19.6
1.3
110.0
-1.2 %
5.3 %
0.0 %
-0.9 %
4.0 %
-3.6 %
0.0 %
1.8 %
In 2020, our Bangladesh total operating revenue was at par with prior year in USD terms and observed a slight growth
of 0.7 % in local currency terms. Overall, the negative impact of the pandemic crisis was offset by consistent performance in the
acceleration of service revenue growth following spectrum acquisition and enhanced network availability along with the continued
expansion of Banglalink’s distribution footprint.
ADJUSTED EBITDA
In 2020, our Bangladesh Adjusted EBITDA increased by 2.7% (in USD terms) and by 2.9% (in local currency terms)
year-on-year. This was mainly due to consistent performance on revenue and operational savings, which was partially offset by
the increase in minimum tax rates adversely impacting operating expenses.
NUMBER OF CUSTOMERS
As of December 31, 2020, the number of mobile customers in our Bangladesh segment decreased by 1.2% year-on-
year to 33.2 million. This was primarily due to higher churn rate when compared with last year. Our mobile data customers also
saw an increase of 5.3% year-on-year.
ARPU
In 2020, our mobile ARPU in Bangladesh remained stable in both USD and local currency terms when compared with
last year.
99
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital is defined as current assets less current liabilities.
As of December 31, 2020, we had negative working capital of US$1,560 million, compared to negative working capital
of US$3,269 million as of December 31, 2019. The change was primarily due to decrease in short term borrowings and other
liabilities and increase in cash position when compared to last year.
Our working capital is monitored on a regular basis by management. Our management expects to repay our debt as it
becomes due from our operating cash flows or through additional borrowings. Although we have a negative working capital, our
management believes that our cash balances and available credit facilities are sufficient to meet our present requirements.
In Algeria, under the terms of a shareholder agreement between Global Telecom Holding S.A.E., the Fonds National
d’Investissement and others, our operating company may only distribute 42.5% of its net profit for a given financial year without
receiving an approval from a qualified majority of its board. This effectively creates a restriction on the ability of Global Telecom
Holding S.A.E. to freely distribute the accumulated retained earnings of our operating company in Algeria.
Consolidated Cash Flow Summary
(In millions of U.S. dollars)
Net cash flows from operating activities
Net cash flows from / (used in) investing activities
Net cash flows from / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period, net of overdraft **
2020
2,443
2019
2018
2,949
2,515
(1,910)
(1,888)
1,997
(103)
(1,639)
(3,916)
430
(48)
(578)
(9)
596
(119)
1,204
1,791
1,314
1,586
1,204
1,791
For more details, see Consolidated Statement of Cash Flows in our Audited Consolidated Financial Statements.
In 2020 , net cash flows from operating activities decreased to US$2,443 million from US$2,949 million in 2019. The
decrease was mainly due to a one off cash inflow of US$350 million in 2019 relating to revised arrangement with Ericsson and
lower revenues during 2020 when compared with last year.
For the year ended December 31, 2020, we recorded an outflow of US$1,910 million from investing activities, compared
to an outflow of US$1,888 million in 2019, this increase reflects the continued high levels network investments in Russia, this
was offset by increased cash outflows in 2019 relating to the amounts pledged as collateral for the Mandatory Tender Offer
(MTO) with respect to acquisition of non-controlling interests in GTH. Our total payments for the purchase of property, equipment
and intangible assets amounted to US$1,778 million compared to US$1,683 million in 2019.
In 2020, net cash outflow for financing activities was US$103 million compared to net cash outflow of US$1,639 million
in 2019. The change of net cash flows used for financing activities was mainly driven by significant financing and refinancing
activities in 2020, compared to the previous year.
Indebtedness
As of December 31, 2020, the principal amounts of our external indebtedness represented by bank loans and bonds
amounted to US$7,678 million, compared to US$7,519 million as of December 31, 2019. As of December 31, 2020, our debt
includes overdrawn bank accounts related to our cash-pooling program of US$8 million.
As of December 31, 2020, VEON had the following principal amounts outstanding for interest-bearing loans and bonds
as well as cash-pool overdrawn bank accounts:
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Entity
Type of debt/ original lenders
Interest rate
Debt
currency
Outstanding
debt (mln)
Outstanding
debt (USD mln)
Maturity
date
VEON Holdings B.V.
Loan from Sberbank
7.35%
VEON Holdings B.V.
Loan from Sberbank
VEON Holdings B.V.
Loan from Sberbank
CBR Key Rate +
2.2%
CBR Key Rate +
2.2%
VEON Holdings B.V.
Loan from Alfa Bank
7.50%
VEON Holdings B.V.
Loan from VTB
CBR Key Rate +
1.85%
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Cash-pool overdrawn accounts
VEON Holdings B.V. Total
3.38%
7.50%
5.95%
4.95%
4.00%
7.25%
6.30%
6.50%
RUB
RUB
RUB
RUB
RUB
USD
USD
USD
USD
USD
USD
RUB
RUB
30,000
37,500
12,500
30,000
30,000
1,250
417
529
533
1,000
700
20,000
10,000
406 06.03.2024
508 06.03.2023
169 06.03.2023
406 03.11.2025
406 07.09.2025
1,250 11.25.2027
417 03.01.2022
529 02.13.2023
533 06.17.2024
1,000 04.09.2025
700 04.26.2023
271 06.18.2025
135 09.11.2025
1
6,731
PJSC VimpelCom
VIP Finance Ireland (i)
7.75%
USD
262
262 02.02.2021
PJSC VimpelCom
Other PJSC VimpelCom
PJSC VimpelCom Total
PMCL
PMCL
PMCL
PMCL
PMCL
PMCL
PMCL
Loan from Habib Bank Limited
6M KIBOR + 0.35% PKR
Syndicated Loan Facility
Syndicated Loan Facility
6M KIBOR
6M KIBOR
PKR
PKR
Syndicated Loan Facility
6M KIBOR + 0.35% PKR
Syndicated Loan Facility
6M KIBOR + 0.55% PKR
Loan from Habib Bank Limited
6M KIBOR + 0.55% PKR
Other
5,000
2,909
1,810
12,837
33,848
10,000
Pakistan Mobile Communications Limited Total
Banglalink
Syndicated Loan Facility
9
271
31 06.15.2022
18 12.15.2023
11 12.15.2023
80 06.15.2022
211 09.02.2026
62 09.02.2026
11
424
Average bank
deposit rate +
4.25%
BDT
6,341
75 09.24.2022
Banglalink
Syndicated Loan Facility
Average bank
deposit rate + 3.0%
BDT
436
5 03.24.2021
Other
Banglalink Digital Communications Ltd. Total
PJSC Kyivstar
Loan from Alfa Bank
PJSC Kyivstar
Loan from OTP Bank
NBU Key rate +
3.00%
10.15%
PJSC Kyivstar
Loan from Raiffeisen Bank
11.00%
PJSC Kyivstar
Loan from Alfa Bank
NBU Key rate +
3.00%
UAH
UAH
UAH
UAH
1,480
1,000
1,400
120
PJSC Kyivstar Total
Other entities
Cash-pool overdrawn accounts
and other
(i) Loan from VIP Finance Ireland (funded by the issuance of loan participation notes by VIP Finance Ireland)
8
88
52 12.14.2023
35 12.22.2023
50 11.26.2025
4 02.08.2021
141
23
7,678
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For additional information on our outstanding indebtedness, please refer to Note 15 — Investments, Debt and Derivatives of our
Audited Consolidated Financial Statements attached hereto. For a description of some of the risks associated with certain of our
indebtedness, see “Item 3D. Risk Factors — Liquidity and Capital Risks — Substantial amounts of indebtedness and debt
service obligations could materially decrease our cash flow, adversely affect our business and financial condition and prevent us
from raising additional capital.”
Cash Subject to Currency and Contractual Restrictions
The company performed a test on the restricted net assets of consolidated subsidiaries and concluded the restricted
net assets exceed 25% of the consolidated net assets of the company as of December 31, 2020. The company is subject to
the legal restrictions to distribute accumulated profits from Algeria by virtue of a local shareholding agreement (i.e. it is
allowed only to distribute 42.5% of current year profit), and the rest is restricted. As of December 31, 2020, VEON Ltd. had
restricted net assets of 390%, compared to 58% in 2019, of total net assets. The relative increase in restricted net asset was
primarily due to the impairment of our Russia and Kyrgyzstan CGU’s, as well as the devaluation of exchange rates in the
countries in which VEON operates, thus lowering the book value of the company’s consolidated net assets compared to an
unchanged share of the restricted assets. The restricted net assets in Algeria have no implications on the company’s ability to
pay dividends.
Accordingly, separate condensed financial statements of VEON Ltd. have been prepared, in accordance with Rule
5-04 and Rule 12-04 of SEC Regulation S-X and presented within Note 25 — Condensed Separate Financial Information of
VEON of our Audited Consolidated Financial Statements attached hereto.
FUTURE LIQUIDITY AND CAPITAL REQUIREMENTS
Telecommunications service providers require significant amounts of capital to construct networks and attract
customers. In the foreseeable future, our further expansion will require significant investment activity, including the purchase of
equipment and possibly the acquisition of other companies.
In 2020, our capital expenditures excluding licenses and right of use assets were US$1,889 million compared to
US$1,741 million in 2019. This was primarily due to investments in our networks in Russia, Pakistan, Ukraine and Bangladesh.
We expect that our capital expenditures excluding licenses and right-of-use assets in 2021 will mainly consist
of investing in high-speed data networks to capture mobile data growth, including the continued roll-out of 4G/LTE and 3G
networks in Russia, Algeria, Bangladesh, Pakistan and Ukraine. We expect that these expenditures will continue to be significant
in 2021.
Management anticipates that the funds necessary to meet our current and expected capital requirements in the
foreseeable future (including with respect to any possible acquisitions) will come from:
•
•
•
•
•
•
Cash we currently hold;
Operating cash flows;
Export credit agency guaranteed financing;
Borrowings under bank financings, including credit lines currently available to us;
Syndicated loan facilities; and
Issuances of debt securities on local and international capital markets.
As of December 31, 2020, we had an undrawn amount of US$1,625 million under existing credit facilities. For additional
information on our outstanding indebtedness, please refer to Note 17 — Financial Risk Management of our Audited Consolidated
Financial Statements attached hereto.
Management expects that positive cash flows from our current operations will continue to provide us with internal
sources of funds. The availability of external financing depends on many factors, including the success of our operations,
contractual restrictions, availability of guarantees from export credit agencies, the financial position of international and local
banks, the willingness of international banks to lend to our companies and the liquidity of international and local capital markets.
Our future cash needs are subject to significant uncertainties. For instance, we are exposed to the impact of future
exchange rates on our U.S. dollar denominated debt obligations and future requirements for U.S. dollar denominated capital
expenditures, which are generally funded by local currency cash flows of our subsidiaries. Remittances from our subsidiaries
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may also be restricted by local regulations or subject to material taxes when remitted. Despite these uncertainties, we believe
that our cash flows from operations and other sources of funds described above will be sufficient to meet our short term and
foreseeable long-term cash requirements.
Below is the reconciliation of Capital expenditures excluding licenses and ROU to cash flows used to Purchase of
property, plant and equipment and intangible assets:
Capital expenditures *
Adjusted for:
Additions of licenses
Additions of right-of-use assets
Difference in timing between accrual and payment for capital expenditures
2020
2019
2018
1,889
1,741
1,415
53
446
(164)
50
299
(108)
526
—
7
Purchase of property, plant and equipment and intangible assets
1,778
1,683
1,948
* Excluding licenses and right-of-use assets, refer to Note 2 — Segment information of the Audited Consolidated Financial Statements
Quantitative And Qualitative Disclosures About Market Risk
For information on quantitative and qualitative disclosures about market risk see — Quantitative and Qualitative
Disclosures About Market Risk.
Contractual Obligations
As of December 31, 2020, we had the following contractual obligations:
Bank loans and bonds
Lease liabilities
Purchase obligations
Less than
1 year
1-3
years
3-5 years
More than
5 years
842
525
778
3,803
3,123
1,408
896
19
639
—
239
—
Total
9,176
2,299
797
Total financial liabilities, net of derivative assets
2,145
4,718
3,762
1,647
12,272
For the description of the contractual obligations please refer to Note 11 — Property and Equipment, Note 12 —
Intangible Assets & Goodwill, Note 15 — Investments, Debt and Derivatives and Note 17 — Financial Risk Management of our
Audited Consolidated Financial Statements attached hereto.
RESEARCH AND DEVELOPMENT
We now have the capacity to launch 4G/LTE in each of our reportable segments. We have acquired new spectrum in
several operating companies to boost our network capacity, enhance spectral efficiency and enable the launch of new Radio
Access Networks Technologies. For example, in Russia, we are working closely with a number of vendors to undertake joint
research and testing of technologies, with a focus on 5G, LTE Advanced Pro and LTE-unlicensed technology. For a discussion of
the risks associated with new technology, see - Risk Factors — Market Risks — “Our failure to keep pace with technological
changes and evolving industry standards could harm our competitive position and, in turn, materially harm our business.”
OFF-BALANCE SHEET ARRANGEMENTS
We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect
on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
RELATED PARTY TRANSACTIONS
We have entered into transactions with related parties and affiliates. See “-—Major Shareholders and Related Party
Transactions—B. Related Party Transactions” and Note 21 — Related Parties to our Audited Consolidated Financial Statements.
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ADDITIONAL INFORMATION
Memorandum and Articles of Association
We describe below the material provisions of our memorandum of association and bye-laws, certain provisions of
Bermuda law relating to our organization and operation, and some of the terms of our share rights based on provisions of our
memorandum of association, our bye-laws, applicable Bermuda law and certain agreements relating to our shares. Although we
believe that we have summarized the material terms of our memorandum of association and bye-laws, Bermuda legal
requirements and our share capital, this summary is not complete and is qualified in its entirety by reference to our memorandum
of association, our bye-laws and applicable Bermuda law. All references to our bye-laws herein, unless otherwise noted, are to
our amended and restated bye-laws, which were approved by our shareholders on July 30, 2018.
The affirmative vote of at least 75.0% of the shares voted at a shareholders meeting is required to approve
amendments to our bye-laws.
General
VEON Ltd. is an exempted company limited by shares registered under the Companies Act on June 5, 2009, and our
registered office is located at Victoria Place, 31 Victoria Street, Hamilton HM 10, Bermuda. Our registration number with the
Registrar of Companies in Bermuda is 43271. As set forth in paragraph 6 of our memorandum of association, VEON Ltd. was
formed with unrestricted business objects. We are registered with the Dutch Trade Register (registration number 34374835) as a
company formally registered abroad (formeel buitenlandse kapitaalvennootschap), as this term is referred to in the Dutch
Companies Formally Registered Abroad Act (Wet op de formeel buitenlandse vennootschappen), which means that we are
deemed a Dutch resident company for tax purposes in accordance with applicable Dutch tax regulations.
Issued Share Capital
As of December 31, 2020, the authorized share capital was US$1,849,190.67, divided into 1,849,190,667 common
shares, par value US$0.001, of which 1,756,731,135 common shares were issued and outstanding. All issued and outstanding
shares are fully paid.
Subject to our bye-laws and to any shareholders’ resolution to the contrary, and without prejudice to any special rights
previously conferred on the holders of any existing shares or class of shares, our board of directors has the power to issue up to
five percent of the total authorized capital of the company as common shares on such terms and conditions as the board of
directors may determine; provided that this limitation does not apply to the issue of shares in connection with employee
compensation awards approved by the board’s compensation and talent committee.
We may increase, divide, consolidate, change the currency or denomination of or reduce our share capital with the
approval of our shareholders.
We may purchase our own shares for cancellation or acquire them as treasury shares in accordance with Bermuda law
on such terms as the board of directors may determine.
We may, under our bye-laws, at any time request any person we have cause to believe is interested in our shares to
confirm details of our shares in which that person holds an interest.
Common shares
The holders of common shares are, subject to our bye-laws and Bermuda law, generally entitled to enjoy all the rights
attaching to common shares.
Except for treasury shares, each fully paid common share entitles its holder to:
•
•
•
•
•
participate in shareholder meetings;
have one vote on all issues voted upon at a shareholder meeting, except for the purposes of cumulative voting for the
election of the board of directors, in which case each common share shall have the same number of votes as the total
number of members to be elected to the board of directors and all such votes may be cast for a single candidate or may
be distributed between or among two or more candidates;
receive dividends approved by the board of directors (any dividend or other moneys payable in respect of a share which
has remained unclaimed for six years from the date when it became due for payment shall, if the board of directors so
resolves, be forfeited and cease to remain owing by VEON Ltd.);
in the event of our liquidation, receive a pro rata share of our surplus assets; and
exercise any other rights of a common shareholder set forth in our bye-laws and Bermuda law.
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There are no sinking fund provisions attached to any of our shares. Holders of fully paid shares have no further liability
to VEON Ltd. for capital calls.
All rights of any share of any class held in treasury are suspended and may not be exercised while the share is held by
VEON Ltd. in treasury.
Shareholders’ Meetings
Shareholders’ meetings are convened and held in accordance with our bye-laws and Bermuda law. Registered holders
of shares as of the record date for the shareholder meeting may attend and vote.
Annual general meeting
Our bye-laws and Bermuda law provide that our annual general meeting must be held each year at such time and place
as the CEO or the board of directors may determine.
Convening the annual general meeting requires that 30 clear days’ prior notice be given to each shareholder entitled to
attend and vote at such annual general meeting. The notice must state the date, place and time at which the meeting is to be
held, that the election of directors will take place and, as far as practicable, any other business to be conducted at the meeting.
Under Bermuda law, shareholders may, at their own expense (unless the company otherwise resolves), require a
company to: (a) give notice to all shareholders entitled to receive notice of the annual general meeting of any resolution that the
shareholders may properly move at the next annual general meeting; and (b) circulate to all shareholders entitled to receive
notice of any general meeting a statement in respect of any matter referred to in the proposed resolution or any business to be
conducted at such general meeting. The number of shareholders necessary for such a requisition is either: (1) any number of
shareholders representing not less than 5.0% of the total voting rights of all shareholders entitled to vote at the meeting to which
the requisition relates; or (2) not less than 100 registered shareholders.
Special general meeting
The CEO or the board of directors may convene a special general meeting whenever in their judgment such a meeting
is necessary. The board of directors must, on the requisition in writing of shareholders holding not less than 10.0% of our paid up
voting share capital, convene a special general meeting. Each special general meeting may be held at such time and place as
the CEO or the board of directors may appoint.
Convening a special general meeting requires that 30 clear days’ notice be given to each shareholder entitled to attend
and vote at such meeting. The notice must state the date, place and time at which the meeting is to be held and as far as
possible any other business to be conducted at the meeting.
Our bye-laws state that notice for all shareholders’ meetings may be given by:
delivering such notice to the shareholder in person;
sending such notice by letter or courier to the shareholder’s address as stated in the register of shareholders;
transmitting such notice by electronic means in accordance with directions given by the shareholder; or
accessing such notice on our website.
•
•
•
•
Shorter notice for general meetings
A shorter notice period will not invalidate a general meeting if it is approved by either: (a) in the case of an annual
general meeting, all shareholders entitled to attend and vote at the meeting, or (b) in the case of a special general meeting, a
majority of shareholders having the right to attend and vote at the meeting and together holding not less than 95.0% in nominal
value of the shares giving a right to attend and vote at the meeting. The accidental omission to give notice of a general meeting
to, or the non-receipt of notice of a general meeting by, any shareholder entitled to receive notice shall not invalidate the
proceedings at that meeting.
Postponement or cancellation of general meeting
The board of directors may postpone or cancel any general meeting called in accordance with the bye-laws (other than
a meeting requisitioned by shareholders) provided that notice of postponement or cancellation is given to each shareholder
before the time for such meeting.
105
Quorum
Subject to the Companies Act and our bye-laws, at any general meeting, two or more persons present in person at the
start of the meeting and having the right to attend and vote at the meeting and holding or representing in person or by proxy at
least 50.0% plus one share of our total issued and outstanding shares at the relevant time will form a quorum for the transaction
of business.
If within half an hour from the time appointed for the meeting a quorum is not present, then, in the case of a meeting
convened on a requisition, the meeting shall be deemed cancelled and, in any other case, the meeting shall stand adjourned to
the same day one week later, at the same time and place, or to such other day, time or place as the CEO may determine.
Voting Rights
Under Bermuda law, the voting rights of our shareholders are regulated by our bye-laws and, in certain circumstances,
the Companies Act.
Subject to Bermuda law and our bye-laws, a resolution may only be put to a vote at a general meeting of any class of
shareholders if:
•
•
•
•
it is proposed by or at the direction of the board of directors;
it is proposed at the direction of a court;
it is proposed on the requisition in writing of such number of shareholders as is prescribed by, and is made in
accordance with, the relevant provisions of the Companies Act or our bye-laws; or
the chairman of the meeting in his absolute discretion decides that the resolution may properly be regarded as within
the scope of the meeting.
In addition to those matters required by Bermuda law or by the NASDAQ rules to be approved by a simple majority of
shareholders at any general meeting, the following actions require the approval of a simple majority of the votes cast at any
general meeting:
•
•
•
any sale of all or substantially all of our assets;
the appointment of an auditor; and
removal of directors.
Any question proposed for the consideration of the shareholders at any general meeting may be decided by the
affirmative votes of a simple majority of the votes cast, except for:
•
•
•
•
•
•
whitewash procedure for mandatory offers, which requires the affirmative vote of a majority of the shareholders voting in
person or by proxy at a general meeting, excluding the vote of the shareholder or shareholders in question and their
affiliates;
voting for directors, which requires directors to be elected by cumulative voting at each annual general meeting;
changes to our bye-laws, which require a resolution to be passed by shareholders representing not less than 75.0% of
the total voting rights of the shareholders who vote in person or by proxy on the resolution;
any merger, consolidation, amalgamation, conversion, reorganization, scheme of arrangement, dissolution or
liquidation, which requires a resolution to be passed by shareholders representing not less than 75.0% of the total
voting rights of the shareholders who vote in person or by proxy on the resolution;
loans to any director, which require a resolution to be passed by shareholders representing not less than 90.0% of the
total voting rights of the shareholders who vote in person or by proxy on the resolution; and
the discontinuation of VEON Ltd. to a jurisdiction outside Bermuda, which requires a resolution to be passed by
shareholders representing not less than 75.0% of the total voting rights of the shareholders who vote in person or by
proxy on the resolution.
Our bye-laws require voting on any resolution at any meeting of the shareholders to be conducted by way of a poll vote.
Except where cumulative voting is required, each person present and entitled to vote at a meeting of the shareholders shall have
one vote for each share of which such person is the holder or for which such person holds a proxy and such vote shall be
counted by ballot or, in the case of a general meeting at which one or more shareholders are present by electronic means, in
such manner as the chairman of the meeting may direct. A person entitled to more than one vote need not use all his votes or
cast all the votes he uses in the same way.
If no instruction is received from a holder of our ADSs, the Depositary shall give a proxy to an individual selected by the
board of directors to vote the number of shares represented by the uninstructed ADSs at any shareholders’ meeting. The board
of directors’ proxy designee will then vote the shares in accordance with the votes of all other shares represented and voting at
106
the meeting, excluding any votes of any security holder of the company beneficially owning more than five percent of the
securities entitled to vote at the meeting.
Voting rights of common shares
The holders of common shares, subject to the provisions of our bye-laws, are entitled to one vote per common share,
except where cumulative voting applies when electing directors.
Transfer Restrictions
For such time as our common shares are fully paid and our ADSs listed on the NASDAQ Stock Market Inc., or our
common shares are listed on Euronext Amsterdam (or another appointed exchange, as determined from time to time by the
Bermuda Monetary Authority), there are no Bermuda law transfer restrictions applicable to our common shares. Were any of our
common shares to not be fully paid, our bye-laws permit the board of directors to decline to register a transfer. At such time as
our ADSs cease to be listed on the NASDAQ Stock Market Inc., or our common shares cease to be listed on Euronext
Amsterdam (or another appointed exchange, as determined from time to time by the Bermuda Monetary Authority), the Bermuda
Exchange Control Act 1972 and associated regulations require that the prior consent of the Bermuda Monetary Authority be
obtained for any transfers of shares.
Foreign Shareholders
Our bye-laws have no requirements or restrictions with respect to foreign ownership of our shares.
Board of Directors
VEON Ltd. is governed by our board of directors, currently consisting of 12 directors.
Subject to certain material business decisions that are reserved to the board of directors, the board of directors
generally delegates day-to-day management of our company to our co-CEOs.
All directors are elected by our shareholders to the board through cumulative voting. Each voting share confers on its
holder a number of votes equal to the number of directors to be elected. The holder may cast those votes for candidates in any
proportion, including casting all votes for one candidate.
Under our bye-laws, the amount of any fees or other remuneration payable to directors is determined by the board of
directors upon the recommendation of the compensation and talent committee. We may repay to any director such reasonable
costs and expenses as he or she may incur in the performance of his or her duties.
There is no requirement for the members of our board of directors to own shares. A director who is not a shareholder
will nevertheless be entitled to attend and speak at general meetings and at any separate meeting of the holders of any class of
shares.
Neither Bermuda law nor our bye-laws establish any mandatory retirement age for our directors or executive officers.
Dividends and Dividend Rights
Pursuant to Bermuda law, we are prohibited from declaring or paying a dividend if there are reasonable grounds for
believing that (a) we are, or would after the payment be, unable to pay our liabilities as they become due, or (b) the realizable
value of our assets would, as a result of the dividend, be less than the aggregate of our liabilities.
The board of directors may, subject to our bye-laws and in accordance with the Companies Act, declare a dividend to be
paid to the shareholders holding shares entitled to receive dividends, in proportion to the number of shares held by them, and
such dividend may be paid in cash or wholly or partly in shares or other assets, including through the issuance of our shares or
other securities, in which case the board of directors may fix the value for distribution in specie of any assets, shares or
securities. We are not required to pay interest on any unpaid dividend.
In accordance with our bye-laws, dividends may be declared and paid in proportion to the amount paid up on each
share. The holders of common shares are entitled to dividends if the payment of dividends is approved by the board of directors.
Dividends unclaimed for a period of six years from the date of payment may be forfeited.
Our bye-laws and Bermuda law do not provide for pre-emptive rights of shareholders in respect of new shares issued
by us.
There is no statutory regulation of the conduct of takeover offers and transactions under Bermuda law. However, our
bye-laws provide that any person who, individually or together with any of its affiliates or any other members of a group, acquires
107
beneficial ownership of any shares which, taken together with shares already beneficially owned by it or any of its affiliates or its
group, in any manner, carry 50.0% or more of the voting rights of our issued and outstanding shares, must, within 30 days of
acquiring such shares, make a general offer to all holders of shares to purchase their shares.
Interested Party Transactions
The board of directors have the right to approve transactions with interested parties, subject to compliance with
Bermuda law. Prior to approval by the board of directors, as the case may be, on such transaction, all interests must be fully
disclosed.
Liquidation Rights
If VEON Ltd. is wound up, the liquidator may, with the sanction of a resolution of the shareholders, divide among the
shareholders in specie or in kind the whole or any part of our assets (whether they shall consist of property of the same kind or
not) and may, for such purpose, set such value as he deems fair upon any property to be divided as aforesaid and may
determine how such division shall be carried out as between the shareholders or different classes of shareholders.
The liquidator may, with the same sanction, vest the whole or any part of such assets in trustees upon such trusts for
the benefit of the shareholders as the liquidator thinks fit, but so that no shareholder may be compelled to accept any shares or
other securities or assets on which there is any liability.
The holders of common shares, in the event of our winding-up or dissolution, are entitled to our surplus assets in
respect of their holdings of common shares, pari passu and pro rata to the number of common shares held by each of them.
Share Registration, Transfers and Settlement
All of our issued shares are registered. The register of members of a company is generally open to inspection by
shareholders and by members of the general public without charge. The register of members is required to be open for
inspection for not less than two hours in any business day (subject to the ability of a company to close the register of members
for not more than 30 days in a year). A company is required to maintain its share register in Bermuda but may, subject to the
provisions of the Companies Act, establish a branch register outside of Bermuda. A company is required to keep at its registered
office a register of directors and officers that is open for inspection for not less than two hours in any business day by members
of the public without charge. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies
of any other corporate records.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from adverse movements in foreign currency exchange rates and changes in interest
rates on our obligations.
As of December 31, 2020, the largest currency exposure risks for our group were in relation to the Russian ruble, the
Pakistani rupee, the Algerian dinar, the Bangladeshi taka, the Ukrainian hryvnia, the Kazakh tenge and the Uzbekistani som,
because the majority of our cash flows from operating activities in Russia, Pakistan, Algeria, Bangladesh, Ukraine, Kazakhstan
and Uzbekistan are denominated in each of these local currencies, respectively, while our debt, if not incurred in or hedged to the
aforementioned currencies, is primarily denominated in U.S. dollars.
We hold approximately 74% of our cash and bank deposits in U.S. dollars in order to hedge against the risk of local
currency devaluation.
To reduce balance sheet currency mismatches, we hold part of our debt in Russian ruble, Pakistani rupee and other
currencies, as well as selectively enter into foreign exchange derivatives. Nonetheless, if the U.S. dollar value of the Bangladeshi
taka, the Russian ruble, the Georgian lari, the Pakistani rupee, the Uzbekistani som, the Algerian dinar, the Ukrainian hryvnia or
the Kazakh tenge were to dramatically decline, it could negatively impact our ability to repay or refinance our U.S. dollar
denominated indebtedness as well as could adversely affect our financial condition and results of operations.
In accordance with our policies, we do not enter into any treasury transactions of a speculative nature.
For more information regarding our translation of foreign currency-denominated amounts into U.S. dollars and our
exposure to adverse movements in foreign currency exchange rates, see — Operating and Financial Review and Prospects —
Factors Affecting Comparability — Net Foreign Exchange (Loss)/Gain and Note 17 — Financial Risk Management to our Audited
Consolidated Financial Statements.
Our treasury function has developed risk management policies that establish guidelines for limiting foreign currency
exchange rate risk. For more information on risks associated with currency exchange rates, see — Risk Factors — Market Risks
— “We are exposed to foreign currency exchange loss and currency fluctuation and translation risks.”
The following table summarizes information, as of December 31, 2020, regarding the maturity of the part of our bank
loans and bonds for which the foreign exchange revaluation directly affects our reported profit or loss:
Aggregate nominal amount of bank loans and bonds denominated
in foreign currency outstanding as of December 31,
Fair Value as of
December 31,
2020
2021
2022
2023
2024
2020
Total debt:
Fixed Rate (in US$ millions)
Average interest rate
Variable Rate (in US$ millions)
Average interest rate
TOTAL
809
6.82%
8
3.45%
817
547
6.72%
—
—
547
439
6.73%
—
—
439
100
6.63%
—
—
100
609
6.39%
—
—
609
816
8
824
As of December 31, 2020, the variable interest rate risk on the financing of our group was limited as 79% of the group’s
bank loans and bonds portfolio was fixed rate debt.
For more information on our market risks and financial risk management for derivatives and other financial instruments,
see Note 15 — Investments, Debt and Derivatives and Note 17 — Financial Risk Management to our Audited Consolidated
Financial Statements.
109
DECLARATIONS
Introduction
This 2020 VEON’s Ltd. Annual Report dated March 15, 2021, comprises regulated information within the meaning of sections 1:1
and 5:25c of the Dutch Act on Financial Supervision “Wet op het financieel toezicht.”
Declarations
The Company’s co-CEOs, as required by section 5:25c, paragraph 2, under c of the Dutch Act on Financial Supervision, confirm
that to the best of their knowledge:
•
•
•
The 2020 financial statements included in this Annual Report give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole.
The Director’s Report included in this Annual Report gives a true and fair view of the position of the Company and the
undertakings included in the consolidation taken as a whole as of December 31, 2020, and of the development and
performance of the business for the financial year then ended.
The Director’s Report includes a description of the principal risks and uncertainties that the Company faces.
This Annual Report, including the 2020 financial statements, which are audited by PricewaterhouseCoopers Accountants N.V.,
has been presented to the Board. The 2020 financial statements and the independent auditor’s report relating to the audit of the
2020 financial statements were discussed with the Audit and Risk Committee in the presence of the senior management and the
external independent auditor. The Board recommends that the General Meeting of Shareholders adopts the 2020 financial
statements included in this Annual Report.
Amsterdam, the Netherlands
March 15, 2021
Kaan Terzioğlu co-CEO
Sergi Herrero co-CEO
110
Consolidated Financial Statements
111
113
114
115
116
118
119
119
120
120
122
124
125
126
127
131
136
136
138
142
145
147
150
150
151
159
160
166
167
168
169
169
173
174
175
TABLE OF CONTENTS
Consolidated Income Statement.............................................................................................................................
Consolidated Statement Of Comprehensive Income............................................................................................
Consolidated Statement Of Financial Position......................................................................................................
Consolidated Statement Of Changes In Equity.....................................................................................................
Consolidated Statement Of Cash Flows.................................................................................................................
General Information About The Group...................................................................................................................
1.... General Information............................................................................................................................................
Operating Activities Of The Group..........................................................................................................................
2.... Segment Information..........................................................................................................................................
3.... Operating Revenue.............................................................................................................................................
4.... Selling, General And Administrative Expenses...................................................................................................
5.... Trade And Other Receivables.............................................................................................................................
6.... Other Assets And Liabilities................................................................................................................................
7.... Provisions And Contingent Liabilities..................................................................................................................
8....
Income Taxes......................................................................................................................................................
Investing Activities Of The Group...........................................................................................................................
9.... Significant Transactions......................................................................................................................................
10..
Impairment Of Assets.........................................................................................................................................
11... Property And Equipment.....................................................................................................................................
12..
Intangible Assets.................................................................................................................................................
13..
Investments In Subsidiaries................................................................................................................................
Financing Activities Of The Group..........................................................................................................................
14.. Other non-operating gain / (loss)........................................................................................................................
15..
Investments, Debt and Derivatives.....................................................................................................................
16.. Cash And Cash Equivalents...............................................................................................................................
17.. Financial Risk Management...............................................................................................................................
18..
Issued Capital And Reserves..............................................................................................................................
19.. Earnings Per Share............................................................................................................................................
20.. Dividends Paid And Proposed............................................................................................................................
Additional Information.............................................................................................................................................
21.. Related Parties...................................................................................................................................................
22.. Events After The Reporting Period.....................................................................................................................
23.. Basis Of Preparation Of The Consolidated Financial Statements......................................................................
24.. Significant Accounting Policies...........................................................................................................................
112
CONSOLIDATED INCOME STATEMENT
for the years ended December 31
(In millions of U.S. dollars, except per share amounts)
Note
2020
2019
Service revenues
Sale of equipment and accessories
Other revenues / other income
Total operating revenues
Other operating income
Service costs
Cost of equipment and accessories
Selling, general and administrative expenses
Depreciation
Amortization
Impairment (loss) / reversal
Gain / (loss) on disposal of non-current assets
Gain / (loss) on disposal of subsidiaries
Operating profit
Finance costs
Finance income
Other non-operating gain / (loss)
Net foreign exchange gain / (loss)
Profit / (loss) before tax from continuing operations
Income tax expense
Profit / (loss) from continuing operations
Profit / (loss) after tax from discontinued operations
Gain / (loss) on disposal of discontinued operations
Profit / (loss) for the period
Attributable to:
The owners of the parent (continuing operations)
The owners of the parent (discontinued operations)
Non-controlling interest
Basic and diluted gain / (loss) per share attributable to ordinary equity
holders of the parent:
From continuing operations
From discontinued operations
Total
7,471
8,240
392
117
465
158
7,980
8,863
5
350
(1,508)
(382)
(2,641)
(1,576)
(343)
(785)
(37)
(78)
635
(683)
23
111
(60)
26
(342)
(316)
—
—
(316)
(349)
—
33
(316)
($0.20)
$0.00
($0.20)
(1,554)
(479)
(2,965)
(1,652)
(394)
(108)
(43)
1
2,019
(892)
53
21
(20)
1,181
(498)
683
—
—
683
621
—
62
683
$0.36
$0.00
$0.36
3
9
4
11
12
10
9
14
8
9
9
19
19
19
The accompanying notes are an integral part of these consolidated financial statements.
2018
8,526
427
133
9,086
—
(1,701)
(415)
(3,697)
(1,339)
(495)
(858)
(57)
30
554
(816)
67
(68)
15
(248)
(369)
(617)
(300)
1,279
362
(397)
979
(220)
362
($0.23)
$0.56
$0.33
113
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the years ended December 31
(In millions of U.S. dollars)
Profit / (loss)
Items that may be reclassified to profit or loss
Foreign currency translation
Share of other comprehensive income / (loss) of Italy Joint Venture
Other
Items reclassified to profit or loss
Reclassification of accumulated foreign currency translation reserve to profit
or loss upon disposal of foreign operation
Reclassification of accumulated share of other comprehensive income /
(loss) of Italy Joint Venture to profit or loss
Other
Other comprehensive income / (loss) for the period, net of tax
Total comprehensive income / (loss) for the period, net of tax
Attributable to:
The owners of the parent
Non-controlling interests
Note
9
9
15
The accompanying notes are an integral part of these consolidated financial statements.
2020
(316)
(623)
—
1
96
—
(15)
(541)
(857)
(800)
(57)
(857)
2019
683
49
—
26
2018
362
(819)
(18)
(7)
—
(79)
—
(19)
56
739
733
6
739
31
5
(887)
(525)
(138)
(387)
(525)
114
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as of December 31
(In millions of U.S. dollars)
Assets
Non-current assets
Property and equipment
Intangible assets
Investments and derivatives
Deferred tax assets
Other assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Investments and derivatives
Current income tax assets
Other assets
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Equity attributable to equity owners of the parent
Non-controlling interests
Total equity
Non-current liabilities
Debt and derivatives
Provisions
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Debt and derivatives
Provisions
Current income tax payables
Other liabilities
Total current liabilities
Total equity and liabilities
The accompanying notes are an integral part of these consolidated financial statements.
115
Note
2020
2019
11
12
15
8
6
5
15
8
6
16
18
15
7
8
6
15
7
8
6
6,879
4,152
305
186
179
7,340
5,688
235
134
163
11,701
13,560
111
572
165
73
335
1,594
2,850
169
628
82
16
354
1,250
2,499
14,551
16,059
163
850
1,013
1,226
994
2,220
8,832
7,759
141
127
28
138
141
33
9,128
8,071
1,977
1,224
151
175
883
4,410
14,551
1,847
2,585
222
102
1,012
5,768
16,059
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended December 31, 2020
(In millions of U.S. dollars)
As of January 1, 2020
Profit / (loss) for the period
Other comprehensive income / (loss)
Total comprehensive income / (loss)
Dividends declared
Other
20
As of December 31, 2020
1,749,127,404
for the year ended December 31, 2019
Attributable to equity owners of the parent
Note
Number of shares
outstanding
Issued
capital
Capital
Surplus
Other
capital
reserves
Accumulated
deficit *
Foreign
currency
translation
Non-
controlling
interests
Total
Total equity
1,749,127,404
2
12,753
(1,887)
(1,330)
(8,312)
1,226
994
2,220
—
—
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
(10)
(10)
—
(1)
(349)
(4)
(353)
(262)
26
—
(437)
(437)
—
(26)
12,753
(1,898)
(1,919)
(8,775)
(349)
(451)
(800)
(262)
(1)
163
33
(90)
(57)
(87)
—
850
(316)
(541)
(857)
(349)
(1)
1,013
(In millions of U.S. dollars)
As of December 31, 2018
Adjustments due to new accounting standards
As of January 1, 2019
Profit / (loss) for the period
Other comprehensive income / (loss)
Total comprehensive income / (loss)
Dividends declared
Changes in ownership interest in a subsidiary
that do not result in a loss of control
20
9
Other
As of December 31, 2019
1,749,127,404
Note
Number of shares
outstanding
Issued
capital
Capital
Surplus
Other
capital
reserves
Accumulated
deficit *
Foreign
currency
translation
Non-
controlling
interests
Total
Total equity
Attributable to equity owners of the parent
1,749,127,404
—
1,749,127,404
—
—
—
—
—
—
2
—
2
—
—
—
—
—
—
2
12,753
—
12,753
—
—
—
—
—
—
743
—
743
—
6
6
—
(2,594)
(42)
(1,412)
(8,416)
3,670
(891)
2,779
(3)
—
(3)
(1)
(4)
(1,415)
(8,416)
3,667
(892)
2,775
621
1
622
(525)
—
(12)
—
105
105
—
—
(1)
621
112
733
62
(56)
6
(525)
(108)
(2,594)
1,986
(55)
2
683
56
739
(633)
(608)
(53)
12,753
(1,887)
(1,330)
(8,312)
1,226
994
2,220
* Certain of the consolidated entities by VEON Ltd. are restricted from remitting funds in the form of cash dividends or loans by a variety of regulations, contractual or local statutory requirements
The accompanying notes are an integral part of these consolidated financial statements.
116
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended December 31, 2018
(In millions of U.S. dollars, except for share
amounts)
Note
Number of shares
outstanding
Issued
capital
Capital
Surplus
Other
capital
reserves
Accumulated
deficit *
Foreign
currency
translation
Non-
controlling
interests
Total
Total equity
Attributable to equity owners of the parent
As of December 31, 2017
1,749,127,404
2
12,753
Adjustments due to new accounting
standards
As of January 1, 2018
—
—
—
1,749,127,404
2
12,753
Profit / (loss) for the period
Other comprehensive income
Total comprehensive income
Dividends declared
Others
As of December 31, 2018
—
—
—
—
—
1,749,127,404
20
—
—
—
—
—
2
—
—
—
—
—
729
—
729
—
11
11
—
3
(1,486)
(7,667)
4,331
(441)
3,890
46
—
46
11
57
(1,440)
(7,667)
4,377
(430)
3,947
582
5
587
(509)
(50)
—
(736)
(736)
—
(13)
582
(720)
(138)
(509)
(60)
(220)
(167)
(387)
(93)
19
362
(887)
(525)
(602)
(41)
12,753
743
(1,412)
(8,416)
3,670
(891)
2,779
* Certain of the consolidated entities by VEON Ltd. are restricted from remitting funds in the form of cash dividends or loans by a variety of regulations, contractual or local statutory requirements,
The accompanying notes are an integral part of these consolidated financial statements.
117
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31
(In millions of U.S. dollars)
Operating activities
Note
2020
2019
2018
Profit / (loss) before tax from continuing operations
26
1,181
(248)
Non-cash adjustments to reconcile profit before tax to net cash flows
Depreciation, amortization and impairment loss / (reversal)
2,704
2,154
2,692
(Gain) / loss on disposal of non-current assets
(Gain) / loss on disposal of subsidiaries
Finance costs
Finance income
Other non-operating (gain) / loss
Net foreign exchange (gain) / loss
Changes in trade and other receivables and prepayments
Changes in inventories
Changes in trade and other payables
Changes in provisions, pensions and other
Interest paid
Interest received
Income tax paid
37
78
683
(23)
(111)
60
(107)
40
94
(29)
(644)
23
(388)
43
(1)
892
(53)
(21)
20
(224)
(28)
52
106
(714)
58
(516)
57
(30)
816
(67)
68
(15)
96
(88)
274
40
(736)
60
(404)
15
Net cash flows from operating activities
2,443
2,949
2,515
Investing activities
Purchase of property, plant and equipment and intangible assets
(1,778)
(1,683)
(1,948)
Payments on deposits
Receipts from deposits
Proceeds from sale of Italy Joint Venture
Receipts from / (investment in) financial assets
Other proceeds from investing activities, net
(142)
69
—
(89)
30
(922)
698
—
(9)
28
(32)
1,066
2,830
62
19
Net cash flows from / (used in) investing activities
(1,910)
(1,888)
1,997
Financing activities
Proceeds from borrowings, net of fees paid *
Repayment of debt
Acquisition of non-controlling interest
Dividends paid to owners of the parent
Dividends paid to non-controlling interests
15
15
9
20
4,621
(4,376)
(1)
(259)
(88)
2,610
(2,978)
(613)
(520)
(138)
807
(4,122)
—
(508)
(93)
Net cash flows from / (used in) financing activities
(103)
(1,639)
(3,916)
Net increase / (decrease) in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at beginning of period
430
(48)
(578)
(9)
1,204
1,791
Cash and cash equivalents at end of period, net of overdraft **
16
1,586
1,204
596
(119)
1,314
1,791
* Fees paid for borrowings were US$29 (2019: US$23, 2018: US$64)
** Overdrawn amount was US$8 (2019: US$46)
The accompanying notes are an integral part of these consolidated financial statements.
118
GENERAL INFORMATION ABOUT THE GROUP
1
GENERAL INFORMATION
VEON Ltd. (“VEON”, the “Company”, and together with its consolidated subsidiaries, the “Group” or “we”) was incorporated
in Bermuda on June 5, 2009. The registered office of VEON is Victoria Place, 31 Victoria Street, Hamilton HM 10, Bermuda.
VEON’s headquarters and the principal place of business are located at Claude Debussylaan 88, 1082 MD Amsterdam, the
Netherlands.
VEON generates revenue from the provision of voice, data and other telecommunication services through a range of mobile and
fixed-line technologies, as well as selling equipment and accessories.
VEON’s American Depository Shares (“ADSs”) are listed on the NASDAQ Global Select Market and VEON’s common shares
are listed on Euronext Amsterdam, the regulated market of Euronext Amsterdam N.V. (“Euronext Amsterdam”).
The consolidated financial statements were authorized by the Board of Directors for issuance on March 15, 2021. The Company
has the ability to amend and reissue the consolidated financial statements.
The consolidated financial statements are presented in United States dollars (“U.S. dollar” or “US$”). In these Notes, U.S.
dollar amounts are presented in millions, except for share and per share (or ADS) amounts and as otherwise indicated.
Major developments during the year ended December 31, 2020
Financing activities
In July 2020, VEON successfully refinanced its existing RUB30 billion (US$422) bilateral term loan agreement with VTB Bank.
For further details, refer to Note 15.
In June 2020, VEON Holdings B.V. entered into a new RUB bilateral term loan agreement with Sberbank for a total amount of
RUB100 billion (US$1,450), which was used to refinance the existing Sberbank facilities. For further details please refer to Note
15.
In April 2020, VEON established a Global Medium Term Note program for the issuance of bonds in multiple currencies, with a
limit equivalent to US$6,500. In June, September and November 2020, VEON issued senior unsecured notes of RUB20 billion
(US$288), RUB10 billion (US$135), and US$1.25 billion respectively, under the program. For further details, refer to Note 15.
Coronavirus outbreak
The global outbreak of COVID-19 and associated containment and mitigation measures implemented worldwide have had a
sustained impact on our operations and financial performance.
The second quarter saw the full impact on our operations of the lockdowns imposed across our markets in response to
COVID-19. This resulted in material disruption to our retail operations following store closures, impacting gross connections and
airtime sales. Restrictions on travel resulted in a significant decline in roaming revenues and the loss of migrant customers from
our subscriber base, particularly in Russia.
Although VEON’s operations remained impacted by lockdown measures throughout the second half of the year, all operations
saw a recovery in the performance as our local businesses continue building resilience to the restrictions related to COVID-19.
Demand for our data services remains strong, enabling us to continue to grow our data revenues. We also experienced a shift in
data traffic from mobile to fixed networks as lockdowns encouraged remote working and home schooling alongside a greater use
of devices through our domestic broadband services.
An increase in demand for hard currencies, in part due to COVID-19, resulted in the devaluation of exchange rates in the
countries in which VEON operates. As such, during the year ended December 31, 2020, the book value of assets and liabilities
of our foreign operations, in U.S. dollar terms, decreased significantly, with a corresponding loss of US$623 recorded against the
foreign currency translation reserve in Other Comprehensive Income.
Our management has taken appropriate measures to keep our personnel safe and secure. As of the date of these financial
statements, other than as described above, we have not observed any particular material adverse impacts to our business,
financial condition, and results of operations. The group liquidity is sufficient to fund the business operations for at least another
12 months.
Other developments
In October 2020, VEON concluded an agreement for the sale of its operating subsidiary in Armenia, to Team LLC for a
consideration of US$51. For further details please refer to Note 9.
In September 2020, the Dhabi Group exercised its put option to sell us its 15% shareholding in Pakistan Mobile Communications
Ltd ("PMCL"), the Company’s subsidiary in Pakistan. For further details please refer to Note 15.
In the third quarter of 2020, VEON recorded impairment losses in respect of its operations in Russia and Kyrgyzstan of US$723
and US$64, respectively. For further details please refer to Note 10.
119
OPERATING ACTIVITIES OF THE GROUP
2
SEGMENT INFORMATION
Management analyzes the Company’s operating segments separately because of different economic environments and stages
of development in different geographical areas, requiring different investment and marketing strategies. All the segments are
grouped and analyzed as three main markets - our cornerstone, our growth engines and our frontier markets - representing the
Company's strategy and capital allocation framework.
Management evaluates the performance of the Company’s segments on a regular basis, primarily based on earnings before
interest, tax, depreciation, amortization, impairment, gain / loss on disposals of non-current assets, other non-operating gains /
losses and share of profit / loss of joint ventures and associates (“Adjusted EBITDA”) along with assessing the capital
expenditures excluding certain costs such as those for telecommunication licenses and right-of-use assets (“CAPEX excl.
licenses and ROU”). Management does not analyze assets or liabilities by reportable segments.
In 2019, the Company adopted the new accounting standard IFRS 16 Leases. Accordingly, operating lease expenses are no
longer recorded in the income statement but are instead considered in recording a lease liability in the statement of financial
position. The Company applied a modified retrospective approach, which means that prior period comparatives were not
restated. As a result, Adjusted EBITDA in 2020 and 2019 is not comparable to Adjusted EBITDA in 2018.
In 2020, the Company has chosen to present results from remaining operating segments in ‘Other frontier markets’, separately to
‘HQ and eliminations’. Prior year comparatives have been adjusted to conform to current year presentation.
Financial information by reportable segment for the periods ended December 31 is presented in the following tables. Inter-
segment transactions between segments are not material, and are made on terms which are comparable to transactions with
third parties.
Total revenue
Adjusted EBITDA
CAPEX excl licenses and ROU
2020
2019
2018
2020
2019
2018
2020
2019
2018
3,819
4,481
4,654
1,504
1,957
1,677
1,017
976
742
1,233
1,321
1,494
933
479
198
689
537
125
870
486
258
775
537
172
688
441
315
813
521
201
612
630
265
68
302
228
22
669
572
270
136
354
222
63
714
387
206
136
363
183
54
249
179
119
52
213
156
108
53
199
115
66
39
95
108
107
126
33
82
38
93
43
Our cornerstone
Russia
Our growth engines
Pakistan
Ukraine
Kazakhstan
Uzbekistan
Our frontier markets
Algeria
Bangladesh
Other frontier markets
Other
HQ and eliminations
(33)
(37)
(41)
(177)
(28)
(447)
19
7
11
Total segments
7,980
8,863
9,086
3,454
4,215
3,273
1,889
1,741
1,415
120
The following table provides the reconciliation of consolidated Profit / (loss) before tax from continuing operations to Adjusted
EBITDA for the years ended December 31:
Profit / (loss) before tax from continuing operations
Depreciation
Amortization
Impairment loss / (reversal)
(Gain) / loss on disposal of non-current assets
(Gain) / loss on disposal of subsidiaries
Finance costs
Finance income
Other non-operating (gain) / loss
Net foreign exchange (gain) / loss
Total Segments Adjusted EBITDA
2020
26
1,576
343
785
37
78
683
(23)
(111)
60
2019
1,181
1,652
394
108
43
(1)
892
(53)
(21)
20
2018
(248)
1,339
495
858
57
(30)
816
(67)
68
(15)
3,454
4,215
3,273
121
3
OPERATING REVENUE
VEON generates revenue from the provision of voice, data and other telecommunication services through a range of wireless,
fixed and broadband Internet services, as well as selling equipment and accessories. Products and services may be sold
separately or in bundled packages.
Revenue from contracts with customers
The table below provides a breakdown of revenue from contracts with customers for the years ended December 31.In 2020, the
Company has presented ‘Service revenue’ (Mobile and Fixed) separately from ‘Sale of equipment and accessories’ and ‘Other
revenue’, for each reportable segment. Prior year comparatives have been adjusted to conform to current year presentation.
Service revenue
Mobile
Fixed
Sale of Equipment
and accessories
Other revenue
Total revenue
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
Our cornerstone
Russia
2,917 3,485 3,679 523 539 566 366 446 396
13
11
13 3,819 4,481 4,654
Our growth engines
Pakistan
Ukraine
Kazakhstan
Uzbekistan
Our frontier markets
1,134 1,229 1,391 — — —
11
6
8
88
86
95 1,233 1,321 1,494
869 812 641
59
52
44 — — —
392 379 363
78
66
73
7
2
4
196 255 312
1
2
2 — — —
5
2
1
6
3 933 870 688
39
1 479 486 441
1
1 198 258 315
Algeria
685 771 801 — — —
4
527 525 504 — — — —
2
1
4 —
2
8 689 775 813
5
10
11
12 537 537 521
102 135 159
19
27
32
4
8
10 —
2 — 125 172 201
Bangladesh
Other frontier
markets
Other
HQ and eliminations
(31)
(37)
(41) — — — — — —
(2) — —
(33)
(37)
(41)
Total segments
6,791 7,554 7,809 680 686 717 392 465 427 117 158 133 7,980 8,863 9,086
Assets and liabilities arising from contracts with customers
The following table provides a breakdown of contract balances and capitalized customer acquisition costs.
Contract balances
Receivables (billed)
Contract assets (unbilled)
Contract liabilities
Capitalized costs
Customer acquisition costs
December 31,
2020
December 31,
2019
728
41
(233)
748
38
(243)
128
101
122
ACCOUNTING POLICIES
Revenue from contracts with customers
Service revenue
Service revenue includes revenue from airtime charges from contract and prepaid customers, monthly contract fees,
interconnect revenue, roaming charges and charges for value added services (“VAS”). VAS includes short messages,
multimedia messages, caller number identification, call waiting, data transmission, mobile internet, downloadable content, mobile
finance services, machine-to-machine and other services. The content revenue relating to VAS is presented net of related costs
when the VEON’s performance obligation is to arrange the provision of the services by another party (VEON acts as an agent),
and gross when VEON is primarily responsible for fulfilling the obligation to provide such services to the customer.
Revenue for services with a fixed term, including fixed-term tariff plans and monthly subscriptions, is recognized on a straight-
line basis over time. For pay-as-you-use plans, in which the customer is charged based on actual usage, revenue is recognized
on a usage basis. Some tariff plans allow customers to rollover unused services to the following period. For such tariff plans,
revenue is generally recognized on a usage basis.
For contracts which include multiple service components (such as voice, text, data), revenue is allocated based on stand-alone
selling price of each performance obligation. The stand-alone selling price for these services is usually determined with reference
to the price charged per service under a pay-as-you-use plan to similar customers.
Upfront fees, including activation or connection fees, are recognized on a straight-line basis over the contract term. For contracts
with an indefinite term (for example, prepaid contracts), revenue from upfront fees is recognized over the average customer life.
Revenue from other operators, including interconnect and roaming charges, is recognized based on the price specified in the
contract, net of any estimated retrospective volume discounts. Accumulated experience is used to estimate and provide for the
discounts.
All service revenue is recognized over time.
Sale of equipment and accessories
Equipment and accessories are usually sold to customers on a stand-alone basis, or together with service bundles. Where sold
together with service bundles, revenue is allocated pro-rata, based on the stand-alone selling price of the equipment and the
service bundle.
The vast majority of equipment and accessories sales pertain to mobile handsets and accessories. Revenue for mobile handsets
and accessories is recognized when the equipment is sold to a customer, or, if sold via an intermediary, when the intermediary
has taken control of the device and the intermediary has no remaining right of return. Revenue for fixed-line equipment is not
recognized until installation and testing of such equipment are completed and the equipment is accepted by the customer.
All revenue from sale of equipment and accessories is recognized at a point in time.
Contract balances
Receivables and contracts assets mostly relate to amounts due from other operators and postpaid customers. Contract assets,
often referred to as ‘Accrued receivables,’ are transferred to Receivables when the rights become unconditional, which usually
occurs when the Group issues an invoice to the customer.
Contract liabilities, often referred to as ‘Deferred revenue’, relate primarily to non-refundable cash received from prepaid
customers for fixed-term tariff plans or pay-as-you-use tariff plans. Contract liabilities are presented as ‘Long-term deferred
revenue’, ‘Short-term deferred revenue’ and ‘Customer advances’ in Note 6. All current contract liabilities outstanding at the
beginning of the year have been recognized as revenue during the year.
Customer acquisition costs
Certain incremental costs incurred in acquiring a contract with a customer (“customer acquisition costs”), are deferred in the
consolidated statement of financial position, within 'Other assets' (see Note 6). Such costs generally relate to commissions paid
to third-party dealers and are amortized on a straight-line basis over the average customer life, within ‘Selling, general and
administrative expenses’.
The Group applies the practical expedient available for customer acquisition costs for which the amortization would have been
shorter than 12 months. Such costs relate primarily to commissions paid to third-parties upon top-up of prepaid credit by
customers and sale of top-up cards.
SOURCE OF ESTIMATION UNCERTAINTY
Average customer life
Management estimates the average customer life for revenue (such as upfront fees) from contracts with an indefinite term and
for customer acquisition costs. The average customer life is calculated based on historical data, specifically churn rates which
are impacted by relevant country or market characteristics, customer demographic and the nature and terms of the product (such
as mobile and fixed line, prepaid and postpaid).
123
4
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consisted of the following items for the years ended December 31:
Network and IT costs
Personnel costs
Customer associated costs
Losses on receivables
Taxes, other than income taxes
Other
Total selling, general and administrative expenses
797
815
653
62
57
257
2,641
2020
2019
2018
1,176
889
867
62
217
486
791
875
720
66
158
355
2,965
3,697
In 2020, our subsidiary in Pakistan recorded a gain of PKR8.6 billion (US$52) in ‘Taxes, other than income taxes’, relating to the
reversal of a non-income tax provision. Refer to Note 7 for further details.
LEASES
On January 1, 2019, the Company adopted IFRS 16 Leases. The Company applied a modified retrospective approach, which
means that prior period comparatives were not restated.
Lease expenses are no longer recorded in the income statement but are instead considered in recording a lease liability in the
statement of financial position (see Note 15), except for short-term leases and leases for low value items which are immediately
expensed as incurred. Total operating lease expense recognized in accordance with IAS 17 Leases in the consolidated income
statement, primarily within "Network and IT costs", amounted to US$425 in 2018.
ACCOUNTING POLICIES
Customer associated costs
Customer associated costs relate primarily to commissions paid to third-party dealers and marketing expenses. Certain dealer
commissions are initially capitalized in the consolidated statement of financial position and subsequently amortized within
"Customer associated costs", see Note 3 for further details.
124
5
TRADE AND OTHER RECEIVABLES
Trade and other receivables consisted of the following items as of December 31:
Trade receivables (gross)*
Expected credit losses
Trade receivables (net)
Other receivable, net of expected credit losses allowance
Total trade and other receivables
* Includes contract assets (unbilled receivables), see Note 3 for further details
2020
769
(198)
571
1
572
2019
786
(176)
610
18
628
The following table summarizes the movement in the allowance for expected credit losses for the years ended December 31:
Balance as of January 1
Accruals for expected credit losses
Recoveries
Accounts receivable written off
Reclassification
Foreign currency translation adjustment
Balance as of December 31
2020
176
62
(7)
(16)
—
(17)
2019
171
66
(8)
(31)
(24)
2
198
176
Set out below is the information about the Group’s trade receivables (including contract assets) using a provision matrix:
Contract assets
Current
< 30 days
Days past due
Between 31
and 120 days
> 120 days
Total
December 31, 2020
Expected loss rate, %
Trade receivables
Expected credit losses
Trade receivables, net
December 31, 2019
Expected loss rate, %
Trade receivables
Expected credit losses
Trade receivables, net
ACCOUNTING POLICIES
Trade and other receivables
1.0 %
41
—
41
1.1 %
38
—
38
1.3 %
468
(6)
462
1.6 %
446
(7)
439
13.6 %
40.7 %
44
(6)
38
4.9 %
82
(4)
78
27
(11)
16
36.5 %
52
(19)
33
92.6 %
189
(175)
14
86.9 %
168
(146)
22
769
(198)
571
786
(176)
610
Trade and other receivables are measured at amortized cost and include invoiced amounts less expected credit losses.
Expected credit losses
The expected credit loss allowance (“ECL”) is recognized for all receivables measured at amortized cost at each reporting date.
This means that an ECL is recognized for all receivables even though there may not be objective evidence that the trade
receivable has been impaired.
VEON applies the simplified approach (i.e. provision matrix) for calculating a lifetime ECL for its trade and other receivables,
including unbilled receivables (contract assets). The provision matrix is based on the historical credit loss experience over the life
of the trade receivables and is adjusted for forward-looking estimates if relevant. The provision matrix is reviewed on a quarterly
basis.
125
6
OTHER ASSETS AND LIABILITIES
Other assets consisted of the following items as of December 31:
Other non-current assets
Customer acquisition costs (see Note 3)
Tax advances (non-income tax)
Other non-financial assets
Total other non-current assets
Other current assets
Advances to suppliers
Input value added tax
Prepaid taxes
Other assets
Total other current assets
Other liabilities consisted of the following items as of December 31:
Other non-current liabilities
Long-term deferred revenue (see Note 3)
Other liabilities
Total other non-current liabilities
Other current liabilities
Taxes payable (non-income tax)
Short-term deferred revenue (see Note 3)
Customer advances (see Note 3)
Other payments to authorities
Due to employees
Other liabilities
Total other current liabilities
2020
2019
128
33
18
179
91
159
43
42
335
101
30
32
163
111
158
45
40
354
2020
2019
17
11
28
372
158
58
95
168
32
883
18
15
33
411
161
64
97
197
82
1,012
126
7
PROVISIONS AND CONTINGENT LIABILITIES
PROVISIONS
The following table summarizes the movement in provisions for the years ended December 31:
As of January 1, 2019
Arising during the year
Utilized
Unused amounts reversed
Transfer and reclassification
Discount rate adjustment and imputed interest (change in
estimate)
Translation adjustments and other
As of December 31, 2019
Non-current
Current
As of January 1, 2020
Arising during the year
Utilized
Unused amounts reversed
Transfer and reclassification
Discount rate adjustment and imputed interest (change in
estimate)
Translation adjustments and other
As of December 31, 2020
Non-current
Current
Non-income
tax provisions
Decommi-
ssioning
provision
Legal
provision
Other
provisions
150
79
(105)
(4)
5
—
1
126
—
126
126
24
(48)
(10)
—
—
(6)
86
—
86
93
28
(1)
—
5
8
5
138
138
—
138
10
(1)
—
—
9
(15)
141
141
—
44
3
(6)
(15)
(1)
—
1
26
—
26
26
—
—
(3)
—
—
(1)
22
—
22
57
70
(51)
—
(2)
—
(4)
70
—
70
70
1
(22)
(6)
—
—
—
43
—
43
Total
344
180
(163)
(19)
7
8
3
360
138
222
360
35
(71)
(19)
—
9
(22)
292
141
151
The timing of payments in respect of provisions is, with some exceptions, not contractually fixed and cannot be estimated with
certainty. In addition, with respect to legal proceedings, given inherent uncertainties, there can be no guarantee that the ultimate
outcome will be in line with VEON’s current expectations.
See ‘Sources of estimation uncertainty’ below in this Note 7 for further details regarding assumptions and sources of uncertainty.
For further details regarding risks associated with income tax and non-income tax positions, please refer to ‘Sources of
estimation uncertainty’ in Note 8.
In 2020, as a result of a change in estimate, Pakistan Mobile Communications Limited ("PMCL") reversed a non-income tax
provision of PKR11.2 billion (US$68), of which PKR8.6 billion (US$52) was recorded as a gain in Selling, general and
administration expenses.
The Group has recognized a provision for decommissioning obligations associated with future dismantling of its towers in various
jurisdictions.
127
CONTINGENT LIABILITIES
The Group had contingent liabilities as of December 31, 2020 as set out below.
VEON - Securities Class Action
On November 4, 2015, a class action lawsuit was filed in the United States against VEON and certain of its then current and
former officers by Charles Kux-Kardos, on behalf of himself and other investors in the Company alleging certain violations of the
U.S. federal securities laws in connection with the Company’s public disclosures relating to its operations in Uzbekistan. On
December 4, 2015, a second complaint was filed by Westway Alliance Corp. that asserts essentially the same claims in
connection with essentially the same disclosures.
On April 27, 2016, the court consolidated the two actions and appointed Westway as lead plaintiff. On May 6, 2016, a motion for
reconsideration was filed on the appointment of Westway as lead plaintiff and on September 26, 2016, the court affirmed the
selection of Westway as the lead plaintiff. An amended complaint was filed on December 9, 2016.
On September 19, 2017, the Court in the Southern District of New York rendered a decision granting in part VEON’s motion to
dismiss the Amended Complaint.
On February 9, 2018, VEON filed its Answer and Affirmative Defenses to the allegations that remain in the Amended Complaint
after the Court’s September 19, 2017 Order. Motions to dismiss were filed by all the individual defendants on February 9, 2018.
On April 13, 2018, plaintiff dismissed its claims voluntarily against one of the individual defendants. On August 30, 2018, the
Court granted the motions to dismiss by all of the individual defendants remaining in the action, and the time for appeal has now
expired. On May 17, 2019, VEON filed a motion for judgment on the pleadings, arguing that Westway lacked standing as a result
of the September 19, 2017 order because it had not purchased any securities on or after the date of the earliest alleged
misstatement. On May 21, 2019, the Rosen Law Firm submitted a letter to the Court on behalf of Boris Lvov seeking a pre-
motion conference for leave to file a motion to intervene and substitute Lvov as lead plaintiff. On May 24, 2019, Westway filed a
letter opposing Mr. Lvov’s request, and VEON filed a letter taking no position. Westway filed its opposition to VEON’s motion on
June 17, 2019, and VEON filed its reply papers on June 28, 2019. On April 17, 2020, the Court denied Westway's motion and
ordered VEON's motion to proceed. On March 31, 2020, VEON’s motion for judgment on the pleadings was denied without
prejudice. Westway filed its Second Amended Complaint on April 14, 2020, adding three additional named plaintiffs and
allegations that VEON lacked adequate internal controls as of the start date of the Alleged Class Period and had a duty to
disclose that fact to investors no later than December 4, 2010. On May 15, 2020, VEON filed a motion to dismiss the Second
Amended Complaint.
On March 11, 2021, the Court granted VEON’s motion to dismiss the Second Amended Complaint, holding that VEON had no
duty to disclose information concerning its internal controls as of the start date of the Alleged Class Period, and that Westway
therefore lacked standing to bring any claims against VEON as Lead Plaintiff or otherwise. The Court ordered that the Lead
Plaintiff selection process be reopened, and that any motions for appointment as Lead Plaintiff be filed by April 8, 2021. The
Company intends to vigorously defend the action at all phases of the proceedings.
VAT on Replacement SIMs
SIM Cards Issued June 2009 to December 2011
On April 1, 2012, the National Board of Revenue (“NBR”) issued a demand to Banglalink Digital Communications Limited
(“Banglalink”) for BDT 7.74 billion (US$91) for unpaid SIM tax (VAT and supplementary duty). The NBR alleged that Banglalink
evaded SIM tax on new SIM cards by issuing them as replacements. On the basis of 5 random SIM card purchases made by the
NBR, the NBR concluded that all SIM card replacements issued by Banglalink between June 2009 and December 2011
(7,021,834 in total) were new SIM connections and subject to tax. Similar notices were sent to three other operators in
Bangladesh. Banglalink and the other operators filed separate petitions in the High Court, which stayed enforcement of the
demands.
In an attempt to assist the NBR in resolving the dispute, the Government ordered the NBR to form a Review Committee
comprised of the NBR, the Commissioner of Taxes (“LTU”), Bangladesh Telecommunication Regulatory Commission (“BTRC”),
Association of Mobile Telecom Operators of Bangladesh (“AMTOB”) and the operators (including Banglalink). The Review
Committee identified a methodology to determine the amount of unpaid SIM tax and, after analyzing 1,200 randomly selected
SIM cards issued Banglalink, determined that only 4.83% were incorrectly registered as replacements. The Review Committee’s
interim report was signed off by all the parties, however, the Convenor of the Review Committee reneged on the interim report
and unilaterally published a final report that was not based on the interim report or the findings of the Review Committee. The
operators objected to the final report.
The NBR Chairman and operators’ representative agreed that the BTRC would prepare further guidelines for verification of SIM
users. Although the BTRC submitted its guidelines (under which Bangalink’s exposure was determined to be 8.5% of the original
demand), the Convenor of the Review Committee submitted a supplementary report which disregarded the BTRC’s guidelines
and assessed Banglalink’s liability for SIM tax to be BDT 7.62 billion (US$90). The operators refused to sign the supplementary
report.
128
On May 18, 2015, Banglalink received an updated demand from the LTU claiming Banglalink had incorrectly issued 6,887,633
SIM cards as replacement SIM cards between June 2009 and December 2011 and required Banglalink to pay BDT 5.32 billion
(US$63) in SIM tax. The demand also stated that interest may be payable. Similar demands were sent to the other operators.
On June 25, 2015, Banglalink filed an application to the High Court to stay the updated demand, and a stay was granted. On
August 13, 2015, Banglalink filed its appeal against the demand before the Appellate Tribunal and deposited 10% of the amount
demanded in order to proceed. The other operators also appealed their demands. On May 26, 2016, Banglalink presented its
legal arguments and on September 28, 2016, the appeals of all the operators were heard together.
The Bangladesh Appellate Tribunal rejected the appeal of Banglalink and all other operators on June 22, 2017. On July 11, 2017,
Banglalink filed an appeal of the Appellate Tribunal’s judgment with the High Court Division of the Supreme Court of Bangladesh.
The appeal is pending.
SIM Cards Issued July 2012 to June 2015
On November 20, 2017, the LTU issued a final demand to Banglalink for BDT 1.69 billion (US$20) for unpaid tax on SIM card
replacements issued by Banglalink between July 2012 and June 2015. On February 20, 2018, Banglalink filed its appeal against
this demand before the Appellate Tribunal and deposited 10% of the amount demanded in order to proceed. By its judgment
dated February 10, 2020, the Appellate Tribunal rejected Banglalink’s appeal. Banglalink appealed to the High Court Division.
Before hearing the appeal, the Court suo moto took up as a preliminary question whether, based on new law, the matter is
subject to an appeal or an application for revision. On March 2, 2021, the Court determined that an application for revision is the
correct procedure and dismissed the appeal. Banglalink will file an appeal before the Appellate Division and is obligated to
deposit 10% of the disputed amount in order to continue its challenge. As of December 31, 2020, the Company has recorded a
provision of US$11 (2019: US$11).
Dispute concerning sale of Telecel Globe Limited
Global Telecom Holding S.A.E. (“GTH”) and Niel Natural Resources Investments S.A. ("Niel") entered into a Share Purchase
Agreement on March 28, 2013, as amended from time to time (the “SPA”) in relation to the proposed purchase by Niel of GTH's
majority stake in Telecel Globe Limited ("Telecel") and telecommunications operations in the Central African Republic and
Burundi. The parties subsequently entered into three amendments to the original SPA between April and August 2013 due to
Niel’s failure to timely close the intended transaction. Pursuant to the terms of the amendments, the parties extended the
Longstop Date each time in exchange for payments of deposits by Niel. As Niel ultimately failed to close the intended
transaction, the deposits paid to GTH were not refunded, which was in accordance with the terms of the SPA which is no longer
in force. GTH completed the sale of Telecel in October 2014, to another purchaser for consideration less than had been agreed
with Niel.
During 2019, Niel commenced legal activities in relation to the deposit monies retained by GTH. For further details, refer to the
Group’s audited annual consolidated financial statements as of and for the year ended December 31, 2019.
In June 2020, a settlement agreement was reached between GTH and Niel, which was subject to Niel’s satisfaction of certain
conditions precedent, whereby GTH would pay US$9 to Niel to resolve all claims and counterclaims at issue in the dispute, as
well as associated proceedings brought by Niel in the Netherlands and Egypt. The US$41 remainder of the value deferred on the
balance sheet was released to profit and loss, within 'Other non-operating gain / (loss)'.
In November 2020, the conditions of the settlement agreement were met and the settlement payment of US$9 from GTH to Niel
was made.
Other contingencies and uncertainties
In addition to the individual matters mentioned above, the Company is involved in other disputes, litigation and regulatory
inquiries and investigations, both pending and threatened, in the ordinary course of its business. The Company’s dispute with the
Pakistan Telecommunication Authority over its license renewal in Pakistan, explained in Note 15 below, is an example of such a
matter. The total value of all other individual contingencies that are able to be quantified and are above US$5, other than
disclosed above, amounts to US$484 (2019: US$69). Due to the high level of estimation uncertainty, as described in ‘Source of
estimation uncertainty’ in this Note 7 and in Note 8, it is not practicable for the Company to reliably estimate the financial effect
for certain contingencies and therefore no financial effect has been included within the preceding disclosure. The Company does
not expect any liability arising from these contingencies to have a material effect on the results of operations, liquidity, capital
resources or financial position of the Company. Furthermore, the Company believes it has provided for all probable liabilities
arising in the ordinary course of its business.
For the ongoing matters described above, where the Company has concluded that the potential loss arising from a negative
outcome in the matter cannot be estimated, the Company has not recorded an accrual for the potential loss. However, in the
event a loss is incurred, it may have an adverse effect on the results of operations, liquidity, capital resources, or financial
position of the Company.
129
ACCOUNTING POLICIES
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Provisions are discounted using a current pre-tax rate if the time value of
money is significant. Contingent liabilities are possible obligations arising from past events, whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.
SOURCE OF ESTIMATION UNCERTAINTY
The Group is involved in various legal proceedings, disputes and claims, including regulatory discussions related to the Group’s
business, licenses, tax positions and investments, and the outcomes of these are subject to significant uncertainty. Management
evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable
estimate of the amount of loss. Unanticipated events or changes in these factors may require the Group to increase or decrease
the amount recorded for a matter that has not been previously recorded because it was not considered probable.
In the ordinary course of business, VEON may be party to various legal and tax proceedings, including as it relates to
compliance with the rules of the telecom regulators in the countries in which VEON operates, competition law and anti-bribery
and corruption laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”). Non-compliance with such rules and laws may
cause VEON to be subject to claims, some of which may relate to the developing markets and evolving fiscal and regulatory
environments in which VEON operates. In the opinion of management, VEON’s liability, if any, in all pending litigation, other legal
proceeding or other matters, other than what is discussed in this Note, will not have a material effect upon the financial condition,
results of operations or liquidity of VEON.
130
8
INCOME TAXES
Current income tax is the expected tax expense, payable or receivable on taxable income or loss for the period, using tax rates
enacted or substantively enacted at reporting date, and any adjustment to tax payable in respect of previous years.
Income tax payable
Current income tax payable consisted of the following items as of December 31:
Current tax payable
Uncertain tax provisions
Total income tax payable
2020
2019
30
145
175
36
66
102
The balance of uncertain tax provisions is shown net of income tax assets which can be utilized to offset future tax charges
should they arise, resulting in a reduction of the current period provision by US$10 (2019: US$51), with the gross amount being
US$155 (2019: US$117).
VEON is involved in a number of disputes, litigation and regulatory proceedings in the ordinary course of its business, pertaining
to income tax claims. The total value of these individual contingencies that are able to be quantified amounts to US$112. Due to
the high level of estimation uncertainty, as described in ‘Source of estimation uncertainty’ disclosed below in this Note 8, it is not
practicable for the Company to reliably estimate the financial effect for certain contingencies and therefore no financial effect has
been included within the preceding disclosure. The Company does not expect any liability arising from these contingencies to
have a material effect on the results of operations, liquidity, capital resources or financial position of the Company, however we
note that an unfavorable outcome of some or all of the specific matters could have a material adverse impact on results of
operations or cash flows for a particular period. This assessment is based on our current understanding of relevant facts and
circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future. For further
details on with respect to VEON’s uncertain tax provisions and tax risks, please refer to the ‘Accounting policies’ and ‘Source of
estimation uncertainty’ disclosed below in this Note 8.
Income tax assets
The Company reported current income tax assets of US$73 (2019: US$16).
These tax assets mainly relate to advance tax payments in our operating companies which can only be offset against income tax
liabilities in that relevant jurisdiction, in fiscal periods subsequent to balance sheet date.
Income tax expense
Income tax expense consisted of the following for the years ended December 31:
Current income taxes
Current year
Adjustments in respect of previous years
Total current income taxes
Deferred income taxes
Movement of temporary differences and losses
Changes in tax rates
Changes in recognized deferred tax assets
Adjustments in respect of previous years
Other
Total deferred tax expense / (benefit)
Income tax expense
131
2020
2019
2018
404
(1)
403
(72)
—
2
9
—
(61)
342
495
5
500
477
9
486
(36)
(152)
(1)
39
3
(7)
(2)
498
6
—
28
1
(117)
369
Effective tax rate
The table below outlines the reconciliation between the statutory tax rate in the Netherlands (25%) and the effective income tax
rates for the Group, together with the corresponding amounts, for the years ended December 31:
2020
2019
2018 Explanatory notes
Profit / (loss) before tax from
continuing operations
Income tax benefit / (expense)
at statutory tax rate (25%)
26
1,181
(248)
(7)
(295)
62
Difference due to the effects of:
Different tax rates in different
jurisdictions
Non-deductible expenses
Non-taxable income
Adjustments in respect of
previous years
Movements in (un)recognized
deferred tax assets
Withholding taxes
Uncertain tax positions
Change in income tax rate
(28)
20
89
(210)
(90)
(120)
37
5
49
Certain jurisdictions in which VEON operates have income tax rates which
are different to the Dutch statutory tax rate of 25%. Profitability in countries
with higher tax rates (including Pakistan, Algeria and Bangladesh) has a
negative impact on the effective tax rate.
The Group incurs certain expenses which are non-deductible in the
relevant jurisdiction. In 2020, as in previous years, such expenses include
impairment losses (unless resulting in a change in temporary differences),
certain non-income tax charges (i.e. minimum tax regimes) and some intra-
group expenses (i.e. interest on internal loans).
The Group earns certain income which is non-taxable in the relevant
jurisdiction. In 2020, non-taxable income included the revaluation of
contingent consideration liability, as well as a gain relating to the settlement
in connection with the dispute concerning the sale of Telecel Globe Limited.
For further details, refer to Note 15 and Note 7, respectively.
(3)
(49)
(39) The effect of prior year adjustments mainly relates to updated tax positions.
(89)
(13)
(354)
(56)
(50)
45
Movements in (un)recognized deferred tax assets are primarily caused by
tax losses and other credits for which no deferred tax asset has been
recognized. This primarily occurs in holding entities in the Netherlands
(2020: US$101, 2019: US$42, 2018: US$147) and in GTH (2020: nil, 2019:
US$43, 2018: US$213.
Withholding taxes are recognized to the extent that dividends from foreign
operations are expected to be paid in the foreseeable future. In 2020,
similar to previous years, expenses relating to withholding taxes were
primarily influenced by dividends expected from Russia, Algeria and
Pakistan.
The tax legislation in the markets in which VEON operates is unpredictable
and gives rise to significant uncertainties (see ‘Source of estimation
uncertainty’ below). Movements in uncertain tax positions stem from such
uncertainties. The impact of movements in uncertain tax positions is
presented net of any corresponding deferred tax assets recognized.
(17)
Changes in tax rates impact the valuation of existing temporary differences.
The nominal tax rates did not change in our operating jurisdictions in 2020.
Nominal tax rate changes occurred in Pakistan in 2019 and 2018 and
Uzbekistan in 2018.
(6)
(1)
—
6
1
Other
15
(33)
(78)
In 2019, the Group recorded an increase in income tax liabilities of US$29
as a result of the settlement with the Egyptian Tax Authority for outstanding
tax liabilities for GTH. Refer to Note 7 for further details.
Income tax benefit / (expense)
(342)
(498)
(369)
Effective tax rate
1,315.4 %
42.2 % -148.8 %
132
Deferred taxes
The Group reported the following deferred tax assets and liabilities in the statement of financial position as of December 31:
Deferred tax assets
Deferred tax liabilities
Net deferred tax position
The following table shows the movements of net deferred tax positions in 2020:
2020
186
(127)
59
2019
134
(141)
(7)
Property and equipment
Intangible assets
Trade receivables
Provisions
Accounts payable
Withholding tax on undistributed earnings
Tax losses and other balances carried forwards
Non-recognized deferred tax assets
Other
Net deferred tax positions
Movement in deferred taxes
Opening
balance
Net income
statement
movement
Other
movements
Closing
balance
(288)
(38)
47
31
156
(52)
2,026
(1,894)
5
(7)
(23)
19
1
1
7
(8)
113
(46)
(3)
61
37
5
(5)
(4)
(23)
—
82
(85)
(2)
5
(274)
(14)
43
28
140
(60)
2,221
(2,025)
—
59
The following table shows the movements of net deferred tax positions in 2019:
Property and equipment
Intangible assets
Trade receivables
Provisions
Accounts payable
Withholding tax on undistributed earnings
Tax losses and other balances carried forwards
Non-recognized deferred tax assets
Other
Net deferred tax positions
Movement in deferred taxes
Opening
balance
Net income
statement
movement
Other
movements
Closing
balance
(275)
(60)
32
30
113
(50)
2,173
(1,955)
9
17
5
22
16
2
11
(2)
(68)
—
12
(2)
(18)
—
(1)
(1)
32
—
(79)
61
(16)
(22)
(288)
(38)
47
31
156
(52)
2,026
(1,894)
5
(7)
133
Unused tax losses and other credits carried forwards
VEON recognizes a deferred tax asset for unused tax losses and other credits carried forwards, to the extent that it is probable
that the deferred tax asset will be utilized. The amount and expiry date of unused tax losses and other carry forwards for which
no deferred tax asset is recognized are as follows:
As of December 31, 2020
Tax losses expiry
Recognized losses
Recognized DTA
Non-recognized losses
Non-recognized DTA
Other credits carried forwards expiry
Recognized credits
Recognized DTA
Non-recognized credits
Non-recognized DTA
0-5 years
6-10 years
More than 10
years
Indefinite
Total
—
—
(107)
27
(1,546)
(1,006)
387
252
(19)
19
—
—
(102)
102
—
—
—
—
—
—
—
—
—
—
(172)
49
(6,660)
1,272
—
—
(492)
115
(279)
76
(9,212)
1,911
(121)
121
(492)
115
As of As of December 31, 2019
0-5 years
6-10 years
More than 10
years
Indefinite
Total
Tax losses expiry
Recognized losses
Recognized DTA
Non-recognized losses
Non-recognized DTA
Other credits carried forwards expiry
Recognized credits
Recognized DTA
Non-recognized credits
Non-recognized DTA
—
—
—
—
(1,292)
(1,645)
279
357
(13)
13
—
—
(46)
46
—
—
—
—
—
—
—
—
—
—
(280)
73
(6,486)
1,258
—
—
(143)
31
(280)
73
(9,423)
1,894
(59)
59
(143)
31
Losses mainly relate to our holding entities in Luxembourg (2020: US$6,285; 2019: US$6,052) and the Netherlands (2020:
US$2,659; 2019: US$2,937).
VEON reports the tax effect of the existence of undistributed profits that will be distributed in the foreseeable future. The
Company has a deferred tax liability of US$60 (2019: US$52), relating to the tax effect of the undistributed profits that will be
distributed in the foreseeable future, primarily in its Russian, Algerian and Pakistan operations.
As of December 31, 2020, undistributed earnings of VEON’s foreign subsidiaries (outside the Netherlands) which are indefinitely
invested and will not be distributed in the foreseeable future, amounted to US$5,241 (2019: US$6,194). Accordingly, no deferred
tax liability is recognized for this amount of undistributed profits.
134
ACCOUNTING POLICIES
Income taxes
Income tax expense represents the aggregate amount determined on the profit for the period based on current tax and deferred
tax. In cases where the tax relates to items that are charged to other comprehensive income or directly to equity, the tax is also
charged respectively to other comprehensive income or directly to equity.
Uncertain tax positions
The Group’s policy is to comply with the applicable tax regulations in the jurisdictions in which its operations are subject to
income taxes. The Group’s estimates of current income tax expense and liabilities are calculated assuming that all tax
computations filed by the Company’s subsidiaries will be subject to a review or audit by the relevant tax authorities. Uncertain tax
positions are generally assessed individually, using the most likely outcome method. The Company and the relevant tax
authorities may have different interpretations of how regulations should be applied to actual transactions (refer below for details
regarding risks and uncertainties)
Deferred taxation
Deferred taxes are recognized using the liability method and thus are computed as the taxes recoverable or payable in future
periods in respect of deductible or taxable temporary differences between the tax bases of assets and liabilities and their carrying
amounts in the Company’s financial statements.
SOURCE OF ESTIMATION UNCERTAINTY
Tax risks
The tax legislation in the markets in which VEON operates is unpredictable and gives rise to significant uncertainties, which
could complicate our tax planning and business decisions. Tax laws in many of the emerging markets in which we operate have
been in force for a relatively short period of time as compared to tax laws in more developed market economies. Tax authorities
in our markets are often somewhat less advanced in their interpretation of tax laws, as well as in their enforcement and tax
collection methods.
Any sudden and unforeseen amendments of tax laws or changes in the tax authorities’ interpretations of the respective tax laws
and/or double tax treaties, could have a material adverse effect on our future results of operations, cash flows or the amounts of
dividends available for distribution to shareholders in a particular period (e.g. introduction of transfer pricing rules, Controlled
Foreign Operation (“CFC”) legislation and more strict tax residency rules).
Management believes that VEON has paid or accrued all taxes that are applicable. Where uncertainty exists, VEON has accrued
tax liabilities based on management’s best estimate. From time to time, we may also identify tax contingencies for which we have
not recorded an accrual. Such unaccrued tax contingencies could materialize and require us to pay additional amounts of tax.
The potential financial effect of such tax contingencies are disclosed in Note 7 and above in this Note 8, unless not practicable to
do so.
Uncertain tax positions
Uncertain tax positions are recognized when it is probable that a tax position will not be sustained. The expected resolution of
uncertain tax positions is based upon management’s judgment of the likelihood of sustaining a position taken through tax audits,
tax courts and/or arbitration, if necessary. Circumstances and interpretations of the amount or likelihood of sustaining a position
may change through the settlement process. Furthermore, the resolution of uncertain tax positions is not always within the
control of the Group and it is often dependent on the efficiency of the legal processes in the relevant taxing jurisdictions in which
the Group operates. Issues can, and often do, take many years to resolve.
Recoverability of deferred tax assets
Deferred tax assets are recognized to the extent that it is probable that the assets will be realized. Significant judgment is
required to determine the amount that can be recognized and depends foremost on the expected timing, level of taxable profits,
tax planning strategies and the existence of taxable temporary differences. Estimates made relate primarily to losses carried
forward in some of the Group’s foreign operations. When an entity has a history of recent losses, the deferred tax asset arising
from unused tax losses is recognized only to the extent that there is convincing evidence that sufficient future taxable profit will
be generated. Estimated future taxable profit is not considered such evidence unless that entity has demonstrated the ability by
generating significant taxable profit for the current year or there are certain other events providing sufficient evidence of future
taxable profit. New transactions and the introduction of new tax rules may also affect judgments due to uncertainty concerning
the interpretation of the rules and any transitional rules.
135
INVESTING ACTIVITIES OF THE GROUP
9
SIGNIFICANT TRANSACTIONS
SIGNIFICANT TRANSACTIONS IN 2020
Sale of Armenian operations
In October 2020, VEON concluded an agreement for the sale of its operating subsidiary in Armenia, to Team LLC for a
consideration of US$51. Accordingly the net carrying value of assets amounting US$33 were derecognized along with
reclassification of cumulative foreign currency translation reserve of US$96 to profit and loss, resulting in the net loss of US$78.
GTH restructuring
In 2020, VEON continued the restructuring of Global Telecom Holding S.A.E. (“GTH”) which commenced in 2019 (see further
details below), with the intragroup transfer of Mobilink Bank and GTH Finance B.V. completed in March and April 2020,
respectively. As the operating assets of GTH had previously been, and will continue to be, fully consolidated within the balance
sheet of the VEON Group, there was no material impact on these consolidated financial statements stemming from these
intragroup transfers. The intragroup transfer for Djezzy is continuing.
SIGNIFICANT TRANSACTIONS IN 2019 AND 2018
Mandatory tender offer for shares of GTH
In August 2019, VEON completed the purchase of 1,914,322,110 shares, representing approximately 40.55% of GTH’s issued
shares, in connection with its Mandatory Tender Offer (“MTO”) which had commenced in July 2019. The total price for the
purchase of such shares was EGP 9,725 million (approximately US$587), reflecting the offer price per share of EGP 5.08.
Following the completion of the MTO and as a result of further purchases by GTH, as of December 31, 2019, VEON and GTH
hold approximately 99.54% of GTH's total outstanding equity. The MTO was funded by a combination of cash on hand and
utilization of undrawn credit facilities (refer to Note 15 for further details).
These transactions represent a purchase of non-controlling interests ("NCI") without a change of control. Consequently, the
difference between the book value of NCI (negative value of US$1,986) and the cost of acquisition (US$608) was recorded
directly within ‘Other capital reserves’in the statement of changes in equity (loss of US$2,594).
Following the successful completion of the MTO, VEON continued with the restructuring of GTH, which included successful
delisting of GTH’s shares from the Egyptian Exchange and the approval by GTH shareholders of VEON’s offer to acquire
substantially all of the operating assets of GTH, both of which occurred on September 9, 2019.
Following that approval, VEON completed the intragroup transfers of Jazz, Banglalink and Med Cable. The operating assets of
GTH had previously been, and will continue to be, fully consolidated within the balance sheet of the VEON Group, and as such,
there is no material impact on these consolidated financial statements stemming from these asset transfers.
Revised technology infrastructure partnership with Ericsson
In February 2019, the Company announced a revised arrangement with Ericsson to upgrade its core IT systems in several
countries in the coming years and to release Ericsson from the development and delivery of the Full Stack Revenue Manager
Solution. This revised arrangement enables VEON to continue upgrading IT infrastructure with new digital business support
systems (DBSS) using existing software from Ericsson which is already deployed in certain operating companies within VEON.
The parties signed binding terms to vary the existing agreements and as a result VEON received US$350 during the first half of
2019. The settlement amount was recorded in the income statement within ‘Other operating income’.
Termination of network sharing in Kazakhstan
In April 2019, the Group received a settlement amount of US$38 from Kcell Joint Stock Company (“Kcell”), related to the
termination of the network sharing agreement between Kcell and our subsidiary in Kazakhstan. This amount has been recorded
in "Other revenue/other income" within the consolidated income statement.
136
Sale of Italy Joint Venture
In July 2018, VEON entered into an agreement with CK Hutchison Holdings Ltd for the sale of its 50% stake in the Italy Joint
Venture. In September 2018 the transaction was completed, and cash consideration was received in the amount of EUR 2,450
(US$2,830).
Share of profit / (loss) of the Italy Joint Venture for 2018 and 2017 was reclassified to “Profit / (loss) after tax from discontinued
operations.”
The effect of the disposal is detailed below:
Cash consideration received
Derecognition of assets classified as held for sale
Release cumulative share of other comprehensive income / (loss) of Italy Joint Venture
Release cumulative foreign currency translation reserve related to Italy Joint Venture
Gain / (loss) on disposal of discontinued operations
2018
2,830
(1,599)
(31)
79
1,279
137
10
IMPAIRMENT OF ASSETS
Property and equipment and intangible assets are tested regularly for impairment. The Company assesses, at the end of each
reporting period, whether there exist any indicators that an asset may be impaired (i.e. asset becoming idle, damaged or no
longer in use). If there are such indicators, the Company estimates the recoverable amount of the asset. Impairment losses of
continuing operations are recognized in the income statement in a separate line item.
Goodwill is tested for impairment annually (at September 30) or when circumstances indicate the carrying value may be
impaired. Refer to Note 12 for an overview of the carrying value of goodwill per cash-generating unit (“CGU”). The Company’s
impairment test is primarily based on fair value less cost of disposal calculations (Level 3 in the fair value hierarchy) using a
discounted cash flow model, based on cash flow projections from business plans prepared by management. The Company
considers the relationship between its market capitalization and its book value, as well as weighted average cost of capital and
the quarterly financial performances of each CGU when reviewing for indicators of impairment in interim periods. In addition to
the above, the Company also considered the impact of COVID-19 when reviewing for indicators of impairment (refer to Note 1).
Impairment losses in 2020
In recent years, Beeline Russia has seen a decline in its subscriber and revenue market share on the back of competitive
pressures in the market, which have impacted both revenues and profitability. This underperformance has negatively impacted
the fair value of our Russian business, and over time has eroded the existing headroom over the book value of the business. The
impact of a weaker Russian ruble, along with ongoing COVID lockdowns and associated travel restrictions, have had a negative
impact on consumer spending, which weakened particularly during the third quarter of 2020. Together with a slower than
anticipated recovery in Beeline’s ARPU, which has in turn impacted our future projected revenue, a revision to our previous
estimates has been deemed necessary.
Based on these revisions, VEON recorded an impairment of US$723 against the carrying value of goodwill in Russia in the third
quarter of 2020. The recoverable amount of the CGU of US$3,001 was determined based on fair value less costs of disposal
calculations (Level 3 in the fair value hierarchy) using a discounted cash flow model, based on cash flow projections from
business plans prepared by management.
Also in the third quarter of 2020, due to the unstable political environment and uncertainties arising with respect to the
recoverability of our operating assets in Kyrgyzstan, VEON has fully impaired the carrying value of all operating assets of
Kyrgyzstan. As a result, the Company recorded a total impairment loss of US$64.
Additionally, in regard with the Company’s commitment to network modernization, the Company continuously re-evaluates the
plans for its existing network, primarily with respect to equipment purchased but not installed, and consequently recorded an
impairment loss of US$5.
2020
Russia
Kyrgyzstan
Other
Property and
equipment
Intangible
assets
Goodwill
Other
Total
impairment
—
38
5
43
—
8
—
8
723
—
—
723
—
18
(7)
11
723
64
(2)
785
Impairment losses in 2019 and 2018
Due to operational performance of operating companies and the Company’s continuous re-evaluation of its equipment
purchased but not installed, in 2019 and 2018 the Company recorded an impairment of US$108 and US$858, respectively.
Impairment losses were allocated first to the existing carrying value of goodwill, and then subsequently to property and
equipment and intangible assets based on relative carrying values.
2019
Kyrgyzstan
Other
2018
Algeria
Armenia
Bangladesh
Georgia
Kyrgyzstan
Other
138
Property and
equipment
Intangible
assets
Goodwill
Total
impairment
33
18
51
—
46
221
31
—
37
335
3
—
3
—
10
230
19
—
40
299
54
—
54
125
25
—
—
74
—
224
90
18
108
125
81
451
50
74
77
858
KEY ASSUMPTIONS
The recoverable amounts of CGUs have been determined based on fair value less costs of disposal calculations, using cash flow
projections from business plans prepared by management.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for
each of the Company’s CGUs. These budgets and forecast calculations are prepared for a period of five years. A long-term
growth rate is applied to project future cash flows after the fifth year.
The tables below show key assumptions used in fair value less costs of disposal calculations for CGUs with material goodwill or
those CGUs for which an impairment has been recognized.
Discount rates
Discount rates are initially determined in US dollars based on the risk-free rate for 20-year maturity bonds of the United States
Treasury, adjusted for a risk premium to reflect both the increased risk of investing in equities and the systematic risk of the
specific CGU relative to the market as a whole.
The equity market risk premium and small capitalization premium is sourced from independent market analysts. The systematic
risk, beta, represents the median of the raw betas of the entities comparable in size and geographic footprint with the ones of the
Company (“Peer Group”). The debt risk premium is based on the median of Standard & Poor’s long-term credit rating of the
Peer Group. The weighted average cost of capital is determined based on target debt-to-equity ratios representing the median
historical five year capital structure for each entity from the Peer Group.
The discount rate in functional currency of a CGU is adjusted for the long-term inflation forecast of the respective country in
which the business operates, as well as applicable country risk premium.
Discount rate
(local currency)
2020
2019
2018
10.1 %
11.6 %
18.2 %
—
10.3 %
—
13.8 %
—
—
9.1 %
10.4 %
14.5 %
—
9.2 %
14.1 %
14.5 %
—
—
10.3 %
11.1 %
14.4 %
12.2 %
8.4 %
14.8 %
13.1 %
12.5 %
10.6 %
Russia
Algeria
Pakistan
Bangladesh
Kazakhstan
Kyrgyzstan *
Uzbekistan
Armenia
Georgia
* In 2020, VEON fully impaired the carrying value of all operating assets of Kyrgyzstan, therefore discount rate was not determined
Revenue growth rates
The revenue growth rates during the forecast period vary based on numerous factors, including size of market, GDP (Gross
Domestic Product), foreign currency projections, traffic growth, market share and others. A long‑term growth rate into perpetuity
is estimated based on a percentage that is lower than or equal to the country long-term inflation forecast, depending on the CGU.
Average annual revenue growth rate during forecast
period
Terminal growth rate
2020
2019
2018
2020
2019
2018
4.3 %
4.3 %
9.7 %
—
5.3 %
—
3.2 %
—
—
1.4 %
1.0 %
3.9 %
—
5.3 %
1.6 %
4.1 %
—
—
1.1 %
0.7 %
3.5 %
0.6 %
2.8 %
2.8 %
5.5 %
0.2 %
2.1 %
1.8 %
1.0 %
5.8 %
—
3.1 %
—
5.1 %
—
—
1.6 %
1.0 %
2.7 %
—
3.3 %
5.0 %
6.0 %
—
—
1.3 %
0.9 %
4.0 %
4.0 %
1.1 %
5.0 %
6.3 %
0.8 %
3.0 %
Russia
Algeria
Pakistan
Bangladesh
Kazakhstan
Kyrgyzstan *
Uzbekistan
Armenia
Georgia
* In 2020, VEON fully impaired the carrying value of all operating assets of Kyrgyzstan, therefore revenue growth rates were not determined
139
Operating margin
The Company estimates operating margin based on pre-IFRS 16 Adjusted EBITDA divided by Total Operating Revenue for each
CGU and each future year. The forecasted operating margin is based on the budget and forecast calculations and assumes cost
optimization initiatives which are part of on-going operations, as well as regulatory and technological changes known to date,
such as telecommunication license issues and price regulation among others.
Average operating margin during the forecast period
Terminal period operating margin
2020
31.2 %
39.9 %
42.0 %
—
49.5 %
—
34.0 %
—
—
2019
34.7 %
42.6 %
47.3 %
—
49.9 %
31.4 %
51.4 %
—
—
2018
34.6 %
44.0 %
47.9 %
35.4 %
46.5 %
39.9 %
43.9 %
23.6 %
24.5 %
2020
35.7 %
40.4 %
44.6 %
—
50.0 %
—
34.0 %
—
—
2019
34.5 %
43.1 %
47.3 %
—
50.1 %
33.0 %
52.4 %
—
—
2018
34.7 %
45.0 %
49.1 %
35.7 %
46.7 %
39.0 %
44.1 %
23.4 %
25.6 %
Russia
Algeria
Pakistan
Bangladesh
Kazakhstan
Kyrgyzstan *
Uzbekistan
Armenia
Georgia
* In 2020, VEON fully impaired the carrying value of all operating assets of Kyrgyzstan, therefore operating margin assumptions were not
determined
CAPEX
CAPEX is defined as purchases of property and equipment and intangible assets excluding licenses, goodwill and right-of-use
assets. The cash flow forecasts for capital expenditures are based on the budget and forecast calculations and include the
network roll-outs plans and license requirements.
The cash flow forecasts for license and spectrum payments for each operating company for the initial five years include amounts
for expected renewals and newly available spectrum. Beyond that period, a long-run cost of spectrum is assumed. Payments for
right-of-use assets are considered in the operating margin as described above.
Average CAPEX as a percentage of revenue during
the forecast period
Terminal period CAPEX as a percentage of revenue
2020
27.9 %
15.2 %
19.6 %
—
19.8 %
—
21.4 %
—
—
2019
19.9 %
12.5 %
17.2 %
—
20.0 %
26.9 %
19.4 %
—
—
2018
19.8 %
15.1 %
16.7 %
14.9 %
17.7 %
17.2 %
16.2 %
21.0 %
23.8 %
2020
21.0 %
14.0 %
18.9 %
—
19.0 %
—
21.0 %
—
—
2019
18.5 %
12.0 %
17.1 %
—
19.5 %
20.0 %
20.1 %
—
—
2018
15.0 %
14.0 %
14.0 %
12.0 %
17.0 %
15.0 %
16.2 %
14.0 %
14.0 %
Russia
Algeria
Pakistan
Bangladesh
Kazakhstan
Kyrgyzstan *
Uzbekistan
Armenia
Georgia
* In 2020, VEON fully impaired the carrying value of all operating assets of Kyrgyzstan, therefore CAPEX assumptions were not determined
140
SENSITIVITY TO CHANGES IN ASSUMPTIONS
The following table illustrates the potential additional impairment for the Russia CGU and the potential impairment or remaining
headroom for the Algeria CGU if certain key parameters would adversely change by one percentage point within both the explicit
forecast and terminal periods ('+/- 1.0 pp'), as well as the change in key assumptions required in order for the recoverable
amount of the CGU to be equal to its book value ('Break-even').
Any additional adverse changes in the key parameters by more than one percentage point would increase the amount of
impairment exposure approximately proportionally.
Sensitivity analysis
Discount rate
Change in key assumption
Headroom / (impairment)
Average annual revenue growth rate
Change in key assumption
Headroom / (impairment)
Average operating margin
Change in key assumption
Headroom / (impairment)
Average CAPEX / revenue
Change in key assumption
Headroom / (impairment)
Russia
Algeria
Assumption
used *
+/- 1.0 pp
Break-even
**
Assumption
used *
+/- 1.0 pp Break-even
10.1%
0.0 pp
—
3.9%
0.0 pp
—
32.0%
0.0 pp
—
26.8%
0.0 pp
—
11.1%
1.0 pp
(473)
2.9%
(1.0) pp
(250)
31.0%
(1.0) pp
(375)
27.8%
1.0 pp
(380)
10.1%
0.0 pp
—
3.9%
0.0 pp
—
32.0%
0.0 pp
—
26.8%
0.0 pp
—
11.6%
0.0 pp
75
3.8%
0.0 pp
75
40.0%
0.0 pp
75
15.0%
0.0 pp
75
12.6%
1.0 pp
(44)
2.8%
12.2%
0.6 pp
—
2.9%
(1.0) pp
(0.9) pp
(12)
—
39.0%
(1.0) pp
19
16.0%
1.0 pp
22
38.7%
(1.3) pp
—
16.4%
1.4 pp
—
* Combined average based on explicit forecast period of five years (2021-2025) and terminal period (2026), excludes intervening period of 2020
** Following the recognition of an impairment loss in the third quarter of 2020, the book value of the Russia CGU is equal to its recoverable amount. As such, the 'break-even' assumptions for
the Russia are equivalent to the Assumptions used.
SOURCE OF ESTIMATION UNCERTAINTY
The Group has significant investments in property and equipment, intangible assets, goodwill and other investments.
Estimating recoverable amounts of assets and CGUs must, in part, be based on management’s evaluations, including the
determination of the appropriate CGUs, the relevant discount rate, estimation of future performance, the revenue-generating
capacity of assets, timing and amount of future purchases of property and equipment, assumptions of future market conditions
and the long-term growth rate into perpetuity (terminal value). In doing this, management needs to assume a market participant
perspective. Changing the assumptions selected by management, in particular, the discount rate and growth rate assumptions
used to estimate the recoverable amounts of assets, could significantly impact the Group’s impairment evaluation and hence
results.
A significant part of the Group’s operations is in countries with emerging markets. The political and economic situation in these
countries may change rapidly and recession may potentially have a significant impact on these countries. On-going recessionary
effects in the world economy and increased macroeconomic risks impact our assessment of cash flow forecasts and the discount
rates applied.
There are significant variations between different markets with respect to growth, mobile penetration, average revenue per user
(“ARPU”), market share and similar parameters, resulting in differences in operating margins. The future development of
operating margins is important in the Group’s impairment assessments, and the long-term estimates of these margins are highly
uncertain. This is particularly the case for emerging markets that are not yet in a mature phase.
141
11 PROPERTY AND EQUIPMENT
The following table summarizes the movement in the net book value of property and equipment for the years ended
December 31:
Net book value
Telecomm-
unications
equipment
Land,
buildings and
constructions
Office and
other
equipment
Equipment not
installed and
assets under
construction
Right-of-
use assets
Total
As of January 1, 2019
3,937
202
393
329
2,023
6,884
Additions
Disposals
Depreciation charge for the year
Impairment
Transfers
Translation adjustment
As of December 31, 2019
Additions
Disposals
Depreciation charge for the year
Impairment
Transfers
Translation adjustment
As of December 31, 2020
Cost
Accumulated depreciation and
impairment
80
(36)
(1,032)
(30)
1,210
177
4,306
47
(50)
(1,009)
(28)
1,282
(498)
4,050
10,893
—
(1)
(33)
(1)
29
20
216
2
(5)
(28)
(1)
5
(30)
159
8
(6)
(139)
(3)
131
33
417
32
(10)
(123)
(2)
111
(57)
368
377
1,330
1,453
299 *
1,840 *
(7)
—
(17)
(1,370)
28
(35)
(85)
(448)
(1,652)
—
—
146
(51)
—
404
416
1,985
7,340
1,626
446
2,153
(12)
—
(7)
(1,396)
(14)
(91)
(416)
(1,576)
(5)
(2)
(43)
—
(59)
(260)
(904)
568
687
1,734
2,526
6,879
15,813
(6,843)
(218)
(962)
(119)
(792)
(8,934)
* Prior year comparatives have been re-presented to conform with current year presentation.
There were no material changes in estimates related to property and equipment in 2020 other than the impairment described in
Note 10 of US$43 (2019: US$51) and lease term reassessments in Russia and Ukraine (included in ‘Additions’) which had the
effect of increasing right-of-use assets by US$181. Please refer to Note 15 for more information regarding Source of estimation
uncertainty for lease terms.
During 2020, VEON acquired property and equipment in the amount of US$601 (2019: US$480), which were not paid for as of
year-end.
Property and equipment pledged as security for bank borrowings amounts to US$865 as of December 31, 2020 (2019: US$652),
and primarily relate to securities for borrowings of PMCL.
142
The following table summarizes the movement in the net book value of right-of-use assets ("ROU") for the year ended
December 31:
Net book value
As of January 1, 2019
Additions
Disposals
Depreciation charge for the year
Impairment
Transfers
Translation adjustment
As of December 31, 2019
Additions
Disposals
Depreciation charge for the year
Impairment
Transfers
Translation adjustment
As of December 31, 2020
Cost
Accumulated depreciation and impairment
COMMITMENTS
ROU -
Telecommunicati
ons Equipment
ROU - Land,
Buildings and
Constructions
ROU - Office and
Other Equipment
1,601
236
(27)
(306)
—
18
116
1,638
339
(14)
(309)
(1)
—
(217)
1,436
2,021
(585)
415
63
(6)
(140)
—
(18)
30
344
102
—
(105)
(4)
(2)
(42)
293
496
(203)
7
—
(2)
(2)
—
—
—
3
5
—
(2)
—
—
(1)
5
9
(4)
Total
2,023
299
(35)
(448)
—
—
146
1,985
446
(14)
(416)
(5)
(2)
(260)
1,734
2,526
(792)
Capital commitments for the future purchase of equipment are as follows as of December 31:
Less than 1 year
Between 1 and 5 years
Total commitments
2020
2019
747
19
766
677
19
696
Capital commitments arising from telecommunications licenses
VEON’s ability to generate revenue in the countries it operates is dependent upon the operation of the wireless
telecommunications networks authorized under its various licenses for GSM-900/1800, “3G” (UMTS / WCDMA) mobile
radiotelephony communications services and “4G” (LTE).
Under the license agreements, operating companies are subject to certain commitments, such as territory or population
coverage, level of capital expenditures, and number of base stations to be fulfilled within a certain timeframe. If we are found to
be involved in practices that do not comply with applicable laws or regulations, we may be exposed to significant fines, the risk of
prosecution or the suspension or loss of our licenses, frequency allocations, authorizations or various permissions, any of which
could harm our business, financial condition, results of operations, or cash flows.
After expiration of the license, our operating companies might be subject to additional payments for renewals, as well as new
license capital and other commitments.
143
ACCOUNTING POLICIES
Property and equipment is stated at cost, net of any accumulated depreciation and accumulated impairment losses.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful of life of VEON's
assets generally fall within the following ranges:
Class of property and equipment
Telecommunication equipment
Buildings and constructions
Office and other equipment
Right-of-use assets
Useful life
3 – 20 years
10 – 50 years
3 – 10 years
Equivalent lease term
Each asset’s residual value, useful life and method of depreciation is reviewed at the end of each financial year and adjusted
prospectively, if necessary.
SOURCE OF ESTIMATION UNCERTAINTY
Depreciation and amortization of non-current assets
Depreciation and amortization expenses are based on management estimates of useful life, residual value and amortization
method of property and equipment and intangible assets. Estimates may change due to technological developments,
competition, changes in market conditions and other factors and may result in changes in the estimated useful life and in the
amortization or depreciation charges. Technological developments are difficult to predict and our views on the trends and pace of
developments may change over time. Some of the assets and technologies in which the Group invested several years ago are
still in use and provide the basis for new technologies.
The useful lives of property and equipment and intangible assets are reviewed at least annually, taking into consideration the
factors mentioned above and all other relevant factors. Estimated useful lives for similar types of assets may vary between
different entities in the Group due to local factors such as growth rate, maturity of the market, historical and expected
replacements or transfer of assets and quality of components used. Estimated useful life for right-of-use assets is directly
impacted by the equivalent lease term, refer to Note 15 for more information regarding Source of estimation uncertainty for lease
terms.
144
12
INTANGIBLE ASSETS
The following table summarizes the movement in the net book value of intangible assets for the years ended December 31:
Net book value
Telecommuni-
cation
licenses,
frequencies &
permissions
Software
Brands and
trademarks
Customer
relationships
Other
intangible
assets
As of January 1, 2019
1,195
264
178
177
Additions
Disposals
Amortization charge for the
year
Impairment
Transfer
Translation adjustment
50
—
(159)
(3)
—
17
177
—
(155)
—
8
22
—
—
(30)
—
—
1
—
—
(42)
—
—
7
As of December 31, 2019
1,100
316
149
142
Additions
Disposals
Amortization charge for the
year
Impairment
Transfer
Translation adjustment
53
—
(139)
(5)
—
(88)
188
(6)
(159)
(3)
6
(41)
As of December 31, 2020
921
301
Cost
2,170
1,041
3
—
(23)
—
—
(12)
117
457
5
—
(15)
—
—
(16)
Goodwill
3,816
—
—
—
(54)
—
197
Total
5,655
—
239
(2)
(394)
(57)
—
247
—
3,959
5,688
13
—
—
(723)
—
(567)
267
(6)
(343)
(731)
—
(723)
25
12
(2)
(8)
—
(8)
3
22
5
—
(7)
—
(6)
1
116
1,530
15
148
2,682
4,152
4,845
10,191
Accumulated amortization and
impairment
(1,249)
(740)
(340)
(1,414)
(133)
(2,163)
(6,039)
During 2020, there were no material change in estimates related to intangible assets other than the impairment described in Note
10 of US$731 (2019: US$57).
During 2020, VEON acquired intangible assets in the amount of US$56 (2019: US$49), which were not yet paid for as of year-
end.
GOODWILL
During the year, the movement in goodwill for the Group, per CGU, consisted of the following:
December 31,
2020
Impairment
Translation
adjustment
Addition
December 31,
2019
1,131
1,053
324
140
34
(723)
—
—
—
—
2,682
(723)
(424)
(114)
(11)
(14)
(4)
(567)
13
—
—
—
—
13
2,265
1,167
335
154
38
3,959
CGU
Russia
Algeria
Pakistan
Kazakhstan
Uzbekistan
Total
145
CGU
Russia
Algeria
Pakistan
Kazakhstan
Kyrgyzstan
Uzbekistan
Total
COMMITMENTS
December 31,
2019
Impairment
Translation
adjustment
December 31,
2018
2,265
1,167
335
154
—
38
3,959
—
—
—
—
(54)
—
(54)
247
(9)
(36)
1
—
(6)
2,018
1,176
371
153
54
44
197
3,816
Capital commitments for the future purchase of intangible assets are as follows as of December 31:
Less than 1 year
Between 1 and 5 years
Total commitments
ACCOUNTING POLICIES
2020
2019
31
—
31
77
5
82
Intangible assets acquired separately are carried at cost less accumulated amortization and impairment losses.
Intangible assets with a finite useful life are generally amortized with the straight-line method over the estimated useful life of the
intangible asset. The amortization period and the amortization method for intangible assets with finite useful lives are reviewed at
least annually and fall within the following ranges:
Class of intangible asset
Telecommunications licenses, frequencies
and permissions
Software
Brands and trademarks
Customer relationships
Other intangible assets
Useful life
3-20 years
3-10 years
3-15 years
10-21 years
4-10 years
Goodwill is recognized for the future economic benefits arising from net assets acquired that are not individually identified and
separately recognized. Goodwill is not amortized but is tested for impairment annually and as necessary when circumstances
indicate that the carrying value may be impaired, see Note 10 for further details.
SOURCE OF ESTIMATION UNCERTAINTY
Refer also to Note 11 for further details regarding source of estimation uncertainty.
Depreciation and amortization of non-current assets
Estimates in the evaluation of useful lives for intangible assets include, but are not limited to, the estimated average customer
relationship based on churn, the remaining license or concession period and the expected developments in technology and
markets.
The actual economic lives of intangible assets may be different than estimated useful lives, thereby resulting in a different
carrying value of intangible assets with finite lives. We continue to evaluate the amortization period for intangible assets with
finite lives to determine whether events or circumstances warrant revised amortization periods. A change in estimated useful
lives is a change in accounting estimate, and depreciation and amortization charges are adjusted prospectively.
146
13
INVESTMENTS IN SUBSIDIARIES
The Company held investments in material subsidiaries for the years ended December 31 as detailed in the table below. The
equity interest presented represents the economic rights available to the Company.
Name of significant subsidiary
VEON Amsterdam B.V.
VEON Holdings B.V.
PJSC VimpelCom
JSC “Kyivstar”
LLP “KaR-Tel”
LLC “Unitel”
LLC “VEON Georgia”
CJSC “VEON Armenia”
LLC “Sky Mobile”
VEON Luxembourg Holdings S.à r.l.
VEON Luxembourg Finance Holdings S.à r.l.
VEON Luxembourg Finance S.A.
Global Telecom Holding S.A.E
Omnium Telecom Algérie S.p.A.*
Optimum Telecom Algeria S.p.A.*
Pakistan Mobile Communications Limited
Country of
incorporation
Nature of
subsidiary
Netherlands
Netherlands
Russia
Ukraine
Holding
Holding
Operating
Operating
Kazakhstan
Operating
Uzbekistan
Georgia
Armenia
Kyrgyzstan
Luxembourg
Luxembourg
Luxembourg
Egypt
Algeria
Algeria
Pakistan
Operating
Operating
Operating
Operating
Holding
Holding
Holding
Holding
Holding
Operating
Operating
Equity interest held by the
Group
2020
2019
100.0 %
100.0 %
100.0 %
100.0 %
75.0 %
100.0 %
80.0 %
— %
50.1 %
100.0 %
100.0 %
100.0 %
99.6 %
45.4 %
45.4 %
85.0 %
100.0 %
100.0 %
100.0 %
100.0 %
75.0 %
100.0 %
80.0 %
100.0 %
50.1 %
100.0 %
100.0 %
100.0 %
99.5 %
45.4 %
45.4 %
85.0 %
Banglalink Digital Communications Limited
Bangladesh
Operating
100.0 %
100.0 %
* The Group has concluded that it controls Omnium Telecom Algérie S.p.A and Optimum Telecom Algeria S.p.A, see 'Significant accounting
judgments' below for further details.
The Company is subject to legal restrictions to distribute accumulated profits from Algeria by virtue of local shareholding
agreement (i.e. it is allowed only to distribute 42.5% of current year profit), and the rest is restricted
MATERIAL PARTLY-OWNED SUBSIDIARIES
Financial information of subsidiaries that have material non-controlling interests (“NCIs”) is provided below:
Name of significant subsidiary
2020
2019
2020
2019
2020
2019
Equity interest
held by NCIs
Book values of
material NCIs
Profit / (loss) attributable
to material NCIs
LLP “KaR-Tel” (“Kar-Tel”)
Omnium Telecom Algérie S.p.A. (“OTA”)
25.0 %
54.4 %
25.0 %
54.4 %
97
783
106
871
26
43
27
55
The summarized financial information of these subsidiaries before intercompany eliminations for the years ended December 31
are detailed below.
147
Summarized income statement
Operating revenue
Operating expenses
Other (expenses) / income
Profit / (loss) before tax
Income tax expense
Profit / (loss) for the year
Total comprehensive income / (loss)
Attributed to NCIs
Dividends paid to NCIs
Kar-Tel
2020
2019
446
(316)
4
134
(28)
106
106
26
—
461
(319)
(6)
136
(29)
107
107
27
—
2018
410
(319)
6
97
(20)
77
77
19
—
Summarized statement of financial position
Kar-Tel
2020
2019
Property and equipment
Intangible assets
Other non-current assets
Trade and other receivables
Cash and cash equivalents
Other current assets
Debt and derivatives
Provisions
Other liabilities
Total equity
Attributed to:
Equity holders of the parent
Non-controlling interests
276
94
162
21
37
31
(75)
(6)
(152)
388
291
97
OTA
2020
2019
689
(564)
(17)
108
(29)
79
79
43
46
271
86
185
18
39
12
(63)
(6)
(119)
775
(621)
(17)
137
(36)
101
101
55
69
OTA
2020
492
116
1,071
31
67
50
(102)
(23)
(267)
2018
813
(754)
(11)
48
(47)
1
1
1
76
2019
600
158
1,187
34
67
42
(134)
(22)
(334)
423
1,435
1,598
317
106
652
783
727
871
Summarized statement of cash flows
Net operating cash flows
Net investing cash flows
Net financing cash flows
Net foreign exchange difference
Net increase / (decrease) in cash
equivalents
Kar-Tel
OTA
2020
184
(88)
(97)
(2)
(3)
2019
199
(84)
(104)
—
11
2018
148
(42)
(90)
(3)
13
2020
211
(102)
(103)
(5)
1
2019
305
(84)
(205)
(1)
15
2018
245
(118)
(193)
(5)
(71)
148
SIGNIFICANT ACCOUNTING JUDGMENTS
Control over subsidiaries
Subsidiaries, which are those entities over which the Company is deemed to have control, are consolidated. In certain
circumstances, significant judgment is required to assess if the Company is deemed to have control over entities where the
Company’s ownership interest does not exceed 50%. The Group has concluded that it controls Omnium Telecom Algérie S.p.A
and Optimum Telecom Algeria S.p.A even though its subsidiary, Global Telecom Holding S.A.E. owned less than 50% of the
ordinary shares. This is because the Company can exercise operational control through terms of a shareholders’ agreement. Our
partner in Algeria can acquire our shares at fair market value under call option arrangements exercisable solely at its discretion
between October 1, 2021 and December 31, 2021. Concurrently, we have a right to require our partner in Algeria to acquire our
shares under put option arrangements exercisable solely at our discretion between July 1, 2021 and September 30, 2021. Both
option arrangements did not have any impact on our ability to consolidate Omnium Telecom Algérie S.p.A and Optimum Telecom
Algeria S.p.A.
149
FINANCING ACTIVITIES OF THE GROUP
14 OTHER NON-OPERATING GAIN / (LOSS)
Other non-operating gains / (losses) consisted of the following for the years ended December 31:
Ineffective portion of hedging activities *
Change of fair value of other derivatives
Gain /(loss) from money market funds *
Loss from early debt redemption
Other gains / (losses)
Other non-operating gain / (loss), net
2020
2019
2018
15
6
12
—
78
111
20
(17)
21
—
(3)
21
8
(58)
—
(30)
12
(68)
* Prior year comparatives have been re-presented to conform with current year presentation.
Included in ‘Other gains / (losses)' in 2020 is a gain of US$41 relating to the revaluation of contingent consideration liability, as
well as a gain of US$41 relating to the settlement in connection with the dispute concerning the sale of Telecel Globe Limited.
For further details, refer to Note 15 and Note 7, respectively.
150
15
INVESTMENTS, DEBT AND DERIVATIVES
INVESTMENTS AND DERIVATIVE ASSETS
The Company holds the following investments and derivatives as of December 31:
At fair value
Derivatives not designated as hedges
Derivatives designated as net investment hedges
Investments in debt instruments *
Other
At amortized cost
Security deposits and cash collateral
Other investments
Total investments and derivatives
Non-current
Current
Carrying value
2020
2019
20
3
75
8
106
325
39
364
470
305
165
11
—
34
—
45
256
16
272
317
235
82
* Investments in debt instruments relate to government bonds or bills and are measured at fair value through other comprehensive income (with recycling).
Security deposits
The ex-Warid license renewal was due in May 2019. Pursuant to directions from the Islamabad High Court, the Pakistan
Telecommunication Authority (“PTA”) issued a license renewal decision on July 22, 2019 requiring payment of US$40 per MHz
for 900 MHz spectrum and US$30 per MHz for 1800 MHz spectrum, equating to an aggregate price of approximately US$450
(excluding applicable taxes of approximately 13%). On August 17, 2019, Jazz appealed the PTA’s order to the Islamabad High
Court. On August 21, 2019, the Islamabad High Court suspended the PTA’s order pending the outcome of the appeal and subject
to Jazz making payment in the form of security (under protest) as per the options given in the PTA’s order.
In September 2019, Jazz deposited approximately US$225 in order to maintain its appeal in the Islamabad High Court regarding
the PTA's underlying decision on the license renewal. There were no specific terms and conditions attached to the deposit. The
deposit is recorded as a non-current financial asset in the statement of financial position.
In May, 2020 a further US$57 was paid under protest, presented within 'Receipts from / (payment on) deposits' in the statement
of cash flows. The most recent hearing on this matter was concluded before the Islamabad High Court on March 1, 2021 and a
judgment is now pending.
151
DEBT AND DERIVATIVES
The Company holds the following outstanding debt and derivatives as of December 31:
At fair value
Derivatives not designated as hedges
Derivatives designated as net investment hedges
Contingent consideration
At amortized cost
Principal amount outstanding
Interest accrued
Discounts, unamortized fees, hedge basis adjustment
Bank loans and bonds
Lease liabilities
Put-option liability over non-controlling interest
Other financial liabilities
Total debt and derivatives
Non-current
Current
Bank loans and bonds
Carrying value
2020
2019
52
1
—
53
52
161
41
254
7,678
7,519
85
(5)
7,758
1,912
273
60
10,003
10,056
8,832
1,224
79
(10)
7,588
2,083
342
77
10,090
10,344
7,759
2,585
The Company had the following principal amounts outstanding for interest-bearing loans and bonds at December 31:
Borrower
Type of debt
Guarantor
Currency
Interest rate
Maturity
2020
2019
Principal amount
outstanding
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
GTH Finance B.V.
PJSC VimpelCom, via VIP
Finance Ireland
PMCL
PMCL
PMCL
PMCL
PMCL
Banglalink
Banglalink
PJSC Kyivstar
PJSC Kyivstar
Loans
Loans
Loans
Notes
Notes
Notes
Notes
Notes
Notes
Notes
Notes
Eurobonds
Loans
Loans
Loan
Loan
Loan
Loan
Loans
Loans
Loans
None
None
None
None
None
PJSC
VimpelCom
None
None
None
None
VEON Holdings
None
None
None
EKN *
None
None
None
None
None
None
Other bank loans and bonds
Total bank loans and bonds
* Exportkreditnämnden (The Swedish Export Credit Agency)
RUB
RUB
RUB
US$
US$
US$
US$
US$
RUB
US$
US$
US$
PKR
PKR
US$
PKR
PKR
US$
BDT
8.75% to 10.0%
7.35% to 7.50%
CBR Key Rate + 1.85% to
2.20%
5.95%
3.95% to 4.95%
7.50%
3.38%
7.25%
6.30% to 6.50 %
4.00%
2022
2024-2025
2023-2025
2023
2024
2022
2027
2023
2025
2025
6.25% to 7.25%
2020-2023
7.75 %
6mKIBOR + 0.35%
6mKIBOR + 0.8%
6mLIBOR + 1.9%
6mKIBOR + 0.55%
6mKIBOR
3mLIBOR + 2.50%
2021
2022
2020
2020
2026
2023
2020
Average bank deposit rate
+ 3.0% to 4.25%
2021-2022
UAH
NBU Key rate + 3.00%
2021-2023
UAH
10.15% to 11.00%
2023-2025
152
—
2,303
812
1,083
529
533
417
1,250
700
406
—
—
529
1,133
417
—
—
—
1,000
700
—
262
111
—
—
273
29
—
80
56
85
52
1,200
262
192
34
75
121
41
300
116
—
—
96
7,678
7,519
SIGNIFICANT CHANGES IN DEBT AND DERIVATIVES
Reconciliation of cash flows from financing activities
Balance as of January 1, 2019
Cash flows
Proceeds from borrowings, net of fees paid
Repayment of debt
Interest paid
Non-cash movements
Interest and fee accruals
Lease additions, disposals, impairment and modifications
Foreign currency translation
Other non-cash movements
Balance as of December 31, 2019
Cash flows
Proceeds from borrowings, net of fees paid
Repayment of debt
Interest paid
Non-cash movements
Interest and fee accruals
Lease additions, disposals, impairment and modifications
Foreign currency translation
Other non-cash movements
Balance as of December 31, 2020
FINANCING ACTIVITIES IN 2020
Bank loans and
bonds Lease liabilities
7,366
1,999
2,610
(2,612)
(566)
599
—
193
(2)
—
(366)
(148)
178
262
158
—
Total
9,365
2,610
(2,978)
(714)
777
262
351
(2)
7,588
2,083
9,671
4,621
(4,054)
(494)
546
—
(398)
(51)
—
(322)
(150)
156
432
(286)
—
4,621
(4,376)
(644)
702
432
(684)
(51)
7,758
1,913
9,671
Optional early redemption of US$600 million 3.95% Senior notes due June 2021
In December 2020, VEON Holdings B.V. completed optional early redemption of all of its outstanding US$600 million 3.95%
Senior Notes due June 2021, pursuant to Condition 5.3 of the 2021 Notes. The Notes were redeemed in full at a redemption
price equal to 101.00% of the principal amount thereof, plus accrued and unpaid interest and additional amounts due thereon.
Financing activities in Ukraine
In December 2020, VEON's operating company in Ukraine, Kyivstar, signed three bilateral unsecured loan agreements with
Raiffeisen Bank Aval Joint Stock Company (“Raiffeisen”), Joint Stock Company Alfa-Bank (“Alfa-Bank”) and Joint Stock
Company OTP Bank (“OTP”), for an aggregate amount of UAH4.1 billion (US$146). The loan agreement with Raiffeisen has a
5-year term with a fixed interest rate of 11.00% and the loan agreements with Alfa-Bank and OTP each have a 3-year term with a
floating rate equal to NBU Key Rate + 3.00% and a fixed interest rate of 10.15% respectively.
Exercise of 15% PMCL put option
In September 2020, the Dhabi Group exercised its put option to sell us its 15% shareholding in PMCL, the Company’s subsidiary
in Pakistan. VEON updated the fair value of its put option liability following the completion of an independent valuation process
which determined a fair value for the shareholding of US$273, resulting in a gain of US$59 recorded in ‘Finance costs’ within the
Consolidated Income Statement. Completion of the transfer remains subject to the conclusion of the contractual transfer
mechanics with the Dhabi Group. Once the transaction is completed, VEON will indirectly own 100% of PMCL.
Global Medium Term Note program
In April 2020, VEON Holdings B.V. established a Global Medium Term Note program for the issuance of bonds (the "MTN
Program"), with a program limit of US$6,500, or the equivalent thereof in other currencies. In June, September and November
2020, VEON Holdings B.V. issued senior unsecured notes of RUB20 billion (US$288), RUB10 billion (US$135) and
US$1.25 billion, respectively, under the MTN Program, maturing in June 2025, September 2025 and November 2027.
153
Refinancing of loan agreement with VTB
In July 2020, VEON Holdings B.V. successfully refinanced its existing RUB30 billion (US$422), bilateral term loan agreement
with VTB Bank. This refinancing extended the final maturity of the existing loan between VTB Bank and VEON Holdings B.V. to
July 2025 and amended the interest cost from a fixed rate of 8.75% to floating rate equal to CBR Key Rate + 1.85 p.p.
Refinancing of loan agreement with Sberbank
In June 2020, VEON Holdings B.V. entered into a new RUB bilateral term loan agreement with Sberbank. The agreement
comprises four facilities for a total amount of RUB100 billion (US$1,450) with final maturity dates ranging between two and four
years. Shortly after the agreement was signed, VEON Holdings B.V. fully utilized three facilities for a total amount of
RUB87.5 billion (US$1,281) and used the proceeds to prepay all outstanding amounts under the Sberbank term facilities
agreement signed in May 2017.
In July 2020, VEON drew down the remaining RUB12.5 billion available under the facility agreement. Subsequently, in
September 2020, VEON repaid one of the facilities of RUB20 billion, originally maturing in June 2022, in full with no fees. The
repaid facility cannot be re-borrowed.
Contingent consideration
In 2015, International Wireless Communications Pakistan Limited and Pakistan Mobile Communications Ltd (“PMCL”), each
indirect subsidiaries of the Company, signed an agreement with Warid Telecom Pakistan LLC and Bank Alfalah Limited, to
combine their operations in Pakistan. In July 2016, the transaction was closed and PMCL acquired 100% of the voting shares in
Warid Telecom (Pvt) Limited (“Warid”) for a consideration of 15% of the shares in PMCL. As a result, VEON gained control over
Warid.
As part of the share purchase agreement, an earn-out payment was agreed in the event that a tower transaction is effected by
PMCL within four years from the acquisition date. The earn-out would also apply if another telecommunications operator in
Pakistan effects a tower transaction, provided the transaction meets certain parameters, in the same timeframe. The contingent
consideration would be settled with a transfer of PMCL shares.
As of June 2020, the probability of completion of a tower deal in Pakistan prior to the relevant deadline, upon which contingent
consideration would be paid, became remote. As a result, the fair value of Contingent consideration was revised downwards to
zero, with a corresponding gain of US$41 recognized in the consolidated income statement.
Extension and extinguishment of Banglalink syndicated loan
In April 2020, Banglalink Digital Communications Limited, a wholly-owned subsidiary, extended the maturity of its US$300
syndicated loan by an additional two years to 2022. Following this extension, VEON Digital Amsterdam B.V., the Company's
wholly-owned subsidiary, acquired the loan from the original lenders, leading to extinguishment of this financial liability within
VEON's consolidated financial statements. No material transactional costs were incurred.
Drawdowns under the Revolving Credit Facility
In March 2020, VEON Holdings B.V., the Company's wholly-owned subsidiary, executed two drawdowns under its existing
revolving credit facility for an aggregate amount of US$600. Although these drawdowns are short-term in nature, VEON Holdings
B.V. has an enforceable right to roll them over until final maturity date of the facility in February 2022. All outstanding drawdowns
under this facility have been fully repaid during June 2020 (US$100) and July 2020 (US$500). In March 2021, VEON entered into
a new multi-currency revolving credit facility agreement, refer to Note 22 for further details.
Refinancing of RUB debt - AO "Alfa-Bank"
In March 2020, VEON Holdings B.V. amended and restated the existing facility with AO "Alfa-Bank", increasing its size and
utilization from RUB17.5 billion to RUB30 billion (US$165). Following this amendment and restatement, the final maturity of this
facility has been set to March 2025.
GTH bonds prepayment
In February 2020, GTH Finance B.V., the Company’s subsidiary, repaid at par the US$500 6.25% bonds, originally maturing
April, 2020.
US$300 tap issuance of existing senior notes
In January 2020, VEON Holdings B.V., issued US$300 in senior unsecured notes due 2025, which are consolidated and form a
single series with the US$700 4.00% senior notes due in 2025 issued by VEON Holdings B.V. in October 2019. VEON used the
net proceeds of the tap issuance to refinance certain existing outstanding debt.
154
155
FINANCING ACTIVITIES IN 2019
VEON Holdings BV new notes
In October 2019, VEON Holdings issued US$700 4.00% senior unsecured notes due 2025. The net proceeds of the notes issued
have been used primarily to refinance drawings on the revolving credit facility used to fund the MTO for GTH.
Pakistan Mobile Communications Limited new bilateral term facility
In June 2019, PMCL entered into a bilateral secured PKR 14,369 million (approximately US$92) term facility with a local bank.
The facility has a tenor of 7 years and bears interest at 6-month KIBOR increased by a margin of 0.75% per annum. The security
is based on terms comparable with PMCL's existing debt.
Pakistan Mobile Communications Limited new syndicated term facility and Islamic facility
In June 2019, PMCL entered into a secured syndicated term facility and an Islamic financing facility for a joint amount of up to
PKR 45,000 million (approximately US$287) and a period of up to 7 years. The cost of both facilities corresponds to 6-month
KIBOR increased by a margin of 0.75% per annum. The security is based on terms comparable with PMCL's existing debt.
Banglalink Digital Communications Limited new syndicated term facility agreement
In April 2019, Banglalink entered into a new US$300 syndicated term facility agreement with several international banks. The
facility is guaranteed by VEON Holdings for nil consideration. The facility has a tenor of 12 months with extension options for
another 24 months upon agreement with the lenders, and was used to refinance the principal amount of Banglalink’s US$300
bond that matured in May 2019.
FAIR VALUES
As of December 31, 2020, the carrying amounts of all financial assets and liabilities are equal to or approximate their respective
fair values as shown in the table at the beginning of this note, with the exception of:
• 'Bank loans and bonds, including interest accrued', for which fair value is equal to US$8,031 (2019: US$7,887); and
• 'Lease liabilities', for which fair value has not been determined.
As of December 31, 2020 and December 31, 2019, all of the Group's financial instruments carried at fair value in the statement
of financial position were measured based on Level 2 inputs, except for the Contingent consideration, for which fair value is
classified as Level 3.
All movements in Contingent consideration in the years ended December 31, 2020 and 2019 relate to changes in fair value,
which are unrealized, and are recorded in “Other non-operating gain / (loss)” within the consolidated income statement.
Fair values are estimated based on quoted market prices for our bonds, derived from market prices or by discounting contractual
cash flows at the rate applicable for the instruments with similar maturity and risk profile. Observable inputs (Level 2) used in
valuation techniques include interbank interest rates, bond yields, swap curves, basis swap spreads, foreign exchange rates and
credit default spreads.
On a quarterly basis, the Company reviews if there are any indicators for a possible transfer between fair value hierarchy levels.
This depends on how the Company is able to obtain the underlying input parameters when assessing the fair valuations.
During the years ended December 31, 2020 and 2019, there were no transfers between Level 1, Level 2 and Level 3 fair value
measurements.
HEDGE ACCOUNTING
The following table sets out the Company’s hedging instruments designated as net investment hedges as of December 31:
Hedging instruments*
Designated
rate
Excluded
component
Hedged
item
Currency
Aggregated designated nominal
value of hedged items, million
2020
2019
Foreign currency forward
contracts
Forward
foreign
currency basis
spread
PJSC
VimpelCom
RUB
26,758 **
88,220 **
* Refer to the Debt and Derivatives section above in this Note for information regarding the carrying amounts of the hedging instruments.
** Hedging instruments have a weighted average term to maturity of 1 year as of December 31, 2020 (2019: 1 year ).
156
There is an economic relationship between the hedged net investments and the hedging instruments due to the translation risk
inherent in the hedged items that matches the foreign exchange risk of the hedging instruments. The hedge ratio for each of the
above relationships was set at 1:1 as the underlying risk of the hedging instruments is identical to the hedged risk and the
nominal value of hedging instruments has not exceeded the amounts of respective net investments. Hedge ineffectiveness might
arise from:
•
•
the value of a net investment falling below the related designated nominal value of the hedging instrument, or
counterparties’ credit risk impacting the hedging instrument but not the hedged net investment.
During the periods covered by these consolidated financial statements, the amount of ineffectiveness was immaterial.
During 2020, the fair values of the Company’s derivatives designated as net investment hedges increased due to depreciation of
the Russian ruble, resulting in a US$178gain recorded against the foreign currency translation reserve. This gain partially offset
the translation loss related to our foreign operations described in Note 1.
Impact of hedge accounting on equity
The below table sets out the reconciliation of each component of equity and the analysis of other comprehensive income (all of
which are attributable to the equity owners of the parent):
As of January 1, 2019
Foreign currency revaluation of the foreign operations and other
Effective portion of foreign currency revaluation of the hedging instruments *
Change in fair value of foreign currency basis spreads
Amortization of time-period related foreign currency basis spreads
As of December 31, 2019
Foreign currency revaluation of the foreign operations
Effective portion of foreign currency revaluation of the hedging instruments *
Change in fair value of foreign currency basis spreads
Amortization of time-period related foreign currency basis spreads
Other movements in foreign currency translation reserve
As of December 31, 2020
Foreign currency
translation reserve
Cost of hedging
reserve **
(8,416)
332
(228)
—
—
(8,312)
(615)
178
—
—
(26)
(8,775)
5
—
—
23
(19)
9
—
—
7
(15)
—
1
* Amounts represent the changes in fair value of the hedging instruments and closely approximate the changes in value of the hedged items used to
recognize hedge ineffectiveness.
** Movements in the cost of hedging reserve are included within "Other" in respective section of statement of other comprehensive income.
157
ACCOUNTING POLICIES AND SOURCES OF ESTIMATION UNCERTAINTY
Put options over non-controlling interest
Put options over non-controlling interest of a subsidiary are accounted for as financial liabilities in the Company’s consolidated
financial statements. The put-option redemption liability is measured at the discounted redemption amount. Interest over the put-
option redemption liability will accrue in line with the effective interest rate method, until the options have been exercised or are
expired.
Derivative contracts
VEON enters into derivative contracts, including swaps and forward contracts, to manage certain foreign currency and interest
rate exposures. Any derivative instruments for which no hedge accounting is applied are recorded at fair value with any fair value
changes recognized directly in profit or loss. Although some of the derivatives entered into by the Company have not been
designated in hedge accounting relationships, they act as economic hedges and offset the underlying transactions when they
occur.
Hedges of a net investment
The Company applies net investment hedge accounting to mitigate foreign currency translation risk related to the Company’s
investments in foreign operations. The portion of the gain or loss on the hedging instrument that is determined to be an effective
hedge is recognized in other comprehensive income within the “Foreign currency translation” line item. Where the hedging
instrument’s foreign currency retranslation is greater (in absolute terms) than that of the hedged item, the excess amount is
recorded in profit or loss as ineffectiveness. The gain or loss on the hedging instrument relating to the effective portion of the
hedge that has been recognized in other comprehensive income shall be reclassified from equity to profit or loss as a
reclassification adjustment on the disposal or partial disposal of the foreign operation. Cash flows arising from derivative
instruments for which hedge accounting is applied are reported in the statement of cash flows within the line item where the
underlying cash flows of the hedged item are recorded.
Fair value of financial instruments
All financial assets and liabilities are measured at amortized cost, except those which are measured at fair value as presented
within this Note.
Where the fair value of financial assets and liabilities recorded in the statement of financial position cannot be derived from active
markets, their fair value is determined using valuation techniques, including discounted cash flows models. The inputs to these
models are taken from observable markets, but when this is not possible, a degree of judgment is required in establishing fair
values. The judgments include considerations regarding inputs such as liquidity risk, credit risk and volatility. Changes in
assumptions about these factors could affect the reported fair value of financial instruments.
Measurement of lease liabilities
Lease liabilities are measured upon initial recognition at the present value of the future lease and related fixed services payments
over the lease term, discounted with the country specific incremental borrowing rate as the rate implicit in the lease is generally
not available. Subsequently lease liabilities are measured at amortized cost using the effective interest rate method.
A significant portion of the lease contracts included within Company’s lease portfolio includes lease contracts which are
extendable through mutual agreement between VEON and the lessor, or lease contracts which are cancellable by the Company
immediately or on short notice. The Company includes these cancellable future lease periods within the assessed lease term,
which increases the future lease payments used in determining the lease liability upon initial recognition.
The Company continuously assesses whether a revision of lease terms is required due to a change in management judgment
regarding, for example, the exercise of extension and/or termination options. VEON's determination of the lease term is based on
facts and circumstances related to the underlying leased asset and lease contracts.
158
16 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other
purposes. Cash and cash equivalents are comprised of cash at bank and on hand and highly liquid investments that are readily
convertible to known amounts of cash, are subject to only an insignificant risk of changes in value and have an original maturity
of less than three months.
Cash and cash equivalents consisted of the following items as of December 31:
Cash and cash equivalents at banks and on hand
Cash equivalents with original maturity of less than three months
Cash and cash equivalents
Less overdrafts
2020
694
900
1,594
(8)
2019
932
318
1,250
(46)
Cash and cash equivalents, net of overdrafts, as presented in the consolidated statement of cash
flows
1,586
1,204
Cash at bank earns interest at floating rates based on bank deposit rates. Short-term deposits are made for varying periods of
between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the
respective short-term deposit rates.
The imposition of currency exchange controls or other similar restrictions on currency convertibility in the countries in which
VEON operates could limit VEON’s ability to convert local currencies or repatriate local cash in a timely manner or at all, as well
as remit dividends from the respective countries. As of December 31, 2020, there were no restricted cash and cash equivalent
balances (2019: nil).
Cash balances include investments in money market funds of US$543 (2019: US$155), which are carried at fair value through
profit or loss with gains presented within ‘Other non-operating gain / (loss)’ within the consolidated income statement.
As of December 31, 2020, some bank accounts forming part of a cash pooling program and being an integral part of the
Company’s cash management remained overdrawn by US$8 (2019: US$46). Even though the total balance of the cash pool
remained positive, the Company has no legally enforceable right of set-off and therefore the overdrawn accounts are presented
as debt and derivatives within the statement of financial position. At the same time, because the overdrawn accounts are an
integral part of the Company’s cash management, they were included as cash and cash equivalents within the statement of cash
flows.
159
17
FINANCIAL RISK MANAGEMENT
The Group’s principal financial liabilities consist of loans and borrowings and trade and other payables. The main purpose of
these financial liabilities is to finance the Group’s operations. The Group has trade and other receivables, cash and short-term
deposits that are derived directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk. The Company’s Board of Directors manages these risks with
support of the treasury function, who proposes the appropriate financial risk governance framework for the Group, identifies and
measures financial risks and suggests mitigating actions. The Company’s Board of Directors, supported by its Finance
Committee, approves the financial risk management framework and oversees its enforcement.
INTEREST RATE RISK
The Company is exposed to the risk of changes in market interest rates primarily due to the its long-term debt obligations. The
Company manages its interest rate risk exposure through a portfolio of fixed and variable rate borrowings and hedging activities.
As of December 31, 2020, approximately 79% of the Company’s borrowings are at a fixed rate of interest (2019: 91%).
The Group is exposed to possible changes in interest rates on variable interest loans and borrowings, partially mitigated through
related derivative financial instruments, cash and cash equivalents and current deposits. With all other variables held constant,
the Company’s profit before tax is affected through changes in the floating rate of borrowings while the Company’s equity is
affected through the impact of a parallel shift of the yield curve on the fair value of hedging derivatives. An increase or decrease
of 100 basis points in interest rates would have an immaterial impact on the Company’s income statement and other
comprehensive income.
FOREIGN CURRENCY RISK
The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the debt denominated in currencies
other than the functional currency of the relevant entity, the Company’s operating activities (predominantly capital expenditures at
subsidiary level denominated in a different currency from the subsidiary’s functional currency) and the Company’s net
investments in foreign subsidiaries.
The Company manages its foreign currency risk by selectively hedging committed exposures.
The Company hedges part of its exposure to fluctuations on the translation into U.S. dollars of its foreign operations by holding
the borrowings in foreign currencies or by foreign exchange swaps and forwards. During the periods covered by these financial
statements, the Company used foreign exchange forwards to mitigate foreign currency translation risk related to the Company’s
net investment in PJSC VimpelCom.
160
Foreign currency sensitivity
The following table demonstrates the sensitivity to a possible change in exchange rates against the US dollar with all other
variables held constant. Additional sensitivity changes to the indicated currencies are expected to be approximately
proportionate. The table shows the effect on the Company’s profit before tax (due to changes in the value of monetary assets
and liabilities, including foreign currency derivatives) and equity (due to application of hedge accounting or existence of quasi
equity loans). The Company’s exposure to foreign currency changes for all other currencies is not material.
Change in foreign exchange rate against US$
Effect on profit / (loss)
before tax
Effect on other
comprehensive income
10%
depreciation
10%
appreciation
10%
depreciation
10%
appreciation
2020
Russian Ruble
Bangladeshi Taka
Pakistani Rupee
Georgian Lari
Other currencies (net)
2019
Russian Ruble
Bangladeshi Taka
Pakistani Rupee
Georgian Lari
Other currencies (net)
35
(30)
(4)
(36)
8
(9)
(27)
(10)
(36)
(4)
(39)
33
4
40
(9)
11
30
11
39
5
32
—
—
—
4
119
—
—
—
—
(39)
—
—
—
(4)
(145)
—
—
—
—
161
CREDIT RISK
The Company is exposed to credit risk from its operating activities (primarily from trade receivables), and from its treasury
activities, including deposits with banks and financial institutions, derivative financial instruments and other financial instruments.
See Note 16 for further information on restrictions on cash balances.
Trade receivables consist of amounts due from customers for airtime usage and amounts due from dealers and customers for
equipment sales. VEON’s credit risk arising from the services the Company provides to customers is mitigated to a large extent
due to the majority of its active customers being subscribed to a prepaid service as of December 31, 2020 and 2019, and
accordingly not giving rise to credit risk. For postpaid services, in certain circumstances, VEON requires deposits as collateral for
airtime usage. Equipment sales are typically paid in advance of delivery, except for equipment sold to dealers on credit terms.
VEON’s credit risk arising from its trade receivables from dealers is mitigated due to the risk being spread across a large number
of dealers. Management periodically reviews the history of payments and credit worthiness of the dealers. The Company also
has receivables from other local and international operators from interconnect and roaming services provided to their customers,
as well as receivables from customers using fixed-line services, such as business services, wholesale services and services to
residents. Receivables from other operators for roaming services are settled through clearing houses, which helps to mitigate
credit risk in this regard.
VEON holds available cash in bank accounts, as well as other financial assets with financial institutions in countries where it
operates. To manage credit risk associated with such asset holdings, VEON allocates its available cash to a variety of local
banks and local affiliates of international banks within the limits set forth by its treasury policy. Management periodically reviews
the creditworthiness of the banks with which it holds assets. In respect of financial instruments used by the Company’s treasury
function, the aggregate credit risk the Group may have with one counterparty is managed by reference to, amongst others, the
long-term credit ratings assigned for that counterparty by Moody’s, Fitch Ratings and Standard & Poor’s and CDS spreads of that
counterparty. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential
counterparty’s failure.
Value Added Tax (“VAT”) is recoverable from tax authorities by offsetting it against VAT payable to the tax authorities on VEON’s
revenue or direct cash receipts from the tax authorities. Management periodically reviews the recoverability of the balance of
input value added tax and believes it is fully recoverable.
VEON issues advances to a variety of its vendors of property and equipment for its network development. The contractual
arrangements with the most significant vendors provide for equipment financing in respect of certain deliveries of equipment.
VEON periodically reviews the financial position of vendors and their compliance with the contract terms.
The Company’s maximum exposure to credit risk for the components of the statement of financial position at December 31, 2020
and 2019 is the carrying amount as illustrated in Note 5, Note 15, Note 16 and within this Note 17.
162
LIQUIDITY RISK
The Company monitors its risk to a shortage of funds using a recurring liquidity planning tool. The Company’s objective is to
maintain a balance between continuity of funding and flexibility through the use of bonds, bank overdrafts, bank loans and lease
contracts. The Company’s policy is to create a balanced debt maturity profile. As of December 31, 2020, 5% of the Company’s
debt (2019: 21%) will mature in less than one year based on the carrying value of bank loans, bonds and other borrowings
reflected in the financial statements. The Company assessed the concentration of risk with respect to refinancing its debt and
concluded it to be low based on liquidity in the markets the Company has access to, and recent history of refinancing. The
Company believes that access to sources of funding is sufficiently available and the Company’s policy is to diversify the funding
sources where possible.
Available facilities
The Company had the following available facilities as of December 31:
Amounts in millions of transactional currency
US$ equivalent amounts
Final
availability
period
Facility
amount
Utilized
Available
Facility
amount
Utilized
Available
2020
VEON Holdings B.V. – Revolving
Credit Facility *
PMCL - Term Facility
Feb 2022
US$1,585 *
—
US$1,585
1,585
Kartel - Term Facility
Nov 2023
KZT 10,000
KZT 5,000
KZT 5,000
Sep 2021
PKR 14,369
PKR 9,999
PKR 4,370
—
62
12
1,585
28
12
90
24
* Facility amount of US$1,586 is available until February 2021. Subsequently, a reduced facility amount of US$1,382 is available until February 2022. In March 2021,
VEON entered into a new multi-currency revolving credit facility agreement, refer to Note 22 for further details.
Amounts in millions of transactional currency
US$ equivalent amounts
Final
availability
period
Facility
amount
Utilized
Available
Facility
amount
Utilized
Available
Feb 2022
US$1,688
—
US$1,688
1,688
—
1,688
2019
VEON Holdings B.V. – Revolving
Credit Facility *
PMCL - Syndicated Term Facility
and Islamic Finance Facility
PMCL - Term Facility
Sep 2020
PKR 14,369
PKR 2,963
PKR 11,406
Mar 2020
PKR 45,000
PKR 15,885
PKR 29,115
291
93
103
19
188
74
* Facility amount of US$1,688 is available until February 2020. Subsequently a reduced facility amount of US$1,586 is available until February 2021. In March 2021,
VEON entered into a new multi-currency revolving credit facility agreement, refer to Note 22 for further details.
163
Maturity profile
The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.
Payments related to variable interest rate financial liabilities and derivatives are included based on the interest rates and foreign
currency exchange rates applicable as of December 31, 2020 and 2019, respectively. The total amounts in the table differ from
the carrying amounts as stated in Note 15 as the below table includes both undiscounted principal amounts and interest while
the carrying amounts are measured using the effective interest rate method.
As of December 31, 2020
Bank loans and bonds
Lease liabilities
Derivative financial liabilities
Gross cash inflows
Gross cash outflows
Trade and other payables
Other financial liabilities
Warid non-controlling interest put option liability
Less than 1
year
1-3 years
3-5 years
More than 5
years
Total
842
525
3,803
896
3,123
639
1,408
239
(228)
237
1,977
—
273
—
—
—
60
—
—
—
—
—
—
—
—
—
—
—
9,176
2,299
(228)
237
1,977
60
273
Total financial liabilities
3,626
4,759
3,762
1,647
13,794
Related derivatives financial assets
Gross cash inflows
Gross cash outflows
Related derivative financial assets
152
(149)
3
—
—
—
—
—
—
—
—
—
152
(149)
3
Total financial liabilities, net of derivative assets
3,629
4,759
3,762
1,647
13,797
As of December 31, 2019
Bank loans and bonds
Lease liabilities
Derivative financial liabilities
Gross cash inflows
Gross cash outflows
Trade and other payables *
Other financial liabilities
Warid non-controlling interest put option liability
Less than 1
year
1-3
years
3-5 years
More than 5
years
2,100
581
(1,150)
1,311
1,847
41
342
3,909
920
2,009
728
(378)
483
—
77
—
—
—
—
—
—
794
420
—
—
—
—
—
Total
8,812
2,649
(1,528)
1,794
1,847
118
342
Total financial liabilities
5,072
5,011
2,737
1,214
14,034
Related derivatives financial assets
Gross cash inflows
Gross cash outflows
Related derivative financial assets
(273)
262
(11)
—
—
—
—
—
—
—
—
—
(273)
262
(11)
Total financial liabilities, net of derivative assets
5,061
5,011
2,737
1,214
14,023
164
CAPITAL MANAGEMENT
The primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios, so as to secure
access to debt and capital markets at all times and maximize shareholder value. The Company manages its capital structure and
makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may
adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. Current credit ratings of the
Company support its capital structure objectives. Since 2019, VEON’s dividend policy targets paying at least 50% of prior year
Equity Free Cash Flow after licenses. There were no changes made in the Company’s objectives, policies or processes for
managing capital during 2020.
The Net Debt to Adjusted EBITDA ratio is an important measure used by the Company to assess its capital structure. Net Debt
represents the principal amount of interest-bearing debt less cash and cash equivalents and bank deposits. Adjusted EBITDA is
defined as last twelve months earnings before interest, tax, depreciation, amortization and impairment, loss on disposals of non-
current assets, other non-operating losses and share of profit / (loss) of joint ventures. For reconciliation of ‘Profit / (loss) before
tax from continuing operations’ to ‘Adjusted EBITDA,’ refer to Note 2. VEON's internal target is to keep Net Debt to Adjusted
EBITDA at around 2.0x on the basis of the so called "GAAP freeze" principle, i.e. under the IAS 17 framework, which is
equivalent to 2.4x on the post-IFRS 16 basis.
Further, this ratio is included as a financial covenant in the credit facilities of the Company. For most of our credit facilities the Net
Debt to Adjusted EBITDA ratio is calculated at consolidated level of VEON Ltd. and is “pro-forma” adjusted for acquisitions and
divestments of any business bought or sold during the relevant period. Under these credit facilities, the Company is required to
maintain the Net Debt to Adjusted EBITDA ratio below 3.5x (on the basis of the so called "GAAP freeze" principle). The Company
has not breached any financial covenants during the period covered by these financial statements.
165
18
ISSUED CAPITAL AND RESERVES
The following table details the common shares of the Company as of December 31:
Authorized common shares (nominal value of US$0.001 per share)
1,849,190,667
1,849,190,667
Issued shares, including 7,603,731 shares held by a subsidiary of the Company
1,756,731,135
1,756,731,135
The holders of common shares are, subject to our by-laws and Bermuda law, generally entitled to enjoy all the rights attaching to
common shares. All issued shares are fully paid-up.
As of December 31, 2020, the Company’s largest shareholders and remaining free float are as follows:
2020
2019
Shareholder
L1T VIP Holdings S.à r.l. (“LetterOne”)
Stichting Administratiekantoor Mobile Telecommunications Investor *
Free Float, including 7,603,731 shares held by a subsidiary of the Company
Total outstanding common shares
Common
shares
840,625,001
145,947,562
770,158,572
1,756,731,135
common and
voting
shares
47.9 %
8.3 %
43.8 %
100.0 %
* LetterOne is the holder of the depositary receipts issued by Stichting and is therefore entitled to the economic benefits (dividend payments, other
distributions and sale proceeds) of such depositary receipts and, indirectly, of the 145,947,562 common shares represented by the depositary receipts. According to
the conditions of administration entered into between Stichting and LetterOne (“Conditions of Administration”) in connection with the transfer of 145,947,562 ADSs
from LetterOne to Stichting on March 29, 2016, Stichting has the power to vote and direct the voting of, and the power to dispose and direct the disposition of, the
ADSs, in its sole discretion, in accordance with the Conditions of Administration and Stichting’s articles of association.
Nature and purpose of reserves
Other capital reserves are mainly used to recognize the results of transactions that do not result in a change of control with non-
controlling interest (see Note 13). The foreign currency translation reserve is used to record exchange differences arising from
the translation of the financial statements of foreign subsidiaries, net of any related hedging activities (see Note 15).
166
19 EARNINGS PER SHARE
Earnings per common share for all periods presented has been determined by dividing profit available to common shareholders
by the weighted average number of common shares outstanding during the period.
The following table sets forth the computation of basic and diluted earnings per share for continuing operations, for the years
ended December 31:
Continuing operations
2020
2019
2018
(In millions of U.S. dollars, except share and per share amounts)
Numerator:
Profit / (loss) for the period attributable to the owners of the parent
(349)
621
(397)
Denominator:
Weighted average common shares outstanding for basic earnings per share (in millions)
Denominator for diluted earnings per share (in millions)
Basic (loss) / earnings per share
Diluted (loss) / earnings per share
1,749
1,749
($0.20)
($0.20)
1,749
1,749
$0.36
$0.36
1,749
1,749
($0.23)
($0.23)
The following table sets forth the computation of basic and diluted earnings per share for discontinued operations, for the years
ended December 31:
Discontinued operations
2020
2019
2018
(In millions of U.S. dollars, except share and per share amounts)
Numerator:
Profit / (loss) for the period attributable to the owners of the parent
—
—
979
Denominator:
Weighted average common shares outstanding for basic earnings per share (in millions)
Denominator for diluted earnings per share (in millions)
Basic (loss) / earnings per share
Diluted (loss) / earnings per share
1,749
1,749
$0.00
$0.00
1,749
1,749
$0.00
$0.00
1,749
1,749
$0.56
$0.56
167
20 DIVIDENDS PAID AND PROPOSED
Pursuant to Bermuda law, VEON is restricted from declaring or paying a dividend if there are reasonable grounds for believing
that
(a) VEON is, or would after the payment be, unable to pay its liabilities as they become due, or
(b)
the realizable value of VEON assets would, as a result of the dividend, be less than the aggregate of VEON liabilities.
There were no dividends declared by VEON in respect of the year 2020. The following table provides an overview of dividends
announced by VEON in respect of the year 2019:
Dividends declared
Dividends paid
Dividends, US$ cents
per share
Final for 2019
Interim for 2019
February 2020
August 2019
March 2020
August 2019
15
13
The Company makes appropriate tax withholdings of up to 15% when the dividends are being paid to the Company’s share
depository, The Bank of New York Mellon. For ordinary shareholders at Euronext Amsterdam, dividends are paid in euro.
DIVIDENDS DECLARED TO NON-CONTROLLING INTERESTS
During 2020, 2019 and 2018, certain subsidiaries of the Company declared dividends, of which a portion was paid or payable to
non-controlling interests as shown in the table below:
Name of subsidiary
Omnium Telecom Algeria S.p.A
VIP Kazakhstan Holding AG
TNS Plus LLP
Other
Total dividends declared to non-controlling interests
2020
45
24
16
2
87
2019
69
24
12
3
108
2018
76
—
13
4
93
In 2020, PMCL, a subsidiary of the Company, declared dividends to its shareholders, of which US$25 (2019: US$24, 2018:
US$11) was declared to non-controlling shareholders of PMCL. Dividends declared to non-controlling interests of PMCL reduces
the principal amount of the put-option liability over non-controlling interest on the date of declaration. As of December 31, 2020,
there is no remaining amount payable to non-controlling interests (2019: none, 2018: US$7).
168
ADDITIONAL INFORMATION
21
RELATED PARTIES
As of December 31, 2020, the Company has no ultimate controlling shareholder. See also Note 18 for details regarding
ownership structure.
COMPENSATION TO DIRECTORS AND SENIOR MANAGERS OF THE COMPANY
The following table sets forth the total compensation paid to our directors and senior managers, who are considered to be key
management of the company:
Short-term employee benefits
Long-term employee benefits
Share-based payments
Termination benefits
Total compensation to directors and senior management *
2020
2019
2018
35
1
—
4
40
48
—
3
—
51
33
—
—
2
35
* The number of directors and senior managers vary from year to year. Total compensation paid to directors and senior management approximates the
amount charged in the consolidated income statement for that year.
Under the Company’s bye-laws, the Board of Directors of the Company established a compensation and talent committee, which
has the overall responsibility for approving and evaluating the compensation and benefit plans, policies and programs of the
Company’s directors, officers and employees and for supervising the administration of the Company’s equity incentive plans and
other compensation and incentive programs.
Compensation of Key Senior Managers
The following table sets forth the total remuneration expense to the key senior managers in 2020 and 2019 (gross amounts in
whole euro and whole US$ equivalents). For further details on compensation and changes to key senior managers, please refer
to the Explanatory notes below.
Kaan
Terzioglu
Group Co-
CEO
Sergi
Herrero
Group Co-
CEO
Ursula
Burns
Serkan
Okandan
Trond
Westlie
Murat
Kirkgoz
Deputy
Kjell
Johnsen
Group CEO
Group CFO
Group CFO
Group CFO Group COO
Scott
Dresser
Group
General
Counsel
Alex
Kazbegi
Chief
Strategy
Officer
Joop
Brakenhoff
&
Compliance
Officer
In whole euros
2020
Short-term employee benefits
Base salary
1,323,000 1,181,368 1,162,750 864,000
16,810 211,600
— 1,300,000 553,500 224,100
Annual incentive
930,418 769,643 540,984 525,730
—
80,302
— 2,300,000 338,378 147,813
Other
439,657 2,158,022 554,328 297,341 212,631
40,360 299,333
24,100 104,124
39,908
Long-term employee benefits
76,366 706,925
—
—
—
—
—
—
Share-based payments
88,056
58,707 111,403
76,316
(217,080)
(7,954)
(217,080)
(65,526)
Termination benefits
—
—
—
—
—
—
—
—
—
—
—
—
8,775
—
Total remuneration expense *
2,857,497 4,874,665 2,369,465 1,763,387
12,361 324,308
82,253 3,558,574 996,002 420,596
2019
Short-term employee benefits
Base salary
220,500 342,036 5,500,000
— 1,500,000 264,500 1,250,000 1,300,000 394,795
Annual incentive
472,151 514,460 10,461,000
— 1,455,216 211,713 4,184,355 2,258,882 700,000
Other
105,999 1,560,229 1,146,503
Long-term employee benefits
Share-based payments
Termination benefits
—
—
—
—
—
—
—
—
—
—
—
—
—
24,100
35,750
46,857
29,100 677,662
—
—
—
—
64,842
8,242
(828,047)
(697,504)
—
—
—
—
—
—
—
Total remuneration expense
798,650 2,416,725 17,107,503
— 3,044,158 520,205 4,653,165 2,890,478 1,772,457
—
—
—
—
—
—
—
* Total remuneration expense for 2020 excludes accrued payroll taxes of EUR9 million (US$10) recorded in ‘Selling, general and administrative expenses’ incurred by
the Company pertaining to payments made to Ursula Burns, Kjell Johnson.
169
In whole US dollars
2020
Short-term employee benefits
Base salary
Annual incentive
Other
Kaan
Terzioglu
Group Co-
CEO
Sergi
Herrero
Group Co-
CEO
Ursula
Burns
Serkan
Okandan
Trond
Westlie
Murat
Kirkgoz
Kjell
Johnsen
Group CEO
Group CFO
Group CFO
Deputy
Group CFO Group COO
Scott
Dresser
Group
General
Alex
Kazbegi
Joop
Brakenhoff
Chief
Strategy
Chief
Internal Audit
1,508,380 1,346,902 1,325,676 985,064
19,165 241,250
— 1,482,157 631,057 255,501
1,060,789 877,486 616,787 599,396
—
91,554
— 2,622,278 385,792 168,525
501,262 2,460,406 632,001 339,005 242,425
46,015 341,276
27,477 118,714
45,500
Long-term employee benefits
87,066 805,980
—
—
—
—
—
—
Share-based payments
100,394
66,933 127,013
87,009
(247,497)
(9,069)
(247,497)
(74,708)
Termination benefits
—
—
—
—
—
—
—
—
—
—
—
—
10,005
—
Total remuneration expense *
3,257,891 5,557,707 2,701,477 2,010,474
14,093 369,750
93,779 4,057,204 1,135,563 479,531
2019
Short-term employee benefits
Base salary
Annual incentive
Other
246,782 382,805 6,155,568
— 1,678,791 296,027 1,398,993 1,454,952 441,852
528,429 575,781 11,707,890
— 1,628,669 236,948 4,683,106 2,528,128 783,436
118,633 1,746,199 1,283,159
Long-term employee benefits
Share-based payments
Termination benefits
—
—
—
—
—
—
—
—
—
—
—
—
—
26,973
40,011
52,442
32,569 758,435
—
—
—
—
72,571
9,224
(926,745)
(780,642)
—
—
—
—
—
—
—
Total remuneration expense
893,844 2,704,785 19,146,617
— 3,407,004 582,210 5,207,796 3,235,007 1,983,723
—
—
—
—
—
—
—
* Total remuneration expense for 2020 excludes accrued payroll taxes of EUR9 million (US$10) recorded in ‘Selling, general and administrative expenses’ incurred by
the Company pertaining to payments made to Ursula Burns, Kjell Johnson.
Explanatory notes
Base salary includes any holiday allowances pursuant to the terms of an individual’s employment agreement. Annual incentive
expense includes amounts accrued under the short-term incentive in respect of performance during the current year, as well as
any special recognition bonus. Other short-term employee benefits include certain allowances (for example, pension allowance
or reimbursement of certain losses etc.) and support (for example, relocation support).
Share-based payments expense relates to amounts accrued under the value growth cash-based multi-year incentive plans, see
below for further details.
Changes in Key Senior Managers
Ursula Burns stepped down as Group CEO with effect from March 1, 2020. Sergi Herrero and Kaan Terzioğlu were appointed as
Co-CEOs with effective from March 1, 2020, having previously served as Joint COOs since September 2, 2019 and November 1,
2019, respectively.
On May 1, 2020, Serkan Okandan joined VEON as Group CFO. Trond Westlie stepped down from the role of Group CFO on
September 30, 2019. Murat Kirkgoz served as Deputy Group CFO from August 1, 2019 to April 30, 2020.
Kjell Johnsen stepped down from the role of Group COO on November 1, 2019.
The Key Senior Managers of VEON include Group (co-)CEOs, Group CFO, Group COO and Group General Counsel. In addition
to the Key Senior Managers disclosed, VEON has also voluntarily disclosed other senior managers. Alex Kazbegi was appointed
Group Chief Strategy Officer effective from February 18, 2019, and Joop Brakenhoff was appointed Group Chief Internal Audit &
Compliance Officer, effective July 1, 2020.
170
Compensation of Board of Directors
The following table sets forth the total remuneration expense to the members of the Board of Directors members in 2020 and
2019 (gross amounts in whole euro and whole US dollar equivalents). For details on changes in Board of Directors, please refer
to explanations below.
In whole euros
2020
2019
2020
2019
2020
2019
Retainer
Committees
Other compensation
Alexander Pertsovsky
47,917
40,000
—
Steve Pusey
Kaan Terzioglu
204,167
—
58,333
—
92,708
—
9,063
Total compensation
3,395,361 1,962,708
746,136
328,567
500,000
750,000
4,641,497 3,041,275
In whole US dollars
2020
2019
2020
2019
2020
2019
Retainer
Committees
Other compensation
Hans Holger Albrecht
Guillaume Bacuvier
Osama Bedier
Ursula Burns
Mariano De Beer
Peter Derby
Mikhail Fridman
Gennady Gazin
Amos Genish
Yaroslav Glazunov
Andrei Gusev
Gunnar Holt
Sir Julian Horn-Smith
Robert Jan van de Kraats
Guy Laurence
204,167
—
72,917
105,114
250,000
23,125
308,333
250,000
68,750
323,864
204,167
204,167
—
—
—
—
87,500
87,500
60,417
40,000
—
—
53,909
25,000
5,952
—
—
—
629,167
250,000
33,333
80,000
204,167
13,350
—
—
60,417
40,000
87,500
—
—
308,333
250,000
118,750
105,114
308,333
250,000
250,000
10,511
85,417
104,167
250,000
12,500
—
—
—
69,643
25,000
30,000
30,000
—
—
Hans Holger Albrecht
Guillaume Bacuvier
Osama Bedier
Ursula Burns
Mariano De Beer
Peter Derby
Mikhail Fridman
Gennady Gazin
Amos Genish
Yaroslav Glazunov
Andrei Gusev
Gunnar Holt
232,775
—
83,134
119,843
279,799
26,365
351,537
279,799
78,383
369,244
232,775
232,775
—
—
—
—
99,761
99,761
68,883
44,768
—
—
60,335
27,980
6,661
—
—
—
717,326
279,799
38,004
89,536
232,775
15,221
—
—
99,761
—
68,883
44,768
—
351,537
279,799
135,389
Sir Julian Horn-Smith
119,843
279,799
11,984
Robert Jan van de Kraats
351,537
279,799
97,386
Guy Laurence
118,763
279,799
14,252
Alexander Pertsovsky
54,631
44,768
—
Steve Pusey
Kaan Terzioglu
232,775
—
66,507
—
103,758
—
10,143
—
—
—
77,944
27,980
33,576
33,576
—
—
Total
2020
277,084
2019
—
128,239
303,909
377,083
275,000
323,864
291,667
291,667
5,952
—
—
60,417
40,000
662,500
330,000
291,667
13,350
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
500,000
750,000
560,417
790,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
427,083
319,643
115,625
393,750
275,000
280,000
116,667
280,000
47,917
40,000
262,500
—
—
101,771
Total
2020
315,909
2019
—
146,208
340,134
429,920
307,779
369,244
332,536
332,536
6,661
—
—
68,883
44,768
755,330
369,335
332,536
15,221
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
570,060
839,396
638,943
884,164
—
—
—
—
—
—
—
—
—
—
—
—
—
—
486,926
357,743
131,827
307,779
448,923
313,375
133,015
313,375
54,631
44,768
299,282
—
—
113,901
Total compensation
3,871,123 2,196,655
850,687
367,731
570,060
839,396
5,291,870 3,403,782
Changes in Board of Directors
Ursula Burns was appointed Group CEO and Chairman of the VEON Ltd. board of directors on December 12, 2018.
Accordingly, her total compensation for 2019 and until March 1, 2020, has been included in the section “Compensation of Key
Senior Managers” above, except for payments received in respect of her role on Board Committees. Ursula Burns stepped down
as Group CEO on March 1, 2020, and later stepped down as Chairman on June 1, 2020.
On June 1, 2020 VEON announced the results of the elections conducted at its Annual General Meeting of Shareholders.
Shareholders elected five new members to the Company’s Board of Directors, Hans Holger Albrecht, Mariano De Beer, Peter
171
Derby, Amos Genish and Stephen Pusey, as well as seven previously serving directors: Osama Bedier, Mikhail M. Fridman,
Gennady Gazin, Andrei Gusev, Gunnar Holt, Robert Jan van de Kraats and Alexander Pertsovsky.
Following the election of the directors, Gennady Gazin was appointed as Chairman of VEON’s Board of Directors, effective June
1, 2020.
Value growth cash-based multi-year incentive plans
To stimulate and reward leadership efforts that result in sustainable success, value growth cash-based multi-year incentive plan
(“Incentive Plans”) were designed for members of our recognized leadership community. The participants in the Incentive
Plans may receive cash payouts after the end of each relevant award performance period.
Vesting is based on the attainment of certain Key Performance Indicators (“KPIs”), such as absolute share price, total return per
share or value growth of certain VEON businesses. Options may be exercised by the participant at any time during a defined
exercise period, subject to the Company’s insider trading policy.
Short Term Incentive Scheme
The Company’s Short Term Incentive (“STI”) Scheme provides cash pay-outs to participating employees based on the
achievement of established KPIs over the period of one calendar year. KPIs are set every year at the beginning of the year and
evaluated in the first quarter of the next year. The KPIs are partially based on the financial and operational results (such as total
operating revenue, EBITDA and equity free cash flow) of the Company, or the affiliated entity employing the employee, and
partially based on individual targets that are agreed upon with the participant at the start of the performance period based on his
or her specific role and activities. The weight of each KPI is decided on an individual basis.
Pay-out of the STI award is scheduled in March of the year following the assessment year and is subject to continued active
employment during the year of assessment (except in limited “good leaver” circumstances in which case there is a pro-rata
reduction) and is also subject to a pro-rata reduction if the participant commenced employment after the start of the year of
assessment. Pay-out of the STI award is dependent upon final approval by the compensation and talent committee.
172
22
EVENTS AFTER THE REPORTING PERIOD
VEON enters into a US$1,250 multi-currency revolving credit facility agreement
In March 2021, VEON successfully entered into a new multi-currency revolving credit facility agreement (the “RCF”) of
US$1,250. The RCF replaces the revolving credit facility signed in February 2017, which is now cancelled. The RCF has an initial
tenor of three years, with the Company having the right to request two one-year extensions, subject to lender consent.
International banks from Asia, Europe and the US have committed to the RCF. The new RCF caters for USD LIBOR cessation
with the secured overnight financing rate (SOFR) administered by the Federal Reserve Bank of New York agreed as the
replacement risk free rate with credit adjustment spreads agreed for interest periods with a one month, three months and six
month tenor. SOFR will apply to interest periods commencing on and from October 31, 2021 (or earlier if USD LIBOR is no
longer published or ceases to be representative prior to that date). The Company will have the option to make each drawdown in
either U.S. dollars or euro.
VEON subsidiary Banglalink successfully acquires 9.4MHz in spectrum auction
In March 2021, Banglalink, the Company's wholly-owned subsidiary in Bangladesh, acquired 4.4MHz spectrum in the 1800MHz
band and 5MHz spectrum in 2100MHz band following successful bids at an auction held by the BTRC. The newly acquired
spectrum will see Banglalink increase its total spectrum holding from 30.6MHz to 40MHz. Banglalink will invest approximately
BDT 10 billion (US$115) to purchase the spectrum.
173
23 BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board and adopted by the European Union, effective at the time of
preparing the consolidated financial statements and applied by VEON.
The consolidated income statement has been presented based on the nature of the expense, other than ‘Selling, general and
administrative expenses’, which has been presented based on the function of the expense.
The consolidated financial statements have been prepared on a historical cost basis, unless otherwise disclosed.
BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Subsidiaries are all
entities (including structured entities) over which the Company has control. Please refer to Note 13 for a list of significant
subsidiaries.
Intercompany transactions, balances and unrealized gains or losses on transactions between Group companies are eliminated.
When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.
When the Group ceases to consolidate a subsidiary due to loss of control, the related subsidiary’s assets (including goodwill),
liabilities, non-controlling interest and other components of equity are de-recognized. This may mean that amounts previously
recognized in other comprehensive income are reclassified to profit or loss. Any consideration received is recognized at fair
value, and any investment retained is re-measured to its fair value, and this fair value becomes the initial carrying amount for the
purposes of subsequently accounting for the retained interest. Any resultant gain or loss is recognized in the income statement.
FOREIGN CURRENCY TRANSLATION
The consolidated financial statements of the Group are presented in U.S. dollars. Each entity in the Group determines its own
functional currency and amounts included in the financial statements of each entity are measured using that functional currency.
Upon consolidation, the assets and liabilities measured in the functional currency are translated into U.S. dollars at exchange
rates prevailing on the balance sheet date; whereas income and expenses are generally translated into U.S. dollars at historical
monthly average exchange rates. Foreign currency translation adjustments resulting from the process of translating financial
statements into U.S. dollars are reported in other comprehensive income and accumulated within a separate component of
equity.
174
24
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of these consolidated financial statements has required management to apply accounting policies and
methodologies based on complex and subjective judgments, as well as estimates based on past experience and assumptions
determined to be reasonable and realistic based on the related circumstances. The use of these judgments, estimates and
assumptions affects the amounts reported in these consolidated financial statements. The final amounts for items for which
estimates and assumptions were made in the consolidated financial statements may differ from those reported in these
statements due to the uncertainties that characterize the assumptions and conditions on which the estimates are based.
The sources of uncertainty identified by the Group are described together with the applicable Note, as follows:
Significant accounting judgment / source of estimation uncertainty
Described in
Revenue recognition
Deferred tax assets and uncertain tax positions
Provisions and contingent liabilities
Impairment of non-current assets
Control over subsidiaries
Note 3
Note 8
Note 7
Note 10
Note 13
Depreciation and amortization of non-current assets
Note 11 and Note 12
Fair value of financial instruments
Measurement of lease liabilities
Note 15
Note 15
NEW STANDARDS AND INTERPRETATIONS
Not yet adopted by the Group
Certain new accounting standards and interpretations have been published that are not mandatory for December 31, 2020
reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on
VEON financial statements in current or future reporting periods or on foreseeable future transactions.
Adopted in 2020
A number of new and amended standards became effective as of January 1, 2020, which did not have a material impact on
VEON financial statements. The Group has not early adopted any other standards, interpretations or amendments that have
been issued but have not yet become effective.
In May 2020, the IASB issued an amendment to IFRS 16 'Leases', providing an option to apply a practical expedient in respect of
accounting for certain rent concessions arising as a direct consequence of COVID-19, such as rent holidays and temporary rent
reductions. Under this amendment, which became effective in 2020, lessees are exempted from having to consider whether
these rent concessions are lease modifications. The Group has chosen not to apply the practical expedient available, and will
therefore account for any rent concessions as lease modifications.
Amsterdam, March 15, 2021
VEON Ltd.
175
Company financial statements
COMPANY STATEMENT OF FINANCIAL POSITION
Before appropriation of profit
as at December 31
(In millions of U.S. dollars)
Assets
Non-current assets
Intangible fixed assets
Tangible fixed assets
Financial fixed assets
Total non-current assets
Current assets
Receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Issued capital
Capital surplus
Reserve results of subsidiaries
Foreign currency translation reserve
Retained earnings / (accumulated deficit)
Result for the year
Total equity
Provisions
Non-current liabilities
Current liabilities
Total equity and liabilities
Note
2020
2019
1
2
3
4
5
6
7
8
9
8
8
138
154
241
79
320
474
2
11,449
525
(8,775)
(2,689)
(349)
163
29
9
273
474
10
15
1,152
1,177
352
41
393
1,570
2
11,449
1,079
(8,312)
(3,613)
621
1,226
41
10
293
1,570
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
177
COMPANY INCOME STATEMENT
for the year ended December 31
(In millions of U.S. dollars)
General and administrative expenses
Other operating gains
Recharged expenses to group companies
Operating (loss) / profit
Finance income
Finance expenses
(Loss) / Profit before tax
Income tax
Share in results of subsidiaries after tax
Net result for the year
Note
12
13
13
14
3
2020
(101)
—
3
(98)
1
(3)
(100)
—
(249)
(349)
2019
(160)
350
21
211
8
(2)
217
—
404
621
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
178
COMPANY AND GROUP ACTIVITIES
VEON Ltd. (“VEON” or the “Company”), registered with the Chamber of Commerce in Amsterdam under number 34374835, was
incorporated on June 5, 2009.
For details of the Company’s and its group of companies (“VEON Group”) principal activities, reference is made to Note 1
(General Information about the Group) to the Consolidated Financial Statements.
The company financial statements are presented in United States dollars (“U.S. dollar” or “US$”). In these notes, U.S. dollar
amounts are presented in millions unless otherwise indicated.
ACCOUNTING POLICIES
General
The Company financial statements have been prepared in accordance with Title 9 of Book 2 of the Dutch Civil Code. In
accordance with the provisions of Article 362, paragraph 8, Title 9 of Book 2 of the Dutch Civil Code the accounting policies used
are the same as those explained in the Notes to the Consolidated Financial Statements, prepared under IFRS as adopted by the
European Union, except for the accounting policies disclosed below. For an appropriate interpretation, the Company financial
statements should be read in conjunction with the consolidated financial statements.
The balance sheet and income statement include references. These refer to the notes.
Comparison with previous year
The valuation principles and method of determining the results are the same as those used in the previous year.
Subsidiaries
Subsidiaries are all entities (including intermediate subsidiaries) over which the Company has control. The Company controls an
entity when it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect
those returns through its power over the subsidiary. Subsidiaries are recognized from the date on which control is transferred to
the Company or its intermediate holding entities. They are derecognized from the date that control ceases.
Investments in subsidiaries are measured at net asset value. Net asset value is based on the measurement of assets, provisions
and liabilities and determination of profit based on the principles applied in the consolidated financial statements.
If the valuation of a subsidiary based on the net asset value is negative, it will be stated at nil. If and insofar as the Company can
be held fully or partially liable for the debts of the subsidiary or has the firm intention of enabling the participation to settle its
debts, a provision is recognized for this.
Newly acquired subsidiaries are initially recognized on the basis of the fair value of their identifiable assets and liabilities at the
acquisition date. For subsequent valuations, the principles that apply for these financial statements are used.
The amount by which the carrying amount of the subsidiary has changed since the previous financial statements as a result of
the net result achieved by the subsidiary is recognized in the income statement.
Equity interests
For a full list of equity interests, reference is made to the list including entity details filed in accordance with Articles 379 and 414,
Title 9 of Book 2 of the Dutch Civil Code at the Dutch Chamber of Commerce.
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
179
Notes to the Company statement of financial position
(in millions of U.S. dollars unless otherwise stated)
1
INTANGIBLE FIXED ASSETS
Software
Balance as at December 31
Movements in these items were as follows:
Balance as at January 1
Additions
Amortization
Balance as at December 31
Cost
Accumulated amortization and impairment
2020
2019
8
8
10
1
(3)
8
72
(64)
10
10
9
4
(3)
10
71
(61)
There are no limited property rights to intangible fixed assets and no security in the form of intangible fixed assets have been
provided for liabilities. Nor have any obligations arisen from the acquisition of intangible fixed assets.
2
TANGIBLE FIXED ASSETS
Equipment
Balance as at December 31
Movements in these items were as follows:
Balance as at January 1
Additions
Disposals
Depreciation
Balance as at December 31
Cost
Accumulated amortization
2020
2019
8
8
15
—
(4)
(3)
8
28
(20)
15
15
17
7
(2)
(7)
15
34
(19)
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
180
Notes to the Company statement of financial position
(in millions of U.S. dollars unless otherwise stated)
3
FINANCIAL FIXED ASSETS
Investments in subsidiaries
Investment in sub lease - non current
Balance as at December 31
Movements in investments in subsidiaries were as follows:
Balance as at January 1
Share premium collection
Changes in ownership interest in a subsidiary that do not result in a loss of control
Result of participating interests after tax
Dividend received from subsidiaries
Investment in subsidiary*
Currency translation adjustments
Other comprehensive (loss) / income related to subsidiaries
Other movements in subsidiaries
Balance as at December 31
* Refer to Note 9 of the Consolidated Financial Statement for further information.
2020
134
4
138
1,152
(317)
—
(249)
—
—
(437)
(14)
(1)
134
2019
1,152
0
1,152
3,587
—
(2,594)
404
(650)
350
105
7
(57)
1,152
Other movements in subsidiaries relates to direct equity movements at the level of the subsidiaries in connection with
movements in the hedge reserves and investments held at fair value through other comprehensive income.
3.1
Investment in sublease
VEON has entered into a lease arrangement as a lessor that is considered to be finance leases. VEON leases subleases a
portion of an office building and as they transfer substantially all of the risks and rewards of ownership of the asset it is classified
as finance leases.
The maturity analysis of lease receivable, including the undiscounted lease payments to be received are as follows:
Less than 1 year
1-3 years
3-5 years
More than 5 years
Balance as at December 31
Undiscounted finance income
Net investment in the sublease
4
RECEIVABLES
Amounts due from group companies
Value added tax
Other receivables and prepayments
Balance as at December 31
2020
2019
—
4
—
—
4
—
4
2020
233
2
5
240
—
—
—
—
—
—
—
2019
345
6
1
352
All amounts are due within one year. No interest is applicable on the receivables from subsidiaries and other participating interest
and no maturity has been agreed. The fair value of the receivables approximates the book value, due to their short-term
character.
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
181
5
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at banks and on hand
Balance as at December 31
6
EQUITY
for the year ended December 31, 2020
2020
2019
79
79
41
41
(In millions of U.S. dollars)
As at January 1, 2020*
Profit for the period
Other comprehensive loss
Total comprehensive loss
Result appropriation
Movement in legal reserve due to
currency restrictions
Dividends declared
Other
As at December 31, 2020
Issued
capital
Capital
Surplus
Reserve
Results of
Subsidiaries
Foreign
currency
translation
reserves
Retained
Earnings /
(accumulated
deficit)
Result for
the year
Total equity
2
—
—
—
—
—
—
—
2
11,449
571
(8,312)
(3,105)
—
—
—
—
—
—
—
—
—
—
—
(46)
—
—
—
(437)
(437)
—
—
—
(26)
—
(14)
(14)
621
46
(262)
25
621
(349)
—
(349)
(621)
—
—
—
11,449
525
(8,775)
(2,689)
(349)
1,226
(349)
(451)
(800)
—
—
(262)
(1)
163
* Legal reserve was adjusted to conform with the calculation as of December 31, 2020
for the year ended December 31, 2019
Issued
capital
Capital
Surplus
Reserve
Results of
Subsidiaries
Foreign
currency
translation
Retained
Earnings /
(accumulated
deficit)
Result for
the year
Total equity
2
—
—
—
—
—
—
—
2
11,449
1,351
(8,416)
(1,301)
—
—
—
—
—
0
0
—
—
105
105
—
—
7
7
582
621
—
621
582
(582)
—
(272)
—
272
—
—
—
—
—
—
(1)
(2,594)
(525)
(54)
—
—
3,667
621
112
733
—
—
(2,594)
(525)
(55)
11,449
1,079
(8,312)
(3,613)
621
1,226
(In millions of U.S. dollars)
As at January 1, 2019
Profit for the period
Other comprehensive loss
Total comprehensive loss
Result appropriation
Movement in legal reserve due to
currency restrictions
Change in ownership interest in a
subsidiary that do not result in a
loss of control
Dividends declared
Other
As at December 31, 2019
Issued capital
Reference is made to Note 18 (Issued capital and reserves) to the Consolidated Financial Statements for issued capital
disclosures.
Capital surplus
Capital surplus represents primarily contributions into the Company from the shareholders.
Results of subsidiaries
The reserve Results of subsidiaries comprise the amount of profits that cannot be repatriated from subsidiaries due to dividend
distribution restrictions, as well as withholding tax for undistributed profits in subsidiaries that are not covered by deferred tax
liabilities.
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
182
Notes to the Company statement of financial position
(in millions of U.S. dollars unless otherwise stated)
Appropriation of result
Management proposes the following appropriation of result, which has not yet been reflected in the financial statements.
Proposed final dividends
Transfer to Retained earnings / (Accumulated deficit)
Net results
2020
—
(349)
(349)
2019
—
621
621
During the year an amount of US$262 (2019: US$525) was paid as dividend out of the retained earnings/accumulated deficit. In
2019, management proposed a final dividend in the amount of US$264 (US 15 cents per share) to be paid out of the retained
earnings/accumulated deficit.
7
PROVISIONS
Legal provisions
Restructuring provision
Balance as at December 31
2020
2019
8
21
29
10
31
41
The legal provision relates to the future direct and incremental expected legal fees associated with the resolution of the
investigations of our business in Uzbekistan. Reference is made to Note 7 (Provisions and contingent liabilities) to the
Consolidated Financial Statements.
The restructuring provision of US$21 (2019: US$31) relates to staff redundancies at the corporate headquarters in Amsterdam.
The movements in provisions were as follows:
Balance as at January 1
Arising during the year
Utilized
Unused amounts reversed
Balance as at December 31
US$29 (2019: US$41) of the provisions qualify as short-term (in effect less than one year).
8
NON-CURRENT LIABILITIES
Lease liabilities
Loan from subsidiary
Balance as at December 31
The movements in loans were as follows:
Balance as at January 1
Balance as at IFRS 16 adoption
Repayment
Foreign exchange (gains) / losses
Balance as at December 31
2020
2019
41
—
(12)
—
29
39
31
(19)
(10)
41
2020
2019
9
—
9
10
—
10
2020
2019
10
—
(2)
1
9
—
12
(2)
—
10
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
183
9
CURRENT LIABILITIES
Payable to group companies
Lease liabilities
Accounts payable
Taxes and social security contributions
Accruals and other payables
Due to employees
Balance as at December 31
2020
238
3
4
1
27
—
273
2019
228
2
4
—
58
1
293
The fair value of the current liabilities approximates the book value, due to their short-term character. All current liabilities fall due
within one year.
10 WORKFORCE
The average number of staff employed by the Company in 2020 was 41 (2019: 61). These employees are located in the
Netherlands.
11 COMMITMENTS NOT SHOWN IN THE BALANCE SHEET
Liability
The Company has issued liability statements pursuant to Article 403, Title 9 of Book 2 of the Dutch Civil Code for its 100%
indirect subsidiary VEON Wholesale Services B.V..
Fiscal unity VAT
The Company forms part of the fiscal unity for value added tax purposes with VEON Amsterdam B.V., VEON Holdings B.V.,
VEON Digital Amsterdam B.V., VEON Global Services B.V., VEON Central Procurement B.V. and Global Telecom Holding
S.A.E., which makes these companies jointly and severally liable for VAT liabilities of the fiscal unity.
Balance and interest set-off agreement
On September 26, 2019 the Company, together with some of its subsidiaries, entered into a new multi-entity and multi-currency
cash pooling agreement with Citibank. Each party to the agreement has irrevocably and unconditionally undertaken, as joint and
several debtor, to Citibank to perform all payment obligations of each other party under the agreement. Before that date, the
Company had such arrangement with ING Bank, which was terminated following the new agreement with Citibank.
Other commitments, contingencies and uncertainties
For other commitments, contingencies and uncertainties related to VEON Ltd. not included in the balance sheet according to the
first sentence of Article 381, paragraph 1, Title 9 of Book 2 of the Dutch Civil Code – such as the VEON-Securities Class Action
and the Canadian action brought by the Catalyst Capital Group Inc. – reference is made to the disclosure mentioned in Note 7
(Provisions and contingent liabilities) to the Consolidated Financial Statements.
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
184
12 GENERAL AND ADMINISTRATIVE EXPENSES
Employee benefits
Advisory fees
Depreciation and amortization
Other expenses
Total general and administrative expenses
12.1 Employee benefits
Salaries and wages
Social premiums
Other personnel expenses
Recharged expenses
Total employee benefits
13
FINANCE INCOME AND EXPENSES
Finance income
Interest income banks and others
Finance expenses
Interest expense loans group company
Interest expense banks and others
Foreign exchange losses
Net financial (expense) / income
14
INCOME TAXES
2020
2019
44
13
6
38
101
52
6
7
95
160
2020
2019
38
1
1
4
44
41
1
1
9
52
2020
2019
1
1
—
(1)
(2)
(3)
(2)
8
8
(1)
(2)
1
(2)
6
During the year there were no income and deferred tax expenses.
For the corporate income tax, no deferred tax asset is recognized for unutilized net operating losses because it is not probable
that future taxable profit will be available. The unutilized net operating losses per December 31, 2020 amount to US$974 (2019:
US$976).
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
185
Notes to the Company statement of financial position
(in millions of U.S. dollars unless otherwise stated)
15 SUBSEQUENT EVENTS
For subsequent events, please refer to Note 22 (Events after the reporting period) of the Consolidated Financial Statements.
16 ADDITIONAL NOTES TO THE COMPANY FINANCIAL STATEMENTS
Remuneration of and loans to members of the Global Executive Committee and the Board
The remuneration, including pension charges and other benefits, of current and former members of the Board charged to the
Company, its subsidiaries and other group companies in the current year is disclosed in Note 21 (Related parties) to the
Consolidated Financial Statements.
Principal Accountant Fees and Services
PricewaterhouseCoopers Accountants N.V. have served as our independent public accountants for the fiscal year ended
December 31, 2020. The following table presents the aggregate fees for professional services and other services rendered by
PricewaterhouseCoopers Accountants N.V. and their member firms in 2020 and 2019:
Audit fees
Audit-related fees
Tax fees
Total other non-audit related services
Total principal accountant fees and services
Audit Services
PricewaterhouseCoopers
Accountants N.V.
Other PwC Global
Network Firms
2020
2019
2020
2019
4.8
1.0
—
—
5.8
4.1
1.0
—
—
5.1
5.1
0.1
—
0.1
5.3
5.8
0.3
—
—
6.1
Audit services mainly consisted of the audit of (consolidated) financial statements, the review of quarterly (consolidated) financial
statements and Sarbanes-Oxley Section 404 attestation services.
Audit-related Services
Audit-related services are assurance and related services which are reasonably related to the performance of audit or review and
generally include services regarding specific regulatory filings, including comfort and consent letters, and other agreed-upon
services related to accounting records and systems.
Amsterdam, March 15, 2021
VEON Ltd.
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
186
Notes to the Company statement of financial position
(in millions of U.S. dollars unless otherwise stated)
OTHER INFORMATION
Provisions governing profit appropriation
The provisions governing profit appropriation are described in articles 19 and 20 as applicable on the signing date of this Annual
Report of the Bye-laws of VEON.
The Board may, subject to these bye-laws and in accordance with the Companies Act 1981 of Bermuda (the ”Act”), declare a
dividend to be paid to the Members (as defined in the bye-laws) holding shares entitled to the payment of dividends, in proportion
to the numbers of shares held by them, and such dividend may be paid in cash or wholly or partly in specie, including without
limitation the issue by VEON of shares or other securities, in which case the Board may fix the value for distribution in specie of
any assets, shares or securities. No unpaid dividend shall bear interest as against VEON. The exact amount and timing of any
dividend declarations and payments shall, subject to the requirements of the Act, be determined by the Board.
The Board may fix any date as the record date for determining the Members entitled to receive any dividend.
The Company may pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some
shares than on others.
The Board may declare and make such other distributions (in cash or in specie) to the Members holding shares entitled to
distributions as may be lawfully made out of the assets of VEON. No unpaid distribution shall bear interest as against the
Company.
Except, insofar as the rights attaching to, or the terms of issue of, any shares otherwise provide:
all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid,
but no amount paid up on a share in advance of a call may be treated for the purpose of this Bye-law as paid up on the share;
and
dividends shall be apportioned and paid pro rate according to the amounts paid up on the shares in respect of which the dividend
is paid during any portion or portions of the period in respect of which the dividend is paid.
The Board may, before declaring a dividend, set aside out of the surplus or profits of VEON, such amount as it thinks proper as a
reserve to be used to meet contingencies or for any other purpose.
Independent auditor’s report
The independent auditor’s report is set forth on the next pages.
VEON Ltd I Company financial statements as of and for the year ended December 31, 2020
187
Independent auditor’s report
To: the general meeting and the board of directors of VEON Ltd.
Report on the financial statements 2020
Our opinion
In our opinion:
•
the consolidated financial statements of VEON Ltd. together with its subsidiaries (‘the Group’) give a true and fair
view of the financial position of the Group as at 31 December 2020 and of its result and cash flows for the year then
ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS)
and with Part 9 of Book 2 of the Dutch Civil Code;
•
the company financial statements of VEON Ltd. (‘the Company’) give a true and fair view of the financial position of
the Company as at 31 December 2020 and of its result for the year then ended in accordance with Part 9 of Book 2 of
the Dutch Civil Code.
What we have audited
We have audited the accompanying financial statements 2020 of VEON Ltd., Bermuda. The financial statements include the
consolidated financial statements of the Group and the company financial statements.
The consolidated financial statements comprise:
•
•
the consolidated statement of financial position as at 31 December 2020;
the following statements for 2020: the consolidated income statement, the consolidated statements of comprehensive
income, changes in equity and cash flows; and
the notes, comprising the significant accounting policies and other explanatory information.
•
The Company financial statements comprise:
•
•
•
the company statement of financial position as at 31 December 2020;
the company income statement for the year then ended;
the notes, comprising the accounting policies applied and other explanatory information.
The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant
provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the
Dutch Civil Code for the company financial statements.
The basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described
our responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of VEON Ltd. in accordance with the European Union Regulation on specific requirements regarding
statutory audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the
‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, Code of Ethics for Professional
Accountants, a regulation with respect to independence) and other relevant independence requirements in the Netherlands.
Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of
Ethics).
VEON Ltd I Independent auditor’s report
188
Our audit approach
Overview and context
VEON Ltd. is a telecommunications company providing voice and data services through a range of traditional and
broadband mobile and fixed-line technologies in various countries throughout the world. The Group is comprised of several
components and therefore we considered our Group audit scope and approach as set out in the section ‘The scope of our
Group audit.’ We paid specific attention to the areas of focus driven by the operations of the Group, as set out below.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we considered where management made important judgements, for example, in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain. In Note 24 of the consolidated financial statements, the Company describes the areas of judgement in applying
accounting policies and the key sources of estimation uncertainty. Of these we considered, given the significant estimation
uncertainty and the related higher inherent risks of material misstatement, the valuation of goodwill and the valuation of
‘uncertain income tax positions’ and ‘non-income tax provisions’ to be key audit matters as set out in the section ‘Key audit
matters’ of this report.
The Group operates in countries which pose elevated risks of non-compliance with anti-bribery and corruption laws and
regulations. Due to this increased risk of non-compliance, we dedicated significant time and resources during our audit to
this area and have therefore identified it as a key audit matter.
Furthermore, we spent significant time and resources to audit revenue recognition, which required us to ascertain the
reliability of the systems and related controls in view of the existence of various legacy revenue systems throughout the
Group. Consequently, we considered this to be a key audit matter.
The key audit matters referenced above are further explained in the section ‘Key audit matters’ of this report.
As in all of our audits, we also addressed the risk of management override of controls, including evaluating whether there
was evidence of bias by management that may represent a risk of material misstatement due to fraud.
We ensured that the audit teams at both Group and component level included the appropriate skills and competences which
are needed for the audit of a telecommunications company operating in a global environment, including activities in emerging
economies. We therefore included experts and specialists in the areas of, amongst others, IT, tax, treasury, forensics and
valuations in our team.
The outline of our audit approach was as follows:
Materiality
•
Overall materiality: USD 86 million
Audit scope
•
We conducted audit work at the corporate headquarters in the
Netherlands and at significant subsidiaries of the Group in
Russia, Pakistan, Algeria, Ukraine, Bangladesh and Uzbekistan.
Virtual site visits were conducted with the component auditors of
the six significant subsidiaries.
Audit coverage: 92% of consolidated Adjusted EBITDA, 92% of
consolidated revenue and 92% of consolidated total assets.
Key audit matters
•
•
Valuation of goodwill
Valuation of ‘uncertain income tax positions’ and ‘valuation of
non-income tax provisions’
Compliance with anti-bribery and corruption laws and
regulations
Revenue recognition
•
•
•
•
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Materiality
The scope of our audit is influenced by the application of materiality, which is further explained in the section ‘Our
responsibilities for the audit of the financial statements’.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall
materiality for the financial statements as a whole as set out in the table below. These, together with qualitative
considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial
statement line items and disclosures and to evaluate the effect of identified misstatements, both individually and in
aggregate, on the financial statements as a whole and on our opinion.
Overall Group
materiality
USD 86 million (2019: USD 90 million).
Basis for determining
materiality
We used our professional judgement to determine overall materiality. As a basis
for our judgement, we used 2,5% of Adjusted EBITDA.
As disclosed in Note 2 of the consolidated financial statements, Adjusted EBITDA
is defined by the Company as profit/(loss) from continuing operations before
interest, tax, depreciation, amortization and impairment (loss)/reversal, gain/(loss)
on disposals of non-current assets, gain/(loss) on disposal of subsidiaries, other
non-operating gains/(loss), net foreign exchange gain/(loss) and share of profit/
(loss) of joint ventures and associates.
We used Adjusted EBITDA as the primary benchmark based on our analysis of the
common information needs of users of the financial statements. Adjusted EBITDA
is predominantly used by the Company’s equity and debt holders to assess the
financial performance of the Group, given the volatility of the Company’s profit
before taxes. On this basis, we believe that Adjusted EBITDA is an important
metric for the financial performance of the Company and, as such, an appropriate
materiality benchmark.
To each component in our audit scope, we, based on our judgement, allocate
materiality that is less than our overall Group materiality. The range of materiality
allocated across components was between USD 15 million and USD 60 million.
Rationale for benchmark
applied
Component materiality
We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative
reasons.
We agreed with the Audit and Risk Committee of the Board of Directors that we would report to them misstatements
identified during our audit above USD 4,3 million (2019: USD 4,5 million) as well as misstatements below that amount that, in
our view, warranted reporting for qualitative reasons.
The scope of our Group audit
VEON Ltd. is the parent company of a group of entities. The financial information of this group is included in the consolidated
financial statements of VEON Ltd.
We tailored the scope of our audit to ensure that we, in aggregate, provide sufficient coverage of the financial statements for
us to be able to give an opinion on the financial statements as a whole, taking into account the management structure of the
Group, the nature of operations of its components, the accounting processes and controls, and the markets in which the
components of the Group operate. In establishing the overall Group audit strategy and plan, we determined the type of work
required to be performed at component level by the Group engagement team in the Netherlands and by each component
auditor.
Of the VEON Ltd. Group operating locations, as disclosed in Note 2 of the consolidated financial statements, the Group audit
primarily focused on the significant components in Russia, Pakistan, Algeria, Ukraine, Bangladesh, and Uzbekistan. For
these components, certain consolidated processes and significant or higher risk areas, notably the valuation of goodwill and
compliance with anti-bribery and corruption laws and regulations, are processes included at the corporate headquarters in
the Netherlands and are therefore in the audit scope of the Group engagement team.
We subjected the Russia, Pakistan, and Ukraine components to audits of their complete financial information, as those
components are individually financially significant to the Group. We further subjected the Algeria, Bangladesh, and
Uzbekistan components to audits of their complete financial information as they include significant or higher risk areas,
notably in the areas of revenue recognition and compliance with anti-bribery and corruption laws and regulations. To obtain
sufficient audit coverage based on our professional judgement, the corporate headquarters and certain non-significant
components were also selected for specific audit procedures.
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The Company engages various service organizations in its revenue and treasury processes, which are material to the
financial statements. Audit work on the IT General Controls of these service organizations has been performed by their
independent auditors who have prepared reports in accordance with ISAE 3402 ‘Assurance Reports on Controls at a Service
Organization’. We assessed the objectivity and competence of the independent auditors of the service organizations and
reviewed the assurance reports that include the scope and results of the assurance procedures performed. We concluded
that we could rely on the assurance reports issued by the independent auditors of the service organizations in combination
with our own testing of complementary user entity controls.
In total, in performing these procedures, we achieved the following coverage on the financial line items:
Adjusted EBITDA
Revenue
Total assets
92%
92%
92%
None of the remaining components represented more than 7% of total consolidated Adjusted EBITDA, 6% of total
consolidated revenue or 3% of total consolidated assets. For the remaining components, we performed, amongst other
things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements
within those components.
The Group engagement team performed the audit work for the corporate headquarters in the Netherlands. For all
components in the scope of the Group audit, we used component auditors who are familiar with the local laws and
regulations to perform the audit work.
Where component auditors performed the work, we determined the level of involvement we needed to have in their audit
work to be able to conclude whether we had obtained sufficient and appropriate audit evidence as a basis for our opinion on
the consolidated financial statements as a whole.
We issued instructions to the component audit teams in our audit scope. These instructions included, amongst others, our
risk analysis, materiality and scope of the work. We explained to the component audit teams the structure of the Group, the
main developments that are relevant for the component auditors, the risks identified, the materiality levels to be applied and
our global audit approach. We had individual calls with each of the component audit teams during the year and upon
conclusion of their work. During these calls, we discussed any significant accounting and audit issues identified by the
component auditors, their reports, the findings of their procedures and other matters, which could be of relevance for the
consolidated financial statements.
The Group engagement team typically visits the component auditors of Russia, Pakistan, Algeria, Ukraine, Bangladesh and
Uzbekistan. Due to circumstances surrounding COVID-19 in the current year, various travel restrictions were imposed
worldwide. As such, the Group engagement team performed virtual site reviews for each of these locations, which included
our review of selected working papers of the component auditors. We frequently met virtually with the component teams and
local management throughout the year to ensure sufficient oversight. The component audit teams also participated virtually
in the audit planning workshop hosted by the Group engagement team.
The Group engagement team performed the audit work at the corporate headquarters on the Group consolidation, financial
statement disclosures and a number of complex audit and accounting items. These included, amongst others, goodwill
impairment assessment and the assessment and follow-up of the claims from the whistle-blower allegations and the other
cases monitored at the corporate headquarters.
By performing the procedures above at components, combined with additional procedures at Group level, we have been
able to obtain sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to provide a basis
for our opinion on the financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements. We have communicated the key audit matters to the Audit and Risk Committee of the Board of Directors. The
key audit matters are not a comprehensive reflection of all matters identified by our audit and that we discussed. In this
section, we described the key audit matters and included a summary of the audit procedures we performed on those
matters.
In comparison to the previous year, the key audit matters are similar in nature to those reported in 2019 and are inherent to
the nature of the Company’s business and its operations.
We addressed the key audit matters in the context of our audit of the financial statements as a whole and in forming our
opinion thereon. We do not provide separate opinions on these matters or on specific elements of the financial statements.
Any comment or observation we made on the results of our procedures should be read in this context.
VEON Ltd I Independent auditor’s report
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Key audit matter
Our audit work and observations
Valuation of goodwill
Notes 10 and 12
As described in Notes 10 and 12 to the consolidated
financial statements, the Company’s consolidated
goodwill balance amounts to USD 2,682 million at
December 31, 2020. The Company conducts an
annual goodwill impairment test as of September 30,
or when circumstances indicate that the carrying
value of goodwill may be impaired. During the annual
goodwill impairment test in the current year, the
Company concluded USD 723 million of goodwill
impairment charges were to be recorded for the
cash-generating unit (‘CGU’) Russia.
Management further performed a subsequent
triggering events analysis as of 31 December 2020
and determined that no additional goodwill
impairment should be recorded.
Potential impairment is identified by comparing the
recoverable value, in particular the fair value less
cost of disposal, of a CGU to the carrying value.
Fair value is estimated by management using a
discounted cash flow model, based on cash flow
projections from business plans prepared by
management. In estimating the fair value of the cash-
generating units, management uses assumptions
relating to the discount rate as well as the projected
revenue growth rate, projected operating margin,
projected capital expenditure, and the related
terminal rates. The Company’s assumptions are
affected by expected future market conditions and
the continuing challenging economic and political
environments in the territories where the Company’s
subsidiaries operate and which are inherently
uncertain.
The focuses of our audit effort were the Russia CGU,
given the USD 723 million impairment recognized in
the current year, and the Algeria CGU, due to the
limited headroom of USD 75 million calculated in the
annual goodwill impairment test. The amount of
goodwill associated with the Russian and Algerian
CGUs as of 31 December 2020 was USD 1,131
million and USD 1,053 million, respectively.
We considered this area to be a key audit matter due
to the magnitude of the goodwill balance as well as
the fact that the determination of the fair value less
cost of disposal is complex, subjective, and, given the
estimation uncertainty, requires substantial
judgement from management.
In the context of the annual goodwill impairment test,
we have performed procedures, with the help of our
valuation specialists, which varied in depth per CGU
based on our risk assessment with respect to the
volatility of the economic circumstances, the extent of
the related goodwill balance as compared to our
materiality used and the headroom available between
the carrying value and the fair value less costs to
dispose. We paid particular focus to the Russian
CGU with goodwill impaired in the current year, as
well as the Algerian CGU where limited headroom
was available. Our audit procedures included,
amongst others:
•
•
•
•
•
•
•
Assessing the appropriateness of management’s
identification of the Company’s CGUs.
Evaluating the design and testing the operational
effectiveness of the related internal controls,
including the completeness, accuracy, and
relevance of underlying data used in the models.
Performing a retrospective review of the prior
year estimates by comparing the current year
actual results to those projected in the prior year.
Testing the composition of future cash flow
forecasts by evaluating (i) the current and past
performance of the CGUs, (ii) the consistency
with external market and industry data, and (iii)
the corroboration of strategic initiatives with
evidence obtained in other areas of the audit.
Specific attention was given to the Russia and
Algeria CGUs’ valuation of strategic initiatives
and whether such initiatives could be
corroborated from a market participant’s
perspective and the impact of the
macroeconomic environments in Russia and
Algeria on the business plan.
Assessing any indications of management bias
in determining the significant assumptions.
Recalculating the carrying values and confirming
the exchange rates applied.
Assessing the adequacy of the Company’s
disclosures regarding assumptions, sensitivities
and headroom as included in the accounting
policies and in Note 10 to the financial
statements.
Our procedures did not result in material findings with
respect to the goodwill impairment assessment at
31 December 2020 nor the respective disclosures in
the financial statements.
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Key audit matter
Our audit work and observations
Valuation of ‘uncertain income tax positions’ and
‘non-income tax provisions’
Notes 7 and 8
With the assistance of our tax specialists, we have
performed the following procedures, amongst others:
As described in Notes 7 and 8 to the consolidated
financial statements, the Company recorded
provisions of USD 155 million related to uncertain
income tax positions and USD 86 million related to
non-income tax provisions at December 31, 2020.
Given that the tax legislation in the markets in which
the Company operates is unpredictable and gives
rise to significant uncertainties, the Company’s
estimate of tax liabilities may differ from
interpretations by the relevant tax authorities as to
how regulations should be applied to actual
transactions. Judgement is therefore required by
management to determine whether it is probable that
an uncertain income tax position will not be sustained
and to estimate the amounts in the range of most
likely outcomes. Judgement is also required by
management in determining the degree of probability
of an unfavourable outcome for non-income tax
claims and the ability of management to make a
reasonable estimate of the amount of loss.
We believe the valuation of ‘uncertain income tax
positions’ and ‘non-income tax provisions’ to be a key
audit matter based on the significant judgements
made by management when assessing the likelihood
of an uncertain income tax treatment being accepted
by a tax authority and estimating the effect of the
uncertainty, as well as assessing the degree of
probability of an unfavourable non-income tax
outcome and the ability to make a reasonable
estimate of the amount of cash outflow. This in turn
required significant auditor attention and effort in
performing procedures to evaluate management’s
estimation uncertainty.
•
•
•
•
•
•
•
•
Evaluating the design and testing the operational
effectiveness of controls relating to ‘uncertain
income tax positions’ and ‘non-income tax
provisions’.
Evaluating management’s assessment of both
the identification and possible outcomes of each
‘uncertain income tax position’ and ‘non-income
tax provision’, including management’s
assessment of the technical merits of each
claim.
Testing the valuation of the Group’s uncertain
income tax positions, including evaluating the
reasonableness of management’s assessment
of whether tax positions are probable of being
sustained and management’s estimate of the
effect of the uncertainty based on the application
of relevant tax laws.
Testing the valuation of the Group’s non-income
tax provisions, including evaluating the
reasonableness of management’s assessment
of the probability of an unfavourable outcome of
the non-income tax positions and the
reasonableness of the estimated amount of loss
based on the application of relevant tax laws.
Validating the information used in the calculation
of the liability for ‘uncertain income tax positions’
and ‘non-income tax provisions’, including
evaluating correspondence with tax authorities,
together with the status and results of any tax
audits, and assessing the outcomes of court
decisions for industry-wide issues.
Evaluating management’s assessment of any
interest and penalties associated with the tax
claims.
Obtaining tax and legal letters from the Group’s
external tax and legal advisors and reconciling
these to the positions taken.
Assessing the adequacy of the Group’s
disclosures.
Our procedures did not result in material findings with
respect to the positions at 31 December 2020 nor the
respective disclosures in the financial statements.
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Key audit matter
Our audit work and observations
Compliance with anti-bribery and corruption laws
and regulations
Note 7
With the assistance of our forensic specialists, we
have performed the following procedures, amongst
others:
As described by the Company in Note 7 to the
consolidated financial statements and the
accompanying Directors’ Report, the Group operates
in markets which pose increased risks of non-
compliance with anti-bribery and corruption laws and
regulations. As such, there is a heightened risk of
potential liability associated with such non-
compliance. We dedicated a significant amount of
time in our audit to this increased risk and therefore
have also determined this to be a key audit matter.
•
•
•
•
•
•
•
•
•
•
•
Understanding the local and international laws
and applicable industry regulations governing
the Group.
Understanding and evaluating the Group’s
interactions and communication with
government officials.
Assessing the adequacy of the Group policies
and procedures addressing the risk of non-
compliance with anti-bribery and corruption laws
and regulations.
Testing the effectiveness of controls which
respond to the risk of non-compliance with anti-
bribery and corruption laws and regulations,
which include code of conduct compliance,
response to whistleblower allegations, vendor
due diligence, and employee access rights.
Assessing any non-compliance with anti-bribery
and corruption laws and regulations within
significant, unusual, or related party
transactions.
Assessing charitable contributions and
donations to government officials.
Evaluating actions undertaken by management
upon identification of potential instances of
bribery or corruption. Our procedures included
the use of forensic expertise and testing of
selected investigations, including assessing and
challenging management’s investigatory
response to actual or suspected instances of
fraud to support conclusions reached and
remedial actions taken.
Obtaining external legal confirmations.
Reading the minutes of the Board of Directors
and the other executive committee meetings.
Attending discussions in the Audit and Risk
Committee on the results of internal and external
investigations and on the design and
effectiveness of the Company’s compliance
programs and internal controls relating to the
prevention and detection of bribery and
corruption.
Assessing the adequacy of the Company’s
disclosures.
Our procedures did not result in material findings with
respect to compliance with anti-bribery and corruption
laws and regulations or the respective disclosures in
the financial statements.
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Key audit matter
Revenue recognition
Note 3
As described in Note 3 to the consolidated financial
statements, the Company’s consolidated revenue
balance was USD 7,980 million at December 31,
2020 and is made up of billions of relatively small
transactions in combination with multiple tariff plans,
with the largest volume of plans in Russia.
Throughout the Group, there is a large number and
wide variety of legacy billing and other operating
support systems in the revenue process that result in
an increased risk of revenue recognition.
The magnitude of revenue and complexity in the
recognition processes arising from a variety of legacy
systems with IT control deficiencies requires
substantial audit effort with respect to the design,
implementation, and operating effectiveness of
mitigating controls and substantive test procedures to
be performed. Therefore, we considered this a key
audit matter.
Our audit work and observations
With the assistance of our IT specialists, we have
performed the following procedures, amongst others:
•
•
•
•
•
•
•
Understanding and testing the IT environment in
which billing, rating and other relevant support
systems reside, including the change
management and restricted access procedures
in place.
Testing the design and operational effectiveness
of the revenue and receivables cycle related
controls.
Testing the end-to-end reconciliation from
mediation to billing and rating systems to the
general ledger. The testing also included tracing
material journals, between the billing or
intelligent network systems and the general
ledger, to underlying documentation and
confirming the rationale.
Reconciling the amounts of vouchers and other
top-up transactions with respect to prepaid
services to the transactional cash receipts data
per the cash system.
Performing tests on the accuracy of customer bill
generation and testing of a sample of the credits
and discounts applied to customer bills.
Performing test calls and reconciling these with
the billed amounts; and
Testing cash receipts for a sample of customers
back to the customer invoice.
Our procedures did not result in material findings with
respect to the revenues recorded for the year 2020
nor the respective disclosures in the financial
statements.
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Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that
consists of:
•
•
the directors’ report;
the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code;
Based on the procedures performed as set out below, we conclude that the other information:
•
•
is consistent with the financial statements and does not contain material misstatements;
contains the information that is required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial
statements or otherwise, we have considered whether the other information contains material misstatements.
By performing our procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch
Standard 720. The scope of such procedures was substantially less than the scope of those performed in our audit of the
financial statements.
Management is responsible for the preparation of the other information, including the directors’ report and the other
information in accordance with Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
Our appointment
We were appointed as auditors of VEON Ltd. on 28 July 2014 by the board of directors following the passing of a resolution
by the shareholders at the annual meeting held on 28 July 2014. Our appointment has been renewed annually by
shareholders representing a total period of uninterrupted engagement appointment of seven years.
No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in Article 5(1) of
the European Regulation on specific requirements regarding statutory audit of public-interest entities.
Services rendered
The services, in addition to the audit, that we have provided to the Company and its controlled entities, for the period to
which our statutory audit relates, are disclosed in Note 16 to the Company financial statements.
Responsibilities for the financial statements and the audit
Responsibilities of management and the board of directors for the financial statements
Management is responsible for:
•
the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book
2 of the Dutch Civil Code; and for
such internal control as the board of directors determines is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
•
As part of the preparation of the financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the
financial statements using the going-concern basis of accounting unless management either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so. Management should disclose events and
circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the financial
statements.
The board of directors is responsible for overseeing the Company’s financial reporting process.
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Our responsibilities for the audit of the financial statements
Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate
audit evidence to provide a basis for our opinion. Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high but not absolute level of assurance, which makes it
possible that we may not detect all material misstatements. Misstatements may arise due to fraud or error. They are
considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified
misstatements on our opinion.
A more detailed description of our responsibilities is set out in the appendix to our report.
Amsterdam, the Netherlands, 15 March 2021
PricewaterhouseCoopers Accountants N.V.
W.J. van der Molen RA
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Appendix to our auditor’s report on the financial statements 2020 of VEON
Ltd.
In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities
for the audit of the financial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism throughout the audit in
accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit
consisted, amongst other things, of the following:
•
Identifying and assessing the risks of material misstatement of the financial statements, whether due to
fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
Obtaining an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Concluding on the appropriateness of management’s use of the going-concern basis of accounting, and
based on the audit evidence obtained, concluding whether a material uncertainty exists related to events
and/or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report
and are made in the context of our opinion on the financial statements as a whole. However, future events
or conditions may cause the Company to cease to continue as a going concern.
Evaluating the overall presentation, structure and content of the financial statements, including the
disclosures, and evaluating whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
•
•
•
•
Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are
responsible for the direction, supervision and performance of the Group audit. In this context, we have
determined the nature and extent of the audit procedures for components of the Group to ensure that we
performed enough work to be able to give an opinion on the financial statements as a whole. Determining
factors are the geographic structure of the Group, the significance and/or risk profile of Group entities or
activities, the accounting processes and controls, and the industry in which the Group operates. On this basis,
we selected Group entities for which an audit or review of financial information or specific balances was
considered necessary.
We communicate with the board of directors regarding, amongst other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit. In this respect, we also issue an additional report to the Audit and Risk Committee in
accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-
interest entities. The information included in this additional report is consistent with our audit opinion in this
auditor’s report.
We provide the board of directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the board of directors, we determine those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
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